Contracts concluded by electronic signature
Some very helpful guidance was recently issued by the Law Society on issues relating to the use of electronic signature of documents. In its practice note, the Law Society clarified its view of good practice and set out the principles for determining whether a given document signed with an electronic signature has been validly executed.
It has been common practice for some time that, where the parties to a transaction are not physically at the same meeting to sign the documents, the lawyers arrange for a remote completion, that is signing via email. This typically involves the signatory signing a hard copy document in wet ink, converting the document and signature into electronic form (usually by scanning into PDF format) and sending it by email.
More recently, as market practice and technology evolve, the use of electronic signatures is becoming increasingly common in a range of commercial transactions and this trend is expected to continue.
Electronic signatures can take a number of different forms, for example:
- A person typing his or her name into a contract or into an email containing the terms of the contract.
- A person electronically pasting his or her signature (as an image) next to their signature block in the contract.
- A person using their finger or light pen and a touch screen to enter their signature into the contract.
Under general principles of English law, unless specific requirements have been imposed by legislation, there is no need for contracts to be in any particular form. Contracts can even be entered into orally, with no writing and no signatures, provided the basic legal elements of a contract are present (offer and acceptance, consideration, certainty of terms and an intention to be legally bound). It is clearly possible, therefore, for a simple contract to be concluded using electronic signatures.
But what is the position where legislation requires specific formalities for concluding a contract? Typical prescribed formalities include the requirement for a contract to be ‘in writing and signed’. This is the case for example, in relation to guarantees, or any contract for the sale or other disposition of an interest in land. Would a contract executed using an electronic signature satisfy a statutory requirement to be ‘in writing and signed’?
The conclusion expressed in the Law Society’s recent practice note is that the answer is yes: a contract executed using an electronic signature satisfies a statutory requirement to be in writing and signed.
This is a welcome finding for lawyers and their clients, who will be able to more confidently rely on electronic signing of contracts.