The Law Commission Consultation Paper: Electronic execution of documents

A project to enhance the electronic execution of documents came out of the Law Commission’s 13th Programme of Law Reform in January 2018. Subsequently, a consultation paper was published on 21 August 2018 and the Law Commission is requesting feedback on certain proposals in relation to the use of electronic signatures and deeds (the “Consultation”).

 

SUMMARY

In a technology-focused era, the law relating to signatures and formal documentary requirements is not adapted to the new ways in which transactions are made. Certain types of documents are subject to stringent requirements which hinder the use of technology. The Law Commission is seeking views on their proposals regarding whether a legal reform is needed to align the current law on the electronic execution of documents in agreements and deeds with new business practices.

THE PROPOSALS FOR REFORM

Electronic signatures

Despite the Law Commission acknowledging that no express domestic law recognises the validity of electronic signatures, they have concluded that an electronic signature can meet the statutory requirements for a signature. Therefore, they believe that legislative reform is not necessary and have provisionally concluded that the EU eIDAS Regulation, case law and domestic legislation do currently accommodate for electronic signatures. Electronic signatures are capable of meeting statutory requirements for a signature, if an authenticating intention can be demonstrated. Recent judgments from the Court of Appeal and the High Court have held that electronic methods of signing, such as a typed name in an email and clicking on an “I Accept” button, do satisfy the statutory requirement for a signature as it shows authenticating intent.

Deeds

Unlike for electronic signatures, there are no legislative provisions currently in effect which deal with the electronic execution of deeds. As a result, for deeds to be validly executed, they need to be signed in the presence of a witness who attests the signature, and must be delivered as a deed. On the point of delivery however, the Law Commission does not consider the formal requirement of physically handing over a deed as mandatory, noting that it was not aware of any strong demand for the removal of the “delivery” requirement for deeds.

The Law Commission has proposed the following provisional solutions to allow for electronic signatures to be used in deeds:

  • permitting witness of an electronic signature by video link;
  • moving away from witnessing and attestation;
  • allowing the use of online signing platforms on which both signatory and attesting witnesses can log in, sign and attest in real time; and
  • introducing the new concept of “electronic acknowledgement” where a signatory would sign a document electronically and then acknowledge to the witness by telephone call, email or even in person that they have signed it, by showing or sending the document to the witness. The witness would then sign the document with their own electronic signature and include a statement that the signatory had “acknowledged” the signature.

Pre-signed signature pages

The Mercury decision[1]that looked at the use of “virtual” completions has led lawyers to question whether the use of pre-signed signature pages and situations where signature pages sent by email or fax were compliant with the decision.  A note was subsequently published by the joint working party of The Law Society Company Law Committee and The City of London Law Society Company Law and Financial Law Committees giving guidance to practitioners in regards to virtual signing of different documents.[2]The Law Commission has now endorsed the note and does not propose legislative reform stating that electronic signatures satisfy the requirement of a “discrete physical entity at the moment of signing” in two ways:

  • electronic signatures on electronic documents are unlikely to raise questions as the signature can be applied to the document without removal of the signature pages; and
  • when a document is executed over an online platform, the party has the entire document before them.

The Law Commission has proposed the possibility of a wider review of the law of deeds as a separate project if necessary.

NEXT STEPS

The Consultation on these proposals are now open and the Consultation closes on 23 November 2018.

To review the Consultation, please click here.

For more information, and any guidance or advice on the use and validity of electronic signatures, Cleveland & Co External in-house counsel, your specialist outsourced legal team, are here to help.

[1]R (Mercury Tax Group Ltd) v Her Majesty’s Commissioners of Revenue and Customs [2008] EWHC 2721
[2]http://www.citysolicitors.org.uk/attachments/article/121/20100226-Advice-prepared-on-guidance-on-execution-of-documents-at-a-virtual-signing-or-closing.pdf

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