11 November 2019

Are electronic signatures legally effective?

A report issued by the Law Commission in September 2019 has attempted to clarify the position on electronic signatures, an issue that often arises but has never been resolved in sufficient detail to give everyone comfort or clarity.

The Law Commission’s report is, therefore, a timely effort given the increased use of technology in so many areas of our lives, to ensure that there is a better understanding of how some types of technology can lead to greater efficiency when creating contractual relationships.  The Ministry of Justice commissioned this review in an effort to give both organisations and individuals reassurance about using electronic signatures in respect of the majority of commercial and consumer documents (although separate consultations are underway around electronic conveyancing and land dispositions or wills, which are outside the scope of this report).

The legal patchwork

The validity of electronic signatures is addressed across different laws, both legislation and case law, and, as a result, this can make it hard to determine a definitive viewpoint.  The report has clarified that under the current law electronic signatures are capable of being used to execute a document and so create a contract.  This is provided that the person signing the document intends to authenticate the document and that any formalities relating to the execution of the document are satisfied.  So, by way of example, if the signature is required to be witnessed, that will still be the case and required to make the electronic signature valid.

An example of another formality which could mean an electronic signature is invalid, is if the document includes a specified requirement that the signature is in handwritten form.  However, it was established in a previous advice to the Government by the Law Commission that the phrase “in writing” can be interpreted to include technological developments and so can be satisfied in an electronic form.

Validity in legal proceedings

Questions around the validity of electronic signatures on legal documents also tend to focus on whether they can be used as valid evidence in legal proceedings.  Are they recognised as providing the evidence required, for example, to prove the identity of the signatory or establish whether they did have an intention to authenticate the document in question?  The quick answer is yes they are, unless it can be proved that specific legislation or contract arrangements say something to the contrary.

Courts have taken an objective view in the recent past in looking at the circumstances relating to an electronic signature to establish that it does demonstrate an individual’s intention to authenticate the document in question.  Examples of this have seen the following forms of electronic signature confirmed as acceptable:

  • a name typed at the bottom of an email;
  • clicking an “I accept” box on a website; and
  • the header of a SWIFT message (SWIFT being the coding system used by financial institutions for secure transmission).

Electronic witnessing

Another area of common concern, and an issue that the Law Commission acknowledged has proved uncertain to date, is whether an electronic signature can be witnessed and, if so, can it be witnessed remotely.  That is to say, what is the situation if the witness is not physically present with the person giving their electronic signature and can they give their confirmation of having witnessed the signature electronically?

The Law Commission’s analysis of the current law confirms that firstly, an electronic signature can be witnessed.  There is no requirement for the witness to access or read the whole document which is being signed, simply to witness that another has executed it.  Also a witness can themselves use an electronic signature to record that they have witnessed the signature by the signing party.

However, the Law Commission concluded that a deed which requires the document signature to be carried out “in the presence of a witness”, does mean that the witness must be present in person at the signing of a deed.  Therefore, the individual acting as witness can’t simply view the signatory by video link or other remote means of access.  A witness viewing the signing on a screen or through an electronic signature platform, without being physically present, is not considered valid.  Although the Law Commission report states the current position, this area is one where future development by the courts is likely.

If you have any questions about any of the above issues, please contact Commercial Partner Emma Roe at eroe@shulmans.co.uk or on 0113 288 2817.