E-signatures: is the law catching up with technology?

9 January 2019

Trust is the cornerstone of commercial activity and can be enhanced in the online world by the use of e-signatures and trust services. In this blog we review the different types of e-signature and consider their legal validity and security for executing contracts and deeds.

What are e-signatures?   

E-signatures take many forms including typewritten, scanned, digital representations of characteristics such as a fingerprints or retina scans, as well as electronic representations of handwritten signatures, such as those used when accepting the delivery of a parcel by signing with a stylus and a handheld touch screen device.

Regulation EU/910/2014 on electronic identification and trust services governs the use of e-signatures and trust services in commercial arrangements and categorises e-signatures according to their level of sophistication for authentication and integrity. Namely these are as follows:

(i) “simple”, meaning data in electronic form such as scanned signatures or tick boxes with declarations;

(ii) “advanced”, meaning signatures that are uniquely linked to an identifiable signatory with sole control of the data used to create it (such as through private encryption); and

(iii) “qualified”, meaning those signatures that meet the “advanced” criteria and are supported by a formal certificate issued by a trust service provider. 

What are trust services?

Trust services are provided by the qualified service providers listed on the EC’s website. Trust services are used to verify the authenticity of an e-signature and include measures such as:

(i) electronic time stamping, whereby data in electronic form binds other electronic data to a particular time which proves that the data existed at a particular time;

(ii) electronic seals, which are incorporated into a document to guarantee its origin and integrity; and

(iii) website authentication, a certificate allowing users to verify the authenticity of a website and its link to the website owner.

The UK’s draft withdrawal agreement from the European Union anticipates that a reciprocal arrangement for accepting information in electronic format will continue after Brexit at least for the duration of a transition period.

Contracts

Contracts for commercial arrangements can be made orally or in writing (including through a variety of electronic communications including by email, acceptance procedures and text message). Signature of the parties is a strong indication of their intention to create legal relations. English law allows for e-signatures of all complexities to be used as the basis for entry into a contract with equal treatment to execution by wet-ink signature, so long as the signatory intends for the e-signature to authenticate the document.

E-signatures can be quickly generated and are likely to be more efficient from a cost and time standpoint in high-volume transactions on standard terms (where there is limited scope for negotiation). That said, the need for security may prevail over convenience in high value transactions where sophisticated e-signatures with a secure link to the owner would more usually be used for authentication purposes.

Deeds

The main difference between a deed and a contract is that deeds must be in writing and there is no need for consideration (i.e. payment in some form) for a deed to be legally binding. There is a statutory requirement in certain types of transaction for the parties to use a deed, for example land conveyances or the release of a debt. The execution requirements are also more complex for deeds. For example, the Companies Act 2006 provides that one director may sign on behalf of the company in the presence of a witness, or two authorised signatories may sign on behalf of the company.

The statutory requirements for signing an agreement must also be considered in line with any requirements prescribed by the company’s articles of association. If the articles do not include provisions governing the use of electronic or wet-ink signatures then the company may execute a deed by e-signature. In the case of a deed, the witness who attests the signature must have actual sight of the live signing. It is considered best practice for the witness to be in the same location as the signatory but the requirement can also be fulfilled by using a live videolink. The witness may either attest the signature by affixing their own e-signature or use a wet-ink signature, subject to any provisions of the company’s articles.

Key considerations

  • Suitability: legal advice should be sought when contemplating whether to sign documentation by e-signature.
  • Trust services: can be used to ensure the security and legal validity of electronic activity and may be helpful where e-signatures are being used.
  • Public bodies: a wet ink signature is required for filing documents with certain public bodies such as HMRC, the Land Registry and Companies House (for example stock transfer forms for the payment of stamp duty).
  • International arrangements: it is best practice to discuss the use of an e-signature to execute an agreement with the counterparty in advance, particularly if they are based outside the EU where e-signatures may not be common place or enforceable.
  • Legislation and constitution: ensure the manner of the execution satisfies the necessary statutory requirements and the company’s articles of association;
  • Witnesses: when executing a deed, make sure the witness genuinely observes the act of signing.

If you require such assistance, or you would like to enquire about how else the team could help with your company’s affairs, please contact a member of our technology law team.


Latest blogs and news

Lifecycle of a tech startup series: Preparing to raise investment

In the last instalment we talked about the ways in which the founders of KNow Wear Limited could protect the intellectual property in their business. Since then, the business has been progressing well and our founders have been working on developing a prototype.  

Lifecycle of a tech startup series: Intellectual Property

In our last instalment our founders, Sarah and Chris, considered the basics in establishing their tech startup and they incorporated a company under the registered name ‘KNow Wear Limited’. 

How the tech sector can make the most of the UK’s new immigration rules

Many companies in the tech sector will be aware of the new immigration system and Skilled Worker category opening in a couple of weeks on 1 December. For those companies without a sponsor licence, they will need to apply for one in order to recruit both non-EU and EU citizens. EU citizens resident in the UK before 11pm on 31 December 2020 can apply to the EU Settlement Scheme.

Lifecycle of a tech startup series: The basics

Welcome back to the blog series covering the lifecycle of a tech startup, from a legal perspective.

Lifecycle of a tech startup series: Case study

Alex (tech), Andy (tech), Emer (investments) and I (investments) work alongside startups and founders day to day and thought it might to helpful to some of you out there to bring together our expertise on the legal issues that tend to arise and how we deal with them. 

