E-Signatures – risks and rewards for law firms

ARTICLE

E-Signatures – risks and rewards for law firms

The COVID-19 pandemic has given rise to a considerable increase in the use of e-signatures. Recently, the Execution of Documents Industry Working Group has published its Interim Report, which sets out best practice guidance that law firms can follow immediately. In this article, James Robins and Ivan Roots, who are specialists in professional risks, discuss some of the key points to consider when using e-signatures in legal practice.

Authenticity, integrity & evidential weight

E-signatures can take a number of forms, ranging from simply typing a name into a document or an email on the one hand to using sophisticated web-based e-signature platforms on the other. Other possibilities include using a finger and a touchscreen to write a name or pasting an electronic image of a signature onto a contract. These different forms of e-signature are not all equally secure and trustworthy, which will impact on their evidential weight if there is a dispute as to the authenticity or integrity of a document.

Authenticity

In this context, authenticity means: (a) is the person signing the document who they say they are?; (b) is the document accurately timed and dated; and (c) is it intended to have legal effect? For law firms, particularly those involved in high risk and high value transactions, digital e-signatures via e-signing platforms (such as DocuSign and Adobe Sign) will provide the greatest level of assurance that the signed document is authentic. The use of such a signing platform is recommended as best practice by the Industry Working Group.

The Industry Working Group also recommend consideration of whether obtaining additional evidence to record the fact that the signatory is approving the document is necessary and/or appropriate. If the method of e-signing used could be considered less reliable or more susceptible to fraud, it will be important to consider what additional steps could be taken to safeguard the process. For example, the lawyer could make an appointment for a virtual meeting with the client for the specific purpose of signing the document live during the meeting using the e-signing technology. It will also be important to keep an audit trail of the process that was followed (and an old fashioned attendance note will be very useful here). This will help build an evidential case if the validity of the execution is challenged. Obtaining the written agreement of all relevant parties to use

e-signatures at an early stage in any legal process will also assist if there is a dispute later as to whether there was an intention to execute a document using e-signatures.

Integrity

Integrity in this scenario means could the document have been tampered with either before or after signing? Again, a digital e-signature via an e-signing platform will offer the greatest level of assurance and provide a clear audit trail showing who signed the document, their email and IP address and the date and time of the signature, which the Industry Working Group cite as a reason for recommending their use. It will be very difficult for a signatory to successfully argue that they didn’t sign a document if the evidence shows it was signed from their computer, at their home, at a time they were there, though if a less secure method of e-signing is used, it will be important to take additional steps to record what was agreed to help build an evidential case if the validity of the execution is challenged.

Practical recommendations for practitioners

Client considerations

Take care to ensure that the use of e-signatures, whilst speedy and convenient, does not result in any less care in ensuring that clients (especially less sophisticated clients) have been properly advised and fully understand the effects of the document they are signing. There will be some circumstances in which a face to face meeting with a client to ensure a complete understanding of the transaction before signature will be more appropriate, especially now this has become easier to do as the restrictions of the pandemic have been eased.

Limitations on use

Some documents still require a wet ink signature – one notable example being a will. Although the temporary legislation to allow for the remote execution and witnessing of wills which came into force during the early stages of the pandemic has been extended (it is now due to expire on 1 February 2024), the Government has decided not to allow the use of e-signatures of wills as part of this temporary legislation. It is also important to remember that some transactions have particular requirements (financing transactions for example require the use of a digital signature rather than a simple e-signature), and some authorities and registries, such as the Land Registry, have very specific requirements.

In its 2019 report on e-signatures, the Law Commission concluded that the remote witnessing of other documents including deeds may not be permitted. However, the Industry Working Group suggests that certain types of e-signature may be used to sign a deed. If there is any uncertainty, very careful consideration should be given to use of e-signatures as there is a risk of invalidating the execution if the signature is not witnessed and attested properly. Consider whether a simple contract can be used instead of a deed, in order to make the execution process more straightforward. Build an evidential trail which could include instructing the witness to use the same device or wifi/internet server as the signatory so that you can check the IP address afterwards, or again an online or telephone meeting could be arranged and an attendance note taken.

If a proposed signatory is a corporate entity, check that its constitutional documents do not prevent the use of e-signatures and that the individual signatory has authority to e-sign on the entity’s behalf. On the other hand, if the proposed signatory is a consumer or individual outside of a business context, it will be important to take appropriate steps to minimise any risk that the client does not understand the consequences of signing a document.

How to manage the risks

Communicate. It is important to obtain the agreement of your client, the solicitor on the other side (if applicable) and any other stakeholders. As we have already said, obtaining written agreement to use e-signatures at an early stage in the process will assist if there is a dispute later as to whether there was an intention to execute a document using e-signatures.

Map out your process. There are a number of helpful resources to consider including several from the Law Society and a checklist produced by the Association of Corporate PSLs which sets out a non-exhaustive list of points to consider when arranging the electronic execution of corporate or commercial documents using an online platform. The Association of Professional Support Lawyers and London Property Support Lawyers Group has also produced a best practice guide for real estate transactions. Ensure that the signatories have been properly instructed on how to apply an e-signature.

Plan ahead by identifying any risks and devising a plan for managing them. Advise the client of the same in order to mitigate against the potential exposure to a negligence claim if the transaction is subsequently challenged. Keep an audit trail, for example by saving a copy of the executed documents, the completion certificate if there is one, and any emails containing signing instructions so they can be found at a later date. Keep good file records and make attendance notes where appropriate. Finally, agree with the client and any third parties what the storage and retention arrangements will be. ■

James Robins (Partner) & Ivan Roots (Associate)

Womble Bond Dickinson