The Law Commission states electronic signature as valid as handwritten one
According to a consultation paper from the Law Commission of England and Wales, electronic signing of legal documents should be considered just as legally binding as a handwritten one – without the need to change the law.
The Law Commission further states that the electronic signature can even be valid when it is just a typed name or a single click of a button to authorise a legal document.
A consultation has been opened on whether new legislation is required to reinforce the validity of e-signatures, but the Commission said: “Our provisional view is that the combination of EU law, statute and case law means that, under the current law, an electronic signature is capable of meeting a statutory requirement for a signature if an authenticating intention can be demonstrated.”
According to the government’s legal adviser, the revelation should allow consumers to be able to use digital devices to sign legal documents that previously required manual signatures, which includes credit agreements, property sales and the granting of power of attorney.
However, the Commission revealed that some businesses still insist on signatures to be handwritten on documents due to reservations that legal challenges may be brought against them if documents are signed electronically. One such organisation asks their clients to sign paperwork by hand before scanning them electronically and shredding the originals, describing this method as an inefficient practice and no doubt monotonous.
A number of recent Court of Appeal and High Court Rulings have set legal precedents that support the authenticity of electronic signatures which can include typing your name on a keyboard, using a finger or pen to sign on a touch-sensitive screen or clicking “I agree” on a website.
A proposal was put forward by the Commission whereby webcam and video link could be utilised when signing requires witnesses, which is not currently permissible by law.
The Law Commission stated: “We provisionally propose that it should be possible for a witness to observe an electronic signature by video link and then attest the document by affixing their own electronic signature to it,” adding that people could also log in to virtually witness an electronic signature being made.
“Contract law in the UK is flexible, but some businesses are still unsure if electronic signatures would satisfy legal requirements,” the Commission said. “We can confirm that they do, potentially paving the way for much quicker transactions for businesses and consumers.
“And not only that, there’s scope, with our proposals for webcam witnesses, to do even more to make signing formal documents more convenient, speed up transactions and get business booming.”
But, there has been substantial disagreement in the industry in recent years as to whether e-signing of legally binding documents such as contracts and deeds is valid.
The Government proposed a plan to allow Lasting Powers of Attorney (LPAs) in England and Wales to be formed entirely online in 2013, but their proposal received strong criticism from leading professional bodies and the consultation was consequently dropped.
Later in 2016, The Law Society published a practice note regarding the e-signing of commercial contracts in England and Wales but did not publish any opinions/comments from the industry which would provide validity.
However, in September last year, the Financial Conduct Authority published a discussion paper which suggested that elderly persons should be encouraged to make, register and store LPAs online without the need for handwritten signatures.
The Government approved new regulations in January this year, which allows HM Land Registry to accept mortgages and transfers made by genuine electronic signatures, in order that conveyancing transactions can be completed entirely online using the Gov.uk Verify service which provides an e-signature mechanism for consumers. Thus, that required changes to the Land Registration Rules 2003, and applies only to conveyancing documents.
Unfortunately, there are instances where an e-signature cannot be used and is invalid without a change in statute law. One of which is the execution of a will under the Wills Act 1837, or where the law expressly provides that a signature must be in ink or handwritten.
Nevertheless, we live in a world of the digital era, meaning one day in the not too distant future there may not be a need for physical (‘wet’) signatures.
As a legal professional, do you fear legal challenges could be brought against you and/or your company if documents are signed electronically?
It has been recommended that an industry working group, including lawyers, technology experts, insurers, and businesses, and coordinated by the Government, should be established to produce best practice guidance on practical issues around electronic execution of documents, and perhaps even deeds, do you think this would be helpful to this sector?