There is no doubt about it – we live in a technologically advanced world. 2010 alone saw the arrival of the iPad, smartphones swamping the market and a special section of the CPR dedicated to the rules of e-disclosure. With the regulation of accountants simultaneously hitting new heights, it is perhaps not surprising that those responsible for risk within accountancy firms are assessing their procedures, even surrounding the basic contractual principles of offer and acceptance, to ensure compliance in the cyber age.

In this article, we provide a reminder of the law relating to electronic contracts (ie contracts which are concluded by electronic means, such as by email or by accessing a website). We then turn to consider the practical implications of contracting in this way.

Contracts and the use of electronic means

The law relating to electronic contracts has been in force for some time. First, there was the EU Directive on Electronic Commerce 2000, which required Member States to ensure that their legal system allowed contracts to be concluded by electronic means.

The UK implemented the Directive’s provisions in the Electronic Communications Act 2000. Section 7 of the Act provided for the admissibility in legal proceedings of electronic signatures and related digital signatures. This meant that a person could “sign” a document in a way which did not utilise the traditional “pen and ink” and, in the event there was a dispute regarding the terms of the contract, the parties could rely on the electronically signed document as evidence of the contract terms in court.

It is worth noting that electronic signatures can come in many forms, including typewritten, scanned in signature format, an electronic representation of a handwritten signature, a unique sequence of characters, the “clicking” of a button or even a digital representation of characteristics (eg a fingerprint or copy of a retina).

At around the time the Act came into force, the Law Commission issued some guidance on electronic contracts entitled “Electronic Commerce: Formal Requirements in Commercial Transactions”.

This guidance referred back to the basic contractual principles that the majority of contracts should be in writing and/or signed. It concluded that these general requirements could be fulfilled via electronic means, without any changes being made to the current law.

The requirement for a contract to have a “signature” can, according to the Law Commission’s guidance, generally be interpreted in a pragmatic way, by asking whether or not the conduct of the signatory indicates an authenticating intention to a reasonable person (ie is there clear evidence that the party signing the contract intended to agree to the terms of the contract). Such evidence could take the form of a previous exchange of correspondence relating to the contract terms (or a desire to instruct the accountant to carry out work).

It is worth noting, at this juncture, that a court will always want to see a party’s best evidence that it intended to contract with the other party. In many ways, a hard copy signed contract is the best evidence available. That said, an electronic contract will be sufficient, even if the only evidence of that contract is on the computer screen.

The requirement for “writing” can be fulfilled by both email and website trading (and does not need any physical memorial, such as paper), but not by electronic data interchange as this does not involve any visible text. For the uninitiated, the National Institute of Standards and Technology states that “electronic data interchange” is more than an exchange of emails and refers to the computerto- computer interchange of messages (in the form of data rather than emails). Accordingly, it is possible for an accountant and client to agree contractual terms via an exchange of emails. It is also, theoretically, possible for terms to be agreed by the “clicking” of a button on a website. However, in the professional services context, we would strongly caution against such an approach, for the reasons set out in greater detail below.

Practical ramifications of the e-commerce guidance

So, where does this leave us with electronic contracts on a practical level? What constitutes a valid electronic contract? What is the position of scanned PDFs? Can terms be offered and agreed by email? Do they have to be printed and stored on hard copy files? We address these questions, and others, below.

Can a PDF version of a contract, with signatures, constitute a valid electronic contract?

Clearly, the best evidence of a signed contract is likely to be the original hard copy version, with ink signatures. However, the Law Commission guidance states that a scanned manuscript signature is capable of indicating that the signatory intended to authenticate the document. Accordingly, PDF copies of signed engagement letters are sufficient evidence of a party’s intention to contract. It does not matter whether the PDF is in black and white or colour. However, it would clearly be best practice to ensure that the e-copy of the contract is clear, legible and complete.

Can the offer and acceptance of engagement terms be made via email?

The short answer is “yes”. A contract can be created over email (via the exchange of offer and acceptance emails) as long as the usual ingredients for creating contractual relations are present (ie there is an offer, acceptance, consideration and an intention to form legal relations). In the electronic environment, sending an email attaching a PDF version of an engagement letter, signed by the professional, would be sufficient to amount to “an offer”. The return of the PDF engagement letter, this time with the signature of the client added to it, would be sufficient to amount to “an acceptance”. The consideration is, as it has always been, the exchange of promises between the professional and the client to the effect that the professional promises to carry out the requested work and the client promises to pay for the work.

The Law Commission guidance states that emails are sufficient to satisfy the requirements of “writing” as they are displayed on the computer screen and are available to both sender and recipient. It is, however, worth noting the case of J Peireira Fernandes SA v Mehta1. This held that the automatic inclusion of the sender’s email address (when the email is sent) did not amount to a sufficient signature. The inclusion of the sender’s name or initials must be intended as a signature, rather than added automatically (and by way of an afterthought) by the sender’s email server. It would, therefore, appear to be best practice to include, at the very least, a name at the bottom of the email prior to sending it. There is no case law to confirm whether an automatic signature at the bottom of the email would suffice or whether the sender should manually add their name (or, at least, initials), so it may be as well, on contractual documents at least, to manually add the sender’s details.

Would it be sufficient for a client to tick a box saying that it accepted the engagement terms?

There would appear to be some tension (as to whether a “tick box” acceptance is sufficient) between the Law Commission’s guidance and the Peireira case (referred to above). The guidance suggests that it could be sufficient for a client to “tick” a box to accept engagement terms (given the clear analogy with “clicking” a button, which has been endorsed by the Law Commission). That said, the Peireira case (decided since publication of the guidance) could be used to support the need for a contracting party to include details of their name (or at least initials) either on the email or webpage containing the “tick box”. Further, accountants should bear in mind that ticking a box without any prior discussion will not help if, for example, a liability cap is later challenged. Absent prior negotiations, a firm may struggle to persuade a court that the cap is reasonable in all the circumstances. On that basis, we would caution against the “tick box” approach to contracting for professional services.

Should evidence of offer and acceptance by email of contractual terms be printed and placed on the paper file?

The Law Commission guidance suggests that it is not necessary to print an email chain as proof of existence of the contract. The fact that the contract can be displayed on a computer screen should be sufficient. That said, the alternative view was expressed by Professor Chris Read in his book “Digital Information Law – Electronic Documents and Requirements of Form” [1996] . This book, however, pre-dates the guidance. It appears to us that this a matter of personal preference. If, for instance, you are still using hard copy files, it might make sense to print out and file emails confirming offer and acceptance.

Are electronic contracts acceptable to the court?

The Electronic Communications Act provides that electronic documents are acceptable to the court as evidence of valid contracts.


The law (like the commercial world) has sought to embrace the move towards e-contracts. We hope that this article has served as a useful reminder of the rules relating to e-contracting and the common issues which could arise when considering the scope (and limits) of the rules and applying them in practice.

We would like to thank Christopher Arnull of KPMG for his input and comments on an earlier version of this article.