10 November 2016

When you need a contract signed but not everyone can meet in the same place at the same time, current practice is rather clunky. With fax machines relegated to the basement (though not the fax numbers for some reason) and smart phones taking over the world, electronic signatures (e-signatures) are seeing an increasing (re)rise to prominence.

E-signatures have been part of UK legislation since the Electronic Communications Act 2000 provided for their admissibility as evidence in court. The problem in the EU was a lack of common standards which made cross-border business very difficult.

The new Regulation on Electronic Identification and Trust Services for Electronic Transactions in the Internal Market (910/2014/EU) (eIDAS) came into force in July 2016 as an attempt to harmonise member states' disparate implementation of e-signature rules.

Hopefully, this new legislative framework, taken together with endorsements by the Law Society, the City of London Law Society, and the UK’s penchant for innovation, will further accelerate digitisation and increased effectiveness of business in the UK.

What is an e-signature?

Article 3 eIDAS defines three types of e-signature:

  • an e-signature is data in electronic form incorporated into (or logically associated with) a particular electronic communication or data
  • advanced e-signatures are created using trustworthy software with the ability to identify the signatory
  • a qualified e-signature uses a certain device and comes with a certificate designed to guarantee authenticity across the EU

Article 25(1) provides that an electronic signature shall not be denied legal effect and admissibility as evidence solely on the grounds that it doesn’t meet the criteria for a qualified electronic signature. In other words, the e-signature is valid evidence that the document is effective unless the opposing party submits contrary evidence. Funnily enough, this is exactly the same standard applied to wet ink signatures.

Qualified e-signatures are rarely used here in the UK, so what’s the point? Perhaps it’s the added friction in forging it that may be a useful additional layer of security for certain applications.

E-signature platforms

A popular option for obtaining e-signatures is through e-signature platforms (Platforms). They have exploded onto the market in recent years and there is now a dizzying choice of providers. They tend to offer an end-to-end service which includes:

  • numerous signature formats on various devices
  • sending the document to all the parties
  • issuing reminders
  • notifying you when people have signed
  • creating copies in various formats (such as PDF)
  • cloud-based storage.

In practice, all you would usually do is upload the document to the platform (in whatever format you want), select where the signature needs to be placed, and choose how it can be signed. This is then sent to the recipient who signs where and how you asked them to.

They could type their name (in fonts ranging from formal to handwriting-style), tick a box, click ‘I accept’, paste an image signature, physically sign with their finger, or use highly secure digitally encrypted signatures with passwords and certificates.

Validity (and practicality) of e-signatures

eIDAS accounts for admissibility of e-signatures, what about validity?

The Law Society practice note on the execution of a document using an electronic signature lists various types of contract one might encounter and considers whether electronic signature is valid. From formality-free simple contracts to deeds, they concluded all could be validly signed electronically.

Even if e-signatures are deemed to be valid in most circumstances, there is still an issue of whether they are appropriate to the circumstance as we transition from analog to digital.

Platforms will promise you the world. However, there are still times where you should consider using a wet ink signature. For example:

  1. If the document is being, or may be, used in relation to foreign litigation where the position on e-signatures is not so clear.
  2. Where you are unsure if the document is being transmitted securely.
  3. Where the document is to be filed with an authority that does not accept e-signatures (such as HM Land Registry).
  4. Is the location of signature being applied legally important (e.g. for tax reasons)? If so, it may be better to sign in wet ink for certainty of the jurisdiction in which a signature was made. It could be uncertain whether an e-signature is made where the signatory is physically located, or where the server is located in which the document is stored.

There may still be some small wrinkles to iron out in the universal application of e-signatures. But eIDAS, e-signatures and Platforms are a significant step forward in the move towards a comprehensive digital marketplace.

Key contact

Tom Dunn

Tom Dunn Partner

  • Head of Regulated Funds and Financial Services
  • Regulated Funds
  • Financial Services

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