Are electronic signatures on contracts valid?

Electronic signatures are generally valid on legal documents, but there are some important exceptions which need to be borne in mind. 

Until recently, there has been uncertainty and confusion surrounding the use of electronic signatures on a huge number of legal documents, despite the passing of the Electronic Communications Act in 2000.

Following a recent study, the Law Commission has confirmed that electronic signatures can indeed be used to sign formal legal documents, and preliminary findings propose that video links may be used to fulfill witnessing requirements for signatures on deeds and other documents where a signature needs to be verified by an independent third party.

The conclusions in the Law Commission's study document have been welcomed by the Land Registry who are looking at ways to improve the process of home buying, which it is hoped with include more digitisation of the process. The proposals will no doubt be welcomed by other bodies and organisations in other areas of law.

The Law Commission's study concluded that no further primary legislation was needed on the basis that the combination of EU law, as well as English statute and case law meant that, an electronic signature was capable of meeting the statutory requirements for a signature, if an authenticating intention is demonstrated.

The LawCommission has however stressed that its proposals are provisional and following public consultation, will be finalised.

In order to clarify and build certainty in the law, the Law Commission is seeking further views on a number of issues such as:

• whether or not there should be a dedicated “signing platform” where electronic signatures need to be witnessed (which would entail the parties logging in to the same signing platform or requiring a signatory to acknowledge that they have signed the document after the event);
• whether webcams or video links could be used instead of a physical witness in the future; and
• the formulation of experts in the industry to monitor the use of electronic signatures and advise on technological developments.

What Legal Documents Can be Signed Electronically?

The documents which can be signed legally using an electronic signature in England and Wales are generally day to day contracts, including:

• Contracts for employment;
• Non disclosure agreements;
• Contracts between businesses; and 
• Certain financial documents.

What Legal Documents Cannot be Signed Electronically?

It is important to note that some documents will not be valid if they are signed electronically rather than in "wet" signature form:

• Probably most importantly, a will is invalid if it is signed electronically;
• Similarly, the witnesses to a will cannot sign it electronically;
• Lasting powers of attorney;
• Documents which transfer the ownership of a property from one party to another; and
• Statutory declarations.

Any of these documents would be held to be invalid if they had been signed using electronic means. 

It will be interesting to see how this progresses, but it seems inevitable that electronic signatures will become more and more common, in the coming years.

If you need advice about whether a document has been validly signed, contact us to speak to one of our legal experts today.