With government lockdowns, social distancing and coronavirus chaos, even the basic menial freedoms we take for granted, such a stroll in the park, can be a challenge.
In this article Spencer Laymond sets out some of the challenges when it comes to signing contracts.
I have often said, everything a business does involves contracts, whether the contracts to hire staff, to borrow money, appoint a supplier, licence some intellectual property, partner or joint venture, it is all about a contract.
To be valid and enforceable, contracts, like cakes, need certain ingredients and a recipe to follow. For the contract it is offer and acceptance; consideration; capacity and intention.
When it comes to what glues the ingredients together, the intention is the egg.
For numerous types of contacts, a written agreement, let alone a simple signature is not even required. Remember the time, pre-corona, when you could go to the market to buy your fruit and vegetables. At the market, intention is handing over the money. At the auction, intention is raising your hand. In business, it is perfectly lawful to enter multi-million-pound transactions on a handshake (albeit from now you would stand your two meters apart).
However, one of the best ways to prove intention, especially for big and important business contracts, is a written agreement, signed by the parties.
Indeed, under English law, certain contracts (such as transferring ownership in your home or creating a will) cannot be created without adhering to strict principles.
But with #COVID-19, signing an agreement can present a host of logistical problems. What if you are working from home? What if you are self-isolating? What if you need multiple parties to sign an agreement? What if you need someone to witness your signature? How can you safely apply a signature and avoid cybercrime? What does English law have to say on the subject? What if you are dealing with a person overseas?
Is the answer to all of these questions an electronic signature?
Certainly, for the purposes of English law, under the Electronic Communications Act 2000, electronic signatures have been admissible in evidence for around 20 years to show authenticity and integrity of communication or data.
However, admissibility is not the same as validity and care are still required to watch out for fraud. There are also the various statutory and other formalities, for example, executing certain agreements as “deeds”, formalities for companies entering into transactions and sometimes good old-fashioned requirements to have original wet-ink signatures.
Confused about how to integrate all of these rules? Unfortunately, there is no consolidated statement of all legal requirements. Perhaps the most helpful summary is the UK Law Commission’s Statement of the Law.
So how do electronic signatures work?
In simple terms, electronic signatures relate to the method of signing things electronically. For example, by pressing “Buy Now” before ordering from Amazon. But they can apply to many more things such as typing your name at the end of an email, a scan of your signature (saved as a Jpeg), biometric data such as your fingerprint or retina scan or a digital signature created cryptographically.
In each case the purpose is to a varying degree is to prove the intention that the person did, in fact, intend to enter into a contract, and to prove integrity that what has been signed is the final and complete version of a contract.
A digital signature is a type of electronic signature where the signature itself is inserted or attached to a document, having been created using encryption technology. The document may or may not also be encrypted depending on its sensitivity. There are numerous providers of digital signatures such as Adobe Sign and DocuSign.
Practical summary
Electronic signatures can be an excellent way to complete important business contracts. Electronic signatures have been around for a long time and are often used day to day as part and part of life. However, we still need to be aware of certain situations where they may not work due to specific legal restrictions.
Practical steps
- If you want to sign documents using an online platform, then consider what is typically used in your industry and for the specific business requirements. Allow time to train staff. There is no point setting up digital signatures if your customer will not want to use the system.
- Consider appointing another person as a signatory, say by appointing further directors or creating a power of attorney.
- Implement safe social distancing and hygiene procedures to allow for more traditional forms of signing and witnessing. If you a contract needs a person to witness in their presence, then that is likely to mean in their physical presence.
