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Electronic signatures are legal and used for many thousands of contracts every day. The main bases of their legal standing can be found in EU law, UK and devolved legislation, and case law (common law).
Known as 'eIDAS', but fully named 'EU Regulation 910/2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC', this major piece of EU legislation governs the use of electronic signatures across the EU. Applied from 1 July 2016, eIDAS supersedes the Electronic Communications Act 2000 which was an outcome of EU Directive 1999/93/EC. eIDAS itself says it "enhances and expands the ‘acquis’ of the Directive".
eIDAS sets outs two types of electronic signature, 'Advanced' and 'Qualified'.
'Advanced Electronic Signature' is defined in Article 26:
"1. it is uniquely linked to the signatory;
2. it is capable of identifying the signatory;
3. It is created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control; and 4. It is linked to the data signed therewith in such a way that any subsequent change in the data is detectable."
Legalesign offers 'Advanced Electronic Signature'.
‘Qualified’ signatures are based on ‘public-key infrastructure’ technology (PKI) and together with a set of regulations on issuance and trust provide a framework to add a strong level of authentication and encryption.
eIDAS also entrenches past commitments that underpin electronic signature, for example, the provision that an electronic signature "shall not be denied legal effect and admissibility in legal proceeding soley on the ground that is it an electronic form or that it does not meet the requirements for qualified signature". (Article 25.1)
In the UK, Qualified Certificates are largely unused because there is no practical way to access and apply them. They are better understood in EU countries where there is a national ID scheme, for example in Spain and Estonia. Citizen IDs can become a ‘qualified certificate’ and thereby provide an avenue for Qualified Signatures to be rolled out and adopted across a whole population.
But Qualified Certificates are used in special cases. The Registrars of Scotland (ROS) issue them to lawyers for the ‘e-conveyancing’ of property contracts. As part of their goal to use electronic signature in property contracts the ROS have been behind Scottish legislation to bring forward electronic signatures for certain property transactions.
For those researching levels of authentication in connection with electronic signature in the EU we recommend reviewing the ENISA work on trust standards.
The main piece of UK law from Parliament was the Electronic Communication Act (2000) but this is now effectively replaced by eIDAS. The further considerations around electronic signature are i) common law and ii) specific regulations. There are many contract-specific regulations (e.g the Consumer Credit Act 1974) and these can have an impact on whether and how electronic signatures should be used in those cases.
In parallel to EU law, and unlike other EU countries, the UK legal system also has a common law element that for centuries has been the basis for contract validity. A contract can be formed orally, for example, but must include certain elements to be legally enforceable including an offer, an acceptance, an intention to create legal relations, certainty over terms, and various other factors, for example that the objects of the contract are legal.
The Law Society of England & Wales has produced an authoritative practice note on the common law underpinnings to electronic signature.
While eIDAS usefully forms a straightforward framework for the validity of contracts under ‘advanced electronic signature’, in the absence of its support for deeds, and because ‘qualified signature’ does not fit with the UK context, the note advances the case for the use of electronic signature on a comman law basis, which informs Legalesign e-Witness:
"Given the willingness of the courts to interpret various statutory requirements for writing to include the situation where a document is represented on a screen and executed with an electronic signature, in the opinion of leading counsel and the JWP, the approach outlined above would apply in respect of deeds."
Click here for the Law Society practice note on the execution of a document using electronic signature.
For students, the earliest related case law we have found is Hull vs Cognos industrial tribunal, the first example of a case with a contract signed by email.
Scots case law has a broadly similar approach to that in England & Wales. i.e. that contracts can be formed based on a set of principles, for example, similar to the English principles of intention and certainty, Scots Law understands ‘consensus in idem’, that is, there must be an essential understanding between parties as to the terms of the contract. Businesses operating under Scots law should however pay particular attention to the Requirements of Writing Act Scotland (1995). This legislation can restrict electronic signature where it might otherwise be used in England & Wales, for example in property leases. As yet there has been no practice note released by the Law Society of Scotland on electronic signature, in particular for its use with ‘probative contracts’ (the Scots equivalent to an English ‘deed’), we will update this page as soon as more guidance is available.
We recommend businesses taken their own legal advice on their contract handling. For example, you may need to inform your signers that they have a ‘cooling off’ period (Legalesign has a place where you can add that text). Some contracts may need to be delivered to become effective so you need to make sure Legalesign email delivery is switched on and PDFs are attached. Some contracts may not be able to be signed by electronic signature. As far as possible Legalesign’s default settings will give the strongest legal offering. But individual sectors and contracts will have their own regulations to consider.
For the true connoisseur of electronic signature, the United Nations Commission on International Trade Law (UNCITRAL) who describe themselves as ’the core legal body of the United Nations system in the field of international trade law’ have a working group on electronic commerce that has done a large amount of work on the core concepts and theory of electronic signature in law. This body has drawn together an excellent set of documents for anyone thinking electronic signature and its adoption by states, and makes interesting reading to juxtapose against national legislation.
If you are researching electronic signature law and want more information then get in touch.
Last updated: 19 November 2016