Contract formation - Electronic signatures: New Law Society practice note
The Law Society has issued a new practice note on the “Execution of a document using an electronic signature”.
The Law Society has issued a new practice note on the “Execution of a document using an electronic signature”. It was prepared by a joint working party of the Law Society Company Law Committee and the City of London Law Society Company Law and Financial Law Committees. It has been approved by leading counsel, Mark Hapgood QC. Its aim is to help parties and their legal advisers who wish to execute commercial contracts electronically in a business context.
The note sets out the different forms of electronic signature, including:
• a person typing their name into a contract
• a person electronically pasting their signature into an electronic version of a contract
• a person accessing a contract through a web-based e-signature platform and clicking to have their name inserted into the contract, and
• a person using a finger, light pen or stylus and a touchscreen to write their name in the appropriate place.
Simple contracts and documents
The note explains that, given that there is no requirement under English law for contracts to be in any particular form (provided there is offer and acceptance, consideration, certainty of terms and intention to be legally bound), a simple contract may be concluded using an electronic signature. Some documents are subject to specific formalities imposed by statute, including a requirement for the document to be in writing and/or signed and/or under hand (eg an assignment of copyright). According to the note, a contract executed using an electronic signature will satisfy these statutory requirements.
In the opinion of the joint working party, deeds (which must be in writing) may also be signed electronically, provided that the various other requirements (eg witnessing) are met.
Limited company minutes and resolutions
The note states that a document (including minutes of directors’ meetings and members’ written resolutions) signed with an electronic signature by a person and sent or supplied to a company will have been suffciently authenticated for the purposes of s.1146 Companies Act 2006 if (a) it is sent in hard copy form by or on behalf of the person who signed it; or (b) it is sent in electronic form, provided that the identity of the sender is confirmed in a manner specified by the company, or if the communication is accompanied by a statement of the identity of the sender and the company has no reason to doubt the truth of the statement.
Leading counsel advised that electronic signatures are no different to wet-ink signatures in relation
to how they are treated by the English courts.
Why is this important?
The note observes that, at present, where the parties to a transaction are not physically at the same meeting to sign the documents, it is common for the lawyers involved to arrange a signing via
email. This typically involves the signatory signing a hard-copy document in wet-ink, scanning the document in and sending it by email. However, as market practice and technology evolves, the use of electronic signatures will become increasingly common in a range of commercial transactions. This guidance will be very helpful as that trend continues.
Any practical tips?
Think about how you can make good use of electronic signatures to save time and improve effciency, and definitely use this note as part of any internal discussions on this topic. Our hunch is that it will be “advanced electronic signatures” which ultimately become the most popular, as opposed to simple or qualified electronic signatures. Advanced electronic signatures use third party platforms, which enable access via an email link to complete authentication procedures and digital signing of a pre-loaded document. The platform prevents further changes to the document being made and captures the relevant information (time, date, IP address) to enable future authentication.