The enforced lockdown brought about by COVID-19 has meant a drastic change in the way business is carried out. One practical impact of isolation is that it has become less convenient to have contracts and agreements printed and signed in the traditional “wet ink” way. Parties are therefore increasingly looking to alternatives; particularly electronic signature of transactional documents. In this article, we take a look at what is meant by electronic signature under Scots law, some of the risks involved and points to bear in mind when considering electronic signing. For detailed guidance on the electronic signing of finance documents in Scotland, please see our tailored guide here.
What is an electronic signature?
An electronic signature simply means that some data in electronic form has been ‘used’ by a person to sign, or otherwise signify agreement or consent as an equivalent to a signature. When you check the ‘I agree’ or ‘Submit’ box in an online form, or when you paste a copy of your handwritten signature into a PDF document, you are signing a contract electronically.
That type of electronic signature is known colloquially, if not legally, as a ‘simple’ electronic signature, but it is an electronic signature nonetheless, and so is governed by the EU Directive on electronic identification and trust services for electronic transactions (eIDAS), and the Electronic Communications Act 2000. But not all electronic signatures are equal, and in commerce and business dealings, if you want to use an electronic signature, it needs to be understood that different types of signature have different effects.
eIDAS recognises three types of electronic signature: 'simple', ‘advanced’ and ‘qualified’.
In Scots law, the majority of documents can be validly signed using a simple electronic signature. However, there are issues around the security and reliability of a simple electronic signature, which are considered in this note.
Some documents cannot be signed using a simple electronic signature. First, any document that must be 'in writing' in accordance with the Requirements of Writing (Scotland) Act 1995 (for example, documents dealing with interests in land, and some trusts and guarantees). Second, documents that must be signed on paper – for example wills and other testamentary documents, or documents which are to be registered in the Books of Council and Session.
Simple electronic signatures
In basic terms, an electronic signature is data in electronic form that is attached to or ‘logically associated’ (i.e. electronically connected) with other data in electronic form, and which is used by the signatory to sign. Simple electronic signatures are the ones most commonly encountered, such as scanned manuscript signatures; using a finger or stylus to sign on a screen; clicking on an onscreen button such as ‘I agree’ or ‘Submit’; and using a PIN with your bank card.
There are other types of simple electronic signature that are more sophisticated and therefore of greater reliability, but due to the inability to be able to link them with the actual signatory, they are still in the category of simple electronic signatures. Typical examples are the type of electronic signature that uses a signing platform such as Adobe Sign® or DocuSign®. The use of these is becoming more prevalent in commercial contracts, for example, where the need to be self-proving is not strictly necessary.
A practical disadvantage of most commercially available electronic signatures is that it is not possible for any third party to interrogate the signature directly, to establish whether the person who purported to sign the document was the person who signed. It is possible to obtain a certificate from the platform provider that can be downloaded and saved, but third parties cannot access this information directly.
Therefore, although simple electronic signatures are perfectly valid, the level of reliance that can be placed on them is potentially problematic depending on how the signature is created.
A simple electronic signature is suitable for most types of documents but there are a number of exceptions. The Requirements of Writing (Scotland) Act 1995 requires certain types of documents – such as those relating to interests in land and some trusts and guarantees – to be in writing. If these documents are signed electronically they must be signed using advanced or, in the case of property documents, qualified electronic signatures. As a result, it is not possible to electronically sign those types of agreements using a simple electronic signature.
Advanced electronic signatures
These are electronic signatures that are uniquely linked to the signatory and are capable of identifying that signatory. They are created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control, and are linked to the data signed with it in such a way that any subsequent change in the data is detectable. Although these types of electronic signatures are available, there is very little anecdotal evidence that they are being used in practice at the moment, and due to the technology and verification required to create an advanced electronic signature they are only available from third party service providers.
Using an advanced electronic signature in Scotland will create a valid document, but it does not confer self-proving status.
As outlined above, for an electronic document of a type required to be in writing by the Requirements of Writing (Scotland) Act 1995 to be valid (i.e. some trusts and guarantees), the electronic signature of a granter incorporated into that document must be an advanced electronic signature. Wills and other testamentary documents must also be in writing but, at the moment, cannot be signed electronically and must be signed on paper.
Qualified electronic signatures
For an electronic document to be presumed authenticated (i.e. ‘witnessed’ and therefore self-proving) by a granter, the electronic signature must be an ‘advanced electronic signature’ and be certified by a ‘qualified certificate’. A qualified certificate contains verification information, must meet certain other requirements, and be provided by a trust service provider , who must also fulfil prescribed requirements.
This type of signature is referred to as a ‘qualified electronic signature’.
A qualified electronic signature is required for documents relating to rights in land. In layman’s terms, what this means is that the type of electronic signature required for electronic conveyancing (where documents need to be self-proving) must be of a very high standard of security and authenticity, independently verified by an authorised verification body. It is secure and reliable and is linked to the document in which it is incorporated in such a way that any subsequent change in the document after ‘signing’ can be detected.
It is not, however, currently possible to register electronically signed documents in the Land Register. Only the Registers' ARTL system can process electronically signed electronic documents. That system is rarely used, unsuitable for most transactions, and is being phased out.
As with advanced electronic signatures, there is very little evidence of qualified electronic signatures being used currently.
There is no equivalent ‘witnessing’ in the electronic world. This is a common misconception.
A person who applies an electronic signature to a document in the presence of another person, who also applies their electronic signature as a ‘witness’, does not confer self-proving status to that document. All you would have is a document electronically signed by two people. Only a qualified electronic signature can confer self-proving status in Scotland. However, instead of a witness, the authentication in the qualified certificate provides this assurance. Documents that are electronically signed using a simple or advanced electronic signature can therefore never be self-proving.
