The question that is increasingly being asked in a digital age where documents are emailed between parties is whether electronic signatures can be used or do we still need that pen to provide a “wet ink” signature on a paper copy of the document?
The basic requirements in English law for the creation of a binding contract are set fairly low, merely requiring an “offer”, proof of “acceptance” and some form of “consideration” being given in return. Consequently, over time in order to avoid disputes as to whether a binding contract has been created additional statutory requirements have been put in place to provide more certainty.
In the case of land, the relevant provision is Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, which states that a contract for the sale or other disposition of an interest in land must:
• Be in writing;
• Incorporate all the agreed terms of the parties in one documents, or where contracts are exchanged, in each document; and
• Be signed by or on behalf of each party.
Further statutory provisions govern how the actual disposition of the land pursuant to the contract should be dealt with, the key provision being Section 52 Law of Property Act 1925. Subject to an exception for short leases, Section 52 requires that a transfer of land or an interest in land must be by deed which will again mean a signed written document is required, although the requirements are even stricter than for a contract as the signature must be witnessed.
So the question is, will documents that have been electronically “signed” fulfil these statutory requirements and be valid?
In July 2000 the Electronic Communications Act 2000 (ECA) came into force following an EU directive. It states that electronic signatures and related certificates will be admissible in evidence in legal proceedings with regards to questions of the authenticity or integrity of an electronic communication. However, the ECA does not deal with the validity of electronic signatures.
A recent case has determined that an exchange of email can be sufficient to fulfil the Section 2 requirement for contracts (Green (Liquidator of Stealth Construction Ltd) v Ireland 2011). In this case the “signatures” to the emails comprised the parties’ forenames only but the court agreed that this would be sufficient for a signature.
Furthermore the Law Society’s guidance note on electronic signatures indicates that in their view a contract or deed executed by an electronic signature (including those which solely exist in electronic form) can satisfy the statutory requirements to be in writing and signed.
But before you throw your pens away there is currently one insurmountable problem – The Land Registry.
If a transaction needs to be registered at the Land Registry, (and most do, for example transfers of land, grants of easements or leases over 7 years) there remains a requirement that a “wet ink” signature appear on the paper document.
The only current exception is that the Land Registry accepts electronic discharges of legal charges, not requiring wet ink signatures, and Part 8 of the Land Registration Act 2002 contains provisions to allow for electronic conveyancing in the future, but these provisions have yet to be put into practice.
However, this is likely to change in the future as the Land Registry opened a consultation earlier this year on making changes to the land registration legislation to allow the introduction of electronic signatures. But for now, the fountain pen is safe.
If you would like any further information please contact Penelope Edgar, Senior Associate in our Commercial Property team.