Developments in contract: Remote completion

Principles

• Contracts governed by English law can be signed using e-signatures, as confirmed by the Law Commission in September 2019. Electronic signatures come in various forms, from the use of e-signing platform to copying scanned images of signatures from a signature bank into documents, or signing a hard copy and scanning a copy of the signature page for another party to add their signature (see our Insights article here on signing legal documents with e-signatures).
• For a document to be validly executed as a deed, it must be both “executed” (that is signed or sealed as appropriate) and “delivered”. A UK company can execute deeds (and other documents) under section 44 of the Companies Act 2006 (CA) in a number of ways. Alternatively, a deed may be executed by a person authorised to execute it in the name of or on behalf of the company, who must sign in the presence of a witness (complying with the formalities for execution of deeds by individuals under section 1(3) of the Law of Property (Miscellaneous Provisions) Act 1989 (LPMPA).
• A "wet ink" signature of all the parties is required in certain circumstances, such as when a signed original has to be filed with Companies House or the Land Registry.

Recent Developments

• The Law Society has published guidance on the use of virtual execution and e-signatures during the COVID-19 crisis, as have the FCA and the PRA. The dramatic increase in working from home has also thrown into sharp relief the question of the “virtual witnessing” of deeds. The provisions of the LPMPA and the CA require the “presence of a witness”. Although they do not specify “physical” presence, the safest interpretation of the current law is that the attesting witness should be in the physical presence of the signatory when he or she signs the deed, failing which the deed will not be duly executed.
• The Law Commission report says at para. 5.35 2 “we are not persuaded that parties can be confident that the current law would allow for a witness viewing the signing on a screen”. GPS or other data might easily be used to challenge the location of a witness down the line.
• In Wood v Commercial First Business Ltd [2019] EWHC 2205 (Ch) it was held that although the witness must be present when the signatory signs, there is no equivalent requirement for the signatory to be present when the witness attests.
• In Bioconstruct GmbH v Winspear [2020] EWHC 7 (QB) it was held that a valid deed cannot be made by taking the executed signature pages from one version of a document and attaching them to another, later, version. The court applied obiter comments made in In R (Mercury Tax Group Ltd) v Her Majesty’s Commissioners of Revenue and Customs stating that s1 LPA 1989 had the effect that (in the case of a deed) “the signature and attestation must form part of the same physical document”.
• Signature Living Hotel Ltd v Sulyok: a guarantee which is invalidly executed as a deed may still be enforced as a simple contract, provided it is supported by consideration and meets the requirements of the Statute of Frauds 1677.

What this means

• Pre-signed signature pages are sometimes used in transactions, but this is not advised if it can be avoided. Concern was raised following comments in R (Mercury Tax Group Ltd) v Her Majesty’s Commissioners of Revenue and Customs [2008] EWHC 2721 (Admin). If using pre-signed pages, care must be taken to ensure that there is authority for signature of the final terms, including any amendments between pre-signature and closing. The Law Society guidance on “Execution of documents by virtual means” should be followed: parties seeking to use pre-signed pages should ensure that they have approved the final version of the document before releasing (pre-)signed pages.
• Particular caution is needed when both signing and witnessing deeds. While remote working, the only person who is available to witness the signing of a deed may be a member of the signatory’s family. There is no legal prohibition on a family member or partner from acting as an attesting witness. As the purpose of witnessing is to provide unbiased evidence of what was signed, by whom and when, the preference will always be for an independent witness. In the current environment, if possible, a socially distanced neighbour or other independent witness should be preferred. As held in Wood though, as long as the witness is present when the individual signs, the formalities for executing a deed by individuals under s.1(3) LPA 1989. are satisfied if the witness signs at a later date.
• Some comfort may also be drawn from the Signature decision, as it is possible that an ineffective deed may still constitute a valid contract. If the intention has been to execute an agreement as a deed, however, the parties may not have given consideration.