COVID-19: electronically signing documents in the new world of remote working
As this is a fast moving topic, please note that this article is current as at 01/04/20. For further information, please contact Katherine Proctor.
As we move into the new world of remote working as a result of COVID-19, businesses are forced to get up to speed much more quickly on the questions of whether and, if so, how they can legally execute documents using electronic signatures.
The position under English law
Most (although not all) contracts and agreements can be entered into orally or by conduct, such that there need not be any signatures. In many cases, however, parties want to record the terms of their agreements and written documents are produced, which are subject to signature.
English law is progressive in the acceptance of electronic signatures, which are generally considered valid for the legal execution of documents (the Law Commissions’ report entitled “Electronic execution of documents” 2019, endorsed by the UK Government Ministerial Statement of 3 March 2020).
In short, documents (including deeds) may be executed using electronic signatures provided:
- There is an intention to authenticate the document, which means that there is an intention to sign and be bound by the document being signed, and
- Any execution formalities are satisfied, such as witnessing or the signature being in a specified form (i.e. handwritten).
An electronic signature is also admissible in evidence in legal proceedings e.g. to prove or disprove the identity of a signatory and/or the signatory’s intention to authenticate the document.
In general, the common law adopts a pragmatic approach and does not prescribe any particular form or type of electronic signature. As a result, valid forms of electronic signature can include:
- Typing a name at the bottom of an email
- Clicking an “I accept” box on a website
- A scanned manuscript signature
- Typing your name or pasting an image of your signature into the signature section of a document
- Clicking to have your signature inserted into a document through an e-signature platform.
The evidential value of the form or type of electronic signature adopted, however, may be questioned and parties should think carefully about which they choose.
Where the formality of witnessing is required, such as with deeds, one must be careful to ensure the physical presence of the witness who can attest to an electronic signature. This is because the law is currently unclear as to whether remote or virtual forms of witnessing, such as by video link or other technology, will satisfy a witnessing requirement. The Law Commission has recommended that an industry working group be convened by government to give consideration to legislative reform in the areas of video witnessing and ‘acknowledgements’ in the absence of actual witnessing of deeds, but any such reform would be some way off yet.
Whilst generally as a matter of best practice one looks for an independent witness, at times like these, a signatory may need to look to an adult family member (or neighbours whilst observing social distancing and cleanliness measures as appropriate) to witness their electronic signature. Note, however, that where family members (or neighbours) are a party to the document being signed, they cannot act as a witness. Both the signatory and the witness can electronically sign a document.
Situations where electronic signatures are not suitable
This is not an exhaustive list, but some of the more common situations in which electronic signatures may not be suitable include:
- Where there are restrictions in legislation or case law
- Where there are restrictions in a company’s constitutional documents as to the capacity or authority of a signatory to electronically execute a document
- Where there is use of a company’s corporate seal in the execution of a document
- Where the document is a negotiable instrument i.e. bill of exchange or promissory note
- For filings or registration purposes i.e. with a governmental organisation or registry (such as the land registry)
- Where cross-border issues arise (see below).
In some of these situations, solutions may be found to help address the COVID-19 disruption. For example, a company may be able to change its constitutional documents to resolve capacity/authority issues and permit electronic execution of documents. Since the Companies Act 2006, a document need not be executed by a company seal. Instead it can be executed electronically by two authorised signatories (i.e. a director or company secretary) or by a director in the presence of a witness who attests the signature.
Businesses are increasingly turning to e-signature platforms to streamline and save cost. There are a growing number of e-signature platforms out there, including (amongst others) Armatic, Docusign, Eversign, Legalesign and Pandadoc.
There are, however, issues to consider in the use of these platforms. In particular, are the platforms secure and reliable? Are they GDPR compliant? Can they ensure that the electronic signatures are authentic and traceable so as to address fraud? Your IT department and legal team will need to assess this.
Some e-signature platforms offer assistance with witnessing of e-signatures, but again one must remember that the witness must be physically present to witness the signing.
Where the governing law of a document is not English law or where non-English parties are involved, local legal advice will be required as to the legal validity (including capacity and authority considerations) and evidential value of any electronic signatures.
Certain jurisdictions can require documents to be notarised or apostilled, which may present difficulties for electronically signing documents.
In addition, hurdles may arise at the stage of enforcement of any judgment or arbitral award outside of England, e.g. where the electronic signature on an underlying contractual document falls short of local formalities for enforcement.
Whether a business can validly sign documents using electronic signatures generally depends upon:
- The governing law of the document
- The law of the place of incorporation of the parties
- The law of the place of enforcement
- The constitutional documents of a company
- The terms of the agreement itself.
Businesses should be careful, therefore, not to rush too quickly towards electronic signatures without proper consideration.
As a matter of English law, in most cases parties will be able to validly sign documents using an electronic signature. In these cases, consideration should be given to the evidential value of the form or type of electronic signature adopted and parties should make sure all execution formalities are satisfied. There are limited situations in which electronic signatures may not be suitable and parties should be careful to check when these apply.
In cross-border matters, be careful to get the appropriate local advice. Suffice to say, that different jurisdictions take very different approaches to the use of electronic signatures.
And finally, be careful to check the security, reliability and capabilities of any e-signature platforms.