Hogan Lovells

Key Dates

Consultation paper issued by Law Commission on 21 August 2018.

Consultation ends on 23 November 2018.


Summary

The Law Commission has issued a consultation paper which reports that some businesses still do not use electronic signatures because of concerns over the legal validity, practical issues over security and reliability, questions of trust and identity, the interoperability of systems and archiving of information.

Unlike for electronic signatures, there are no legislative provisions that currently deal with the electronic execution of deeds.  Deeds however, bring about more onerous formalities for valid execution.

Some deeds are required by statute, for example, the appointment or discharge of a trustee, conveyances of land and for powers of attorney.  Deeds may also be used for practical purposes where the parties want to secure longer limitation periods or for agreements without consideration.

The Law Commission provided provisional conclusions as to the use of electronic signatures under the current law as well as suggested potential areas for reform in the future.

Formalities for deeds

A deed must be a deed "on the face of it" and it must be validly executed.  The formalities for execution are different depending on whether the signatory is an individual or a company.

Individuals

The deed must be signed in the presence of a witness who attests the signature and the document is delivered as a deed.

Companies under the Companies Act 2006

A deed may be executed by either:

Signature

The Law Commission considers that the combination of EU regulations, domestic law and case authority means electronic signatures are capable of meeting a statutory requirement for signatures, provided an authenticating intention can be demonstrated. In other words, the Law Commission considers that the current law accommodates electronic signatures in the same way as handwritten signatures.

Witnessing and attestation

Witnessing is the observation of the execution of a document, whereas attestation is the actual recording on the document that the witness did indeed observe the execution.  This is important for individuals as well as companies executing by a director and a witness.

The paper observes that businesses complain that witnessing documents inherently causes delays to transactions. It is argued that there are limited benefits to having a witness; there are no requirements as to who can be a witness (subject to limited exceptions) and the witness does not need to be able to identify the signatory.  This raises the question as to how much protection, realistically, a witness can provide to the execution of documents.  The Law Commission does however reiterate the important evidential function performed by a witness.

As the Law Commission concluded that e-signatures are capable of fulfilling a statutory requirement for documents to be "signed", it is also satisfied that the physical presence of a witness, who observes a signatory applying their electronic signature to the document, satisfies the requirement for witnessing. Furthermore, the witness can attest this by affixing their own electronic signature to the document.  The Law Commission commented that a number of stakeholders already use this method.

The Law Commission's provisional proposals

Video-link

The Law Commission considered the use of video-links as an option for reform.  Under this proposal, rather than requiring the physical presence of a witness, an individual could witness the execution of a document through a live video link.  The Commission did however concede that there could be practical issues as to the timing of the attestation and asked for consultees' views.

It is perhaps questionable how much time would actually be saved through the provision of a video-link.  A third party witness would be still required, a link would need to be established (which would need to be of sufficient picture quality to enable the witness to actually observe what was happening) and there would be timing issues as to the attestation; would the witness have access to the document at the same time and be able to see the electronic signature being applied or would the document be emailed afterwards?

Signing platform

The Commission proposed using a signing platform whereby both the signatory and witness are logged into a system, through the use of a password, PIN etc.  The witness could then see, in real time, the signatory's signature being applied to the document. The witness would then apply their own signature to the same document to attest the signature.

Of course, the witness would not actually see the signatory sign the document, so the witness would not be able to attest this. Instead, the witness would need to be reasonably satisfied that the signature was applied by the signatory, given the login procedure/requirements.

Whilst a third party witness would still need to be found, and a signing platform set-up, a signing platform is likely to be administratively more convenient than a video link.

Acknowledgement concept

The Commission also considered doing away with witnessing and attestation altogether and replacing it with a legal concept of "acknowledgement".   This would involve a witness stating that a signatory has "acknowledged" their electronic signature to the witness.  The witness would need to see the signatory's signature on the document and would need to receive an explicit acknowledgment (in writing, in person or otherwise) from the signatory.  The Commission envisages the acknowledgment taking place within 24 hours of signing and that a record of the acknowledgment would appear on the document itself, along with the witness's signature.

Delivery

The Law Commission conceded that the term "delivery" is outdated, but concluded that there are practical reasons for the concept of delivery. It suggests that the concept is still useful because parties require a way of knowing when a deed will take effect and does not consider legislative reform is necessary.

Conclusion

English law is inherently flexible in its approach to forming contracts. The execution of deeds however, is currently impractical and unsuitable for global transactions or transactions that require speedy completions. 

The Commission will consider responses from the consultations and plans to publish a subsequent report with its final recommendations, although no date has yet been set for this publication.



Date Accessed: 03/12/2021