New guidance on e-signatures in legal documents: what does it mean for businesses?

New guidance has clarified that e-signatures can be used in most legal documents, such as deeds and business contracts. Kirsty Davey, Partner in the Corporate and Commercial team, welcomes the news.

The Law Commission has issued a statement confirming that electronic signatures can be used in the majority of legal documents, including those which have a statutory requirement for a signature. This is welcome clarity from the body, which is responsible for recommending legal reform in England and Wales, on the legal position on the use of e-signatures.

The issue has long been a source of frustration to my clients who are used to conducting business electronically and for whom providing wet signatures and dealing with delays caused by waiting for documents to arrive by post can seem archaic. The Law Commission’s statement is long overdue and will hopefully make business transactions quicker and more convenient in the future.

What does the Law Commission statement mean?

In January 2018, the Law Commission launched a project to clarify the validity of e-signatures. While analysing a range of legislation and court decisions, the independent body was faced with the challenge of considering the needs of today’s businesses and individuals while addressing any potential security issues.

The Law Commission has now published its final report on the issue. It confirms the legal position that an e-signature is a valid alternative to a handwritten signature in most legal documents. The report clarifies that the usual rules on signatures must be met and this includes circumstances where signatures must be witnessed. On the current interpretation this means a requirement for the witness to be physically present.

Has the law on e-signatures changed?

Many businesses and individuals are already using electronic signatures on contracts but there has not previously been any clear guidance on whether or not they can be used in place of hand-written signatures. I address the issue on a case-by-case basis with my clients as some parties will not accept electronic signatures and there are still circumstances in which hard copies will be required or recommended. Understandably, given the lack of clarity on the issue, some people have previously been reluctant to accept an electronic signature.

The Law Commission has confirmed that an electronic signature is capable in law of executing a document, providing certain criteria are met. The law has not changed but the report clarifies that e-signatures are legally-binding in most situations.

Are there any exceptions?

The Law Commission’s recommendations extend to most legal documents, including the majority used by our business clients but do not include Wills and some dispositions of land.

The report tackles some practical considerations, including the question of whether e-signatures are more susceptible to fraud than handwritten signatures and the impact of digital transactions on cross-border agreements. It also raises the question of whether there is potential for deeds to be witnessed remotely via video link.

The Law Commission has recommended that an industry working group is now set up to consider these issues and provide best practice guidance for the future. I will watch these developments with interest and will ensure we continue to give our corporate and commercial clients the opportunity to conduct business in the way that best meets their needs.

For any help or advice, please contact Kirsty Davey in the Corporate and Commercial team at Coodes Solicitors on 01326 214034 or kirsty.davey@coodes.co.uk.