New guidance on electronic signatures on commercial contracts
The Law Society and the City of London Law Society company law teams have published updated guidance* on the execution of legal documents using electronic signatures. Sarah Phillips, real estate associate with law firm of Irwin Mitchell LLP, reports.
Given the wide use of electronic means for all things related to commercial contracts this seems a good time to remind ourselves where the law stands on electronic signatures when used to execute commercial business contracts.
Electronic signature can take many forms, for example using a stylus to sign a touch screen, pasting an image of a signature into a soft copy document or the typing of an individual’s name into a document in the relevant place.
Under English law, simple contracts (i.e. those that are not deeds and which are therefore valid for 6 years) do not have to be in any particular form or even in writing and given that historically they could be formalised by the simple making of a mark, unsurprisingly an electronic signature can be used to make such a contract.
Contracts made as a deed are valid for 12 years and these have to be in writing, executed and delivered. English law defines writing to include “modes of representing or reproducing words in a visible form” which is wide enough to include the representation of a contract on screen provided it is readable. Delivery of a deed will be deemed to have taken place upon execution unless a different intention can be shown.
If the execution formalities require that a signature must be witnessed, this too can be accomplished by an electronic signature but the witness must of course have actually seen the first signature being inserted and be able to confirm whose signature it was. It is recommended that such witnessing should be by someone who is physically present at the location of the “signing”.
The main issue with all signatures is that their validity may be challenged. The test for a valid signature is whether the mark that is in the appropriate place in the contract was put there to make the contract valid and with the intention of making it valid. Any challenge to a signature whether a “wet ink” one or an electronic one would therefore be treated by English law as an issue to be proved or disproved by evidence and the signature would be treated as valid unless sufficient evidence to prove to a court that it was not was produced.
Where a document has been validly executed by electronic signatures, English law does not require a wet ink version to also be created and if parties have executed separate counterpart documents whether all electronically or a mixture of wet ink and electronic, an English court would accept either these documents as counterparts and/or a composite document incorporating all of the signatures.
Beware if the parties to one of your contracts are in different legal jurisdictions because the law relating to electronic signatures varies from territory to territory. Make sure you obtain proper local legal advice in all relevant jurisdictions before agreeing to electronic execution.
Finally, any issue that applies to a wet ink signature will also apply to an electronic one for example the capacity and authority of the signatory to bind their company to the particular contract should always be confirmed and if your contract is anything other than a straightforward commercial one, you should take advice to make sure there are no other formalities required that may preclude electronic signature.
* The full Law Society guidance can be found at www.lawsociety.org.uk
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This article was published on 11 Aug 2016 (last updated on 12 Aug 2016).