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Reflections on the Law Society’s reply to Law Commission’s consultation on electronic execution of documents

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30/01/2019

This article was first published on Lexis®PSL Commercial on 16 January 2019. Click for a free trial of Lexis®PSL.

Commercial analysis: Christina Gill, Associate at Walker Morris, considers the Law Society’s response to the Law Commission’s consultation on electronic execution of documents.

Original news

Law Society publishes response to consultation on electronic execution of documents.

The Law Society has published evidence and opinions in response to the Law Commission’s consultation to consider how to simplify the execution of documents electronically LNB News 27/11/2018 74

What are the practical implications for practitioners?

An immediate practical implication of the Law Society’s response to the Law Commission’s consultation is that practitioners can be confident that generally the law of England and Wales does already permit the electronic execution of documents.

That means that, unless a transaction involves the witnessing and attesting of a deed, there is generally no need to print, ‘wet ink’ sign by hand and scan documents. That may result in significant time and cost savings and may enable deals to proceed even when signatories are not physically present.

Practitioners should be aware, however, that there may still be certain instances in which e-signatures will not be permitted—eg if, due to a contracting party’s national or corporate/constitutional laws or policies, it is otherwise unable or unwilling to e-sign or accept e-signatures. Whether or not to e-sign should, therefore, still be considered on a case-by-case, document-by-document basis and early enough in the transaction to allow time for a traditional wet signature if required.

In addition, as the Law Society has acknowledged, issues remain where deeds are required.

The Law Commission’s consultation (and Law Society’s response) did not address electronic execution of registered dispositions under the Land Registration Act 2002 nor the making of wills. In the e-conveyancing context, at least, there may currently exist a practical workaround—Section 91 of the Land Registration Act 2002 (LRA 2002) does allow for certain electronic documents to be regarded as a deed if they comply with LRA 2002, s 91 and related rules (for further background see HM Land Registry’s Practice guide 8: execution of deeds). This issue has not been specifically addressed in either the Law Commission’s consultation or the Law Society’s response, however, and so it remains ‘one to watch’ for the time being.

To what extent does the response agree with the position taken by the Law Commission?

In a consultation paper published in August 2018, the Law Commission sought to address legal uncertainty surrounding the electronic execution of documents, which is causing practical problems in today’s fast-paced, technology-driven business world.

For example, while basic contracts can be validly formed without any documentation or formality, other contracts and legal documents must comply with certain formalities in order to have legal effect. For example, contracts for the sale of land must be in writing and they must contain all agreed terms and be signed by all parties. Transfers of land, charges by way of legal mortgage and some leases must also be made by deed (which involves signing, witnessing and attesting).

While both Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the internal market and the UK courts accept electronic signatures as valid, the law of England and Wales is not entirely clear on the issue of electronic signatures. Nor does it expressly confirm the validity of electronic execution in the context of deeds.

As regards the additional steps of witnessing and attesting deeds, the Law Commission concluded that the physical presence of a witness is still required. The consultation therefore asked whether changes should be made to the law and modern technological solutions allowed, so as to allow transactions involving deeds to become fully digital.

The Law Society has now published its response to the consultation.

The Law Society agrees with the Law Commission about the validity of electronic signatures. However, as some practitioners remain nervous about the validity of electronically executed documents, the Law Society’s suggestion is that the best way to remove those doubts is to legislate.

What are the key take-aways from the Law Society’s response?

The key take-aways from the Law Society’s response include that the Law Society:

  • agrees that, in general, UK law does permit the use of electronic signatures and that the requirement for delivery does not impede the electronic execution of deeds, but that the physical presence of a witness is still required when it comes to the witnessing and attesting of deeds
  • is sceptical that the practice of witnessing an electronic signature via video link will become widespread (as the current practice of ‘in person’ witnessing is not considered to be onerous)
  • recommends that the best way to remove doubt about the validity of electronic execution would be to legislate and such legislation should be enabling and not prescriptive
  • suggests that an industry working group would be best placed to advise on the electronic solutions that would be practical in light of current and future technology
  • believes the law in relation to delivery and deeds should be reviewed and updated
  • doubts that use of electronic signatures will translate into a high saving per transaction

What are the next steps?

Going forward, it seems likely that practitioners may be able to look forward to the enactment of some clarifying legislation, as well as, potentially, guidance as to the technological solutions which can facilitate the efficient and effective e-signing of documents.

If the Law Commission adopts the Law Society’s recommendations, practitioners should also hopefully soon be able to look forward to updated law and practice when it comes to the valid execution of deeds.

Interviewed by Alex Heshmaty.

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