Legal Effect of Signatures
I am frequently asked questions about the signature (or lack of) on a simple contract (ie those contracts that do not need to be in the form of a deed). For example, such questions include: The contract was not signed but the parties have worked together in accordance with its terms so is it valid? Is an electronic signature capable of binding the parties?
Signatures on simple contracts are evidence that the parties have agreed to the terms set out therein. Simple contracts can be entered into verbally so it therefore follows that a signature is not essential for the contract to be valid and enforceable. However, it is likely to be very difficult to prove what has been agreed where there are no signatures. Having a document with all the written terms set out and signed by the parties is the most secure and certain method of ascertaining what was agreed between the parties.
Electronic Signatures
If signatures are a matter of evidence, what is the evidential effect of electronic signatures? Under the Electronic Communications Act 2000, electronic signatures are admissible in legal proceedings so could therefore be a valid means of executing a document. However, there are risks associated with signing in such a way as, for example, electronic signatures tend to be easier to impersonate and electronic documents are easier to tamper with. In order to overcome such risks, commercial electronic signature products have been developed which make use of encryption technology and authorisation certificates. These carry a similar evidential weight to handwritten signatures.
Unsigned Documents
Where simple contracts are unsigned, it is more difficult to show that the document is valid and enforceable. It would mean providing evidence of the parties’ behaviour showing that they have worked in accordance with the terms of the contract notwithstanding that it was never signed.
Conclusion
In this electronic age and given that parties might be in different countries, it is inevitable that contracts and the like will be signed electronically from time to time. We should be aware that such signatures may need to be used as evidence in the future of what was agreed between parties. This should always be borne in mind when executing contracts.
This should not be relied upon for legal advice. If you would like any further information or advice please email richard@clariclegal.co.uk.