Menu

Making your Mark: the validity of electronic signatures in property documents

Print publication

15/10/2013

In an age where speed is key, the use of electronic signatures is gaining in popularity as it represents a fast and practical alternative to manuscript signatures and circulating documents for signature in the post. Whether or not such electronic signatures satisfy the statutory requirements for the valid execution of a property document is a widely debated topic and one which is examined in this article.

Valid execution of property documents

Property transactions will generally involve either a contract, a deed or both. For a document to be executed as a deed it must be delivered as a deed and either:

  • signed by the parties in the presence of a witness who attests the signatures or
  • signed at the parties direction and in the presence of two witnesses who each attest the signature [1].

For a valid property contract to be created, it must be in writing and incorporate all of the terms that have been expressly agreed [2]. In addition, the documentation incorporating these terms must be signed by or on behalf of each party and adhere to standard contractual principles (i.e. there must be an offer, acceptance and an intention to create legal relations).

Signatures: function vs. form

A signature is commonly regarded as the writing by hand of one’s full name, or initials and surname to confirm one’s willingness to be legally bound by a set of agreed terms. However, the courts have recognised that the essential characteristic of a signature is its function rather than its form. That is, a signature must demonstrate a signatory’s authenticating intention (that the signatory intended to be bound by the terms of the contract).

The Law Commission’s 2001 report, Electronic Commerce: Formal Requirements in Commercial Transactions (the 2001 report) underlined the principal function of a signature and proposed a purely objective test for measuring its validity: namely, would the conduct of the signatory indicate an authenticating intention to a reasonable person? It was envisaged that this straightforward yet flexible approach, if developed by the courts, would produce the greatest certainty.

The question remains: can electronic signatures demonstrate a signatory’s authenticating intention?

Electronic Signatures

An ‘electronic signature’ is defined by statute as something in electronic form which is incorporated into or logically associated with an electronic communication or data and which seeks to establish the authenticity and/or integrity of that communication or data [3].

The 2001 report suggested that the following methods of electronic signature are generally capable of showing that the signatory possessed the necessary authenticating intention:

  • Digital signatures: digital signatures rely on a form of encryption to authenticate messages. In this type of encryption two ‘keys’ are used. A ‘private key’, which is known only to the signatory, is used to create the digital signature and change the message into encrypted form. A ‘public key’, which is used by a relying party, verifies the digital signature and decrypts the message. This system provides a high level of assurance that an electronic communication has been sent by the person possessing the private key.
  • Scanned manuscript signature: a manuscript signature may be scanned and stored in electronic form to be incorporated into an email or other document. This can demonstrate a signatory’s authenticating intention in much the same way as an original manuscript signature would.
  • The typing of a name: the name of the signatory (or their initials) may be typed into an email or other document. This is similar to authenticating a document by way of a stamped or printed signature.
  • Clicking on a website button: online purchasers of goods and services will regularly ‘click a button’ on a website to confirm their order and demonstrate an intention to be bound by agreed contractual terms. The Law Commission considers this ‘clicking’ to be the technological equivalent of a manuscript ‘X’ signature.

Fundamentally, as mentioned, it is the electronic signature’s function rather than form which determines its validity. There must be evidence that the party signing the contract intends to be bound by the contractual terms.

Admissibility of electronic signatures

The provisions of the Electronic Communications Act 2000 (ECA) [4] aim to ensure that the legal effect of documents or signatures will not be denied simply because they are represented electronically. For instance, section 7 of the ECA confirms that electronic signatures are admissible in legal proceedings to determine the authenticity of any electronic communication in which they are incorporated.

However, the ECA does not consider how a signature can demonstrate the necessary authenticating intent. Instead, the courts must determine the evidential weight to be granted to such signatures.

Contracts and Electronic Signatures

The validity of an electronic signature was considered in a 2012 case [5] where an email which contained the name of a party was deemed to be ‘in writing’ and ‘signed’ (for the purposes of section 4 of the Statute of Frauds 1677) since the inclusion of the name was intended to give authenticity to the document. The court held that both parties intended to be bound by the terms recorded in the email exchange since the correspondence was not made ‘subject to contract’.

This contrasts with an earlier court decision [6] which suggested that electronic signatures must also be voluntarily affixed to the documentation as a means of authentication. In this instance, the automatic (i.e. not deliberate) insertion of a person’s email address after the document had been sent did not constitute a ‘signature’ as its inclusion was merely incidental. It did not demonstrate the sender’s intention to be bound by the terms of the correspondence.

The courts are therefore willing to endorse the use of electronic signatures provided that the signature adequately identifies the relevant party and demonstrates an objective intention to authenticate. The court has even gone so far as to suggest that a: ‘first name, initials, or perhaps a nickname’ could suffice [7].

Deeds and electronic signatures

Unfortunately the courts have not provided a definitive answer as to whether an electronic signature will satisfy the statutory requirements for executing deeds. The most prudent course of action would therefore be to continue to execute deeds by way of manuscript signature. In addition, the Land Registry does not presently accept electronically signed documents for registration.

WM Comment

The courts have adopted a pragmatic approach to the use of electronic signatures in commercial transactions. In light of recent court decisions it appears that electronically signed property contracts would be valid provided that the signature demonstrated an authenticating intention and that the additional requirements of section 2 of the Law of Property (Miscellaneous Provisions) 1989 were complied with. Care should therefore be taken when negotiating contractual terms by email. To ensure that a party is not bound by the terms of their electronic communications, it could mark emails ‘subject to contract’. This should provide a clear demonstration that the party lacks the requisite authenticating intention for the document to be ‘signed’.

However, the law has not yet developed to the same extent in relation to the execution of deeds and the validity of electronic signatures remains uncertain. As such, to avoid any doubt (and satisfy the Land Registry’s requirements) all deeds should continue to be executed by way of a manuscript signature.

————————

[1] Section 1(3) Law of Property (Miscellaneous Provisions) Act 1989 (LP(MP)A)
[2] Section 2 LP(MP)A
[3] Section 7(2) Electronic Communications Act 2000 (ECA)
[4] The ECA came into force in the UK in July 2000
[5] Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd [2012] EWCA Civ 265
[6] Pereira Fernandes SA v Mehta [2006] EWHC 813 (Ch)
[7] Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd [2012] EWCA Civ 265

Contacts