Businesses are operating in a technological age, utilising the
latest technology to streamline their business activities. The
specialist commercial lawyers at Bahamas law firm Parris Whittaker are often
asked by businesses for advice as to whether they can rely on digital
signatures in the course of business.
The
issue is vital because a company may consider another business is legally bound
by a digital document – only to find it may not be.
Clients and their lawyers are increasingly reliant on digital
signatures and direct digital communications to sign off documents, conclude
negotiations and even ‘sign’ legal deeds and documents.
It is probably only a matter of time before the law formally provides for
digital signatures in every area of legal practice.
What’s
the law on digital signatures?
Under the Electronic Communications and Transactions Act, there is
legal recognition of electronic contracts and electronic signatures. However, the provisions do not apply to the
conveyance of real property or the transfer of any interest in real property.
In September 2019, the UK’s Law Commission stated that electronic signatures can be used to execute documents
(including where a signature is a statutory requirement). This means that, in
most cases, electronic signatures can be used as an acceptable alternative to
handwritten ones. Again, this does not yet extend to registered
dispositions of land and property.
However, businesses should not ignore an important ruling from the UK’s High Court relating to the conclusion of a contract via email where the parties were negotiating the sale of a piece of land. The ruling is particularly relevant to businesses whose activity includes buying/disposing of land and property, but it is also relevant to circumstances where contractual terms require an agreement or notice to be in writing and signed in order to be effective.
What’s the background?
The parties were involved in a dispute over a right of way. Negotiations – entirely by email – took place to settle the matter. An agreement was reached under which the claimants would purchase a piece of land for £200,000 in full and final settlement. The evidence was clear that the defendant had given clear instructions to his solicitor to accept an offer but he then changed his mind and wanted to renege on the deal.
The claimants applied to the court for an order of specific performance arguing that the defendant was legally bound by a contract for the disposition of an interest in land. The defendant said it was unenforceable as it failed to comply with strict legal requirements that a contract for the sale of land must be in writing, incorporating all the terms agreed between the parties and signed by them.
At issue was whether the defendant solicitor’s digital signature automatically generated on email correspondence was adequate such that the document was legally ‘signed’ for the defendant to comply with the statutory requirements.
The court adopted the approach taken by the Law
Commission that “an electronic
signature is capable of meeting a statutory requirement for a signature if an
authenticating intention can be demonstrated”.
The
court found that the emails in this case satisfied the test of whether the name
was applied with authenticating intent. It concluded that:
It is common ground that such a [email] footer can only be present because of a conscious decision to insert the contents, ie the signature. The recipient would therefore naturally conclude that the sender’s details were included to identify the sender with the contents of the email;
The sender is aware their name is being applied as a footer and the recipient has no reason to think that the presence of the name as a signature is unknown to the sender;
The use of ‘Many Thanks’ before the footer shows an intention to connect the name with the contents of the email; and
The presence of the name and contact details is in the conventional style of a signature, at the end of the document.
The contract was, therefore, found to be binding on
the defendant.
What does this mean?
The rules on the
effectiveness of digital signatures continue to develop and, while the existing
rules (and the Law Commission approach) lay foundational guidance, they should
not be treated as a legally conclusive position. Depending on the
circumstances, the court may find a legally binding contract exists, even if at
first blush it appears that the strict legal requirements have not been
complied with.
Business must therefore
take extra care when negotiating by email, particularly if there is no
intention to conclude a contract by way of electronic communication – including
where land and property are involved.
How can we help?
We
advise and represent commercial clients with their commercial negotiations, contracts
and disputes. If you need assistance with any pre-contractual matters and negotiating
and drafting contracts, or if the other party is refusing to acknowledge a
contract exists, contact the expert commercial lawyers at ParrisWhittaker for strategic
advice and representation.
