It is common practice for solicitors to send documents to their clients by e-mail in order for their clients to be able to print off, sign and return the document in order for it to be executed and formally authorised by their client.
With day to day business activities and market practices becoming increasingly adaptive and receptive to technological advancements we take a look at the use of electronic signatures, which are removing the need for traditional ‘wet ink’ signatures.
Within this article, we take the time to look at what an electronic signature is, the common forms and their use, paying particular attention to their utilisation in executing formal documents.
What is an Electronic Signature?
An electronic signature in its most basic form is quite simply an electronic version of a person’s written signature. Electronic signatures are presented in a number of differing forms and levels of complexity. Businesses are conscious of increased threats of cybercrime and look to increase cyber protection wherever possible, the level of complexity that can be afforded to electronic signatures serves to increase security when executing a document in an electronic format. .
Below are a number of examples of electronic signatures that are commonly employed by businesses:
- A typed entry of a person’s name into a contract or into an e-mail containing the terms of the contract;
- A person electronically inserting or pasting their signature into an electronic version of the contract;
- A person viewing a contract through an internet based electronic signature platform and clicking to have their name inserting into the contract;
- A person using a finger, pen or stylus upon a touchscreen to write their name electronically in the appropriate place in the contract.
The use of electronic signatures has increased over recent years as different business sectors look to innovate business practices, utilising technology to their advantage and aiming to increase efficiency.
E-mail is now considered one of the main methods of communication between businesses and their clients. It was only a matter of time before the formality of executing a document would have to catch up with instantaneous methods of communication.
One of the main advantages provided by the use of electronic signatures is that the parties to a transaction are not required to sign specific documents in person. As we know, it is not always convenient or possible to be present at the point in time that a signature would be required. Further, the parties may not be in a static location or have the facilities available to obtain a hard copy of a document for signature. Electronic signatures allow for a person to execute a formal document whilst going about their daily business, providing a person with the ultimate flexibility required when it is necessary for documents to be executed.
Current European Regulations
At the time of writing, Regulation (EU) No 910/2014 has been in force in the UK since 1 July 2016. The Regulation applies to the use of electronic signatures and categorises electronic signatures into three groups: Simple, Advanced and Qualified.
Simple Electronic Signature: This includes scanned signatures and tick boxes together with declarations.
Advanced Electronic Signature: This allows the user to be identified from the electronic signature; it is unique to the user, under their sole control and will be attached to a document in a way that if any content should be changed after being electronically signed the document will become invalid.
Qualified Electronic Signature: This is the most advanced electronic signature and it contains a digital certificate encrypted by a secure signature creation device.
The provisions within the Regulation provide that an electronic signature should be given the same legal effect as that of a handwritten signature and that an electronic signature cannot be refused legal effect on the sole ground that it is a signature in electronic form.
The Regulation does provide that it is for national law to determine and clarify the legal effect of an electronic signature and this has been clarified within the UK by way of the Electronic Communications Act 2000. Whilst this Act does provide clarity on the legal effect of an electronic signature it fails to address the issue of an electronic signature’s validity.
Use of Electronic Signatures
The default position in the UK is that a simple contract does not have to be in any particular form and as such, a simple contract can be executed by electronic signature.
Documents Subject to Specific Formalities
Within England and Wales, there are many examples of documents that are subject to specific legal formalities in order to be effective. One such example is that of a contract for the sale of land; for it to be effective it has to be in writing and it has to be signed. There are also requirements for specific documents to be executed ‘under hand’.
The Law Society has recently released guidance highlighting that an electronic signature satisfies the statutory requirements requiring a contract to be in writing and/or signed and/or under hand.
Within England and Wales, should the authenticity of a document that has been executed through an electronic signature be challenged, the Court will generally accept that the document is authentic subject to the person challenging the authenticity proving otherwise.
The person alleging that a document is not authentic would need to produce evidence challenging the authenticity of the document. For example, it could be shown that a person did or did not access a particular document through their computer, it may be possible to ascertain the exact location of where the document was accessed and establish the exact time that the signature was applied to the document to ascertain the authenticity of the electronic signature.
Robert Bourns, the Law Society President stated in relation to electronic signatures that “commercial contracts drafted by solicitors operate in every aspect of our economy and can govern deals worth millions, or even billions, of pounds. There is no room for error when so much is at stake, therefore it is vital that solicitors can have confidence in the legal framework surrounding such innovations.”
Whilst the Electronic Communications Act 2000 provides further clarity to the issue of electronic signatures and their use together with providing authority for further legislation to be made, there are still specific requirements relating to certain documents that have not been subject to amended legislation. The Law Society’s guidance indicates that electronic signatures will be treated in the same respect as that of a ‘wet ink’ signature; however, one does still need to have regard to specific filing requirements when considering signing documents with an electronic signature. We list below some other point to watch out for.
Points to Watch Out For
1. Does the person electronically signing a document have the capacity and the authority to do so?
2. Are you certain that the person purporting to have electronically signed the document has themselves done so?
3. If the document(s) is due to be filed ensure that it will be accepted if it has been electronically signed.
4. If the electronically signed document is to be held electronically ensure that the document is sufficiently secure and protected.
The use of electronic signature may be beneficial in some circumstances as it can reduce the burden on parties privy to a transaction. There is however some way to go with the legal framework surrounding electronic signature as this format brings an added element of risk to the validity of transactions. Signature is normally the last hurdle in finalising a transaction so it may not be worth taking the risk if traditional methods can easily be used, at least until the legal framework in this area catches up.
Do you need help with electronic signatures? Please get in touch by clicking here.