The government’s restrictions imposed in response to the COVID-19 pandemic have raised a number of practical difficulties for parties when signing documents. This article examines the options available when signing contracts remotely.
Does a contract need to be signed?
Under English law a contract does not need to be made in any particular form. Most commercial contracts can be made informally and are not required to be signed at all. In many cases contracts can be concluded orally or by conduct, provided the essential elements for an enforceable contract are present.
How can a contract be signed?
Where a contract or document is signed, the most common forms of signing are:
“wet ink” signatures (an original or “hard copy” version of a document is signed by the parties who are physically present)
virtual signing (a document is signed by parties not physically present in the same place). There are established rules and guidance for virtual signings.
electronic signing (where one or more of the signatories signs a document by using an electronic signature).
It is possible to combine these different methods for the same document subject to the applicable rules being followed.
Accordingly most contracts which the parties choose to record in writing can be validly concluded with an electronic signature on the basis that there is no legal requirement for signature in the first place. That said, for some types of contract (e.g. guarantees, land contracts or transfers of securities) there may be statutory formalities which the parties must follow if their transaction is to have legal effect. This may mean that the contract not only has to be in signed and in writing but also comply with other formalities (e.g. if it is a deed).
E-signatures
Electronic signatures are not a new concept. An electronic signature is a signature in electronic form where the person does not physically put pen to paper. Electronic signatures are valid under English law. In its 2019 Report on executing documents using electronic signatures (endorsed by the government in March 2020) the Law Commission for England and Wales stated that an electronic signature is capable in law of being used to validly execute a document (including a deed) provided that:
any formalities relating to execution of that document are satisfied e.g. if a signature needs to be witnessed
the signatory intended to authenticate the document (i.e. intended to sign and be bound by it).
It should be borne in mind that the Report did not cover wills.
According to the Law Commission electronic signatures do not need to take a particular form or type unless required by law or contractual arrangements. Accordingly e-signatures can take various forms including:
the signatory typing their name or initials at the bottom of an electronic document (e.g. an email), or in the signature block of a Word document.
a scanned handwritten signature incorporated into an electronic document.
clicking an “I accept” or “I agree” button on a website.
using a JPEG image of their signature and affixing that into a contract.
using a finger or stylus on a touchscreen.
signing through an e-signing platform (see e-signing platforms below).
Although it does not affect the legal validity of an electronic signature not all electronic signatures will have the same evidential weight. Similarly not all technology will enjoy the same security and reliability and resilience to fraud. Clearly typing a name into a document will not be as secure as using a JPEG image of a signature or signing through an e-signing platform. Similarly, certain types of electronic signatures which will be more appropriate for commercial transactions as they carry a greater level of security e.g. an electronic signature securely linked to the owner should be used in a higher value transaction.
E-signing platforms
The use of electronic signing platforms can help address concerns relating to the authenticity and reliability of electronic signatures. E-signing platforms use fraud prevention techniques including sending PIN numbers to signatories' mobile phones to access the platform and generate a completion certificate at the end of the signing process. There are however a number of preliminary matters which should be considered:
the security of the relevant platform - most are cloud-based – to ensure that it satisfies the parties’ own IT and security policies
obtaining any licences necessary to use the platform
are the parties trained in the use the technology
who is coordinating the platform (this process can be time consuming and affect timetables).
Witnessing
At the time of writing we are not aware of any relaxation of the position that a witness must be physically present in order to attest a signature. Accordingly the same witness requirements must be complied with for an electronic signature as if it were a ‘wet-ink’ signing . Clearly in light of the government’s requirement for people to stay at home this requirement will raise logistical challenges. The Law Commission's advice was that virtual witnessing is not possible, so a witness cannot witness via video link.
There is no statutory requirement for the witness to be independent - there is no prohibition on a signatory’s spouse, co-habitee or civil partner from acting as a witness and it is generally acceptable for a party’s co-director or employee to witness – nevertheless, independent witnessing is always best practice. Remember that a family member could not be a witness if they are also a party to the relevant document.
This best practice is increasingly becoming relaxed in light of the government’s requirement and we have experienced other law firms adopting a pragmatic approach to this point. Consideration should be given to whether an alternative signing method is available e.g. - in the case of a corporate - two directors sign or a director and company secretary (instead of a director and a witness). It is also worth bearing in mind that whilst the witness must be physically present at the signatory’s signing the witness can attest later i.e. the witness does not need to sign in the presence of the signatory.
Both the signatory and witness can sign electronically.
Corporate signatories
In the case of a corporate signatory there are a number of checks to be made when accepting or using an e-signature:
does the entity have capacity to electronically sign?
do the articles contain any restrictions on electronic signing?
does the signatory have authority to sign electronically and apply their electronic signature to the document?
does the signatory intend to be bound and sign up to the relevant document?
does the signatory’s relevant internal risk policies permit it to sign electronically?
Cross border transactions
There are occasions when the use of electronic signatures will not be suitable e.g. or where legislation or case law prevents it. Cross-border transactions – involving a non-English law party, a non-English law document, or a document which may need to be produced for litigation in another jurisdiction - raise specific issues and the parties should take local legal advice on the validity of electronic signatures in the relevant jurisdiction before executing documents electronically. Common issues will be:
restrictions in a party’s constitutional documents, the governing law of the transaction or specific laws of a party’s jurisdiction
does the overseas party have authority to sign electronically under the laws of its jurisdiction
whether an electronically signed document would be admissible in court or in terms of any other action in the relevant jurisdiction.
does the document need to be notarised or apostilled in another jurisdiction - this may only be possible for wet ink signed documents.
Other considerations and closing thoughts
notwithstanding the validity of electronic signatures under English law, it may not be possible to use them in every case
consider whether alternative methods might be available so there is no need for electronic execution. If the parties have a printer and can print and sign, they can return the signed page either by scan or by photograph
not all parties to the document need to sign using electronic signatures - some can sign in wet ink and others electronically. Different types of electronic signatures can be used
care should be taken to consider any tax implications arising from where the document is signed
parties should take legal advice on the particular circumstances to ensure compliance with the relevant law and formalities
