Electronic signing of legal agreements is where a person executes a legal agreement in electronic form by a method that does not involve putting pen to paper (commonly known as wet ink signature). Historically, “signing” a legal agreement was the only way to validly execute it or bring it into force.

Although for many wet ink signatures have continued to be the preference, electronic signature of legal agreements has been around for some time. The validity of electronic signatures under English law was confirmed by the Law Commission in its 2019 report ‘Electronic Execution of Legal agreements’ which was endorsed by the UK Government on 3 March 2020. Now with social distancing, quarantine, travel restrictions and (with many people working from home away from their offices) and with no or limited access to printers and scanners making wet ink signatures has become extremely difficult if not impossible. Accordingly, signing of legal agreements has been forced very rapidly into the 21st century.

In this briefing we consider the advantage of electronic signing, the different forms of electronic signing, validity of executing legal agreements and deeds using electronic signature and what types of legal agreements cannot be signed electronically under English law. This briefing only considers the position under English law; if the parties to the legal agreement are overseas, performance of the legal agreement is to take place overseas or the governing law of the legal agreement is not English law, specific advice should be taken in the relevant jurisdiction(s).

1.The Advantages of Electronic Signing

Electronic signing has many advantages (even absent Covid-19 restricted times):

• i.Ease and speed of getting agreed legal agreements in full force and effect;
• ii.Electronic signing is recognised by the courts so there are no admissibility issues;
• iii.Verification as to the identity of the signatories, witnesses and which version of the legal agreement is being signed is possible; and
• iv.Less paper and ink is used reducing the environmental impact.

2.What are the Different Types of Electronic Signatures?

There are three main types of electronic signature of legal agreements:

• i.Email execution
  The signatory either types their name into an electronic copy of the legal agreement or into an email containing an electronic copy of the legal agreement or prints, signs and emails back a scan or photograph of the signature page or whole legal agreement to indicate their consent to be bound by the legal agreement. Care must be taken when using this method that, following R (on the application of Mercury Tax Group and another) v HMRC [2008] EWHC 2721 (known as the Mercury case), the latest guidance is followed (particularly in the case of deeds and real estate contracts) which is set out in the Law Society’s practice note ‘Execution of Documents by Virtual Means’ (which was updated in May 2020 in light of Covid-19 restrictions);
• ii.Jpeg signature
  TThe signatory electronically pastes their signature (in the form of an image) into an electronic version of the legal agreement in an appropriate place (for example, next to the signature block for that party in the legal agreement) and returns the legal agreement via email; or
• iii.E-signature platforms
  The signatory accesses the legal agreement by clicking into a link sent via email which takes the signatory to a web-based e-signature platform; the signatory then follows the instructions on that platform for the signatory’s name (typed or electronically handwritten) to be automatically inserted into the legal agreement in the appropriate place. The e-signature platform then applies a computer-generated signature of each party and creates a fully signed pdf together with a digital certificate which records who signed the legal agreement, time/date of signature and the IP address of each signatory’s computer.

Whilst all of the above methods of electronic signature are legally valid, in terms of evidential weight in the event that a legal agreement is disputed, the more robust and secure the method used (with in-built security or fraud prevention) the more evidential weight it will carry. So, for example, because of the digital certificates and records that are generated by an e-signature platform, this form of electronic signature will carry more evidential weight than, for example, signatures exchanged by email.

3.Is Electronic Execution of Legal Agreements Valid under English Law?

The Law Commission confirmed that an electronic signature is capable in law of being used to execute a legal agreement (including a deed) provided that:

• i.The person signing the legal agreement intends to authenticate the legal agreement; and
• ii.Any formalities relating to execution of that legal agreement are satisfied. Formalities may arise under by way of statute or contract and may include:
  a.  that the signature be witnessed; or
  b.  that the signature be in a specified form (such as being handwritten).

In addition, whether a legal agreement can validly be executed electronically will depend on other factors:

• i.Governing law;
• ii.Type of agreement (for example, legal agreements that need to be filed with a governmental agency/registry or that need to be notarised/apostilled/legalised may need a wet ink signature);
• iii.Form of electronic signature used;
• iv.Cross border impacts; and
• v.Where a company is the signatory, the constitution of the company and any internal policies. English companies do not generally need specific permission to sign electronically but the constitution of the company should always be checked to ensure it does not contain any restrictions on electronic signature.

If a jpeg signature is being applied by someone who is not the signatory (for example, a personal assistant to a director) then that person must have the requisite authority to do so.

It must be noted that if a signatory to a legal agreement is not an English incorporated company or you wish to enforce the contract abroad, the local law requirements will need to be met.

To summarise, save for the legal agreements set out below in ‘What Legal Agreements Cannot be Signed Electronically?’, simple contracts can be validly signed electronically via email, jpeg signatures or through an e-signature platform.

4.Additional Points to Consider when Executing Deeds

A deed is a formal kind of English law contract which, when it is signed by an individual or by a single director on behalf of an English company, must be witnessed. Any contract can be a deed (if the formalities are complied with) but some agreements such as powers of attorney and transfers of land must be executed as a deed. English companies can avoid the need for a witness if two directors/one director and the company secretary sign the deed.

As a reminder, the rules for wet ink witnessing of a deed require that:

• i.The witness sees the signatory execute the deed (although the witness does not need to read or understand the legal agreement);
• ii.The witness be physically present; and
• iii.ideally the witness be independent (in the event that the witness is called to provide evidence of the binding nature of the legal agreement is ever questioned), but it is enough if the witness is not a party/beneficiary to the legal agreement.

These same rules apply even where the deed is being executed virtually. This means that whilst a deed can be executed virtually, the signatory and witness must be physically together i.e. virtual witnessing of execution is not possible.

It is also worth noting that if a jpeg signature is being used, for a deed to be validly signed electronically, the jpeg signature must be applied by the signatory themselves and not by someone else.

To summarise, save for the legal agreements set out below in ‘What Legal Agreements Cannot be Signed Electronically?’, deeds can be validly signed and witnessed electronically via email, jpeg signatures or through an e-signature platform provided that the witness is physically present with the signatory.

5.What Legal Agreements Cannot be Signed Electronically?

Some legal agreements cannot be witnessed electronically (such as wills, legal agreements to be filed at HM Land Registry or at the Companies Registry) and for some contracts (for example, consumer contracts) additional requirements must be complied with.

Conclusion

Perhaps one positive outcome from the current circumstances is the proliferation of execution of legal agreements via electronic signing and a move away from wet ink signatures. However, care needs to be taken however to ensure that the requirements are stringently met for the execution to be legally valid. To that end, parties to legal agreements need to contemplate and agree well ahead of time how they will execute their legal agreement, keep records as to how legal agreements were signed (to provide an evidential trail) and whether, post execution, they will still require hard copies to be circulated (where these are legally not required).