Keep up to date with our blog articles, latest news and industry developments. See below for the latest posts or use the category listings to hone your search for stories of interest.
Execution of documents during COVID-19
A guide to execution requirements under English law during remote working and social distancing.
The signing of transaction documents has been made more complicated by the measures introduced to combat the spread of COVID-19. With signatories working remotely and unable to attend physical meetings, it’s important to plan ahead and consider the practical issues of getting documents signed.
How formal do you need to be?
The first thing to bear in mind is that there’s no general rule under English law that requires all contracts to be in writing. In many cases, an oral contract will be just as enforceable as a written agreement but there are some important exceptions to this general rule:
- a transfer of legal title to shares, a contract for the sale of land, a guarantee and an assignment of the benefit of a contract (amongst other things) must, as a matter of law, be in writing;
- if the agreement is to vary the terms of an existing contract, you should check what the existing terms state as to how the contract can be varied. It is common to include a “no oral variation” clause restricting the form of any future variation (to “in writing and signed”, for example), and will generally mean that any less formal agreement is unenforceable;
- a “deed” also has specific formal requirements, discussed further below, which include being in writing. Deeds have advantages, but are often not strictly necessary for many of the commercial transactions for which they are commonly used.
There are also practical difficulties with evidencing the terms of oral contracts, so make sure you keep an accurate record of what was agreed. You should also bear in mind that any oral contract is unlikely to be as comprehensive as a written agreement.
In an increasingly digital world, the concept of “virtual” signings has become much more relevant: whilst the COVID-19 crisis has not (yet) resulted in a change to the underlying law, the social distancing rules and the lockdown have created a much tighter focus on the ability to close transactions without physical face-to-face meetings.
When a contract is made virtually, the precise formalities depend on the type of document: this could be a simple contract (also called an “agreement under hand”) or a deed.
Signing paper documents, sending scanned copies by email
Perhaps the most straightforward method (and one that’s already common practice for lawyers) is the exchange of signed copy documents via email. This requires parties to print and physically sign each document, before scanning and emailing a copy to the law firm coordinating the signing. Many ways of doing this work for simple contracts, but some work for deeds as well, as detailed below:
- Method 1: each signatory prints and signs the whole document, and scans/circulates a complete copy of the signed counterpart. (This can be used for both simple contracts and deeds, subject to the deed being properly witnessed – see below.)
- Method 2: each signatory prints and signs just the signature page and then sends an email to the person/law firm coordinating the signing attaching: (a) a scan of the signature page; and (b) the final version of the document (either in Word or PDF format). (Again, this can be used for both simple contracts and deeds, subject to the deed being properly witnessed.)
- Method 3: where the document is a simple contract, each signatory prints and signs just the signature page, and then circulates a copy of just the signed signature page, with authority for the page to be appended to the final approved version of the document. (This method can be used where the document has already been finalised, or where a document needs to be signed in advance of the final version being agreed; once the document has then been finalised, each party will need to confirm the final version is agreed and authorise the person/law firm coordinating the signing to append the signature to the final version.)
Using electronic signatures – simple contracts
There are various types of electronic signature which may be appropriate, depending on the circumstances. These can include someone:
- typing their name, intending it to operate as their signature;
- pasting an image of their signature into the execution block of an electronic version of the document;
- using a touchscreen to manually insert an electronic version of their signature into the execution block; or
- using an e-signature platform, such as “DocuSign” or “Adobe Sign”, to insert an encrypted electronic signature.
Using electronic signatures – deeds
In order to be validly executed, a deed signed by an individual must be signed in the presence of a witness. A similar process can be used for a deed executed by a company, whereby a director signs in the presence of a witness.
The requirement for a witness is the key issue here, and the generally accepted view is that where a signatory signs a deed using an electronic signature and another individual genuinely observes the signing (i.e. he or she has sight of the act of signing, and is actually aware that the signature to which he or she is attesting is the one that he or she witnessed), he or she will be a witness for these purposes. If that witness subsequently signs the adjacent attestation clause (using an electronic signature or otherwise), that deed will have been validly executed.
However, there’s some debate around what constitutes “observing” for these purposes: it is considered to be best practice to have the witness physically present when the signatory signs, as opposed to witnessing through a virtual means (e.g. video conferencing). We’ve heard of neighbours witnessing signatures from their doorstep or over a fence, where they’re able to maintain appropriate social distancing. Similarly, signatures are being witnessed through closed windows or car windscreens.
The public health restrictions currently in force may mean it’s not always possible to follow this best practice, but in that case you’d need to consider other means of providing “evidential weight” of the signing and witnessing having taken place properly: please talk to us if that’s an issue.
Also, bear in mind that some official bodies will have their own rules here: for example, the Land Registry’s view is that it would be unsafe to accept any form of witnessing other than contemporaneous, physical witnessing.
Do you actually need a deed?
As you’ll have seen, the process for executing a deed is more formal than for a simple contract, so you may want to avoid the requirements of a deed if the practicalities of witnessing are going to be a problem.
The use of a deed is only required in a fairly limited set of circumstances. These include:
- when granting a power of attorney;
- when transferring land or an interest in land;
- when entering into some kinds of lease;
- when granting mortgages or charges over land;
- when appointing trustees; and
- when gifting goods without passing possession to the recipient.
That’s not to say you should always look to structure things as simple contracts wherever possible; you can choose to use a deed instead of a simple contract, even where a simple contract would suffice. Reasons for using a deed can include:
- you’d like the benefit of a longer statutory limitation period for bringing a claim: with a deed, the limitation period is (in most circumstances) 12 years from the date of the cause of action; with a simple contract, the limitation period is six years; or
- there is no consideration being given in the transaction.
Varying an existing deed
Where the parties to an existing deed wish to vary the document, it’s common for the variation document also to be in the form of a deed. Bear in mind however, that the use of a deed in those circumstances may not be mandatory: the rule of equity permitting a deed to be amended by a simple contract prevails over the old common law rule that required a new deed.
As noted above, the first step to determine what form the variation document must take is checking the existing deed to see whether it contains any terms governing future variations, as this will limit what is possible. It’s fairly standard for it to stipulate that any variation of that deed must be made in writing and signed by all of the parties; if the terms governing future variations are silent as to the form of document to be used, the parties should be free to choose between a simple contract or a deed (although do remember that you may need to get consent from any guarantor(s), or other third parties, before varying).
If the variation document will take the form of a simple contract, because it will be a new, separate agreement between the parties, some form of consideration must be provided for the variation to be effective (which could be the payment of a nominal sum).
For further information, please contact John Allen.
The above article is for general information purposes only and does not constitute legal advice. Please consult us or your own solicitor on requirements when executing a contract or other document.
Disclaimer: This article is produced for and on behalf of White & Black Limited, which is a limited liability company registered in England and Wales with registered number 06436665. It is authorised and regulated by the Solicitors Regulation Authority. The contents of this article should be viewed as opinion and general guidance, and should not be treated as legal advice.