COVID-19 and the subsequent increase in remote working has accelerated the digitality of contracts and the need for e-signatures; they are now part of the new normal. However, there are a number of factors that contracting parties should consider when deciding whether to execute a contract using e-signatures or traditional, wet ink signatures.
In practice, parties often set out an agreement in a written, formal and signed document. This creates certainty and formalises the contractual arrangement. However, in order for a contract to be legally binding, a specific form is, in most cases, not necessary. It is possible for contracts to be created orally, through an email exchange, text messages, or by conduct alone, providing there is an offer, acceptance, consideration and an intention to create legal relations. In light of this, e-signatures are acceptable, and their inclusion alone is unlikely to affect the validity of the contract.
Are e-signatures acceptable where a statute mandates for the document to be ‘signed’?
In short, the answer is yes in most circumstances. The Law Commission’s 2019 report states that an e-signature is capable in law of being used to validly execute a document providing:
- The person signed the document with the intention to authenticate it (see further discussion on this below)
- Any other necessary formalities relating to execution are satisfied, such as witnessing.
There are some specific circumstances where a wet ink signature is part of the prescribed formalities and e-signatures may not be used. Briefly considering property transactions, whilst electronic signatures are accepted for application forms at HM Land Registry, wet ink is required for registration of dispositions and dealings, statements of truth, general power of attorney and lasting powers of attorney. Please note – there is a comprehensive list of what signatures are accepted by HM Land Registry for different documents.
Court’s approach to signatures including e-signatures
A signature - whether e-signature or wet ink - can be a cause of dispute between contracting parties. When considering the validity of a signature, the Court’s approach is focused on function over form. In other words, the purpose of the signature carries more weight than the type of signature used. The question posed is whether the addition being relied on as a signature was inserted with the intention to authenticate the document. As such, the Court has accepted much looser ‘intended signatures’ than an e-signature, such as a name typed at the bottom of an email chain (Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd [2012]) or clicking an ‘I accept’ tick box on a website (Kathryn Bassano v Alfred Toft & Ors [2014] EWHC 37 QB)
Commercial considerations
A dispute could arise concerning the authenticity of a document. As such it is important that an e-signature does not “let down” the document’s integrity. Thus, there are numerous possible practical steps for parties to consider before entering a commercial contract, such as:
- Whether a term could be included which expressly states that both parties agree that the contract can be validly signed electronically;
- Ensuring that care is taken with e-signatures as would be with wet ink signatures – for example, ensuring a draft document does not have an e-signature on it;
- Using secure and reliable software for execution, which should help avoid disagreements over legitimacy or forgery of the e-signature;
- Where transactions are cross jurisdictional, it is important to consider whether e-signatures are acceptable and valid under the governing law of the contract.
Now that e-signatures are commonplace in commercial contracts, it is important that any associated risks are anticipated and minimised before the contract is entered into. In particular, parties should think about the validity and suitability of an e-signature in the specific context of each contract, and whether an e-signature is a lawful option at all.
Our Commercial Team provides legal and practical advice on a range of commercial and contract matters. If you have a query, please contact us.
