COVID-19 Signatories and execution clauses

During this uncertain period, businesses will be developing contingency plans to protect their employees and mitigate any detriments to their commercial interests.

At the time of writing this article, the UK government has announced precautionary measures to slow the spread of COVID-19, including isolation measures intended to keep the public safe.  Many businesses, from sole-traders to large trading companies limited by shares and stocks, are enforcing these measures and are implementing policies to effect social distancing.

In light of the above, many businesses may be thinking to automate and innovate their current business practices to overcome any challenges that have arisen and ensure their commercial interests are maintained.

One specific challenge is how a signatory can continue to sign and execute agreements on behalf of a business whilst in isolation.

Many issues with signing agreements stem from the understanding that agreements must be signed in a hard copy to create legally binding relations.  Legal counsel and advisers are right to continue advising this course of action when it is safe, practical and possible to do so; clients and their lawyers can retain copies of signed agreements in a secure environment supported by an IT infrastructure in order to protect relevant documents and meet the legal and regulatory requirements on all parties involved in forming and executing that agreement.  However, signatories should be made aware of the possibilities of virtual signing or execution of agreements.

As contemplated in the High Court in R(on the Application of Mercury Tax Group Limited and another) v HMRC [2008] EWHC 2721, the law currently applies the position that a signature on an incomplete draft agreement, as a deed or otherwise, cannot be transferred to effectively execute a complete and final version of that agreement.  Furthermore, the decision in Koenigsblatt v Sweet [1923] 2 Ch 314 remains the leading authority on the applicability of the principles of authority and ratification to create legally binding agreements.

However, the law does also take into consideration that every transaction should be approached according to its own facts and situation. 

The Directive 1999/93/EC established a legal framework for electronic signatures and associated certification services to ensure agreements remain functional and legally binding.  The provisions of the Directive were implemented into the Electronic Communications Act 2000 and the Electronic Signatures Regulation 2002 (SI 2002 No. 318).  Further implementations were made, following EU Regulation 910/2014, into the Electronic Identification and Trust Services for Electronic Transactions Regulations 2016 (2016 No. 696) and section 7 of the Electronic Communications Act 2000.

Therefore, electronic signatures constitute a valid means of executing an agreement, provided that the signatory has a means of authenticating that agreement and any formalities of the execution of that agreement are satisfied.

There are number of specialist software to allow a signatory to sign and complete agreements on behalf of a business.  The software will be different per application, however, businesses should be able to find software that will avoid the need for printing and signing hard copy agreements whilst maintaining a level of security and legal compliance.

For advice of the specific formalities that may be required for the execution of an agreement, please contact Claudine Lawrence, Partner and head of our Corporate and Commercial Department on 0203 827 6117 or cll@axiomstone.co.uk.