Deeds are ancient instruments, and their formal requirements have evolved in common law and statute over hundreds of years.
Back in 1584, for example, "specialties" were already well established when Goddard’s Case (Goddard v Denton [1584] 76 ER 396) confirmed that the essence and substance must be committed in writing. Creating a deed is slightly more challenging than a famous Stevie Wonder hit – they must be signed, sealed, delivered and witnessed. Yet the label cautions the signatory to give proper thought to their deed’s effects, which can be dramatic.
In certain scenarios, of course, the use of a deed is mandated. The Law of Property Act 1925, for example, ensures that transferring rights or property is generally carried out by deed (section 52(1)) and the Power of Attorney Act 1971 is similarly insistent that this is how powers are conferred (section 1(1)). But with the effects of a deed in mind, they are often selected by choice rather than necessity. Under the Limitation Act 1980 (section 8(1)), claims arising under deeds can be made for 12 years, rather than six, and consideration is not needed for enforcement.
Still, at the heart of the Law Commission’s recently completed consultation on the electronic execution of documents is a revolutionary question – is it time to reopen a deed’s formalities?
Signing, sealing and delivering
The consultation focuses on signing. Depending on whether you are an individual or another entity, there are already a number of ways of “making one’s mark on the instrument” (section 1(4) of the Law of Property (Miscellaneous Provisions) Act 1989), but the future is here, and it has brought sophisticated and secure electronic platforms. So can signing be done with an e-signature? The Law Commission seems broadly content that it may.
Admittedly the existing legal framework is not perfect. The first attempt to accommodate new technology, the Electronic Signatures Directive (1999/93/EC) and its UK manifestation in the Electronic Communications Act 2000 confirms e-signatures are admissible as evidence in court. By mid-2016, the EU (regulation EU/910/2014) had gone on to define a broad range of “electronic signatures” (including scanned or typed names, or confirming website orders with a click). This sounds positive, but many practitioners feel that corresponding UK regulations failed conclusively to settle one fundamental question: whether an e-signature satisfies a formal validity requirement for signature under English law. The e-signature may be admissible but, technically speaking, the jury is still out.
The next two deed formalities are less contentious. Since legislative reform in 1989, seals can be dispensed with, where there is a “face value” deed executed with an attested signature (section 1(3) of the 1989 Act). The common law formality of delivery simply sets the point at which the signatory is bound.
Witnessing an e-signature
Generally speaking, attesting involves a “credible” (as in, competent) witness watching the execution and signing a confirmatory statement attesting to the fact. There is no prescribed form for that confirmation. Witnesses do not have to divulge personal information, such as occupation or address. Yet what has emerged in practice is a relatively standardised, belt-and-braces approach to creating an evidentially-sound attestation. We tend to ask for sufficient personal detail to be able (theoretically, at least) to track down the witness later. We avoid asking partners, to demonstrate independence. Conscious of capacity questions, we don’t ask children. An unattested deed, after all, may subsequently be ineffective against third parties.
We do ask that the witness actually witnessed the execution. It seems an obvious point, but the waters were briefly muddied when, in Shah v Shah [2001] EWCA Civ 527, a deed was upheld which wasn’t witnessed in the presence of the signatory. Still it would take a brave practitioner and a confident industry to approach the problem of real-time electronic witnessing by relying on enforcing obligations via an equitable doctrine of estoppel (and trusting in an absence of fraud).
So can you properly witness an e-signature? With platforms offering various fixes, the Law Commission’s provisional conclusion amounts to: yes, sort of. A witness hovering physically behind the shoulder of a typist is one thing, but any proxy for physical presence, or fixing an immediate witness signature, needs a little more technological ingenuity.
The consultation provisionally proposes a scenario of virtual witnessing (via webcam or video link) and subsequent attestation (or a lesser notion of “acknowledgement”) via electronic platforms that might be more or less simultaneous to the actual signing. This might work, it says. Admittedly “to a lesser extent” than traditional physical witnessing, but, in the interests of transaction efficiency, the Law Commission is broadly content. Another option is replacing witnessing and attestation requirements wholesale with a more complex, cryptographically secure e-signature.
Speed is of the essence
It’s no surprise that e-signature technology is developing faster than the law. The consultation suggests a future Law Commission review of the law of deeds, but this project should come urgently. Before we awkwardly balance smartphones to livestream virtual executions; or stretch flexible concepts of attestation beyond recognition; or debate what constitutes a timely electronic acknowledgment.
Deeds are a useful legal conceit, but the formalities of creation need recalibration for the modern world. There are clearer ways to address the formalities after all: could additional liability be set out in a standard boiler plate, or implied by creation pursuant to (new) legislation? Are deeds always necessary where history has mandated it so? Can we fix a lack of consideration with a nominal token?
Secure electric signing platforms are undoubtedly the way forward, but wholesale take-up is not encouraged while we try to shoehorn age old legal understanding and convention into today’s digital offer. The confidence of (and investment in) a new marketplace and the ingenuity of technical developers (or lawyers for that matter) need certainty to facilitate the kind of advances and efficiencies that the technology is capable of. We are all poised to embrace change, but without legal clarity it seems we must wait for the hurly burly to subside.
This article was first published in Estates Gazette on 21 November 2018.
