14 September 2018

Law Commission consultation on electronic execution of documents

The Law Commission looks to answer the question of whether deeds can be witnessed electronically.

What's the issue?

The use of electronic signatures has not yet been widely adopted on legal documents despite attempts at clarification in legislation and in case law. This is in part due to some legal uncertainty when it comes to satisfying the formalities around deeds which must be signed, witnessed and delivered.

In 2016, the Law Society published a practice note on the use of e-signatures in commercial contracts, concluding that they could be used in simple contracts but suggesting that, in terms of best practice, a witness should be physically present at the signing of a deed. The rationale was that this would be the simplest way to evidence the signature being witnessed.

As technology develops, and we get increasingly used to doing everything digitally, the formalities for executing deeds look increasingly antiquated and the lack of clarity around the use of e-signatures becomes more frustrating.

What's the development?

The Law Commission has published a consultation on the use of e-signatures in legal documents. It draws a number of provisional conclusions and asks for comments on them. The consultation focuses particularly on the formalities for deeds and consumer contracts, especially those concluded with vulnerable individuals.

The Law Commission provisionally concludes that:

  • Electronic signatures are valid and will generally meet statutory requirements for signature where there is an intention to authenticate. Current law (notably the eIDAS Regulation, and the Electronic Communications Act 2000) is sufficiently clear and legislative reform is not needed.
  • Deeds should retain the witnessing and attestation requirements. Based on current law, signature should take place in the physical presence of the witness and witnessing by video link is unlikely to satisfy the requirements.
  • The Law Commission goes on to discuss its views and ask for opinions on a range of options in relation to deeds:
    • The ability for witnesses to use a video link to view the signature and then attest the document by affixing their own electronic signature to it – an option favoured by the Commission.
    • The use of a signing platform – a signatory and witness could be logged on to the same platform from different locations using a high level of authentication. If this is acceptable, would it be necessary for the witness to see the application of the signatory's e-signature?
    • Requiring a higher level of electronic signature for deeds, for example, asymmetric or public key cryptography. The Commission's provisional conclusion is, however, that there should not be a requirement tied to a particular type of technology.
    • A new concept of "electronic acknowledgment" – the signatory would sign the document electronically and then acknowledge to the witness they had signed it, 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. In principle, this could be done in writing, in person, by video link or telephone. In the Law Commission's view, the acknowledgment and witnessing would need to take place reasonably soon after the signing. As this option would require major legislative change, it is not one the Commission says it would recommend lightly.
  • The Law Commission recognises that a simple typed electronic signature is easy to forge and that this could be a risk for consumer transactions. It does, however, believe that specific legislation already exists to protect the particularly vulnerable. It recommends that the Office of the Public Guardian (OPG), consider carefully whether or not to introduce a system which would allow electronic signature of lasting powers of attorney (not currently possible), but takes the view that it would not be beneficial to carve out exceptions to the rule that electronic signatures have the same validity as written ones.

What does this mean for you?

The initial conclusions by the Law Commission bolster the view that electronic signatures are as valid as written ones. This is relatively uncontroversial. Doubts which remain about using electronic signatures have more to do with questions around security and authentication than anything else.

Question marks around the witnessing of deeds remain. While under English law, the deed may be signed and witnessed using electronic signatures, the witness still needs to be physically in the same room as the signatory. There may be additional formalities or issues under local law if a non-UK company is signing the deed and 'wet ink' signatures may be needed for registration purposes.

Those who find this anachronistic should be encouraged by the Commission's proposals that witnessing by video link, or possibly using a signing platform, be permitted. More radical still, is the Commission's proposal that a further project examine whether to do away with deeds altogether.

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