What has happened?
The UK Law Commission has confirmed that electronic signatures can be used to sign formal legal contracts.
What does this mean?
In publishing its conclusions on the issue of electronic signatures, the Law Commission, which acts as the UK government independent legal experts, said that it aimed "to sweep away the current uncertainty in the law" and allow businesses to "speed up transactions by going fully digital".
The move has implications for a wide range of legal documents that currently require manual signatures, such as credit agreements, trust deeds, property sale contracts or powers of attorney.
The Law Commission stated that many businesses are currently wary of using e-signatures because of concerns that they could be challenged in court.
The Commission said that, in one case, a large organisation had its documents signed manually before scanning them electronically and then shredding the originals, describing this as an "inefficient" practice.
A consultation has now been opened on whether a new law is required to reinforce the validity of e-signatures, but the Commission said that it was "not persuaded at present" that this is necessary in England and Wales, because the law is already in force.
The Commission said:
“Our provisional view is that the combination of EU law, statute and case law means that, under the current law, an electronic signature is capable of meeting a statutory requirement for a signature if an authenticating intention can be demonstrated.”
It added that this is not "limited to a particular type of signature – a typed name at the end of an email is sufficient, as is clicking an 'I accept' button on a website".
"Furthermore, it is our view that an electronic signature inserted with the intention of authenticating a document would be sufficient to satisfy a statutory requirement that the document must be executed 'under hand'. Our conclusion does not extend to the few situations where the law expressly provides that a signature must be in ink or handwritten. Nor does it apply to the signing of wills under the Wills Act 1837," it said.
The Commission also suggested that, where a signing requires witnesses, such as for a deed, this could be done via webcam or video link, which is not currently permissible by law.
“We provisionally propose that it should be possible for a witness to observe an electronic signature by video link and then attest the document by affixing their own electronic signature to it,” the Law Commission said, adding that people could also log in to virtually witness an electronic signature being made.
Law Commissioner Stephen Lewis said:
“Contract law in the UK is flexible, but some businesses are still unsure if electronic signatures would satisfy legal requirements.
“We can confirm that they do, potentially paving the way for much quicker transactions for businesses and consumers."
The consultation ends on 23 November 2018.