Electronic Signatures and Contract “Informalities” – FAQs
In the current unprecedented climate of social distancing, office and business closures and imminent lockdown, many businesses are trying to operate on a “business as usual” basis, but this of course brings challenges, not least in relation to making contracts with the logistical issues we all face.
We have put together a set of FAQs which our clients are asking us which should help you to keep that “business as usual” approach as far as possible.
Does a contract have to be in writing?
The general rule is no it doesn’t, contracts can be made informally; verbally, in writing or by other means, for example, by phone, text or electronic messenger services.
Some contracts, however, do need to be in writing, including:
- those for the sale or lease of land
- guarantees and powers of attorney
- assignment of intellectual property
- transfers of shares
A simple contract for the supply of good or services, sponsorship or other general commercial transaction need not be in writing and the rules on when they are formed are clear.
If you have an offer that has been accepted, and there is something changing hands from both parties (consideration – i.e. a clear price or something else of value), then it is very likely that you have a contract despite there being nothing in writing, or any signatures.
Should I put anything in writing?
Absolutely, particularly in these uncertain times. Whilst a written contract is not a requirement, it is always recommended so that both parties are clear what has been agreed, what their obligations are and when they have to do them.
Crucially, a written contract can contain a clause excusing a party from performance where this is due to circumstances beyond their control – something which may be very relevant in these times and on which we have published a previous e-news.
How can I sign my contract?
As there are no rules for a contract to have to be in writing, it follows that there are no formal requirements on how a written contract needs to be signed, or whether it needs to be signed at all. In practice, we would always recommend signature by both parties where possible so that there can be no arguments later as to what each party has signed up to.
It is therefore up to the parties to agree how they evidence that they have agreed to the terms set out in any written document, letter or email. For example, if you want to allow signature electronically, then legally you can agree with the other party that this will be acceptable.
There is legislation providing for this which states than any electronic signature incorporated into or logically associated with other electronic data (like a document, message or e-mail) is admissible in evidence in relation to the binding nature of the contract in question.
So practically speaking, as long as the parties have agreed the means by which they will be deemed to have signed and accepted the terms in the document, they can sign in that manner. However, remember that there is more room for a party to argue that they did not actually intend to be bound if you don’t see them sign, or they haven’t signed using their own handwriting.
If you are agreeing to signatures in a manner other than by hand, then set out in writing exactly what will be acceptable.
There are many options for executing documents depending on what is possible; what will be possible in the coming weeks and months is likely to change with new and changing restrictions being placed on us. The following are all compliant ways of executing a document, by agreement with the other party:
- Document signed by hand by each party (with or without the presence of a witness) (copies exchanged by post where needed)
- Document signed by each party by hand in separate counterparts (with or without a witness) and then swapped so that each party has a copy of the other party’s signature
- Paste a copy of your scanned signature into the contract and attach the document to the email stating that the application of your scanned signature signifies acceptance of the terms
- Print out and sign the last page of the contract, scan the signature page and return by email along with a copy of the whole contract attached to the same email
- Where you do not have a printer, and cannot paste a scanned copy of your signature onto the document, you can e-mail confirmation of acceptance of the terms (preferably with those terms attached to the same email to avoid confusion)
It is inadvisable to simply send a copy of a signature page with no attached copy of the full agreement – this is because there is too much uncertainty about which copy of the terms you are actually agreeing to be bound by, particularly if there have been a number of amended versions.
My contract says I need to serve a notice in writing – will email suffice?
The inevitable lawyer’s answer to this question is “it depends”.
Many contracts contain a “notices” clause setting out how official notices under the contract (for example, notifications of a force majeure event affecting a party’s performance of the contract, or a notice to terminate) should be served. In most cases, that clause will state that notices will need to be served “in writing”.
Frequently, email notices are expressly prohibited in the contract itself and post and hand delivery are the only option. However, if there is no definition of what “in writing” means in the contract then the words “in writing” or “written” are defined according to the Interpretation Act 1978 and this will generally include email and electronic communications.
How can I deal with contract management without face to face meetings?
In many long-term contracts, there is express provision for regular, face to face contract review meetings and site visits. In many cases this is simply now not possible.
You need to be thinking of alternatives now and putting arrangements in place with suppliers and customers where possible. If you agree these in email or writing between you, then this will supersede the contract in most cases and give a practical approach that is workable for all parties.
We have so far seen some creative use of video messaging and video conferencing, but conference calls, emails and messaging have all shown their value in recent weeks and can be used for this purpose. Provided that it suits your needs and is workable for both parties it should suffice.
Where there are tasks that simply cannot be dealt with remotely or by agreed “workarounds” then you need to consider agreeing formal variations to contracts, allowing suspension of obligations or, as a last resort, relying on force majeure clauses where this is possible and you are the affected party. For more on this issue see our recent briefing on this topic.