We are increasingly being asked by clients about signing deeds and documents digitally, both in standard commercial matters and where virtual signings and closings are necessary.
Given that electronic correspondence is fast becoming the norm, particularly for commercial clients; and the practical challenges presented where one party is in another country, it is becoming more important than ever before that the parties can sign legal documentation and close deals remotely.
What’s the current legal position?
Since the so-called Mercury case (2008) virtual signings and closings have become standard practice where a physical meeting, for the purposes of executing legal documentation, is not possible. Put simply, virtual signing involves a number of different ways in which to facilitate execution if not all signatories are physically present at the same time (and there is no power of attorney granting an agent to sign on someone’s behalf).
The Mercury ruling confirmed that merely adding a signature page to a deed or using a signature page from a previous draft of the deed, in a final draft, would not be valid. Instead, there are specific requirements where virtual signings are required – though it is important to note that these depend on the nature of the documents concerned.
The Law Society’s guidance, ‘Execution of documents by virtual means’, is particularly helpful and sets out the options. These options depend on the type of document in question, reflecting the statutory and legal arrangements surrounding the formality of their creation.
Though aimed at legal representatives, the guidance will prove useful in giving practical guidance to businesses unfamiliar with the requirements. Importantly, the method chosen must have the prior approval and co-operation of all the parties
Law Commission guidance on e-signatures
In the wider area of commercial law and practice, it is now legally acceptable to sign the majority of legal deeds and documents digitally. Earlier this year, the Law Commission confirmed that electronic signatures are as valid as traditional handwritten signatures in the execution of documents where a signature is required by statute.
This includes contracts for the sale of land (but not when execution for registered dispositions of land and property are required for land transfers or other deeds). An e-signature could be, for instance, a tick or a typed name. However, for a party’s digital signature to be valid, there must be an intention to give legal authorisation by the person providing the e-signature.
What does that mean for us?
Businesses will welcome any developments that allow commercial transactions and contracts to be sped up, and clarity over the legality of executing legal documents in digital form.
In relation to virtual closings and signings, it is important that the signatories ensure they are familiar with, and adhere to the specific requirements in the signing email. In complex matters where, for instance, there are many different types of documents and or signatories involved, it is particularly important to follow instructions to the letter.
The parties also need to be aware of any different time zones in case one or more of the parties may not be contactable.
It is important to note that in some of the options available, circulating the original documents with the ‘wet’ signatures may be advisable as evidence it has taken place.