On 23 March 2020 the UK Government announced a period of ‘lockdown’, prohibiting all but essential face-to-face contact for an unknown period of time as part of its plan to combat Covid-19. As business goes on in the unprecedented time contracts will continue to be signed and agreements reached. Although signing documentation digitally is an ever-increasing trend and very familiar to some, if you are running or managing a business it is now imperative to be aware of the requirements of an effective electronic signature.
Broadly speaking, an electronic signature can be used to execute all types of agreements, from basic contracts established via email to formal deeds, providing that:
• The person signing (whether as the signatory or their agent) intends to sign and be bound by the document; and
• Any formalities relating to execution of that document are satisfied.
What can constitute an electronic signature?
Examples include an individual:
• Typing their name or inserting their signature as an image into a digital contract or email containing contractual terms.
• Using a stylus pen to make their signature on an electronic device.
• Accessing a web-based platform (such as DocuSign or Zoho Sign) and completing the document signing process.
• Scanning their manuscript signature.
• Clicking on an icon on a website to confirm an order.
If a document is a deed, the signature of each signatory must be witnessed. If any challenges are faced (more on this below) a key point to bear in mind is to ensure as far as possible that there would be overwhelming factual evidence to rebut any challenge that the deed was not legally executed. In this context:
• If the signatory is an individual, a person will be required to witness the electronic signature and that person can sign the attestation clause using an electronic signature in the same way as the signatory to the deed. Statute dictates that the witness must be physically present at the place at which the signatory signs the deed. The law, as it stands, does not permit ‘remote witnessing’ via a video link. But with individuals working from home in the current climate, having somebody suitable and available to act as witness may be challenging. A cohabitant of the signatory can act as witness unless that person is a family member who is also a party to the deed, or a minor. If necessary, to add to the weight of evidence that the deed has been validly executed, a third party could observe the process through video link. Suitable record keeping would be essential.
• If the signatory is a company, the Companies Act 2006 provides that two directors (or a director and the company secretary) may execute a deed (instead of a director in the presence of a witness). There is no requirement for the signatures to be applied at the same time, therefore the signatories on behalf of the company could be in different places and sign at different times. In either case, if a deed is executed via an e-signing platform, the digital audit trail should record the IP address of the signatory and witness, so steps should be taken to ensure that those signing use the same device or WI-FI network. This would provide evidence to suggest the signatory and witness were in the same physical location.
Clearly, it may be difficult for an individual or sole director to execute a deed when in self-isolation or lockdown. Any person in this scenario may wish to ask themselves:
• Can an attorney, acting under the authority of a power of attorney, execute the document on my behalf?
• Should I appoint a secretary (or second director, if appropriate) who can act as the second signatory (the filing can be done online via the Web Filing service, and is free of charge)
• Could a contract be entered into on a temporary basis and the deed executed at a later date? (i.e. after the period of self-isolation or lockdown)
• Does the document actually need to be a deed? Would a contract suffice?
If parties to a contract, or deed, are seeking to vary the arrangement, care should be taken to comply with any prescribed method in the document to achieve this. For example, it may be a requirement that a variation is made in writing, or the consent of a third party may be necessary. It should be noted that some public authorities have specific requirements regarding the type of signatures they will accept. For example, HMRC and the Land Registry have typically required ‘wet ink’ signatures on original documents sent to them. Certain Companies House forms must be filed in paper form, but forms can be completed digitally, printed and posted. In our experience, Companies House will accept the electronic signature of a person authorised to sign on behalf of the company. In the current climate, it is possible that public authorities will relax their requirements, but individuals should seek guidance directly if uncertain.
How can Blaser Mills Law help you and your business? In a commercial context, the good news is that electronic signatures are widely accepted in most scenarios as constituting a valid signature. However there is always a risk that a contract may not be upheld as valid if not executed properly and in the current climate, every contract with a customer or supplier could be essential to your business. As such, if you have any uncertainty please get in touch with the Corporate and Commercial team on 020 3814 2020 or contact Simon Stone at firstname.lastname@example.org.