The restrictions that have been put in place as a result of the COVID-19 outbreak have raised questions on how it is possible to continue legally executing documents. The use of electronic signatures is likely to become more popular in the coming weeks, as organisations seek to continue entering into legally binding arrangements, whilst effecting social distancing measures and working remotely.
The purpose of this article is to provide greater clarity on the methods of signing an agreement electronically, so that (where appropriate and with further guidance) companies can use electronic signatures with confidence during these uncertain times. Companies should establish their own protocols to ensure that signatures are correctly authorised.
Whether it is possible and whether an agreement is valid or not will depend on the governing law of the agreement, the type of agreement that needs to be executed and how it has been electronically signed.
Please note that this article only sets out the different ways of signing an agreement electronically. There are many different factors that need to be taken into account when determining whether an agreement is binding on the relevant parties and you should seek legal advice before executing documents using electronic signatures.
The Electronic Identification and Trust Services Regulation (EU/910/2014) (the “Regulation”) sets out the validity of electronic signatures in the EU, including the UK. The Regulation came into force on 1st July 2016 and is incorporated into English law. As at the date of this article, the Regulation continues to apply in the UK, despite having left the EU.
The view of the Law Commission is that “[a]n electronic signature is capable in law of being used to execute a document (including a deed) provided that (i) the person signing the document intends to authenticate the document and (ii) any formalities relating to execution of that document are satisfied.”
Unless relevant legislation, contractual arrangements or case law specific to the document being signed provides otherwise, the law adopts a pragmatic approach and does not prescribe any particular form or type of signature. In determining whether the method of signature adopted demonstrates an authenticating intention, the courts will adopt an objective approach.
An electronic signature can take a variety of forms:
- somebody typing their name into a contract or email with contractual terms;
- a person pasting a scan of their signature into a soft copy contract in the execution block;
- a person using an electronic signature platform to click to insert a typed or handwriting font into the execution block;
- a person using a e-pen or finger to sign their name on a tablet.
Below is a list of some types of agreements under English law and a brief example of the practical methods that can be used to help validly execute the agreement by electronic means.
DIFFERENT METHODS TO ELECTRONICALLY SIGN AN AGREEMENT
Please note there are a number of exceptions where HMRC and the Land Registry currently expect “wet ink” versions of executed documents. Therefore, we advise that you seek legal advice before executing such documents.
Simple contracts – These agreements can be formed orally or in writing and are not subject to specific statutory requirements. This means they only require an offer, an acceptance, a transfer of money (or something of value) and an intention to create an agreement. These agreements can be signed by clicking an acceptance box when presented with the terms & conditions on a website. For more bespoke contracts, a person can sign by typing their name at the end of an acceptance email after being presented with the terms & conditions, or by pasting their name into the signature section of an electronic copy of the agreement. If the parties are signing by way of email, then it is good practice to include express wording in the relevant document, acknowledging that the document has been signed by email.
Contracts that are subject to statutory requirements – These are agreements that need to meet the statutory requirements calling for documents to be executed ‘in writing’, ‘under hand’ or ‘signed’. These agreements (subject to any specific requirements) can be executed using the electronic forms described above.
Deeds – Depending on the legal entity signing the document, deeds must be signed by the parties, witnessed by an independent adult, and signed by that witness and delivered. They must also be in writing. As with the other two types of agreements explained above, the parties can paste signatures into an electronic version of the agreement. However, the requirement for the deed to be signed “in the presence of a witness” means that the witness must be physically present (whilst practicing appropriate social distancing measures), even where both the person executing the deed and the witness are executing/attesting the deed using an electronic signature.
Where two directors or a director and the company secretary are signing a deed of behalf of the company, guidance provided by The Law Society states that the officers can sign the documents in counterparts to meet the requirements for due execution of a deed by a company (historically, it had been thought that both officers might need to sign the same physical document to meet the Companies Act 2006 requirements).
Company secretarial documents – Companies House has an online secure system (WebFiling) which allows most companies to submit company information. The authentication code required for WebFiling takes the place of a signature on the document. Forms that are not filed using the WebFiling system may be signed using wet-ink or by pasting an electronic signature (provided they have been properly approved by the signatory).
For further information, please contact Howard White on 01932 590696 or email firstname.lastname@example.org. Howard is a Senior Associate in the Corporate and Commercial Department of Mundays and provides advice to companies and businesses in a wide range of commercial sectors. His work covers the full range of corporate transactions including mergers and acquisitions, business sales and joint ventures as well as general corporate governance, compliance and procedural issues.
The contents of this article are intended as guidance for readers. It can be no substitute for specific advice. Consequently we cannot accept responsibility for this information, errors or matters affected by subsequent changes in the law, or the content of any website referred to in this article. © Mundays LLP.