The Law Commission has confirmed that electronic signatures are a valid means by which to execute documents.
A report published by the Law Commission on the “Electronic execution of documents” has clarified whether an electronic signature can constitute valid execution of a document between businesses.
Organisations have come up with a variety of time-saving and cost-effective ways of providing electronic signatures. For example, using your finger to sign a touch screen, typing your name or using a tick box in an agreement. Businesses will welcome any clarification of how reliable these methods are and whether they will be upheld. The Law Commission has confirmed that in most cases electronic signatures can be used as an alternative to handwritten ‘wet ink signatures’.
What constitutes a signature?
The courts have held that the following wet ink signatures are valid:
(1) signing with an ‘X’;
(2) signing with initials only;
(3) using a stamp of a handwritten signature;
(4) printing of a name;
(5) signing with a mark, even where the party executing the mark can write; and
(6) a description of the signatory if sufficiently unambiguous, such as “Your loving mother”.
Given the willingness of the courts to accept so many different forms of signature, it was perhaps inevitable that electronic signatures would become a part of everyday life.
An example of electronic signatures having been considered by the Courts is the decision in Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd and another  EWCA Civ 265 (09 March 2012).
The case revolved around the question of whether an exchange of emails containing the terms of a guarantee by one party to another were capable of forming a binding guarantee. The Statute of Frauds provides that a guarantee will only be binding if in writing and signed. In this case, the ‘guarantee’ was not signed in wet ink but its terms were confirmed by email. Clarke J held that the emails were sufficient to constitute a guarantee because the terms were set out in writing and the printed name at the end of them could amount to a signature. This was considered to be the case even where only the first name, initials or a nickname was used.
This case illustrates that an electronic signatures has the same status as a wet ink signature. If a person puts their name on an email, this indicates that it has been sent with that individual’s authority and they take responsibility for its contents.
According to the Law Commission there are three fundamental questions in relation to the validity of a signature, whether electronic or wet ink:
(1) How can you be confident that person who signed the document is that person, and not another person pretending to be them?
(2) Does the person signing the document have capacity and the requisite authority to sign the document, either for themselves or for their corporate body?
(3) What is the document that is being signed?
Users of electronic signatures should satisfy themselves that they have sufficient evidence to answer the above questions for the purpose of their transaction. If the authenticity of an electronic signature or wet ink signature is disputed, a forensic investigation will usually be required to determine whether it was made by a particular person. It is therefore essential that any formalities associated with executing a particular type of document are followed.
There are situations where the use of an electronic signature will not be deemed to be appropriate, such as in the case of a signature by a vulnerable person. The Law Commission have also stated that it is not yet appropriate for wills to be executed by electronic signature.
In circumstances where a signature must be witnessed (for example because it is for the purpose of executing a deed), can this be done electronically? The Law Commission says that it can, provided that the witness looks over the shoulder of the person signing the document on screen. The law does not yet allow for the witnessing of a signature to be done via video or other electronic means so a witness must be physically present.
In international transactions it will be important to ensure that the mechanism of electronic execution being used is recognised and enforceable in the other party’s respective jurisdiction.
The eIDAS Regulation (EU) No 910/2014 of the European Parliament deals with electronic identification and trust services for electronic transactions in the internal market. It is envisaged by the European Union Withdrawal Act 2018 that this regulation will be incorporated into UK law. This means that the validity of electronic signatures is probably here to stay.
Similarly, Hong Kong, New South Wales (Australia), New York, Scotland and Singapore have all introduced legislation dealing specifically with electronic signatures and electronic execution.
The Law Commission’s report provides support to those keen to use electronic signature. This is similarly encouraged by Article 25(1) of the eIDAS which provides that an electronic signature cannot be refused simply due to its electronic nature.
However, many are still wary of using electronic signatures and discussion between the parties should take place before executing a document in this manner. The parties should agree the type of electronic signature they will use to ensure that it will be accepted by the other party. This will hopefully mitigate any subsequent disputes which may arise out of the execution of the document via electronic signature.
If you have any further questions related to electronic signatures, please contact the authors or another member of the Commercial Litigation team.
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