The Coronavirus challenge for tech coworking spaces

This blog will explore the difficulties currently facing tech coworking spaces in light of the Covid-19 pandemic, how providers can keep tenants engaged and what the future may hold for these spaces. For an audio introduction to this topic, please listen to episode 7 of our Tech in Two Minutes podcast.

AI and Algorithmic Decision-Making in the Public Sector and Criminal Justice System

In recent years there has been lively discussion about artificial intelligence revolutionising the way we work and live our lives. In its policy paper on the AI Sector Deal, the UK government predicted that the development of AI technology could have the same dramatic impact on society as the invention of the printing press.

An early Christmas present for the tech sector from the CMA?

The Competition and Markets Authority (“CMA”) has today (18 December 2019) given the tech sector an early Christmas present by publishing its interim report on its market study, commenced earlier this year, into online platforms and digital advertising.

Essentials for drafting online consumer terms and conditions

If you are a trader selling to consumers online, whether that is through a web-based platform or a mobile app, it is important that you understand and comply with relevant consumer protection laws. Eager to launch, many traders fail to satisfy the key legal requirements of fairness and transparency in their online consumer terms despite serious consequences for non-compliance.

Shanks v Unilever: What does this mean for employers’ intellectual property rights?

After a 13 year legal battle, the Supreme Court has awarded £2m in compensation to a professor for an invention he created during his employment, nearly forty years ago. This ruling poses the question; will Shanks v Unilever open the floodgates to future compensation claims from disgruntled employees?

Security tokens: a new class of crypto assets

Security tokens are a digital representation of ownership rights in real world assets (such as property or shares) and have captured the curiosity of entrepreneurs, startups and investors. This blog summarises the potential benefits and pitfalls of security tokens and is part of our wider crypto assets blog.

Doing well in the crypto-currency market? Make sure you don’t die rich!

Whether you are in the market for short-term profit or making long-term investments, adequate planning is certainly a worthwhile (and small) investment of your time and money. If you’ve been savyy enough to successfully invest in crypto-assets, make sure you are smart enough to ensure your loved ones can benefit, should the worst happen.

E-signatures: is the law catching up with technology?

Trust is the cornerstone of commercial activity and can be enhanced in the online world by the use of e-signatures and trust services. In this blog we review the different types of e-signature and consider their legal validity and security for executing contracts and deeds.

Website development agreements – consider the content of your contract as well as the content on your site

A strong online presence is often a crucial component of a business’ marketing strategy. If your business doesn’t have sufficient resources to develop its website in-house, it will need to engage a website developer. It is imperative to enter into a carefully drafted legally binding contract with your website developer from the outset of the project in order to protect your business interests and minimise the risk of any future disputes.

FCA Dear CEO letter on cryptoassets – a warning to firms

On 11 June, the UK Financial Conduct Authority (FCA) issued a “Dear CEO” letter on how banks should deal with the financial crime risks associated with “cryptoassets”. The FCA defines cryptoassets as publicly available mediums of exchange that feature a distributed ledger and decentralised system for exchanging value, such as Bitcoin and Ether. These assets are more commonly known as cryptocurrencies.

Serious and organised crime threats to the UK: 2018 and beyond

Last month the National Crime Agency (‘NCA’) published its annual strategic assessment of Serious and Organised Crime (‘SOC’) in the UK. The data has come from a variety of law enforcement agencies and other sources including the National Cyber Security Centre (‘NCSC’).

Cryptocurrencies - tread carefully before trading

Bitcoin, Ehtereum, Litecoin... cryptocurrencies are all over the press. Most of us are now broadly aware that cryptocurrencies are digital currencies which use blockchain technology. But how many people actually understand how the underlying technology works, what it means to ‘invest’ in a cryptocurrency, and appreciate the risks behind them? For anyone thinking about investing in cryptocurrencies, set out below is a summary of the main concerns, which should hopefully encourage you to stop and think before jumping on the crypto band wagon.  

Social Media Giants vs Children – the truth behind social media contracts

Increasingly, facts and figures about the negative effects of social media are being reported in the press. Recent statistics have shown that three-quarters of children aged 10-12 already have social media accounts, and that the amount of time children aged 12-15 spend online has more than doubled in a decade. Just last week, the Children’s Commissioner announced that schools should be playing a bigger role in preparing children for social media’s “emotional demands”. Such reports are understandably very concerning, and raise questions about the morality of social media giants benefiting at the expense of the emotional wellbeing of children. However, thought should also be given to the legal aspect of these relationships, and in particular, the terms and conditions that children are signing up to when creating social media accounts.

Cyber-security, ransomware and the GDPR

One in five NHS Trusts were hit by a cyber-attack known as “Wannacry” on 12 May 2017 leading to PCs and data being locked up and held for ransom. The malicious ransomware known as WanaCrypt0r has hit companies and other organisations, from Russia to Australia, and Europol estimated there had been 200,000 victims in at least 150 countries. It was alleged that NHS networks were left vulnerable because they were using outdated Windows XP software, which is no longer supported by Microsoft, and therefore security upgrades had not been installed. The National Cyber Security Centre warned that more cases of the ransomware were expected to come to light beyond the NHS and “possibly at a significant scale”. 

Driverless Cars: is the law still playing catch-up?

We published a blog last year about Uber’s pilot and driverless cars and, at that point, it seemed straight out of the pages of a science fiction novel, but driverless cars are now well and truly amongst us, and it seems that everyone is jumping on the band wagon. 

Share insightLinkedIn Twitter Facebook Email to a friend Print

Email this page to a friend

We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.

Leave a comment

You may also be interested in:

Close Load more

Skip to content Home About Us Insights Services Contact Accessibility