E-Signatures: I thought they were supposed to make things easier?

Insights - 30/11/2018

Nicholas Saunders, Solicitor in our Corporate and Commercial team explores electronic signatures and the current laws surrounding them in the below article.

In August of this year the Law Commission published a consultation paper regarding the electronic execution of documents. The consultation itself states that the current law caters adequately for electronic signatures (e-signatures), however, the Law Commission remains aware that some stakeholders would like a clear legislative statement to avoid any doubt.

Whilst we await this clarity, what is an e-signature, when can they be used and when can you not use an e-signature?

What is an e-signature and what are the current laws surrounding them?

An electronic signature is defined in the Electronic Communications Act 2000 (ECA 2000). It is defined as anything in electronic form which is incorporated into or otherwise logically associated with any electronic communication or electronic data and purports to be used by the individual creating it to sign (section 7(2), ECA 2000).

It is ‘commonly’ understood that e-signatures can be divided into three groups:

Simple e-signatures – these include scanned signatures and tick box declarations.

Advanced e-signatures – these are uniquely linked to the signatory, are capable of identifying the signatory, and are linked to data within the signature that can detect any changes made.

Qualified e-signatures – an advanced electronic signature that is created by a qualified electronic signature creation device and which is based on a qualified certificate for electronic signatures.

When can I use an electronic signature?

The rules of English law that apply to contracts do not, generally, require that a contract is made in a specific form.  This is subject to certain specific exclusions (see some examples below).  This means that a valid agreement can be made by way of email correspondence, text messages or even a messenger services.

This reason for this is because, in broad terms, at the root of contract law, in order for a binding contract to be created, the key elements of offer, acceptance, consideration, intention to create legal relations and certainty of terms must be present. These underlying principles are not reliant on any prescribed technology being applied to the contract and (in most cases), when seeking to rely on an e-signature, the parties will only need to consider whether the key elements for the formation of a contract have been met.

When can I not use an electronic signature?

There are certain transactions or arrangements for which the law prescribes a particular form, either as a substantive legal condition of a binding contract or a condition of its enforceability.

Common examples include:

  • Guarantees. 
  • A transfer of certificated shares.
  • Certain consumer credit agreements.

If a particular transaction may only be executed by deed, certain common law and statutory requirements relating to the form, execution and delivery of the instrument must also be observed in order to create a valid and enforceable deed, these include:

  • Land transfers.
  • Leases (other than leases taking effect in possession for a term not exceeding three years).
  • Powers of attorney.

 So what changes are proposed?

The Law Commission states that it believes the existing legislation and case law is “sufficiently flexible to accommodate electronic signatures”. As such, it does not consider that legislative reform is necessary to confirm the position on the validity of e-signatures.  However, they have suggest that further consideration is needed with regards to practical and technical issues.

With regard to the e-signature of deeds, the initial view is that, at present, a witness must witness the signing in person in order to meet the required formalities.  In the Law Commission’s view, the witnessing of a signature by video link is unlikely to satisfy the current legal requirements.

In light of this, the Law Commission have made a number of suggestions including:

  • Legislative reform to permit witnessing via video link.
  • Further potential reforms which move away from the traditional requirement for witnessing and attestation, such as electronic acknowledgement.
  • Considering whether a wider review of the law of deeds is required.

These provisional conclusions have, on the whole, been welcomed however some stakeholders remain disappointed that the Law Commission has not proposed legislative reform to clarify and confirm the validity of e-signatures.

 If you have any questions regarding e-signatures please contact Nicholas Saunders or a member of our Corporate and Commercial team. 

Other articles from November's newsletter

Disclaimer:

Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.