Electronic signatures: problems & solutions
Electronic signatures are often, but not always, valid. Legal problems can emerge. It depends on the type of document. We explain how to avoid issues.
In this insight we
- Look at the issues with executing documents.
- Explain how those issues can be overcome with practical solutions.
- Provide tips on how to avoid the common pitfalls.
The problems with modern deals
The days when parties physically met to sign a contract with wet ink are over. These days, both parties can sit either side of the globe and electronically sign their agreement. Nevertheless, your agreement may be invalid if you execute a document using an electronic signature.
What counts as an electronic signature?
Not every form of electronic signing is a valid electronic signature. A sign or a combination of signs must satisfy statutory requirements to be valid. It is a valid electronic signature if it is a:
- Sign which is typed; or
- Picture inserted in an appropriate place in a document,
- With the intention of authenticating the document.
Hence, valid, and probably acceptable, electronic signatures, include a person:
- Typing their name into a contract or email that includes the agreement’s terms;
- Electronically pasting their signature, e.g. a .jpg or .png image, into an electronic version of the contract, in the appropriate place;
- Accessing a contract through a web-based e-signature platform and,
- Clicking to have their name, written in a typed or “handwritten” font, automatically added to the contract in the designated place;
- Using a finger or light pen with a touchscreen to electronically write their name,
- In the appropriate place in the contract.
Documents that can be executed electronically
Legal documents require varying degrees of authentication. The more important the document, the greater the required degree of diligence. Below, we describe which documents you can execute with an electronic signature, and which require additional formalities.
You can conclude a contract using an electronic signature, if the contract is not subject to specific statutory requirements.
Documents subject to statutory requirements
Some documents are subject to statutory requirements, e.g. contracts for land. Here the document is required to be in writing and/or signed and/or under hand.
However, if you insert an electronic signature with the real intention to authenticate the document, that is usually sufficient for a document to have been executed in writing and under hand.
A deed cannot be electronically signed and delivered, since a validly executed deed needs to be:
- In writing; and
- Executed and delivered as a deed.
The Law of Property (Miscellaneous Provisions) Act 1989 says deeds:
- Must be signed; and
- A witness must attest the signature.
So an electronic signature is a valid signature if a witness genuinely observed it. In practice, the signatory and witness must be physically present, in the same place, whatever the signature method. The witness can attest to an electronic signature’s authenticity, using their electronic signature.
However, if a company is only authorised to execute deeds by affixing a seal, then you cannot execute valid documents using an electronic signature. Checking the company’s articles will go some way to satisfying due diligence.
Usually, the company’s constitutional documents state if an electronic signature is acceptable for the company’s board and general meeting minutes.
A document signed with an electronic signature, and provided to the company, e.g. a written resolution, is valid if it is:
- Provided in hard copy form by, or on behalf of, the person who signed it; or,
- Sent or supplied in electronic form, provided that
- The identity of the sender is confirmed in a manner the company specifies.
The document is also presumed valid, unless the contrary can be proven, if the company does not specify how to provide documents, and if you:
- Provide the document electronically; or
- Sign it with an electronic signature.
Common questions include:
Must both parties use identical technology?
For instance, what happens if one party executes electronically, and the other party on paper? The answer is:
- If the signatures are valid, the parties are not obliged to use the same technology.
Are electronically signed documents allowed as evidence in court?
Yes. Courts in England and Wales accept:
- Electronic versions of validly executed documents;
- Hard copies of printed documents which have been signed electronically.
Note, if English law does not govern the document, the jurisdiction may not accept electronically signed documents.
Top tips to avoid problems with electronic signatures
In summary, we advise:
- Check if the person signing the document has a right to do so:
- A company’s constitutional documents may prohibit electronic signatures;
- Check the person’s electronic signature is genuine in advance of the transaction;
- Ensure electronic channels are secure, to:
- Prevent unauthorised third parties signing documents;
- If you file an executed document at Companies House or other registry, ensure:
- They accept electronic signatures before you sign, to avoid rejection;
- Ensure the document is actually witnessed, if required.
Challenging the validity of an electronic signature
Unless there is evidence to the contrary, an electronic signature validly authenticates a document. The courts use the same test for a wet ink signature to authenticate an electronic signature.
The court’s test involves looking at evidence such as if the signatory accessed the document using his private email address or his own password. The court assesses authenticity on case by case basis.
If the agreement is not validly executed it is void. In the process, you can lose your funds.
John Deane is a partner in the commercial team. John acts for corporate clients, as well as individuals. Knowing the legal pitfalls is where we add value to all services. Please do not hesitate to get in touch with John if he can be of assistance.