Law Commission gives green light to electronic signatures

Earlier this month, the Law Commission published a report confirming that electronic signatures may be used to execute legal documents. Stevens & Bolton has been encouraging the use of electronic signatures for some time now, including the use of electronic signature platforms such as DocuSign, but some readers may have encountered old-fashioned lawyers who hanker after the good old days of physical closing meetings with the opportunity they offer to collect wet ink signatures.

The Law Commission’s report can be accessed here. It includes both a summary of the current law around the use of electronic signatures and makes a number of recommendations for future reform, both of which we cover in more detail below.

In summary, although the report generally endorses the validity of electronic signatures, there remain statutory formalities for certain types of documents, especially those requiring to be filed with certain public authorities. Additionally, where a witness is required the Law Commission has concluded that as the law currently stands that witness will still need to be physically present in the same place as the person signing.

What we mean by electronic signatures

But first, what do we mean by an electronic signature?

The term “electronic signature” covers a whole variety of different signature methods, none of which require a signatory to dip their pen in wet ink before adding their signature by hand to a legal document. The Law Commission uses the term “electronic signatures” broadly in its report, noting that it includes the following:

• Adding a scanned manuscript or digital signature to a document
• Typing a signature into a document (for example, by using the typewriter tool in Adobe)
• Clicking “I accept” on a website page

The above is not a comprehensive list and other examples are included in the Law Commission’s report. But the beauty of all such examples is that they avoid the need to print a hard copy of the document and allow individuals to sign documents on the go, wherever they may be.

Law Commission’s statement of the law on execution with electronic signatures

A summary of the Law Commission’s statement of the law around the use of electronic signatures is set out below. This applies both where there is a statutory requirement for a signature to a document (as in the case of a guarantee, for example), or where there is not, and is not limited to commercial or consumer documents alone.

1. An electronic signature can be used to execute a document (including a deed) provided that (i) the person who signs the document intends to authenticate the document and (ii) any formalities for the execution of that document are satisfied.
2. Formalities for execution may be prescribed by statute or contract. The Law Commission’s report gives specific examples of the formalities applicable, for example, to guarantees, transfers of securities under the Stock Transfer Act 1963, contracts for the sale of land, regulated credit agreements under the Consumer Credit Act 1974 and lasting powers of attorney. To this list, we might add HM Land Registry’s recent reminder to English companies and LLPs about acceptable forms of execution when using deeds (i.e., from 20 September 2019, HM Land Registry will not accept ‘signed as a deed’ in prescribed form deeds such as Forms TR1 and CH1 executed by corporate bodies).

Whilst it was not part of the Law Commission’s Statement of the law: execution with an electronic signature, readers may be interested to hear that it seems it is now possible to register a security interest created by an English company or LLP at Companies House without possession of the wet ink original. In particular, in paragraph 2.65 of its report, the Law Commission comments that “Where a copy of a document needs to be filed at Companies House, for example, a document creating a charge over a company’s assets, Companies House require a certified copy of the relevant document to be provided. If the document creating the charge has been executed using only electronic signatures, a PDF copy of the document or deed can be uploaded and the person making the filing can certify that it is a correct copy of the original without the need for a wet ink signature. A copy of the charge certificate is then emailed to the person who registered the charge.”

3. Electronic signatures are admissible in evidence in legal proceedings.
4. Except where relevant legislation or contractual arrangements or case law specifically requires otherwise (as is likely the case with wills, for example), English common law adopts a pragmatic approach and does not prescribe any particular form or type of signature.
5. The English Courts have, for example, held that the following non-electronic forms amount to valid signatures: (i) signing with an ‘X’; (ii) signing with initials alone; (iii) using a stamp of a handwritten signature; (iv) printing a name; (v) signing with a mark (even where the person boasted hand-writing skills) and (vi) using a suitably unambiguous description of the signatory (such as “Your loving mother” or “Servant to Mr Sperling”).
6. Electronic equivalents of the non-electronic forms of signatures mentioned at (5) above are likely to be recognised by the English Courts as legally valid.
7. The English Courts have, for example, held that the following electronic forms represent valid signatures where there is a statutory requirement to provide a signature but the statute is silent as to whether an electronic signature is acceptable: (i) a name typed at the bottom of an email; (ii) clicking an “I accept” tick box on a website and (iii) the header of a SWIFT message.
8. The Law Commission’s current view is that the requirement for a deed to be signed “in the presence of a witness” means that the witness must be physically present. The Law Commission considers this issue in some detail in its report and concludes that “we are not persuaded that parties can be confident that the current law…allow[s] for a witness viewing the signing on a screen or through an electronic signature platform, without being physically present”. In practice, this means that until legislative reforms are made, a signatory and the witness must be together in the same place when execution of a deed takes place.

Recommendations and options for reform

The Law Commission’s report represents a helpful statement of the current law around the use of electronic signatures. This is based on common law and current statute, and should not be misinterpreted as new law. The Law Commission does, however, make several recommendations for future reform in this area, including the following proposals:

1. The UK Government should convene an industry working group to consider practical and technical issues associated with the electronic execution of documents. This working group could be tasked with producing best practice guidance for using electronic signatures. They could also consider solutions to enable video witnessing which address concerns around potential fraud.
2. There should be a review of the law around the use of deeds, including the implications associated with the well-known Mercury case (which effectively prevents lawyers circulating signature pages to a deed for execution before negotiations on the document have been completed).