E-signatures – risks and rewards for law firms

Guest article written by James Robins and Deirdre Fenton at Womble Bond Dickinson

COVID-19 has seen an explosion in the use of e-signatures by lawyers and clients alike, with widespread working from home without access to physical documents. 

In Womble Bond Dickinson alone, the number of users registered on the e-signature platform jumped from 30 to over 600 in just a few days at the start of the first lockdown. Hundreds of documents are now signed electronically every month and the e-signature platform has become a business critical tool offering significant advantages in terms of greater speed and transparency. However, the use of e-signatures is not without risk – particularly around authenticity and integrity and there are some limitations on their use. It's important that law firms think about how these issues can be managed when adopting an electronic signing process in place of a paper based approach. 

Authenticity, integrity & evidential weight

As the Law Society Practice Note  explains, e-signatures can take a number of different forms. These range from simply typing a name into a document or 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 into a contract.  

These different forms of e-signature[1] are not all equally secure and trustworthy and this will impact on their evidential weight if there is a dispute concerning the authenticity or integrity of a document. 

Authenticity in this context means is the person signing the document who they say they are; is it accurately timed and dated and is it intended to have legal effect?[2] For instance, a simple typed name on a document is easy to falsify and will not carry the same evidential weight as an e-signature which can be linked to the owner via an online e-signing platform.  

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 signatory is who they say they are and the signed document is authentic. However, if the method of e-signing used could be considered less reliable or more susceptible to fraud (for example a simple typed name) or if there are any concerns that there are risks of an unauthorised person intercepting the document and signing it, 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 (which could be by telephone or via an online video meeting platform) for the specific purpose of signing the document live during the meeting using the e-signing technology. The lawyer could then keep a detailed record of the fact that the client was seen and heard to e-sign the document at that time. Or a call could be made to the client before sending the document to them for signing, just to verify their identity and authority. It will also be important to keep a documented 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.[3] 

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 in this scenario means could the document have been tampered with before or after signing? Again a digital e-signature via an e-signing platform will provide the greatest level of assurance. These offer built-in fraud prevention systems such as two factor authentication and completion certificates that show the audit trail recording who signed the document, their email and IP address and the time and date of the signature. It will be very difficult for a signatory to successfully argue that they didn't sign a document if the evidence shows that it was signed from their computer, at their home, at a time when they were there. Again, however, 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. 

Practitioners should also take care to ensure that the use of e-signatures, whilst speedy and convenient, does not result in any less care being taken in ensuring that clients (especially less sophisticated clients) have been properly advised and fully understand the effect of the document that they are signing.

It is also worth remembering that even though we all now have the convenient option of using e-signatures, there may be some circumstances in which a face to face meeting with a client to ensure a complete understanding of the transaction before signature will still be more appropriate (especially as this becomes easier to do as the restrictions of the pandemic are eased).

Check whether there are any limitations on use

Although e-signatures can be widely used, some documents still require a wet ink signature – one notable example being a will. Although temporary legislation to allow for the remote execution and witnessing of wills came into force during the pandemic, the government decided not to allow e-signatures of wills as part of this temporary legislation (although this is under review)..  

In its 2019 report on e-signatures, the Law Commission concluded that remote witnessing of other documents including deeds may not be permitted[4]. It follows that very careful consideration should also be given to the use of e-signatures for deeds as there is a risk of invalidating the execution if the signature is not witnessed and attested properly. Consideration can be given to whether a simple contract can be used instead of a deed, in order to make the execution process more straightforward. Otherwise, if a document needs to be witnessed, it is important to map out a clear signing process with clear instructions to the signatory and the witness in advance. Build an evidential trail which, depending on the type of e-signature technology used, could include instructing the witness to use the same device or wi-fi/internet server as the signatory so that you can check the IP address afterwards or requesting confirmation by email that the witness was physically present with the signatory and observed the signature being applied after the signing process. Again, an online or telephone meeting could be arranged to run through the actual signing process so that the lawyer can make a contemporaneous attendance note of the steps that were followed.

Consider also your proposed signatories. If the proposed signatory is a corporate entity, it is important to check that its constitutional documents do not prevent the use of e-signatures and that the individual signatory has authority to e-sign. If, on the other hand, 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[5]. For example, if an individual is e-signing a statement of truth for court proceedings, it is always prudent to speak to the person signing to explain the importance of the statement of truth and the consequences of signing a statement of truth without an honest belief in its contents. It may also be appropriate to follow this up with an email. 

Bear in mind also that if the place of signature or location of the document is important, perhaps for jurisdiction or tax reasons, it may be preferable to avoid e-signing as unless using an e-signing platform which can record the signatory's geo-location, there may be doubt as to where execution occurred.

It is also important to remember that some transactions have particular requirements (financing transactions require the use of a digital signature for example rather than a simple e-signature) and some authorities and registries, such as the Land Registry, have very specific requirements.

How to manage the risks

Communicate. Once you have chosen your e-signature technology and established that there are no limitations on the use of e-signatures for the transaction in question, 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. 

Plan ahead. Identify any risks and devise a plan for managing them. Advise the client of the same in order to mitigate against the exposure to a potential negligence claim if the transaction is subsequently challenged.  

Map out your process. There are a number of helpful resources to consider in this regard 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. As part of this process, ensure that the signatories have been properly instructed on how to apply an e-signature.

Keep an audit trail. Save a copy of the executed documents, the completion certificate if there is one, and any emails containing signing instructions using a suitable document description so that they can be found at a later date. If a combination of execution methods has been used by the parties (ie wet and e-signatures), consider how the different forms of contracts will be linked and stored. 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. 

[1]The Law Commission confirmed in 2019 that e-signatures are valid provided that the signatory intends to authenticate the document and any relevant formalities are complied with. 

This article has been written by Womble Bond Dickinson and the opinions and views stated in this article are those of Womble Bond Dickinson and not Howden Insurance Brokers Limited (“Howden”). Howden is an insurance broker and is not authorised or regulated to advise on the use of electronic signatures. Howden shall not (i) owe or accept any duty, responsibility or liability to you or any other person; and (ii) be liable in respect of any loss, damage or expense caused by your or any other party’s reliance on this article.