The Law Commission has issued its report on 4 September 2019 on “Electronic Execution of Documents” in England and Wales.
In 2017 we reported on the launch of the Law Commission’s project on electronic or e-signatures. The hope was that overcoming any legal uncertainty over the validity of e-signatures will encourage businesses to move towards fully electronic transactions, promoting greater time-savings and efficiencies.
Has the Law Commission report delivered on that hope? They have issued a helpful report that they hope will assist users and potential users of e-signatures to proceed with confidence. However, although they confirm their previous view that e-signature is a valid way of executing deeds, this is strictly on the basis that the attesting witness is physically present with the signatory. In other words, they are not confident that the current law allows for the witnessing to be done by video-link or other technological means.
Law Commission’s Statement of the Law
The Law Commission found that the law accommodates the use of e-signatures, but it is not contained in a single source, making the law inaccessible to many. The Law Commission have therefore prepared in the report a short, referenced, statement of the law relating to the validity of e-signatures, with the hope that it will assist users and potential users of e-signatures to proceed with confidence.
The statement includes a confirmation that an e-signature is capable of being used to validly execute documents and deeds. Some documents such as deeds or contracts to sell land have statutory requirements for a signature and the Law Commission confirm that an e-signature is capable of satisfying those requirements.
For a valid execution, the person signing must intend to authenticate the document or deed and any formalities relating to execution must be satisfied. In determining whether the method of signature adopted demonstrates an authenticating intention, the courts adopt an objective approach considering all of the surrounding circumstances.
The Law Commission do not consider registered dispositions under the Land Registration Act 2002, which is being dealt with by HM Land Registry’s project on electronic conveyancing and registration.
Witnessing of e-signature of deeds
One area of concern relates to where the e-signature of a deed requires witnessing. The Law Commission state that a deed must be signed in the physical presence of a witness who must attest the signature. This is the case even where both the person executing the deed and the witness are executing/attesting the document using an e-signature.
The Law Commission are not persuaded that parties can be confident that the current law would allow for a witness viewing the signing on a screen or through an e-signature platform, without being physically present. Their conclusion is based on the restrictive wording of the relevant statutory provisions and the serious policy questions underlying any extension to accommodate technological developments. A company may already execute a deed validly with e-signatures (and without needing to satisfy a requirement for witnessing) under the Companies Act 2006.
The Law Commission’s comments confirm pre-existing doubts held by many about whether an e-signature can be virtually witnessed (such as by video link or other types of technology) and this will deter the e-signature of deeds that require witnessing.
Other caveats with e-signatures
While the Law Commission conclude that the current law (existing legislation and common law) generally accommodates the use of e-signatures, they acknowledge that there are situations in which the law is more prescriptive as to the form or type of signature required. This occurs, for example, where there is something explicit in a statute or case law that requires a particular kind of signature. The example cited is in connection with wills. Also the use of e-signatures will not always be appropriate even where the law allows it, for example due to the vulnerability of the signatory or the pressurised nature of the circumstances.
Options and Recommendations for Government
Although the current law already provides for e-signatures, the Law Commission took account of views expressed by many that a definitive general legislative statement about the validity of e-signatures would nevertheless be beneficial, particularly to businesses, and would make the law of England and Wales in this area more accessible.
The Law Commission, therefore, set out an option for Government to consider whether such a legislative statement (and the Law Commission offer a possible draft provision) should be introduced to improve the accessibility of the law. The Law Commission do not make a formal recommendation that such a statement should be introduced, in recognition of the Law Commission’s limited terms of reference for this report (limited to commercial and consumer documents).
The Law Commission do, however, recommend further work by a Government convened industry working group with multi-disciplinary membership to consider practical, technological, non-legal issues relating to the electronic execution of documents. This will include consideration of potential solutions to the practical and technical obstacles to video witnessing of e-signatures on deeds and the Law Commission also recommend that Government should consider legislative reform to allow for video witnessing. More generally, there is a recommendation for a future broad review of the law of deeds.