A potential way out of difficulties caused by Covid-19, but beware witness and registration requirements
The lockdown is causing difficulties for a number of our clients in signing and completing physical documents. People may lack the facilities to print/scan documents or to receive physical documents or get to a post box to send them.
This article gives a brief overview of the use of electronic signatures in some common scenarios that our charity clients may be likely to encounter.
The general rule for simple contracts
The general rule is that a contract can be made by any number of means, including verbally, by exchange of emails or by conduct, as long as the key legal ingredients of a contract are present. In practice, the parties will often want more certainty so they will draw up a formal written contract which is then signed and dated.
The usual method of signing is the physical handwritten signature, and this is still probably the safest way of proceeding given that it focuses the attention of the person signing. However, recent case law and guidance has confirmed that an electronic version of a manuscript signature, or even a typed name, will be sufficient to sign a document provided that it is clear that the person signing in this way intends to sign and be bound by the document.
Where there is a signature it can be provided by one authorised signatory of an organisation without the need for a second signature or a witness.
Deeds – extra formalities and the witness requirement
There are certain types of contracts where extra formalities are specifically required.
For example a contract for the sale or disposition of an interest in land must be in writing, incorporating all agreed terms and signed on behalf of each party. The generally understood position as set out in case law and guidance is that an electronic signature will suffice here.
For certain transactions by which an interest, right or property passes or is confirmed, or a binding obligation on a person is created or confirmed, the document must be executed as a deed. Deeds have special requirements, so there are some additional practical hurdles to deal with during Covid-19.
Where signature of a deed is by:
- an individual, it needs to be in the presence of a witness (this will also apply to individual trustees signing on behalf of the charitable trust or an unincorporated association)
- a company, it must be by:
- two directors,
- one director and the company secretary,
- one director in the presence of a witness,
- or by company seal
- a charitable incorporated organisation (CIO), it must be by two trustees or by using the CIO's seal
You will notice that some of the above require the presence of a witness.
The latest review of the law in this area concluded that 'in the presence of a witness' did mean in the physical (not electronic) presence of that witness.
Therefore where a witness signature is required, whilst the signatory and witness can both sign by electronic signature, they will need to be in the same room as each other while they do so. This will cause difficulty during Covid-19.
There is nothing strictly preventing the witness from being a family member or flatmate, which may help in the present circumstances (although in normal times we would not recommend that family members act as witnesses).
Where the person signing is not able to sign in the physical presence of someone else then where it is possible to do so it will be better to use other options. For example, in the case of signature by a charitable company the charity could specifically opt for electronic signature by two directors, or one director and the company secretary, rather than one director in the presence of a witness.
Land Registry formalities
There are further hurdles if you are dealing with property and the transaction needs to be registered at the Land Registry in order to have full legal effect – broadly:
- transfers of land
- leases of over seven years or which take effect three months after they were granted
- legal charges aka mortgages (although the Land Registry does have an electronic procedure for dealing with these)
- easements (a right benefiting a piece of land that is enjoyed over land belonging to someone else) and similar rights
- and deeds of variation/releases relating to any of the above
In these situations, the parties must sign with a physical wet ink signature rather than an electronic one (at least in part – see below).
This is because in order for an electronic document disposing of land to be recognised as a deed:
- it must make provision for the date and time it takes effect
- it must have the electronic signature of each person by whom it purports to be authenticated
- each electronic signature must be certified
- it must meet such other conditions as may be provided for in rules
The Government has not specified what 'electronic signature' and 'certification' mean, so it was left to the Land Registry to make further rules about what these things would look like. So far, this has only been done with respect to mortgages, so for all other disposals of land the Land Registry will only accept physical wet ink signatures.
However, on 4 May the Land Registry amended their guidance to provide that until further notice they will register deeds that have been signed by the following means:
- final agreed copies emailed to each party by their lawyer
- each party prints signature page only
- each party signs signature page (in physical presence of witness, who then also signs, if that is what their execution clause requires)
- each party sends single email to their lawyer to which they attach the agreed full document that was previously emailed to them, together with a PDF/JPEG/other suitable copy of the signature page that they have physically signed
- the lawyers complete on the basis of those attachments and submit those attachments to the Land Registry in their application for registration
This gives some more flexibility, although it does still require a wet ink signature at one point in the process i.e. access to a printer/scanner. Accordingly in this scenario organisations will have to think about making a practical arrangement for this.
But in most other scenarios, electronic signatures should provide a useful way out of some of the current practical difficulties caused by Covid-19.