Will an electronic signature stand up in a court of law?

Electronic signatures are becoming more popular as a quick, easy and environmentally friendly way to execute documents. But do electronic signatures carry the same legal weight as wet ink, will they be legally binding, and do they offer adequate protection from forgery? On 4 September, the Law Commission published its report on the electronic execution of documents. It concluded that “an electronic signature is capable in law of being used to execute a document (including a deed) provided that: the person signing the document intends to authenticate the document; and any formalities relating to execution of that document are satisfied”. The report does not extend to registered dispositions under the Land Registration Act 2002, as they are being considered separately alongside the Land Registry. However, the report provides an insight into the Law Commission’s current thinking in this area. What is an electronic signature? The eIDAS Regulation is an EU regulation on standards for electronic identification and trust services for electronic transactions in the European Single Market. It provides for three types of electronic signature: A “simple electronic signature” which is “data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign”. This is the simplest form of electronic signature and could include signing on a tablet using a stylus, a scan of a wet ink signature, or typed words. An “advanced electronic signature” which is an electronic signature: uniquely linked to the signatory; capable of identifying the signatory; created using electronic signature creation data that the signatory can, with a high level of confidence, use under their sole control; and linked to the data signed in such a way that any subsequent change in the data is detectable. A “qualified electronic signature”, which is an electronic signature that satisfies all of the requirements of an advanced electronic signature but which: is created by a qualified electronic signature creation device; and is based on a qualified certificate for electronic signatures issued by a qualified trust service provider. How does this apply to property transactions? Contracts Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 provides that contracts for the sale of land must be in writing, incorporate all of the agreed terms and be signed. The Law Commission’s view is that as long as a contract satisfies these requirements and the signatory intends to authenticate the document, an electronic signature will be valid. However, there remains no legislation confirming that an electronic signature would, in fact, be valid. The Law Commission has recommended that a working party should be convened to provide best practice guidance, and that the government should consider simplifying the relevant law into one statement. Deeds A deed must be: in writing; clearly identified as a deed; validly executed; and “delivered” (usually by dating the document). The Law Commission believes these requirements can be satisfied electronically, but advises that parties should ensure it is clear when delivery takes place and that a witness should be physically present when the document is electronically signed. The Law Commission has also recommended that the industry working group should “consider potential solutions to the practical and technical obstacles to video witnessing of electronic signatures on deeds and attestation” and that “the government should consider legislative reform to allow for video witnessing”. One of the more significant outcomes of the Law Commission report was a recommendation that there should be a review of the law of deeds more generally (executed on paper and electronically) to consider “broad issues about the efficacy of deeds and whether the concept is fit for purpose”. It would be interesting to see the outcome of such a review. Practicalities From a practical perspective, there are various interested parties in a property transaction who would need to accept the validity of an electronic signature: The respective parties and their conveyancers must be comfortable relying on an electronic signature rather than a familiar wet ink signature, including parties such as lenders and guarantors. Bodies such as HMRC and the Land Registry must accept the validity of a document that is electronically signed. If matters ever become contentious, the court may have to decide whether the electronic execution of a document was valid. The Land Registry The Land Registry has indicated that a contract signed using electronic signatures will be accepted. This is because contracts are not substantively registered, but are noted against the title. This does not, however, mean that the interest itself is valid. In respect of deeds, the Land Registry has confirmed it will not accept an electronic signature for registration unless it complies with the provisions of the Land Registration Act 2002 and the Land Registration (Electronic Conveyancing) Rules 2008. The Land Registry has also commented that “it is not possible for an electronic signature to be physically witnessed in the way that a pen and ink signature can” even if the witness was physically present. Instead, it requires the electronic signature to be “certified”. There is clearly a divergence here between the Law Commission report and the comments of the Land Registry. The Land Registry has proposed a system whereby they would be a “trust service provider”, providing advanced electronic signatures with an additional authentication process carried out through the gov.uk verify system. This would provide certification as to the identity of the electronic signatory and would take the place of the traditional method of witnessing. This system though is, at the moment, only aimed at mortgages and is not currently in place. Therefore at the present time wet ink signatures will remain the most common method of signing. The Land Registry does, however, plan to make amendments to the 2008 rules to allow for more electronic conveyancing. Courts The issue of electronic signatures has been considered by judges in a number of court cases. The general principle which has emerged is that for an electronic signature to be admissible, the person signing must have done something with the intention of authenticating the document as a whole and creating a legal relationship. However, the application of this principle is very fact-sensitive and will depend on the specific circumstances. Examples of electronic signatures that the courts have found to be valid are a name typed at the bottom of an e-mail and clicking an “I accept” tick box on a website. Guidance from the Law Society suggests that it would be for the party disputing the admissibility of an electronic signature to prove to the court that it was not admissible. Risks There are various risks that should be considered in the context of electronic signatures, which include fraud, breaches of data protection rules, agreeing documents inadvertently (and possibly negligently), technological errors, difficulties for vulnerable individuals and the validity of documents in other jurisdictions. However, it could be argued that technological ways of verifying an electronic signature, such as passwords, IP addresses and personal logins, are in fact more reliable than for wet ink signatures, which can be forged. The future One of the ways in recent years of firms reducing their environmental impact has been the drive towards a paperless future. While the thought of this may horrify some longer-standing legal practitioners, going paperless appears to be the future and will need to be embraced by the legal industry. The move towards electronic signatures is going to be a huge part of this. The legal industry is already making strides in this area but the regular use of electronic signatures appears to be the next step. The question remains: when it will happen? Click here to view The Law Commission report.   Summary An electronic signature is capable of being used to execute a document provided that the person signing intends to authenticate the document and any formalities relating to the execution of the document are satisfied The common law does not prescribe any particular form or type of signature Due regard must also be given to the requirements of HM Land Registry in respect of registration Consideration must be given to the method of witnessing the electronic signature where required The Law Commission has recommended a future review of the law of deeds and whether they remain fit for purpose The Law Commission has recommended codifying the law on electronic signatures Steven Faragher is a senior associate and Rachel McCastman is a trainee in the real estate team at Russell-Cooke