Covid-19 Coronavirus: What you need to know about virtual and electronic signing

Client Alert
March 30, 2020

In these uncertain times, trade finance and other transaction parties may face particular logistical challenges when signing documents in person. One option available to the transaction parties is to sign documents "virtually" (in other words, signing a hard copy of a document and sending a scan of the signature page to the other side). This method of signing will be familiar to most people who have entered into transactional documents with an international counterparty. Certain formalities must be observed for virtual signings in light of the Mercury case (discussed further below).

Parties are also increasingly turning to the possibility of utilising electronic platforms for signing documents, called "e-signing" or "electronic signing".

But can electronic signing be a valid form of signing an agreement? We look in detail at the options available to those signing agreements under English law.

Virtual signing of agreements

As a matter of English law, you can rely on an electronic version of a document that has been created under a virtual signing provided that the appropriate Mercury instructions have been followed and the individuals who sign are duly authorised to do so.

Mercury instructions

In 2008, the English High Court in the Mercury case [1] caused some concern about how documents could be signed and transactions closed using scanned copies of signatures pages. In response, a joint working party of The Law Society Company Law Committee and The City of London Law Society Company Law and Financial Law Committees (the JWP) published a note (the Note) which records a number of options for parties to adopt when executing documents virtually.

The Note covers the process of each party signing counterparts of the agreement, whereby a signatory prints and signs the signature page (there is no need to print off the full document) then returns in a single email to their lawyers or the law firm coordinating the signing to which is attached the final version of the document (.pdf or Word) and a .pdf copy of the signed signature page. A final version of the document, together with copies of the executed signature pages, may then be circulated to all parties.

There is also an alternative to the above option, which is that only the .pdf copy of the signed signature page is returned to the party’s lawyers, or the law firm coordinating the signing, along with the party’s authority to attach the .pdf copy of the signed signature page to the final approved version of the document.

In respect of pre-signed signature pages collected before documents are finalised, a .pdf copy of the signed signature page is returned to the party’s lawyers, or the law firm coordinating the signing, to be held to the order of the party (or their lawyers) until authority is given for it to be attached to the document to be signed. Once the agreement has been finalised, the law firm coordinating the signing emails the final version of the agreement to each party (and/or its lawyers) and obtains confirmation from each party (or its lawyers) that they have agreed the final version of the agreement and authorises the relevant law firm to attach the pre-signed signature page to the final version and to date and release the agreement.

The JWP considers that the final version of the document (in .pdf or Word) and the .pdf of the signed signature page (both attached to the same e-mail) will constitute an original signed document and will equate to the "same physical document".

Electronic signing of agreements

Via electronic signing platform, such as DocuSign

The Law Commission’s view is that parties can sign all agreements (whether a "simple contract" or a deed) using an online platform. Their report (endorsed by the British Government on 3 March 2020) says that signatories can 'sign' a document via an online execution platform, such as DocuSign. Once the document is executed, the system delivers electronically a link or a .pdf of the signed document to the coordinator who may then be authorised to insert a date or counter sign after all the signatories’ signed counterparts have been received.

Via other forms of electronic or jpeg signatures

Where an agreement is between English-domiciled entities, a party should also be able to sign a document via the insertion into a Word or .pdf document of an electronically typed signature or a .jpeg signature image provided that the person attaching the electronic or .jpeg signature is authorised to do so (if it is not the person whose signature was being attached). The electronically signed document can then be sent to the other counterparty/ies or to the law firm coordinating the signing for collating.

Subject to the other parts of this note regarding which documents cannot be signed as deeds, and the Mercury requirements for deeds, this form of signing should also work for deeds.

The Law Commission confirmed that the processes described above would fulfill the Mercury formality requirements and equate to the "same physical document" referred to in Mercury.

Electronic signing via SWIFT?

