The advantages of using an “e-signature” are clear. It provides a quicker and easier method of signing documents and avoids the need for physically delivering the documents - especially time consuming when you have multiple tenants and guarantors potentially all over the world.
However, the law regarding the use of e-signatures is particularly complex.
We have received a number of enquiries recently from letting agents as to the validity of the use of e-signatures on documentation.
Here we will focus on the validity of electronic signatures for Terms of Business, as the use of electronic signatures for residential leases and personal guarantees is a separate issue.
The law in this area is primarily governed by the Electronic Communications Act 2000, the Electronic Signatures Directive 1999/93/EC and the Electronic Signatures Regulations 2002.
The main provision of the Electronic Signatures Directive states that an advanced electronic signature based on a qualified certificate which is created by a secure signature creation device satisfies the legal requirements of a signature and will be legally admissible in court proceedings.
The majority of service providers support the Advanced Electronic Signature model. The EU Directive defines an advanced electronic signature as one that meets the following requirements:
- it is uniquely linked to the signatory;
- it is capable of identifying the signatory;
- it is created using means that the signatory can maintain under their sole control;
- it is linked to the data to which it relates in such a manner that any subsequent change in the data is detectable.
Normally, service providers do this through email and IP address authentication. However, each individual service provider is different and uses an authentication process particular to them. Therefore, the question of whether the electronic signature meets the standard of advanced electronic signature is dependent on whether the service providers’ process of authentication adheres to the EU Directive. Without looking at each set up separately, we cannot be more specific as to whether these processes do in fact comply with EU law.
Where the electronic signature does not reach the standard of advanced electronic signature, it will not necessarily be inadmissible in court proceedings. However, the evidential weight given to such a signature will depend on the facts of the case and the nature of the signature. Thus, in this situation, we would need to understand the background and circumstances of the individual case in order to give more detailed advice.
Another problematic issue is that the majority of e-sign service providers are based in the US and the data of the signatories are held on servers in the US. Therefore, there may be a question of transferring personal data outwith the EU which may breach EU data protection laws.
Therefore, as stated, the validity of electronic signatures is a complicated one and we perhaps advise to err on the side of caution. To be in a position to properly assess the validity of electronic signatures we would need to consider a variety of issues, such as the process used by the service provider and the nature of the signature.
To avoid these potential difficulties it may be simpler to have the documents manually signed and witnessed, therefore the documents will be self-proving, and for added protection they may be subsequently registered in the Books of Council and Session.
