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Digital Signatures In Contracts

For the first time in a residential property transaction in England a digital signature has been used on the exchange of contracts. It has been described as a “significant step in the right direction” for e-conveyancing and is a sign that times are changing in the way solicitors will be handling transactions. Residential property sale and purchases are just one example of where the technology can be used to by parties to enter simultaneously in to legally binding contracts, but it is nonetheless a significant first step in this area of practice.

The first digital exchange in a residential transaction was recorded as taking place on 6 April 2017 at 3.59pm and the solicitors acting in the transaction used secure third party software to effect the transaction. The software enables both solicitors to confirm the contract was read and signed, with a code replacing the signature. The contract was exchanged under the Law Society ‘Formula B’ for exchange which requires each solicitor to undertake to the other they hold a contract signed by or on behalf of their client.

Clients are now far more happy in dealing with documents and signing them electronically than they ever have been in the past and it is likely more and more transactions in the future will be conducted as conveyancers come to terms with using the technology with their clients.

Earlier this year Land Registry consulted on amending rules to allow documents to be signed online by the government’s Gov.UK.Verify process, which is used in other areas where confidentiality of documents is vital such as the filing of HMRC self assessment returns. It is evidence of a growing trend led by the government.

The process is likely to develop further with electronic e-signatures replacing the need for deeds which currently need to be witnessed by another individual. Provided the appropriate proof of identity and verification checks and balances are in place. Under the current system of paper deeds, solicitors do not need to check the identity and authenticity of witnesses to deeds, so developing an electronic system should not give rise to fraud. In fact electronic signatures and verification which have gone through a series of rigorous identity and password code procedures would be less likely to be forged.

The adoption of such technology marks a growing trend as solicitors embrace it and ensure they are able to ease transactions for the benefit of clients.

This article was produced on the 19th April 2016 by our Residential Property team for information purposes only and should not be construed or relied upon as specific legal advice.