Law Commission supports view that electronic signatures are valid

The Law Commission has published its provisional findings on the validity of electronic signatures and has outlined potential options for reform.

In January 2018, following concerns over a lack of clarity in the law, the Law Commission launched a project to address uncertainties as to the formalities around electronic execution of documents. It was acknowledged that the uncertainty in the law, alongside practical issues such as security and reliability, was discouraging the use of electronic signatures while recognising that there is a growing demand for an effective and acceptable method of using electronic signatures on legal documents.

The Law Commission was asked by the Ministry of Justice to consider the problems surrounding the law in relation to electronic signatures and to consider whether, and if so what, legislative reform or other measures are needed to address those issues. The project was given a wide scope, covering documents which are required by law to be 'signed' and documents which are required by law to be executed as deeds. However, it did not extend to wills (which are the subject of a separate Law Commission project) or documents relating to the registration of land (which is being dealt with by the Land Registry's project on electronic conveyancing and registration). In addition, there are some limited statutory requirements for 'handwritten' signatures which are also outside the scope of the project.

Can a document be 'signed' electronically?

In its consultation document, published on 21 August 2018, the Law Commission set out its provisional conclusion that "under the current law, an electronic signature is capable of satisfying a statutory requirement for a signature, where there is an intention to authenticate the document", and referred to case law under which electronic methods of execution were held to be valid for the purposes of legislation such as the Statute of Frauds 1677 and the Law of Property (Miscellaneous Provisions) Act 1989. Further, this conclusion is not restricted to a particular type of electronic signature and extends to documents which are required by statute to be executed 'under hand'.

The consultation document acknowledges that some parties would prefer to be able to point, with confidence, to a statutory statement that an electronic signature is as valid as a handwritten signature. The Law Commission has therefore explored whether legislative reform is necessary, but has concluded that it is not. It believes that the current law is already sufficiently flexible to accommodate electronic signatures.

What about deeds?

Much of the consultation document is dedicated to the requirements for due execution of deeds which, in addition to requirements for 'signing', require extra levels of formality including 'witnessing', 'attestation' and 'delivery'.

Given the conclusion that an electronic signature is capable of fulfilling a statutory requirement for a document to be signed, the Law Commission found that "it is logical that the requirement for witnessing may be satisfied by the witness watching the signatory apply their electronic signature in the same location".

It does not consider, however, that the law is sufficiently certain to allow for witnessing without that physical presence and explores, and seeks views on, a number of options for reform, including:

• witnessing by video link;
• a move away from the requirement for witnessing with the use of particular types of digital signatures which use an additional authentication process; and
• the introduction of a new concept of 'acknowledgment' by which a witness can sign to confirm that the signatory has 'acknowledged' their signature to the witness.

The Law Commission supports the video link option because it is sufficiently similar to witnessing by physical presence and seeks views on how the witness should 'attest' the signature (i.e. record on the document that they have observed the execution).

As to the requirement for 'delivery' (essentially, to signify that the maker of the deed intends it to become effective and that he or she is bound by it), the Law Commission also confirms that it does not consider this to impede the practice of executing deeds electronically.

More generally, however, the Law Commission is also seeking views on whether it should undertake a separate project to review the formalities for executing deeds and whether the concept of deeds in general remains fit for purpose in the twenty first century.

Practical considerations

The Law Commission's confirmation of the validity of electronic signatures will undoubtedly encourage their wider use and will pave the way for quicker and more efficient transactions.

However, some practical and technical issues may still remain as barriers to the use of electronic signatures. The Law Commission acknowledges that issues such as security and reliability, trust and identity, the interoperability of electronic signature systems and the archiving of information will remain concerns to contracting parties and their advisers. It has, therefore, suggested that a working industry group should be established to consider those issues and believes that guidance in those areas may provide more confidence in the use of electronic signatures.

Some documents may also be subject to certain registration requirements where the relevant registry will only accept documents executed with 'wet ink' signatures. This will continue to be a barrier to executing those particular documents electronically and the Law Commission is in contact with a number of registries to ascertain the position.

Comment

Electronic signatures are already used in many industries, particularly for simple contracts, and the Law Commission's preliminary views on the validity of electronic signatures will be welcomed. In the absence of a statutory statement of validity, the proposed guidance on practical and technical issues will be essential in promoting confidence and wider use for deeds and for complex transactions.

Next steps

The Law Commission invites views on its provisional conclusions and options for reform by 23 November 2018, following which it plans to publish final recommendations.

Link to consultation: https://www.lawcom.gov.uk/project/electronic-execution-of-documents/