Electronic signatures: validly executed or not?

In today’s modern society, electronic signatures are used in place of handwritten signatures in many different types of transaction.

What about property transactions? The Law Commission has recently published its report on the extent to which electronic signatures can be used to create legally binding obligations between contracting parties. Unfortunately the Law Commission report did not consider deeds that evidence registrable dispositions under the Land Registration Act 2002. This obviously excludes a significant number of Land Registry forms that are routinely used in property deals.

Otherwise the report considers (among other things):

• Use of electronic signatures generally within the current legal framework;
• Use of electronic signatures where there is a statutory requirement that a document is signed in the presence of a witness.

In relation to the first aspect, the Law Commission is of the view that an electronic signature is a legally valid way to execute a document (including a deed). This is provided that the person signing has the necessary intention to authenticate the document and that any further formalities (eg. statutory, contractual or arising by common law) are satisfied.

Nonetheless, the practical issues relating to electronic execution becomes apparent in regards to the second aspect. For example, under current law where a deed includes an individual as a party to it the deed must be signed by the individual in the presence of a witness. The Law Commission is of the view that in these circumstances the witness must be physically present. It is difficult to see, in these circumstances, how video chat applications such as Skype can be used to satisfy the witness requirement.

Use of electronic signatures is, belatedly, gathering pace in the property sector although there is, as yet, no consensus on what electronic signatures will look like in property deals of the future. This is something HM Land Registry can help drive as part of its project on electronic conveyancing where, currently, electronic execution of charges has been rolled out for residential re-financing.