In the wake of the Covid-19 pandemic, businesses have been doing their best to keep operational. Although that has become impossible for some, in particular as a result of the unprecedented measures announced on Friday 20 March 2020 and Monday 23 March 2020 by the government, there are those which have been able to continue by implementing remote working policies for their staff.
This article considers whether those contracts concluded by an electronic signature due to remote working will be enforceable in the English Courts and some practical considerations for their use. The Law Commission has, as recently as September 2019 published a report on the use of electronic signatures.
It concluded that the law is difficult to follow because it is not found in one place, but provided a helpful statement, which is copied below.
Will contracts concluded by electronic signature be legally enforceable?
Concluding commercial contracts with signatures can avoid arguments about whether a contract has been agreed and the terms which apply to that contract for goods and/or services. It is unsurprising that in the interests of certainty signatures are commonplace when finalising the terms of a commercial contract.
However, generally speaking under English Law, formalities (including signatures - electronic or otherwise) are not actually required to agree a contract. All that is required is an offer (to provide goods or services), acceptance of that offer (as opposed to a counter-offer), consideration passing between the parties (for example an exchange of money for goods or services), and an intention to create a legally binding contract. The Courts take a pragmatic approach, looking at the circumstances of each case separately to determine whether a contract has been agreed and if so on what terms.
Electronic signatures may well assist parties in the same way as ‘traditional’ or ‘wet’ signatures to evidence the existence and terms of a contract, as well as the intention to create a legally binding contract.
There are a number of issues to consider whilst remotely working and concluding contracts using electronic signatures:
1. Ensure you are clear with other parties about your intention to create a legally binding contract (or lack thereof at any particular point.) For the avoidance of doubt, you could clearly spell out or mark your communications spelling out your intention either way so that this cannot be misinterpreted.
2. What is the law which applies to the contract? If it is not English law, what are the rules in the other jurisdiction about conclusion of contracts?
3. If you or the other party is a limited company, is there anything in either of the parties’ constitutional documents which prevents agreement electronically or requires any additional formalities.
4. Do you and the person with whom you are communicating have the correct authority to bind the respective parties?
5. Depending on the circumstances, if your staff hold themselves out as having authority they may bind you or the company. It may be a sensible time to refresh staff members’ training/knowledge about limits to authority and in what circumstances they are allowed to agree contracts. It may be that new policies have to be put in place with any change in internal process caused by the circumstances.
6. There are a number of exceptions to the general rule referred to above, for example contracts expressed to be deeds, any contract involving the transfer of an interest in land and any other contract requiring the witness of a signature.
7. In light of the current conditions, should any of your terms of business be reviewed, for example any credit terms? (Our Commercial team would be happy to discuss this with you)
8. There may be practical issues as to those that need access to relevant software or printer/scanner facilities.
9. It would be prudent to consider any cyber-security issues with experts in this area (particularly with providing bank account information electronically).
Law Commission’s Guidance
A helpful statement about the use of electronic signatures is copied below from the Law Commission’s Report.
‘Statement of the law: execution with an electronic signature
1. An electronic signature is capable in law of being used to execute a document (including a deed) provided that (i) the person signing the document intends to authenticate the document and (ii) any formalities relating to execution of that document are satisfied.
2. Such formalities may be required under a statute or statutory instrument, or may be laid down in a contract or other private law instrument under which a document is to be executed. The following are examples of formalities that might be required: (i) that the signature be witnessed; or (ii) that the signature be in a specified form (such as being handwritten).
3. An electronic signature is admissible in evidence in legal proceedings. It is admissible, for example, to prove or disprove the identity of a signatory and/or the signatory’s intention to authenticate the document.
4. Save where the contrary is provided for in relevant legislation or contractual arrangements, or where case law specific to the document in question leads to a contrary conclusion, the common law adopts a pragmatic approach and does not prescribe any particular form or type of signature. In determining whether the method of signature adopted demonstrates an authenticating intention the courts adopt an objective approach considering all of the surrounding circumstances.
5. The courts have, for example, held that the following non-electronic forms amount to valid signatures:
a. signing with an ‘X’;
b. signing with initials only;
c. using a stamp of a handwritten signature;
d. printing of a name;
e. signing with a mark, even where the party executing the mark can write; and
f. a description of the signatory if sufficiently unambiguous, such as “Your loving mother” or “Servant to Mr Sperling”.
6. Electronic equivalents of these non-electronic forms of signature are likely to be recognised by a court as legally valid. There is no reason in principle to think otherwise.
7. The courts have, for example, held that the following electronic forms amount to valid signatures in the case of statutory obligations to provide a signature where the statute is silent as to whether an electronic signature is acceptable:
a. a name typed at the bottom of an email;
b. clicking an “I accept” tick box on a website; and
c. the header of a SWIFT message.
8. Our view is that the requirement under the current law that a deed must be signed “in the presence of a witness” requires the physical presence of that witness. This is the case even where both the person executing the deed and the witness are executing / attesting the document using an electronic signature.’
If you are concerned about any of the issues raised in this article, please get in contact with one of the team would be happy to discuss.
The information on this site about legal matters is provided as a general guide only. Although we try to ensure that all of the information on this site is accurate and up to date, this cannot be guaranteed. The information on this site should not be relied upon or construed as constituting legal advice and Howes Percival LLP disclaims liability in relation to its use. You should seek appropriate legal advice before taking or refraining from taking any action.