The global pandemic has already seen numerous commercial projects and contracts put on hold. However, there will be some contracts which, due to their nature cannot be delayed, which presents businesses with the logistical problem of execution. With the country on lockdown and remote working and social distancing in full swing, how do such documents get signed?
Whilst there has been plenty of talk about a shift from the ceremonious ‘wet signature’ towards the use of electronic alternatives in recent years, the practise hasn’t been commonly adopted because of the number of reservations that businesses have. In 2019 the Law Commission confirmed that electronic signatures can be used to execute documents, including where there is a statutory requirement for a signature. This means that in most cases, electronic signatures can be used as a viable alternative to handwritten ones, but only where it can be demonstrated that the signatory intends to authenticate the document and the relevant formalities required have been complied with.
Electronic signatures may include:
- Typing your name or inserting your email signature;
- jpeg signatures;
- Executions through electronic signature platforms such as DocuSign and Adobe Sign;
- Using your finger or a pen to electronically sign; or
- Electronically ticking a box.
Whilst legally accepted, the lack of up-take is due to the risks around enforcement and reliability. Evidencing who provided the signature, the risk of a challenge to its validity, and the potential consequences have meant that up until now, a handwritten signature is preferred for most commercial contracts. However, given the current circumstances and where contracts cannot be physically signed, an electronic alternative may be the only solution.
Before adopting this approach you should consider the following:
- Does the contract require execution? Just because it is a contract, it does not necessarily mean that it requires execution. Contractual terms can be incorporated through actions such as making payment or commencing the provision of services.
- What type of contract is it? For certain documents where originals are required such as contracts or forms with Companies House or the Land Registry, electronic alternatives are not possible, and you should review the execution requirements. Some authorities are permitting the use of electronic alternatives on a temporary basis for now (including HMRC in relation to stamp duty forms), but it’s advisable to check with the relevant authority for confirmation.
- What type of electronic alternative is suitable? For terms and conditions a tick box may be the best option; for deeds, use of an electronic signature platform may be preferred. When thinking about an electronic alternative, you should consider the nature of the document and what level of security or evidence is needed; for example, using a platform which requires two factor authentication or stores meta data documenting the date, time and location of signature is likely to be preferred over use of a jpeg signature.
- What is the governing law? If the contract’s governing law is not English law, then you would need to consider if electronic signatures are legal in the applicable jurisdiction.
- What are the execution requirements? Does the contract require the contracting parties’ signatures only? Does it require witnessing or notarising? If it requires notarisation, an electronic substitute will not be suitable. Whilst witnessing can be achieved through an electronic platform, please note that witnessing via video link is not currently permitted (although this is something which the Law Commission had previously recommended for reform, and that reform may well be accelerated in the current circumstances). Obtaining a witness whilst social distancing may also prove difficult. Whilst it is best practice to ensure witnesses are independent, for most documents/contracts, providing the witness is not a party to it, there is no requirement for the witness to be otherwise independent; family members would therefore be valid witnesses.
- Counterparts - Does the contract expressly include a counterparts provision to permit parties to electronically sign separate versions where printing signing and scanning this will be essential? (Please note that for some electronic signature platforms this will not be necessary.)
- Transmission – Does the contract address transmission, and if so, is this restricted just to email? Post and fax will not be possible for most remote workers in the current circumstances.
In summary, use of an electronic signature may not be ideal, but it may be a viable alternative to get the contract over the line in these unprecedented times. Before adopting such an approach you should consider the practical considerations identified above, in particular focusing on the risks, and consider using an electronics signature only where there is absolutely no alternative.
Of course there is every chance that further guidance will emerge over the coming weeks; rest assured that we will provide an update as-and-when the situation changes.