Electronic signatures, also known as digital signatures, are commonplace in recent years.
The technological advances of our daily environment mean both individuals and businesses require more modern and efficient ways to enter into binding transactions and the question has been proposed on whether the law in England and Wales can keep up. The law relating to signatures and other formal documentary requirements has a history dating back to 1677 when the Statute of Frauds required certain documents to be in writing and signed.
The English courts have generally taken a lenient approach to the admissibility of electronic signatures. However due to the lack of statutory or common law guidance on their legal value it has meant that their use on larger transactions has been somewhat restricted. Currently the law does allow electronic signatures to be used to execute simple contracts which are not required to be in any particular form. However there are certain statutory requirements in relation to deeds which require the document to be “in writing” or “signed” and in the presence of a witness in order to be valid. In 2016 the Law Society produced a practice note stating that an electronic signature can satisfy these tests and it is also possible to witness electronic signatures through being physically present when the electronic signature is applied.
Although potentially problematic, it seems theoretically possible that a deed could be validly executed electronically although there is no case law or legislation that expressly confirms this point. Additionally HM Land Registry has previously confirmed that an electronic document with an electronic signature could not be regarded as a deed and they cannot accept such documents without a statutory provision confirming that to be the case.
The Law Commission has identified that the confusion surrounding the use of electronic signatures is inhibiting the use of new technology. In an attempt to address the uncertainty in this area the Law Commission has launched a consultation on the electronic execution of documents with an aim to ensure that the law governing these formalities is sufficiently certain and flexible to remain competitive in a post-Brexit environment. The Law Commission has confirmed 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’ and legislative reform is not necessary. However they have set out potential options for reform and are seeking views on whether:-
- the government should set up a group of industry experts to monitor the use of electronic signatures and advise on potential changes which could help businesses as new technology emerges
- webcam or video links could be used instead of a physical witness for documents which require witnessed signatures
- there should be a move away from traditional witnessing in person to:
- a signing platform alone, where the signatory and witness are logged onto the same programme from different locations; or
- the ability of a person to “acknowledge” that they applied an electronic signature to a witness after the event
- there should be a further project on whether the concept of deeds is fit for purpose in the 21st century
The consultation covers a wide range of documents including deeds, powers of attorney, lasting powers of attorney, consumer contracts and contracts for the sale or other disposition of land it does. It currently excludes wills and registered dispositions under the Land Registration Act 2002 although it has acknowledged that HM Land Registry, who will no doubt welcome this guidance, is currently working on a system for the registration of electronically executed documents effecting the transfer of an interest in land.
The Law Commission has stressed that although the proposals are provisional it hopes that it will potentially pave the way for faster and more efficient transactions for both individuals and businesses.
