Electronic Signatures and Execution of Deeds

January 5, 2016

In this increasingly digital age, we are regularly asked questions surrounding the electronic execution of documents for instance whether hand-written “wet ink” signatures are actually required, will an exchange of emails suffice and whether an electronic signature will be valid. This article aims to address these queries.

Evidence and Surety
In order for a contract (whether verbal or written) to exist there needs to be, amongst other requirements, certainty of terms. If there is a dispute over the terms of a verbal contract it is difficult to prove that the terms were indeed certain and that a contract exists at all. If those terms are written down, the existence of a contract (even if there is a dispute over the terms) is much easier to establish.

However, every contract (written or otherwise) is open to the accusation of fraud. If a physical execution of the document has taken place it is much easier to establish who did sign and who is bound by the contract. In contrast, the use of simple electronic signatures (or an exchange of emails) increases the risk of impersonation and/or the tampering of the electronic “final” document. To deal with this, an increasing number of companies are utilising e-signature products with encryption and authorisation software to reduce such risk, but everyone should note the limitations of electronic signatures under the current law.

Definition and Validity
The law defines an “electronic signature” as data in electronic form attached to or logically associated with other electronic data and which serve as a method of communication. This would include a click on a website, the insertion of a scanned image of a signature into a document, the use of a fully encrypted third party verified digital signature, and the use of bespoke signature writing machines.

In contrast, there is no statutory definition of “signed” or “signature”. However, it has been established that the act of attaching or inserting an electronic signature would constitute a valid signature if it is capable of showing that the signatory intended to authenticate the associated document.

Simple Contracts
Most simple contracts which can be executed “under hand” can be executed using an electronic signature. However, it should be noted that most documents which are required to be registered with an authority (e.g. the Land Registry) in hardcopy must contain a “wet ink” signature. Even here, however, many authorities (e.g. Companies House and the Intellectual Property Office) now accept online filings which impose their own digital authentication requirements.

There are numerous legal obstacles to overcome in using electronic signatures for the execution of deeds - market practice is that deeds should still be signed in wet ink. Despite this, some lawyers have argued it may be possible to validly execute and deliver a deed by electronic signature.

A company may (amongst other methods) execute a deed if it is signed by two directors of the company. If it is accepted that signing includes the application of an electronic signature, there appears to be no reason why a company cannot validly execute a deed by having two directors separately attach electronic signatures to the deed.

Execution of a deed by an individual is a little more complicated, as the deed is to be signed by the individual in the presence of a witness, who attests the signature. The question that has yet to be answered is whether a witness who is present and witnesses an electronic signature being applied is able to validly attest the same and, if so, whether they themselves can provide such attestation in the form of their own electronic signature.

As the digital era continues apace, the use of electronic signatures is becoming more prevalent. In the case of simple contracts, such use (when carefully applied) gives rise to a valid execution. As stated above, the same cannot be said with certainty with respect to the execution of deeds, and these should be executed in “wet ink” wherever possible. However it is likely that, as e-signature technology becomes more advanced, electronic execution of deeds in one form or another will be recognised by the courts, and better guidance for best practice shall emerge

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