Electronic signatures: Law Society answers your questions…

At the start of the COVID-19 pandemic, we summarised the then current legal status of electronic signatures as applied to English law contracts.

Since then, the use of electronic signatures has become more widespread allowing transactions to complete more efficiently and more remotely than ever.  Nevertheless, a number of legal questions remain in play.

The Law Society recently put together a Q&A on the subject.

We set out questions posed by the Law Society below in italics and bold.  We then summarise and comment on what the Law Society said on each.

Where a document (such as a deed) needs to be witnessed, is it necessary for the witness to be physically present at the location of the signatory or can they witness the signature via video link?

The Law of Property (Miscellaneous Provisions) Act 1989 (the “LP(MA)”) sets out the necessary requirements for execution of a deed (which apply regardless of the execution method).

An instrument is validly executed as a deed by an individual if, and only if:

1. it is signed:

• by her in the presence of a witness who attests the signature; or
• at her direction and in her presence and the presence of two witnesses who each attest the signature; and

2. it is delivered as a deed.

Section 1(3)(a) of the LP(MA) states that a witness must be “present” in order to witness the signature. Section 44 of the Companies Act 2006 also requires the “presence of a witness”.

The legislation does not specify what presence means.  And the Law Society acknowledges that the LP(MA) and Companies Act 2006 remain silent on the subject.

The Law Society say in the Q&A that it is not clear whether remote forms of witnessing – i.e. by video link – satisfy the condition of “presence”.

We would go further and say that parliament did not have video witnessing in mind when the LP(MA) and the Companies Act 2006 were debated.  The legislator was talking about flesh and blood, geographically proximate, physical presence.  This train of thought has been confirmed in the Law Commission’s report on the use of electronic signatures. Presence was always intended to be physical rather than remote.

Note that a temporary amendment was made to the Wills Act 1987 (on 27 July 2020) to specify that “presence” for the purpose of witnessing wills can include virtual presence by means of video conference or other visual transmission methods.

Unless executing a will, what to do then in the time of covid?  Witnessing can be through a window.  At more of a distance than usual.  And outside in a public place.  But witnessing with one’s own eyes without intermediation seems to be the key.  Perhaps that begs a further question as to what counts as intermediation.  Sunglasses are probably OK.  Telescopes and binoculars…?

Can a witness apply the electronic signature of a person entering into a deed to enable the witness to physically witness the application of the signature where they are not in the same place?

No. Fairly obviously, the signatory would not be applying her own signature and there would therefore be no signature to witness.

Who can act as a witness to a deed?

The Law Society states in their Q&A that a spouse or family member may act as a witness to a deed.

That said, it is still best practice for a spouse or family member not to act as a witness (best to avoid any possibility of an argument that there has been undue influence upon the witness).  The witness could potentially be called upon to give unbiased evidence as to the signing should a dispute arise as regards due execution.

The witness should also not be a relative who benefits from the document (as per Law Society Guidance), for the same reason – i.e. there is no law against it per se but best practice is to avoid any possibility of arguments as to their having been undue influence.

An individual who is party to a deed may not act a witness to the signature of another party to that same deed, as per the judgment in Seal v Claridge (1881).

Solicitors – provided all other necessary conditions are met – can act as witnesses to the signatures of the parties, and junior lawyers often do (or at least used to do so pre-covid) at physical completion meetings.

If you are not using an electronic signing platform, how can one electronically sign a simple contract?

An electronic signature can take many different forms, the Law Commission and Law Society identify:

• a person typing their name into a contract in Word or into an email containing the terms of a contract;
• a person pasting their scanned signature into the signature block of an electronic (i.e. soft copy) version of the contract;
• a person clicking an “I accept” tick box online;
• a person using an electronic signature platform (such as DocuSign, HelloSignor Abobe Sign) to click to insert a typed or handwriting font into the execution block; and
• a person using a finger, light pen or stylus and a touchscreen to write their name electronically in the signature block of the contract.

Whilst the methods set out above can be used to validly execute a simple contract, parties should consider the evidential weight of a particular method of execution (i.e. the ability of demonstrating that the signatory did in fact decide to execute the document).

The Law Society stresses that option (d) above is evidentially strong since it is secure and resilient to fraud (i.e. the risk of fraudulent signatures is reduced). Online signing platforms create tamper-proof (so they claim) completion certificates which contain the signing information at the end of the signing process.

If you are using any other approved execution method, you should collect and retain supporting information (such as the email address used by the signatory to send/receive a document for signing or, where appropriate, separate confirmations provided by the signatory as to their authenticating intentions).  Note that there is no legal requirement to do so but could prove useful if the authenticity of the signature was ever disputed.

A signature from each party is not a necessary condition for the formation of a simple contract per se.  Contracts can be formed by a course of dealings, through an exchange of correspondence, or in other ways and without anything being written down at all.

Parties should also pay attention to whether a written contract specifies how it must be signed or executed so as to come into force.

Can a simple contract be agreed by attaching a copy to an email and indicating “signature” or agreement in the body of an email?

Yes, provided the other necessary conditions for the formation of the contract have been satisfied.  The law of contracts asks inter alia for offer and acceptance, but acceptance can take many forms.

It will not work for a deed of course.  And watch out for registries with their own requirements as to the form of the contracts that they will register (such as the Land Registry).

Can an individual’s signature be applied by another individual electronically, for example can a director’s PA insert the director’s electronic signature into the document?

Inserting someone else’s signature electronically into a document would not by itself usually constitute valid execution of a contract.

That said, contracts can be signed by agents under a principal and agent relationship or by way of a power of attorney.

Note that section 44 of the Companies Act requires a signature ‘by’ a director and it does not provide for provide for a director to delegate their function as a signatory (absent a power of attorney arrangement being in place).

Can minutes of board/shareholder meetings and written resolutions of directors/resolutions for a company be signed with an electronic signature?

The 2016 electronic signatures practice note published by the Law Society confirms that board minutes and written shareholder resolutions can be electronically signed.  These are not, of course, contracts.

Companies House also now accepts electronic signatures on shareholder resolutions.

Concluding thoughts

The Q&A does not contain anything particularly new as regards electronic signatures.  But, life-in-lockdown has accelerated the transition from traditional paper-based ways of doing things towards the digital.

And current legislation was not much drafted with that in mind, flesh and blood physical presence has great evidential advantage but is problematic in the time of covid.  Calls for legislation to permit video witnessing of deeds in all circumstances may grow in volume.

This piece was researched and prepared by Amir Kursun with input from Henry Humphreys.

All the thoughts and commentary that HLaw publishes on this website, including those set out above, are subject to the terms and conditions of use of this website.  None of the above constitutes legal advice.  Much of the above will no doubt fall out of date and conflict with future law and practice one day.  None of the above should be relied upon.  Always seek your own independent professional advice.

Humphreys Law