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Electronic signatures: can you digitally sign your life away?

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Many of us in these difficult times are working from home and conducting business through our computer screen. This business will often involve the creation, variation, and termination of contracts and many other transactions besides, often of considerable importance and value. I was recently asked whether ‘electronic signatures’ have the same legal effect as traditional ‘wet signatures’?

As a starting point, the law allows us to enter into contracts electronically in the same way as we would do on paper.

We are all used to buying goods online and we transact through the medium of the seller’s website, with a contract being formed on each purchase. We may also commit ourselves contractually by exchanging emails. Indeed, the Courts have concluded that contracts of guarantee can be created by email and also contracts involving the disposition of interests in property.

What constitutes an ‘electronic signature’?

We can all appreciate that the purpose of a signature is to authenticate the document. So the question is, what will suffice as an ‘electronic signature’?

The law generally takes a pragmatic approach to the question with the Courts accepting various methods as being adequate. Examples of electronic signature would include typing the name, a scan of the signature and use of an electronic signature app. The Courts have held that the automatic addition of the party’s name in swift and email messages can constitute a signature and thus create binding contracts.

When is an electronic signature not enough?

It is important to bear in mind that the law imposes special requirements on certain contracts which must be adhered to if the contracts are to be valid and binding.

These include contracts involving interests in land, guarantees, the transfer of certificated shares and assignments of intellectual property rights. In such cases, careful attention must be paid to the legal requirements and, while it may be possible to use an electronic signature, there is also the question of the risks attached to their use. Also, where a transaction requires a deed then there are limitations on their use when executing deeds necessitating two witnesses. The position currently is that it is necessary for both witnesses to be physically present to witness the party signing, which can be either by ‘wet’ or ‘electronic’ signature. This makes the use of electronic signatures of little value.

The future of electronic signatures

The law in this area is developing rapidly, to keep pace with the changes in digital technology. Indeed, with the coronavirus pandemic there is increasing reliance on transacting digitally and this is only likely to increase and all businesses and public bodies will be adapting their processes to accommodate this. One such recent example is the protocol that has been introduced by the Land Registry for the digital execution of deeds.

It remains to be seen whether these changes are adopted permanently once we all get back to some semblance of normality. Nevertheless for some, good old paper and ink may still be preferred, because it may be seen to be less open to fraud, less susceptible to legal challenge and accepted both at home and importantly across the rest of the world and by other legal systems as proper evidence of a binding contract.

For advice on electronic signature use, please contact Stewart Wilkinson on:

020 7842 1460     Email usstewart.wilkinson@roydswithyking.com

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