Introduction

The following note will look at the use of electronic signatures in law in England and Wales.  The use of electronic signatures have increased due to the Coronavirus pandemic and the fact that lockdowns and coronavirus restrictions have made it harder for people to sign documents in wet-ink. As a result of this, parties have resorted to using electronic signature platforms such as DocuSign to sign documents.  This has raised a number of issues and as such the following guide seeks to address and provide for clarity on these. 

Electronic signature platforms and how they work

Electronic signature platforms such as DocuSign typically work as follows:

• the administrator uploads a document to a secure cloud based platform;
• the administrator then specifies who the document should be signed by and how;
• the platform then sends the document to the relevant signatories and requests that they ‘sign’ the document;
• the signatory then signs the document, by clicking a button to denote that he wishes for his electronic signature to be inserted;
• once the document is fully signed it is returned to the administrator for review and to be dated and circulated.

When a signatory logs in to the platform to sign the document the platform will capture the key core information including the signatory’s email address, their IP address and their data time of access. This helps to ensure the security of the document.   

The law in England and Wales

At present, the law in England and Wales does not set out a prescribed method for the use of electronic signatures.

The generally accepted position in relation to a contract provides some guidance in that it is commonly established that a contract need not to be in writing as long as the essential elements for a contract can be established, these being there is an offer, acceptance, agreed terms, consideration and intention that for both parties to be bound by the contract. This position is slightly different for deeds and in which there are other particular formalities which are required to be complied with.

One issue which can arise out of the use of electronic signature platforms can be the intention of the parties to be bound. This is normally satisfied by electronic signature platforms by the signatory applying their signature to the contract and as such this would constitute sufficient evidence of their intention to be bound by the agreement being signed.

It is therefore commonly accepted that there is not much of issue in relation to electronic signatures for simple signatures i.e. those signatures which are not required to be signed as deeds, however, the position in relation to deeds is more complicated and is discussed below. 

Electronic signatures and deeds

In order for a document to constitute a deed it must be:

1. in writing;
2. expressed to be a deed;
3. delivered as deed; and
4. executed as deed.

The first three requirements can generally be satisfied by contractual drafting, however, in order for (4) to be satisfied, the relevant statutory provisions must be complied with and will differ for overseas companies.

The most significant issue facing a simple element from its signature platforms is meeting the requirements for a deed to be witnessed in the presence of another individual. The creation of an electronic signature is not something which can easily be witnessed in the sense that this is done virtually however, the signatory’s actions in marking their intention to be bound by inserting their signature to the document or clicking a box which allows them to do so can be witnessed

A report by the Law Commission, which was published in September 2019, has confirmed that electronic signatures can be witnessed in the way specified above and the report further stated that an electronic signature can still be deemed to be witnessed correctly even though a witness may not be able to see the digital information but they still see the signatory press the relevant button to add their signature to a document on the screen.

However, a deed must be signed in the presence of a witness and this can lead to issues in relation to electronic signatures especially in light of the Covid 19 pandemic. 

The risks of using simple electronic signature platforms

We believe there are three principal risks in using simple electronic signature platforms to enter into deeds and contracts.  These are as follows:

1. The counterparty or third party argues that a simple electronic signature platform cannot meet the formalities required to execute a deed;
2. the counterparty or third party argues that there was no contract because an electronic signature is not a valid form of entering into the contract; and
3. the counterparty argues that it fact did not sign the contract, someone else accessed the electronic signature platform fraudulently, without the requisite authority or by mistake.

Points 2 and 3 have been addressed previously however, in relation to point 1 in regard to the validity of deeds there is risk that whilst a contract can be created by using simple electronic signature, a deed might not be able to. 

However, the Law Commission report dismisses this and this can also be worked around in the sense that companies and LLPs can create a deed without the need for a witness if two directors or a director and a secretary sign the document.  This can alleviate concerns surrounding the witnessing of electronic signatures for corporate entities however, the risk still exists for individual sellers or signatories. 

Electronic Signatures and the Land Registry

The Land Registry are now accepting electronically signed deeds as set out in their Practice Guide 8. This includes deeds which grant a legal charge over property, and interestingly permits one party to sign electronically and the other using wet ink, where counterpart documents should be used. Witnessing requirements remain necessary, and where an electronic signature is being witnessed, then the witness must be in the physical presence of the signatory when the electronic signature takes place.

Where electronic signatures are used, the following points should be considered during the signing process:

1. Parties must mutually agree to use electronic signatures and adopt a single signing platform in relation to the deed.
2. Parties must have conveyancers acting for them in the transaction, save for when a lender’s discharge/release, where only the lender shall need to be represented.
3. The set-up and control of the signing process through the signing platform must be managed by a conveyancer.
4. If a deed is being registered at the Land Registry, the conveyancer must submit the application electronically together with a PDF form of the completed deed. This application should be accompanied by a certificate from the conveyancer stating “I certify that, to the best of my knowledge and belief, the requirements set out in practice guide 8 for the execution of deeds using electronic signatures have been satisfied.”

Our Property team recently summarised the key points to be aware of when signing documents electronically, and the full article can be found here.