E-signatures for land contracts: a premature step?

A joint working party of The Law Society Company Law Committee and the City of London Law Society Company Law and Financial Law Committees has published a note, based on the opinion of leading counsel (Mark Hapgood QC) on the effects of executing a document using an electronic signature. The working party states that the aim of the note is to make suggestions only and not to give advice. Although published by Company Law and Financial Law Committees, the note expressly extends to property contracts under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989, and to deeds, and will therefore be of interest to property lawyers. Unfortunately, it seems that the Conveyancing and Land Law Committee of the Law Society was not involved in the preparation of this note. This is a concern, since the note has been published as a Practice Note on the Law Society’s website.

Electronic signatures as signed writing. 

The note says that an electronic signature can take a number of forms. These include:

  • a person typing his or her name into a contract or into an email containing the terms of a contract;
  • a person electronically pasting his or her signature (e.g. in the form of an image) into an electronic version of the contract in the appropriate place (e.g. next to the relevant party’s signature block);
  • a person accessing a contract through a web-based e-signature platform and clicking to have his or her name in a typed or handwriting font automatically inserted into the contract in the appropriate place (e.g. next to the relevant party’s signature block); and
  • a person using a finger, light pen or stylus and a touchscreen to write his or her name electronically in the appropriate place (e.g. next to the relevant party’s signature block) in the contract.

There may be other forms of electronic signature. Specifically for property lawyers, the note states that, in the opinion of leading counsel “a contract executed using an electronic signature (and which may exist solely in electronic form) satisfies a statutory requirement to be in writing and/or signed and/or under hand.” Statutory requirements for writing and/or signed writing include section 2 LP(MP)A 1989 for land contracts, deeds made by companies pursuant to section 46 of the Companies Act 2006, and deeds made by individuals under section 1(3) LP(MP)A 1989.

Comment:

  • The likelihood of property lawyers using typed names (or other e-signatures) for property contracts and deeds is probably minimal. There is a sufficient strength of opinion in the property sector that signatures should be in manuscript, and lawyers remain conscious of the Land Registry’s requirements for documents to bear wet-ink signatures. However, if the practice of e-signatures starts to become adopted, the key question will be by whom was the e-signature made. A contract for the sale of land must be signed “by” (or on behalf of) each party. The requirement in the Law Society Formulae for exchanging contracts, that a solicitor “confirms that he or she holds the part signed by his or her client(s)” should gain even more heightened significance.
  • Authority cited in support of the suggestion that an electronic signature is as good as a “wet-ink” signature for statutory compliance purposes is Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd [2012] EWCA Civ 265 (in which the Court of Appeal said that it was “common ground … that an electronic signature is sufficient and that a first name, initials, or perhaps a nickname will suffice” so long as it was done in a manner which indicated that it was intended to authenticate the document) and Mehta v J Pereira Fernandes SA [2006] EWHC 813 (Ch) (in which HHJ Pelling QC accepted that a person could sign a document (an email) evidencing a guarantee by causing his name to appear in the document in order to give, and with the intention of giving, authenticity to it).
  • These cases show a willingness of the courts to allow the law to catch up with modern commercial transacting. However, they relate to guarantee agreements, the statutory formalities for which are set out in Section 4 of the Statute of Frauds 1677 rather than section 2 LP(MP)A 1989. No comment is made in the note on the Court of Appeal decision in Firstpost Homes Ltd v Johnson [1995] 1 WLR 1567 in which a question arose as to whether a party’s name, typed into the body of a letter, constituted a signature for section 2 purposes. Peter Gibson LJ said: “In my judgment, it is an artificial use of language to describe the printing or the typing of the name of an addressee in the letter as the signature by the addressee when he has printed or typed that document. Ordinary language does not, it seems to me, extend so far.” While the world of commerce has moved on since 1995, it remains for the Court of Appeal to consider again whether an electronic signature in the form of a typed name is sufficient for section 2 purposes. Indeed, Peter Gibson LJ said: “In any event, I do not accept that authorities on what was a sufficient signature for the purposes of the Statute of Frauds 1677 and section 40 of the [Law of Property Act 1925] should continue to govern the interpretation of the word “signed” in section 2 of the Act of 1989.”
  • The note is just a note, based on leading counsel’s opinion. However, it has been published as a Practice Note on the Law Society’s website. The legal status of a Practice Note is that it represents “the Law Society's view of good practice in this area” (although it is not legal advice). The President of the Law Society is quoted in the Law Society Gazette as saying that: "Solicitors are eager to take up any opportunity to innovate, and this practice note will help guide them in making ever-increasing use of this small but significant improvement". However, there is a fine line between innovation and cutting corners, and whether property lawyers wish to regard a person typing his or her name into a contract as “good practice”, as opposed to writing his or her name with a pen, remains to be seen - at least until high level authority considers the matter.

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