Electronic signing of legal agreements is where a person executes a legal agreement in electronic form by a method that does not involve putting pen to paper (commonly known as wet ink signature). Historically, “signing” a legal agreement was the only way to validly execute it or bring it into force.
Although for many wet ink signatures have continued to be the preference, electronic signature of legal agreements has been around for some time. The validity of electronic signatures under English law was confirmed by the Law Commission in its 2019 report ‘Electronic Execution of Legal agreements’ which was endorsed by the UK Government on 3 March 2020. Now with social distancing, quarantine, travel restrictions and (with many people working from home away from their offices) and with no or limited access to printers and scanners making wet ink signatures has become extremely difficult if not impossible. Accordingly, signing of legal agreements has been forced very rapidly into the 21st century.
In this briefing we consider the advantage of electronic signing, the different forms of electronic signing, validity of executing legal agreements and deeds using electronic signature and what types of legal agreements cannot be signed electronically under English law. This briefing only considers the position under English law; if the parties to the legal agreement are overseas, performance of the legal agreement is to take place overseas or the governing law of the legal agreement is not English law, specific advice should be taken in the relevant jurisdiction(s).
Electronic signing has many advantages (even absent Covid-19 restricted times):
There are three main types of electronic signature of legal agreements:
Whilst all of the above methods of electronic signature are legally valid, in terms of evidential weight in the event that a legal agreement is disputed, the more robust and secure the method used (with in-built security or fraud prevention) the more evidential weight it will carry. So, for example, because of the digital certificates and records that are generated by an e-signature platform, this form of electronic signature will carry more evidential weight than, for example, signatures exchanged by email.
The Law Commission confirmed that an electronic signature is capable in law of being used to execute a legal agreement (including a deed) provided that:
In addition, whether a legal agreement can validly be executed electronically will depend on other factors:
If a jpeg signature is being applied by someone who is not the signatory (for example, a personal assistant to a director) then that person must have the requisite authority to do so.
It must be noted that if a signatory to a legal agreement is not an English incorporated company or you wish to enforce the contract abroad, the local law requirements will need to be met.
To summarise, save for the legal agreements set out below in ‘What Legal Agreements Cannot be Signed Electronically?’, simple contracts can be validly signed electronically via email, jpeg signatures or through an e-signature platform.
A deed is a formal kind of English law contract which, when it is signed by an individual or by a single director on behalf of an English company, must be witnessed. Any contract can be a deed (if the formalities are complied with) but some agreements such as powers of attorney and transfers of land must be executed as a deed. English companies can avoid the need for a witness if two directors/one director and the company secretary sign the deed.
As a reminder, the rules for wet ink witnessing of a deed require that:
These same rules apply even where the deed is being executed virtually. This means that whilst a deed can be executed virtually, the signatory and witness must be physically together i.e. virtual witnessing of execution is not possible.
It is also worth noting that if a jpeg signature is being used, for a deed to be validly signed electronically, the jpeg signature must be applied by the signatory themselves and not by someone else.
To summarise, save for the legal agreements set out below in ‘What Legal Agreements Cannot be Signed Electronically?’, deeds can be validly signed and witnessed electronically via email, jpeg signatures or through an e-signature platform provided that the witness is physically present with the signatory.
Some legal agreements cannot be witnessed electronically (such as wills, legal agreements to be filed at HM Land Registry or at the Companies Registry) and for some contracts (for example, consumer contracts) additional requirements must be complied with.
Perhaps one positive outcome from the current circumstances is the proliferation of execution of legal agreements via electronic signing and a move away from wet ink signatures. However, care needs to be taken however to ensure that the requirements are stringently met for the execution to be legally valid. To that end, parties to legal agreements need to contemplate and agree well ahead of time how they will execute their legal agreement, keep records as to how legal agreements were signed (to provide an evidential trail) and whether, post execution, they will still require hard copies to be circulated (where these are legally not required).