As lockdown restrictions are once again being tightened across the country, the UK government continues to advise many of us to work from home where possible. The purpose of this blog  is to summarise some of the rules and pitfalls on using electronic signatures and signing contracts virtually.

Electronic signatures – what are they and are they legal? 

Put simply, an electronic signature (e-signature) is a form of signature where wet ink is not put to paper.  An e-signature can take various forms but is typically a name which has been typed, an image of a handwritten signature or a signature created on a touchscreen using a finger or stylus pen.

E-signatures have been used for some time now and are generally accepted under the laws of England and Wales as having the same legal status as a wet ink signature, but there will be times when a document requires a wet ink signature.

Wet ink signature or e-signature – which should I use? 

In most cases, an e-signature is acceptable but it will depend on the document you are being asked to sign;  HM Land Registry, HMRC and Companies House, for example, usually require certain documents to be executed with wet ink signatures so it’s always worth checking with the appropriate body (in light of the current Covid-19 pandemic, HMRC and Companies House are temporarily accepting e-signatures for certain documents that ordinarily require a wet ink signature – so, again, worth checking).

An e-signature may also be used to sign a deed (this applies to witnesses too), provided the requirements to constitute a deed are met.

For cross-border transactions governed by the laws of England and Wales, the signatory of an overseas company may execute the contract with an e-signature provided that they have authority to use an e-signature and bind the company in accordance with the laws of the company’s place of residence and/or incorporation.

What about a contract that is to be signed by one party with a wet ink signature and another party using an e-signature?  As mentioned above, e-signatures have the same legal status as wet ink signatures so providing an e-signature is permissible this should be fine.

Remote / Virtual signings – practical points to consider 

You may find yourself in the closing stages of a transaction late at night and asked to sign a deed in the presence of a witness.  This may be difficult given lockdown measures and social distancing rules, but since the outbreak of Covid-19 the laws on e-signatures and executing contracts virtually have not changed so compliance with applicable formalities is still necessary.

If you have been asked to sign a deed it is best practice to find a witness who is an independent adult (i.e. not a family member, spouse or party to the contract), although in the current circumstances this may not be possible so asking a family member or spouse should be fine.  It is also best practice for your witness to be physically present (i.e. in the same room) when you sign the deed.

Although it is best practice for a signatory and witness to sign simultaneously, the witness does not necessarily need to sign at the same time as the signatory nor in his or her presence.  This may be useful if you want to ask a neighbour to witness your signature whilst you are both complying with social distancing rules – the witness can then sign on a separate occasion when it is safe to do so.

What if I cannot find a witness?  If you are struggling to find a witness, consider whether the deed can be executed as a simple contract i.e. where a witness is not required.  Where a company incorporated in England or Wales is executing the deed, you may be able to remove the requirement for a witness if the deed is signed by two directors or a director and the company secretary – in this scenario, the two individuals signing should be able to sign in counterpart.

What else should I consider? 

It is important to ensure that you record the terms of a contract in writing (i.e. not verbally).  Verbal contracts are admissible but are generally inadvisable as they can lead to uncertainty regarding terms of contract and the parties’ intentions.

So long as all other formalities relating to board resolutions are fulfilled, there are no restrictions to electronically signing board resolutions. Remember to always check the company’s articles to ensure there is nothing restricting the use of an e-signature.

Whether you are selling a business or closing an agreement, executing the related contract(s) remotely during the Covid-19 pandemic should not be a cause for panic: it is likely that you will be able to sign the contract with an e-signature or find an alternative approach.

If you would like to know more on the topics discussed in this article, please feel free to get in contact for a free chat.