In this increasingly digitised world, it’s no surprise that electronic signatures have grown in popularity over the past few years. They are now available in many forms, including typed, scanned, an electronic representation of a handwritten signature, a unique representation of characters, a digital representation of characteristics (e.g. a fingerprint or retina scan) and a signature created by cryptographic means, to name but a few.

But are they worth the (electronic) paper they’re written on?

The law

The accepted English law approach to the validity of electronic signatures, recently backed up by the Law Society, is that a simple contract – i.e. one which does not include a contract for the sale or other disposition of land or any deed – can generally be formed without any signature, provided the essential elements of a contract (offer, acceptance, consideration and an intention to create legal relations) are present. Recent case law even establishes that an exchange of e-mails is sufficient to create a legally binding contract. The question then becomes: “Are electronic signatures as good as wet-ink signatures in the eyes of the law?”

In the UK, the Electronic Communications Act 2000 establishes that all electronic signatures are admissible in English legal proceedings. Whenever a signature is provided to confirm an intention to be bound, the signatory will be bound unless there is evidence of a contrary intention.

The European Union is also striving to facilitate the validity of electronic signatures and their increased use in business transactions. New European legislation, known as eIDAS, specifically aims to strengthen confidence in new technologies and to assist the use of electronic signatures across the EU by providing a common legal framework for the recognition and admissibility of electronic signatures. Whether Brexit will have an impact on any of these perceived benefits remains to be seen.

Electronic signature platforms

Providers of electronic signature technology are also developing increasingly safe and easy-to-use platforms to facilitate the use of e-signatures. These platforms create e-sigs that claim to offer greater authenticity and security than a scanned signature. Currently, the leading platforms – such as Adobe Sign and DocuSign – are transforming the way that business is conducted in the digital world. The availability and use of these emerging platforms is central to the general move towards an EU-wide acceptance of electronic signatures.

The main advantages of using e-sig platforms over methods such as handwritten signatures are as follows:

  1. Increased efficiency. Conventional electronic signatures involve a person physically signing a document, scanning it into a computer and e-mailing it to a party. Using an e-signature platform removes these steps, and therefore the workflow is faster and arguably more efficient, leading to a costs saving. Using an electronic platform can allow users to complete approvals and agreements quickly from almost anywhere and on most electronic devices, including mobile phones and tablets. The process involves securely accessing and signing documents on the device itself. More advanced platforms include features to send reminders and check signing status at any time.
  2. Electronic platforms record who signed a particular document, the time of signing and details of the signatory’s e-mail and IP address. More advanced platforms can even record the location of signing! This audit trail can be used as evidence in legal proceedings to prove the authenticity of documents that are in dispute. This is arguably far more advanced and fraud-proof than our current standard of wet-ink signatures.

The final word

While simple contracts, and even guarantees, can be signed electronically, a word of warning about deeds (i.e. most security agreements and most receivables purchase agreements). The electronic execution of deeds by electronic signature is yet to be tested in the English courts, and so legal advice should be taken to ensure that deeds executed by this method comply with all relevant formalities. That said, the Law Society recently gave positive soundings that an English deed may be validly executed by e-signature.

This ever-evolving world is based on fast-paced and instant access to finance at the touch of a button, so we can expect to see e-signatures growing to become the norm. We will also see more advanced e-signature and document authentication technologies emerging in the medium term. Those that don’t embrace the future may get left behind.

Jonathan’s article is in the September 2017 edition of Business-Money magazine.


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