Industry News

Law Society Practice Note - E-Signatures

25 October 2016

The Law Society has issued guidance on the execution of contracts using electronic signatures, whether by clients of your practice or by another party to the transaction.  As usual, the status of the Practice Note is that it represents the Law Society's view of good practice: it is not mandatory, but it would be far easier to account to the SRA for your actions (if necessary) if you have complied with it. It also has the backing of leading counsel approval.


The Practice Note applies to commercial contracts entered into, and some other documents signed, in a business context, although its principles may be applicable to other contracts between consumers or individuals.  It is subject to any relevant regulatory or tax considerations (i.e. in some cases, parties will require their own original document containing original signatures for those purposes).  It will obviously also depend upon whether English law has been chosen to govern the contract or agreement in the jurisdiction/governing law clause. 

Summary 


In summary, the following may be concluded using an electronic signature, using a combination of electronic and wet-ink signatures, and without any specific reference to the electronic signature being required in the document itself for it to be validly executed:

  • simple contracts:
  • documents which are subject to a statutory requirement to be in writing, such as guarantees, promissory notes, contracts for sale or for other dispositions of an interest in land, dispositions of equitable interests, assignments of copyright, transfers of registered securities; 
  • deeds.

Generally, documents relating to a company incorporated under the Companies Act 2006 may be signed with an electronic signature, but if sent or supplied in electronic form, it may be necessary for the identity of the sender to be confirmed by the company or accompanied by a statement of identity that the company has no reason to doubt the truth of it.  (Refer to the Practice Note for further information relating to execution by companies.)

Evidence 

For evidential purposes, if the authenticity of a document signed using an electronic signature were to be challenged, the same principles would apply as if a wet-ink signed document were challenged, namely ’an English court would accept the document bearing the electronic signature as prima facie evidence that the document was authentic and unless the opponent adduced some evidence to the contrary, that would be sufficient to deal with the challenge’.

The scenarios in which it is necessary to check the identity of the signatory, the authenticity of the signature and/or whether the document was properly approved, and those in which it is possible to rely on assumptions, are the same irrespective of whether the signature is wet-ink or electronic.  However, paragraph 5 of the Practice Note sets out various examples of the different evidence, which could be used to prove the authenticity of a signature, where necessary. 


Originals and Counterparts

Guidance is also given on where there are a number of originals and counterparts, including: 

  • it is possible to have multiple originals of a document in both hard copy and electronic form (unless prohibited for some other reason);
  • each part separately signed electronically is deemed to form the same counterpart; 
  • there is no need for an additional wet-ink version of a document to be produced following electronic execution;
  • a composite document may be created, consolidating the hard copy and electronically signed pages (printing out or scanning as appropriate), which would be acceptable in evidence to Court;
  • electronic and hard copy print outs of electronically executed documents are acceptable in evidence;
  • electronically executed documents may be validly dated with the authority of the parties by inserting the date electronically or printing out and inserting by hand;
  • amendments can be made to electronically executed documents, whether in manuscript or electronically.

Other Considerations

Paragraph 8 of the Practice Note also sets out other factors which need to be taken into account, including:

  • capacity and authority to execute electronically - whether there is any restriction on electronic execution (e.g. a company’s constitutional documents requiring use of a common seal);
  • whether there is sufficient certainty that the person purporting to sign is that person or is acting with his/her authority;
  • security of distribution, signing and storage of the document (including IT security, confidentiality, value of the contract);
  • whether the document has to be filed: both HMRC and the Land Registry still require wet-ink signature versions, whereas Companies House’s web-filing service accepts certified copies of charging documents executed using an electronic signature;
  • whether the location of the signature or document has any legal consequences.

Jurisdiction

Separate legal advice should be obtained on this where any party is not from England, or where the document does not specify English as either the governing law or the jurisdiction for any proceedings, enforcement, registration, or where there is any other requirement for the document to be notarised or apostilled.

Action

  • Technical training or circulation of this summary to fee earners on the new guidance.
  • Consider whether any amendments are required to your internal procedures, after specialist IT input if necessary, e.g. automated/online records/evidence being both printed off and stored electronically; a file note made of the steps taken to include the time at which the fee earner applied his or her signature to the document or details of any web-based e-signature platform used.
  • Refer also to the Law Society Practice Note: Execution of documents by virtual means.

 

 

 

 

 

 

 

 

 

 

Ian Braithwaite
Client Relationship Manager

T: 0845 056 3949
M: 0743 727 4046
E: ian.braithwaite@lbslegal.co.uk

For General Enquiries: Email enquiries@lbslegal.co.uk
24 hour Helpline 0845 0563949
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