Electronic signatures

18 / 09 / 2018

Commercial parties are becoming more familiar with electronic signatures. In the summer of 2016, the Law Society produced a practice note summarising the current legal position and supporting the use of electronic signatures.

However, many concerns continue to subsist in relation to this, particularly in the real estate industry.

For this reason the Law Commission has turned its mind to the issue.

A lot of contracts do not need to be signed, or even written, in order to be valid. However, in relation to real estate section 2, Law of Property (Miscellaneous Provisions) Act 1989 is problematic. That states that contracts for the sale of land must:

  1. be in writing;
  2. contain all the agreed terms; and
  3. be signed by or on behalf of all the parties.

The law does not expand upon the meaning of writing or the meaning of signed and pre-dates today’s web-powered digital world. Is it possible to fulfil the statutory requirement for “signature in writing” without wet ink?

The Law Commission’s consultation notes widely diverging views and practices from routine use of electronic signatures to those who will not entertain them in any circumstance. The Law Commission wants to cut through all this uncertainty, which is very helpful. Perhaps less helpfully, it has concluded that there is no need to change the law. We think that the fact that the current law regarding real estate raises profound and fundamental issues of interpretation presents a strong case for greater clarity and a debate over whether real estate should be treated differently to all other contracts?

The current consultation paper will not change the mind of any professional still committed to wet ink. For change to happen, the law needs to state clearly what is acceptable in an electronic world, and put the issue beyond debate and this must come from either Parliament or the appellate courts.

There is a strong case for an Act of Parliament to place the validity of electronic signatures on all types of contract beyond any doubt and demonstrate that English law is looking forward to a digital future. The Law Commission is reluctant to propose investing Parliamentary time on unnecessary legislation, but on this occasion, we can’t help feeling it would be worthwhile and should not require significant debate.

Until the law is absolutely clear and any debate amongst legal professionals stops, adoption of electronic signing protocols will remain limited. Commercial parties should be allowed to contract in whatever manner they deem fit.

For further information please contact Edward Craft or Harriet Forster.