By Thomas Lumsden, Partner
Now that some time has passed since the onset of the Covid-19 pandemic, it is worth revisiting the law and practice on electronic signatures of documents, including deeds. The use of electronic signatures was common, even before the onset of the pandemic, but the adoption of electronic signing (e-signing) and in particular the use of e-signing platforms was accelerated by Covid-19.
A review now is also timely, because the Joint Working Party of the Law Society Company Law Committee and the City of London Law Society Company Law and Financial Law Committee has updated its earlier Briefing Note.
A legal case in 2008 (Mercury Tax Group Limited -v- HMRC) laid down some basic rules for e-signing. The Mercury Procedures required that:
In terms of the Mercury Procedures, there are various options available, but a commonly used option for deeds, real estate contracts, guarantees and simple contracts would involve the parties' lawyers first agreeing that the Mercury Procedures would be adopted. The signatory would then be sent a final execution version of the document (as a PDF or Word document).
The signatory would print out the signature page only and then sign the signature page. The signatory would then send back (in one single email) a PDF copy of their signed signature page, plus the execution version of the document. (This would fulfil the legal requirement that the signed document should exist as a discreet physical entity and for the signature and attestation by a witness to form part of the same physical document when the Deed is signed).
Similar principles apply to e-signing platforms. There are many different commercial brands of e-signing platforms available which are in common use. When an e-signing platform is used and the entire final version of the relevant document is uploaded, this makes it more straightforward to comply with the legal requirement (for Deeds) that the relevant signatures and any witness attestation must form part of the same document when signed.
It is still important for the lawyers or other parties organising the signing process, to make sure that proper legal authority is available and taken from the signatories, in order to implement the dating and delivery of the relevant documents.
There are different forms of electronic signatures which can be any of the following:
As a rule, under English law, there is no need for simple contracts to be in any particular form. They can in fact be entered into orally, provided there is offer and acceptance and consideration, certainty of the terms, and an in intention to be legally bound. Any simple contract can therefore be created using an electronic signature.
There are some types of contracts that must be in writing and/or signed or under hand. These include:
One of the issues that arose during the various pandemic lockdowns was in relation to the legal requirement for a signatory to have his or her signature witnessed by an independent adult witness in the presence of the signatory. In practice this might not be possible where for example the signatory lived many miles from the nearest witness or was not a part of the same household or if they were both part of the same household, but the witness was related to the signatory, and therefore could not be seen as properly independent.
The use of an e-signing platform in this situation was potentially a problem. This is because it would in some situations be completely impossible for the witness to be physically present (that is, in the same room and next to, the signatory ) at the time the document was signed without both the witness and the signatory and the witness potentially breaking the law.
Some signatories proceeded by signing a document with the witness watching the signatory carry out the signing process over a video platform such as Teams or Zoom. It was argued that, because the witness had seen the signatory signing the document over a video platform, such a witnessing process was lawful. However, this argument is flawed, and the Joint Working Party that prepared the Briefing Note, having taken a leading barrister's advice, confirmed that a witness must be physically present when the signatory signs, rather than witnessing through a live televisual medium such as Teams or Zoom. This was also endorsed by the Law Commission in their 2019 Law Commission Report when they said:
"We are not persuaded that parties can be confident that the current law would allow for a witness viewing the signing on a screen or through an electronic signature platform, without being physically present. This conclusion is based on the restrictive wording of the statutory provisions and the serious policy questions underlying any extension to accommodate technological developments.”
"Our view is that the requirement under the current law that a deed must be signed ‘in the presence of a witness’ requires the physical presence of that witness. This is the case even where both the person executing the deed and the witness are executing/attesting the document using an electronic signature."
Therefore, the law remains that where an e-signing platform is used, both the signatory and the witness must be physically present, i.e. next to one another at the time the signature is witnessed by the witness.
One possible way to mitigate any risk that the witness is not present physically would be to ensure that the document being signed contains a clause on the signature page in which the witness gives a warranty that they were at all material times in the physical presence of the signatory. The warranty clause could also contain an indemnity from the witness that the witness will indemnify any parties suffering loss for any reason if the deed is declared null and void because of a defect in compliance with the witnessing requirements.
E-platforms have proved extremely helpful throughout the pandemic and will no doubt continue to be used and developed and refined as time goes on. Whilst some government bodies have embraced the digital age, others have been slow to do so. The Land Registry do allow for electronic signatures for some documents (as set out in their Practice Guide 82). However, their requirements are quite strict and usually involve much work for the lawyers involved, who would be required to provide a certificate for conveyancer-certified electronic signatures. Many solicitors, therefore, still tend to rely on wet ink documents as it is usually simpler.
The Land Registry's strict requirements are perfectly reasonable, as their main concern is trying to prevent genuine landowners suffering losses because of criminals using fraudulent documents to carry out mortgage fraud, for example, which is an ever-increasing problem.
In summary, for the sake of expedience, e-signing platforms and electronic signatures should be welcomed and embraced provided they meet the legal requirements for them to be effective and secure.
If you would like us to discuss e-signing platforms and electronic signatures, please do not hesitate to contact Thomas Lumsden on email: tal@cooperburnett.com or tel: 01892 515022.
This blog is not intended as legal advice that can be relied upon and CooperBurnett LLP does not accept any responsibility for the accuracy of its contents.
