Dotted lines are disappearing but the Law Commission has joined the dots on electronic signatures

"Because only one thing counts in this life ... get them to sign on the line which is dotted”

The line above is from a 1994 movie (Glengarry Glen Ross). Fast forward to life in 2019, the lines which are dotted are disappearing and signing does not seem as straightforward. To help, the Law Commission has published a report on the electronic execution of documents (report) with the aim of helping “users of e-signatures to proceed with confidence.”

Law Commission goes back to basics and joins the dots

While the current law on e-signatures - EU eIDAS Regulation, Electronic Communications Act 2000 and UK case law (current law) - accommodates e-signatures, the report underlines that as the current law is not set out in a single source, it is inaccessible. To make it more accessible, the report joins the dots of the law together to provide a short statement as to the law on e-signatures including:

1. E-signatures may be used provided that the signatory intends to authenticate the document and fulfils any necessary formality.
2. What constitutes an intention to authenticate is likely to be widely interpreted by the courts. Signing with an “X” and ticking a box are given as examples in the report. The width of interpretation was highlighted by a case decided after the release of the report, where it was held that a sender’s name on an email – even though automatically generated – showed an intention to authenticate.
3. Formalities may be required under statute or contract, with examples being that the signature be witnessed or that the signature be in a specified form (such as handwritten).
4. Deeds can be signed and witnessed by e-signature but the witness must be physically present with the signatory when the deed is signed.

A good deed does go unpunished if e-signed properly

The report’s conclusion on the execution of deeds is probably the most noteworthy part, as the witnessing of an e-signature had been somewhat of a grey area. In the Law Commission's view, the current law does not allow for a witness viewing the signing on a screen; they must be physically present.

Where there’s a will there’s no way (the report’s guidance applies)

The scope of the report should be noted. Unlike the 2016 practice note from The Law Society on the Execution of a document using an electronic signature, the report applies to individuals outside a business context, as well as companies within a commercial context. There are two particularly significant types of arrangement/transaction which are excluded from its scope: wills and dispositions of land under the Land Registration Act 2002. Both are being looked at by the Law Commission and HM Land Registry.

Signing in the future

The report makes recommendations to facilitate the future use of e-signatures including:

1. Codifying the law and the report contains a draft provision which could be incorporated into the current law or enacted as a freestanding provision.
2. Setting up an industry working group to consider practical issues such as security and reliability and to provide best practice guidance.
3. Modifying the current law to allow for video witnessing and considering a holistic review of the law on deeds.

If you are not sure it is fine, do not e-sign

Factors including the following may mean that an e-signature should not be used:

1. Contractual/statutory requirements.
2. The practices of bodies such as HMRC and the Land Registry.
3. Cross-border transactions.

If unsure, ask and we will provide an answer. To help you on your way, however, please find below guidance on certain categories of document and whether an e-signature may be used.

Simple contracts ✓

• In the absence of any requirements (contractual or statutory), these may be concluded using an e-signature.

Contracts required to be “in writing” / “signed” / “under hand” ✓

• In the absence of any requirements (contractual or statutory), a contract signed electronically, and which is itself in electronic form, would satisfy the requirements.

Deeds ✓

• In the absence of any requirements (contractual or statutory), these may be executed using an e-signature.
• If a witness is required, a witness can attest an e-signature using an e-signature. However, the report makes clear that the witness must be physically present with the signatory, and may not witness through video link (which previously was thought to be possible, although not best practice).
• Under the Companies Act 2006, two directors or one director and the company secretary may sign a deed on behalf of a company without the need for a witness. In such cases, the signatories do not have to be present together and also do not have to sign at the same time.

Directors’ and shareholders’ resolutions ✓

• Minutes of a directors’ meeting may be e-signed and under the Model Articles and the 1985 Table A, directors may e-sign directors’ written resolutions.
• Shareholders’ written resolutions and minutes of a shareholders’ meeting may be e-signed.

Forms to be filed with HMRC and the Land Registry ×

• Both HMRC and the Land Registry still insist in most circumstances on wet ink signatures, so e-signatures should not be used for forms and documents (including stock transfer forms) to be submitted to either body without first seeking advice.

Here is our earlier, more general, article on the report Law Commission confirms legality of electronic signatures