Currently, there is no reason to believe that a secure communications platform, such as SWIFT, cannot be used as a method for execution of documents. If transaction parties are executing documents via SWIFT, they should ensure that the SWIFT message either includes the form of the relevant agreement or can specifically identify the document being signed. This could be achieved by clearly identifying the form of the document which is to be agreed to by SWIFT (e.g. by referencing the document and version number and the specific email in which that form of documentation is agreed and in which the parties agree to be bound by the SWIFT "signing").

However, it should be noted that the execution of documents via SWIFT is unlikely to be an acceptable form of execution of a deed, due to the formality requirements, noted above.

Electronic signing of Deeds

Although it is possible for deeds to be signed electronically, the formalities for signing deeds must still be followed. In short, under English law, deeds can be signed by two authorised signatories or by a single authorised signatory and a witness [2]. Where there are two authorised signatories, they can sign using e-signing, but where a witness is required the situation is more complex.

Where an individual signs a deed, the signature must be witnessed [3]. The Law Commission notes a witness should be physically present at the signing. However, where the application of an electronic signature is witnessed and attested in the physical presence of the witness who then applies their own electronic signature, the signature and attestation will form part of the "same physical document".

However, this only works if the witness is in the same place as the signatory. It is unlikely that 'remote' witnessing, where the witness is not physically present when a signatory signs a deed or where they observe the signing through video conference or call, for example, would be recognised as valid attestation under the current law.

Furthermore, the physical presence of a witness at the time of signing avoids any evidentiary risk of the person genuinely witnessing the signature.

Consideration should also be given to who can witness a signature under English law. For example, a party to a deed cannot witness the signature of another party to the same deed [4]. Although the law does not prevent a signatory's spouse, civil partner or cohabitee from acting as a witness (if they are not a party to a deed), this is usually best to be avoided if possible but may be unavoidable in the current circumstances. It is also advisable that the witness be no younger than 18 years old and of sufficient maturity for their evidence to be relied on should circumstances arise which require them later on to verify the execution of the deed.

Deeds that cannot be signed electronically

It is important to note that there are various documents which cannot be signed electronically. These include:

Negotiable instruments also need to be considered carefully because of the requirements that these instruments exist in a physical form. For example, for bills of exchange, it is understood that physical possession of the bill is required in order to effect delivery. 'Delivery' is defined under the BoE 1882 as the "transfer of possession, actual or constructive, from one person to another". This reference to 'possession' may cause problems because there is a general and long-established principle of English law that it is not possible to possess an intangible (i.e. a data file).

Virtual signing of deeds

Whilst the execution of real estate contracts, guarantees and simple contracts have multiple options available (described above), only a single option is available for the execution of deeds, which follows the strict formalities required to execute a deed.

An electronic version of a deed created under a virtual signing will be valid provided that the appropriate Mercury instructions have been followed, and the individuals who sign the deed are duly authorised to do so.

For a document to be executed as a valid deed:

Confidentiality of electronically signed documents via a platform

It is also important to consider the confidentiality of documents when using online platforms and electronic signature service providers to execute documents. For example, documents signed using Docusign are encrypted and stored in data centres where they cannot be accessed, even by DocuSign employees, which maintains the confidentiality of the executed documents which are signed via the electronic platform.

Electronic signatures provided by foreign law companies

We have only analysed the validity of electronic signatures under English law, however, important consideration should also be given to documents signed virtually or electronically by a foreign law company and whether such methods of execution are permitted by the laws of the party's jurisdiction and are recognised as a manner of valid execution. There is a potential risk that if electronic originals are not recognised in a party's jurisdiction, that party could claim that they are not bound by the document as they did not enter into it validly.

For further information on virtual or electronic signing please don’t hesitate to get in touch with Geoffrey Wynne or your usual contact at the firm.

[1] R (Mercury Tax Group Ltd) v Her Majesty’s Commissioners of Revenue and Customs [2008] EWHC 2721 (Admin), [2009] STC 743

[2] Section 44(2)(a) of the Companies Act 2006 and Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989

[3] Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989

[4] Seal v Claridge (1881) 7 QBD 516 at 519

Related People

Jump to Page