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Business has always been at the forefront of innovation, and it has never been more crucial to be adaptable than now given the recent outbreak of coronavirus (COVID-19).
Given restrictions on the movement of people and physical gatherings, and the increase in remote working, more and more businesses may find themselves relying on electronic signatures rather than traditional ‘wet ink’ signatures. So just how legally binding are they and what matters should be borne in mind when using them?
Usual legal contractual principles apply to contracts completed using e-signatures
In order for a contract to be binding in Northern Ireland the key legal concepts of offer, acceptance, consideration, intention to create legal relations and certainty must be present, no matter how the contract is signed.
In general, there is no need for a contract to be in writing and signed by the parties but some contracts need to be in writing and executed in a particular manner either by law, or to fulfil a specific registration requirement and the main reason for signing a written contract is to provide certainty to the parties
In the absence of a statutory or registration requirement as to the form of contract or the way in which it is to be executed, the contract can be in any form that the parties agree to provided that the elements of a contract as set out above are present.
Where no legal formalities are required as to the method of execution the key concern of the parties is usually that the signature will be accepted as valid in the event of a dispute
E-signatures are governed in the UK by the Electronic Communications Act 2000 (ECA 2000) and across the EU by the Electronic Identification and Trust Services Regulation (eIDAS) which introduced an EU wide framework for the recognition of electronic signatures.
Section 7(1) of the ECA 2000 provides that an electronic signature incorporated into or logically associated with a particular electronic communication or particular electronic data shall be admissible in evidence in relation to any question as to the authenticity of the communication or data or as to the integrity of the communication. Article 25(1) of the eIDAS states that an electronic signature shall not be denied legal effect and admissibility as evidence in legal proceedings solely on the grounds it is in electronic form or that it doesn’t meet the requirements for a qualified electronic signature (being an advanced e-signature created using a specific device and with a qualified certificate – this is not a usual method of execution in the UK).
What if the contract I am signing is governed by specific requirements relating to signature?
The most recognisable form of signature is of course an individual signing his or her own name onto a written document, but a body of case law has built up over the years indicating that the key determining factor as to whether a mark appearing in a document is a signature is whether the mark was inserted with the intention to give authenticity to the document and with the intention of the party executing the document being bound by it. Therefore, in order to be effective an electronic signature must demonstrate such intentions.
Where the document is subject to additional formalities relating to execution, for example deeds, those formalities must be satisfied for the contract to be effective
A deed is a form of written contract which requires additional execution formalities to be recognised as a deed: it must be in writing, it must be clear from the face of the document that it is intended to take effect as a deed, it must be validly executed by the parties to it as a deed (which usually requires the presence of a witness) and it must be delivered. All four requirements must be satisfied for the document to be a valid deed.
Valid execution as a deed will depend on the party who is executing it.
An individual must sign a deed in the presence of a witness.
It is important to note that the generally accepted principle is that a witness must still be physically present when the signatory is executing the document and the witness’ signature must form part of the same physical document as the party executing the document and the provisions in the deed. It is not regarded as best practice for a witness to witness the signature of the document via electronic means. Given current circumstances it will be difficult, if not impossible, for individuals to obtain an independent witness signature on a document, therefore, whilst usual advice and best practice would be for a witness to be an independent individual (i.e. not a relation) if a deed is to be executed in the present circumstances, there is nothing legally preventing a member of the same household being a witness.
In the case of a company, section 46 of the Companies Act 2006 provides that a document is validly executed as a deed by a company for the purposes of Northern Irish law if it is validly executed by the company and is delivered as a deed. A document is validly executed by a company pursuant to section 44(2)(a) of the CA 2006 by two authorised signatories, or pursuant to section 44(2)(b), by a director in the presence of a witness. It is suggested by the Law Commission report published in 2019, that for the purposes of section 44(2)(a) a document may be validly executed as a deed by a company by two authorised signatories, who do not necessarily have to apply their signatures at the same time, as there is no requirement for this in the Companies Act. Whilst this is merely guidance, and guidance provided in England and Wales as opposed to Northern Ireland, our view is this would be persuasive in Northern Ireland.
In conclusion, an electronic signature in and of itself is valid, will be admissible in court and will not be denied legal effect simply because it has been inserted electronically; however, parties should ensure that all of the usual contractual principles apply and that any additional execution formalities which are required by virtue of the document that is being signed are complied with to ensure an effective and legally binding contract.
This article has been produced for general information purposes and it does not constitute legal advice. Further advice should be sought from a professional advisor. Please contact our Corporate & Commercial team at Cleaver Fulton Rankin for further advice or information relating to any of the issues outlined in this article.