10 February 2020

Courts expand the scope of electronic signatures

Electronic Signatures

A court has ruled that an automatic email footer is sufficient to create a binding contract between the sender and the recipient, forcing companies to review their electronic procedures.

Legislation permitting the use of electronic signatures was introduced by the Electronic Communication Act in 2000, followed by the EU’s eIDAS regulations in 2016 to align e-signature standards across all EU states. However, uncertainty remains as to the scope of these rules.

Company Commercial expert Deepa Patel from Howell Jones LLP explained that in order to create a contract under English Law the agreement does not have to be signed or in writing, provided that it is not a contract to guarantee payment by someone else, a contract which relates to land or a contract made by deed. A binding contract can simply be created with clear agreement and intention. Contractual negotiations are increasingly taking place through electronic communications and therefore the importance of understanding the rules on the electronic execution of documents is pivotal. Furthermore, Deepa states that companies need to be aware of the circumstances where an exchange of emails can become a binding contract.

In order to overcome this uncertainty, the Law Commission published a report in 2018 outlining the rules on the electronic execution of documents. The Law Commission stated that in most circumstances e-signatures are sufficient to execute documents in replace of ink signatures and can be relied upon as evidence of a binding contract.

In the recent case of Neocleous v Rees [2019] the court expanded the rules on e-signatures by ruling that an automatic email footer displaying the writer’s name amounted to an electronic signature and was therefore sufficient to conclude a contract for the transfer of land.

The judge ruled that even though the sender’s name was inserted automatically by operating software, the sender knew it would be added along with their contact details, and therefore it represented a conscious decision and reflected the conventional style of a signature. It was determined that the exchange of emails concluded the negotiations between the parties to resolve a right of way dispute.

The court’s ruling has significant implications for anyone using electronic communications in contractual negotiations, as highlighted by Deepa who states that although the case involved a rare type of property transaction, all companies should be aware that a typed name is enough to conclude a binding contract. Therefore, companies would be well advised to add a clear disclaimer to prevent unintentionally forming a contract amongst negotiations, as it not enough to simply add an automatic proviso to your e-signature.

When executing a deed, ink signatures remain important as they must be signed in the presence of a witness. Whilst remote witnessing is not currently permitted by law, the use of live video witnessing is being discussed.

 

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