Why is this relevant? If a contract is used in court proceedings then a qualified electronic signature will be presumed to have been signed by the signatory. If a simple or advanced electronic signature is used instead then evidence may be required to prove that the signatory did in fact sign the electronic document.
Are all electronic signatures equal under the law?
Up to a point, yes. The Electronic Communications Act 2000 provides that, in any legal proceedings, an electronic signature (by which it means the basic definition) 'incorporated into or logically associated with' a particular electronic communication or particular electronic data, and the certification by any person of such a signature, are each admissible in evidence in relation to any question as to the authenticity of the communication or data or as to the integrity of the communication or data.
So all kinds of electronic signatures are admissible in evidence, and recognised as 'a signature' under the law. But that is not the same as saying that the signature can be relied on, and reliance is a key consideration, particularly for business transactions.
Simple electronic signatures may have a lower evidential value compared to an advanced electronic signature, and will need additional evidence to establish both that they were ‘signed’ by the person who purported to sign, and that they intended to be bound by the signature. A simple electronic signature created using an e-signing platform will have a certificate, which may be helpful evidence if the signature was challenged.
Steps to take when signing documents with a simple electronic signature
The first consideration is whether the document needs to be signed at all. Some documents, particularly informal ones and correspondence, may not require a signature.
The second consideration is whether the document can be signed using a simple electronic signature. If the document is of a type that needs to be in writing in accordance with the Requirements of Writing (Scotland) Act 1995 (i.e. property documents, wills and testamentary documents and some trusts and guarantees) then a simple electronic signature will not be possible.
If the document requires a signature and a simple electronic signature is proposed you should consider the following steps:
Conduct a risk assessment: What is the value of the transaction on which the signature depends? How likely is it that the signatory may dispute their signature, or intention to be bound? What would be the impact of such a dispute?
It is recommended that you carefully consider whether to use a simple electronic signature (such as a facsimile signature or a signature created through an e-signing platform) if the document relates to a high value or high risk matter, or may be contentious or subject to challenge.
If you do opt to use a simple electronic signature in such cases, then this should only be after careful consideration and assessment of the risks.
Obtain and keep supporting evidence: A simple electronic signature has no self-proving status, and if challenged, its validity will depend on the circumstances of application and intention.
Always ensure you have supporting evidence of the signatory’s intention to be bound by the document. This supporting evidence would include, e.g. an email trail confirming intention to be bound; a note of a telephone call from a signatory confirming they have signed; and a certificate issued by an e-signing platform.
Facsimile signatures: Protect your signature from tampering or unauthorised use by securely storing it e.g. in a private personal folder on your computer, so that only you have access to it.
Signing platforms: To assist in verification of your or a third party's signature on an e-signing platform, request a certificate from the platform provider, which can be downloaded and saved. For example, DocuSign provides a certificate setting out details about the signing process including who signed the document, when and from which IP address.
While the certificate provides some reassurance as to the identity of the signatory, it is not foolproof against tampering, fraud or unauthorised application of the e-signature. You should seek separate independent confirmation from the signatories that they applied their own signature and intend to be bound.
The Legal Writings (Counterparts and Delivery) (Scotland) Act 2015 applies to electronic documents as well as traditional documents, and so it is competent for parties to electronically sign a Scots law document in counterpart.
However, in the same way that it is not thought competent for the same party to sign a traditional Scots law document in separate counterparts (e.g. two directors of a company cannot each sign a separate counterpart on behalf of the company) it is also unlikely to be competent for the same party to electronically sign separate counterpart copies of the document. One director of a company attaching a scan of their signature to a PDF document and then emailing this to another director to also attach their signature is likely to be treated by Scots law as two separate signatures rather than one combined signature on behalf of the company, and therefore not competently signed by the company.
If an e-signing platform is used instead then both directors would be applying their electronic signature to the same electronic document on behalf of the company (even when the directors may be in different locations). This is not counterpart signing.
The Law Society of Scotland has produced a detailed Guide on the Use of Electronic Signatures in Scotland, which is available on the LSS website.
Wet-ink signatures: points to consider
Finally, if a simple electronic signature is not appropriate (for example, because the document needs to be signed using an advanced or qualified signature, or electronic signing is not competent) and the parties must sign a Scots law document in the traditional, wet-ink manner it is worth bearing the following points in mind.
Who can witness: Anyone over the age of 16 can witness a signature provided they are not a party to the document and they know the signatory. Where a signatory is isolating with family members, it is therefore possible for a family member to witness their wet-ink signature (making the document valid and self-proving).
Subsequent witnessing: Signature by a witness ought to occur at the same time as the signatory signs the document. However, it is possible for a signatory to subsequently 'acknowledge' their signature to a witness in person, and for the witness to then sign and add their details to the wet-ink document. For time-sensitive transactions where a signatory is isolating alone, this may offer a short term-solution to allow the transaction to complete on the basis of validly executed wet-ink documents (with later acknowledgement in person and signing by a witness to make them self-proving).
What is 'self-proving'?
While signing a document makes it 'valid' under Scots law, it may still be challenged (e.g. that it was not the granter's signature), making it necessary for the granter to prove that they did indeed sign. However, if that granter's signature is witnessed or authenticated, there is then a legal presumption that the granter did sign, and the onus would then be on the party challenging the signature to prove that the granter did not sign.
Thus the act of witnessing, or the electronic authentication contained in a qualified electronic signature, provides the 'proof' within the document that the granter signed.