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    Electronic signatures: are we getting there?

    Locke Lord Publications

    Click here for PDF

    Despite the availability of a wide variety of technology solutions which allow parties to use electronic signatures with a level of certainty comparable to that of using handwritten signatures, and the existence of a legal framework that recognises the validity of electronic signatures, the use of electronic signatures remains relatively low.

    There are a number of possible reasons for this. Many businesses continue to prefer to negotiate their key contracts in person and in paper format and, as such, have not required the use of digital signatures. Key contracts will commonly be signed either in person at a negotiation meeting or counterpart copies will be signed and shared with each party by email or post.

    Validity of signatures
    What constitutes a valid signature is a question that has been troubling English judges for centuries, with the approach taken depending very much on the particular context.

    This is another reason which has added to the reluctance of businesses to use electronic signatures. There is a fear that the signature will not be upheld and the contract deemed to be unenforceable. The continued development of technology and prevalence of e-commerce transactions has meant that parties increasingly require comfort that the use of electronic signatures will be recognised by law.

    In Goodman v J Eban Ltd [1954] 1 QB 550 it was held that the affixing of a name (or mark representing a name) in order to authenticate or verify a document was sufficient and that adopting this approach to the question of a “valid signature” is what makes it possible in English law to “sign with an X”.

    Electronic signatures
    The technological changes that have occurred over the past few decades, in particular the ability to conclude contracts online, has added an additional complexity to the question of what constitutes a valid signature. There are a number of ways of “signing” in the electronic world.

    To achieve a level of certainty comparable to a handwritten signature, an electronic signature needs to be unique to the signatory, created using means within a signatory’s sole control and capable of being linked to the relevant document or data in such a manner that any subsequent changes to that document or data would be detectable.

    The Electronic Signatures Directive (99/93/EC) (the Directive) was designed to ensure the free movement of electronic signatures and supporting products within the EU. The Directive was implemented into UK law by the Electronic Communications Act 2000 (2000 Act) and the Electronic Signatures Regulations 2002 (SI 2002/318) (2002 Regulations). The effect of the 2000 Act is that all electronic signatures are admissible in UK legal proceedings. The nature of a particular electronic signature will, however, determine the evidential weight attributed to that electronic signature in legal proceedings. A simple typed signature at the foot of an email would not, for example, carry the same evidential weight as an electronic signature certified by a certification authority.

    The definition of electronic signatures is drafted widely and, from a technological perspective, neutrally. It includes anything in electronic form incorporated in, or associated with, an electronic communication or electronic data which purports to be so associated or incorporated for the purpose of establishing the authenticity or integrity of that communication or data.

    Agreements regulated by the Consumer Credit Act 1974
    In its 2001 advice paper, Electronic Commerce: Formal Requirements on Commercial Transactions, the Law Commission concluded that digital signatures (involving verification via an encryption key), the affixing of scanned manuscript signatures, the typing of a name or initials, or clicking on a website, were all capable of satisfying statutory signature requirements. The legislation that followed the Law Commission’s paper did not establish a definition of electronic signature or take the debate any further.

    Nevertheless, the Law Commission’s conclusion gradually became the generally accepted view and in Bassano v Toft [2014] EWHC 377 (QB), Popplewell J held, on the facts of the case, the action of clicking “I accept” fulfilled the “signature requirement” in section 61(1) of the CCA.

    The case confirms, among other things, that credit agreements regulated by the Consumer Credit Act 1974 (CCA) can be validly concluded by way of electronic signature.

    Popplewell J made the following key remarks in his judgment:

    “There is therefore nothing in the CCA to suggest that regulated agreements should not be capable of electronic signature; and I can see no reasons of policy why a signature should not be capable of being affixed and communicated electronically to an agreement regulated by the Act.”

    There has been long standing ambiguity surrounding this question since neither the Consumer Credit Act 1974 or the 2006 Act and neither the (Electronic Communications) Order 2004 (SI 2004/3236) provided any guidance about what is necessary to properly execute a regulated agreement. The judgment in Bassano was therefore welcomed.

    Consumer Credit (Agreements) Regulations 2010 and Consumer Credit (Agreements) Regulations 1983
    The regulations prescribe the form and content of regulated consumer credit and consumer hire agreements, the manner of signature, legibility and the terms to be contained in such agreements.

    Regulation 4 (5) of the 2010 Regulations states that:

    “Where an agreement is intended to be concluded by the use of electronic communication nothing in this regulation shall prohibit the inclusion in the document of information about the process or means of providing, communicating or verifying the signature to be made by the debtor.”

    Regulation 6(5) of the 1983 Regulations states that

    “Where an agreement is intended to be concluded by the use of electronic communication, nothing in this Regulation shall prohibit the inclusion of the signature box of information about the process or means of providing, communicating or verifying the signature to be made by the debtor or hirer.”

    This was inserted into the regulations by the Consumer Credit Act 1974 (Electronic Communications) Order 2004, (SI 2004/3236), art 4(2), as of 31 December 2004.

    As such it would appear that both consumer hire and consumer credit agreements have the facility to be signed electronically.

    Contractual Formalities
    For additional comfort, parties may wish to consider including a provision in their electronic agreement stating that such agreement is deemed to be in writing and the use of an electronic signature is deemed to be a signature. While the intent of the parties indicated by such a clause may not be sufficient to counter any statutory requirements, it may at least build a sufficient argument in a court that either party would be estopped from challenging the validity and enforceability of that electronic agreement on those grounds.

    Other electronic considerations
    E-Commerce Regulations
    The E-Commerce Regulations contain certain information requirements which are relevant to contracts formed by email (email contracts are specifically excluded from certain other provisions applicable to contracts formed online). They impose information requirements which only apply to the extent that they are more extensive than, and do not conflict with, the information requirements under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134) (CCRs).

    Generally information must be made easily, directly and permanently accessible. Government guidance has previously indicated that provision on a website is sufficient, or alternatively the information could be provided during the email exchange, in an SMS message or in a brochure. It might be appropriate to place some information in email footers.

    The PSRs
    The Provision of Services Regulations 2009 (SI 2009/2999) (PSRs) will apply to the supply of most services to consumers and can apply if the trader is providing services in conjunction with goods and digital content. As is the case with the E-Commerce Regulations, the PSRs only apply to the extent that they are more extensive than, and do not conflict with, the information requirements under the CCRs.

    Certain information must be supplied in a clear and unambiguous manner, in good time before the conclusion of the contract. The trader could provide the information during a telephone call, during the email exchange, in an SMS message, in a brochure or via a website.

    The Consumer ADR Regulations
    The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 (SI 2015/542) (Consumer ADR Regulations) require the provision of information about any ADR entity the trader is obliged to use. In addition from 15 February 2016, all traders who form contracts online must provide at least a link to the EU platform.

    The most extensive pre-contract information obligations require traders to put information on their websites, in email offers and in their terms and conditions. Less extensive obligations apply if the trader is not obliged (by law, its trade body or by contract) to use a registered ADR provider or if the trader does not contract online.

    Timothy Anson, London, Paralegal also contributed to this article.

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