COVID-19: Executing Simple Agreements and Deeds Remotely Under English Law
- Social distancing restrictions in place to combat the COVID-19 pandemic mean that the majority of people working in financial institutions, leasing companies, law firms and the corporate departments of airlines and other aircraft operators, among others, are working remotely from home.
- Aircraft finance and leasing transactions are still taking place, airline deferrals and restructurings need to be documented, contractual disputes are ongoing, corporate jets continue to be traded and corporate approvals still need to be obtained, and so there are vast numbers of documents that still need to be executed on a daily basis even if all authorized signatories are at home.
- This Holland & Knight alert provides an overview of the various ways to execute documents under English law, including the legal position in relation to electronic signatures, particularly in relation to deeds that require signatures to be witnessed in most cases.
Amid the social distancing restrictions and shelter-at-home orders caused by the COVID-19 crisis, many workers involved in the aircraft finance and leasing industry are working remotely. Transactions and restructurings are still taking place, and vast numbers of documents still must be executed on a daily basis even if all authorized signatories are at home.
Below is an overview of ways to execute documents under English law, including the legal position in relation to electronic signatures, as well as to deeds that require signatures to be witnessed in most cases.
A. Simple Agreements
Under English law, a binding agreement requires certain key elements – offer, acceptance, consideration, intention to create legal relations and certainty of terms.
Surprisingly, it is not actually necessary that the agreement be made in writing or in any other particular form in order to be legally binding, so long as the above key elements are satisfied (save for a few statutory exceptions, i.e., guarantees1 and assignments2 – and others beyond the scope of this alert, e.g., the sale of land).
In addition, as there is no legal requirement for the agreement to be in writing or in any other particular form, then it follows that there is no legal requirement for the agreement to be signed/executed in any particular way.
However, as everyone knows, it is common practice (and has been for centuries) for parties to elect to record their agreement in a written form that is signed on behalf of the parties. This is in the interests of certainty of terms and for evidential reasons.
Whether the mark made by a signatory to an agreement is sufficient to bind the relevant party depends on whether the mark was intended to bind it, and the actual type of mark is less important. This is known as function over form. So, the signatory can, for example, copy and paste a scan of his or her signature, sign with an 'X', use an electronic signing platform or use the pen function in Adobe to sign.
There are a number of European Union (EU) directives and United Kingdom regulations governing the use of electronic signatures dating from 1999 to 2016, which are beyond the scope of this alert. Helpfully, a 2019 report issued by the Law Commission in England3 considers them all and confirms that the current law permits the use of an electronic signature to execute agreements as a valid alternative to handwritten ones.
It is widely and generally accepted under English law, therefore, that a signatory can sign an agreement using an electronic signature. There are some exceptions, but these are also beyond the scope of this alert, i.e., certain land transactions.
A signatory working remotely, can sign an agreement by hand or electronically.
What if the agreement must be executed in the form of a deed, i.e., if there is a concern regarding consideration, there is a desire to avail of the longer limitation periods4 or the agreement contains a power of attorney in the body of it or is one?5
Note that there are other significant reasons why an agreement must be executed as a deed, but a discussion in relation to those is again beyond the scope of this alert).
A deed must be in writing, it must be clear from the face of it that it is intended to be executed as a deed, it must be validly executed (which usually means being signed and witnessed), and it must be delivered.
There is no flexibility on the above, as it is common and statutory law.6
There is no law that stipulates who should and who should not act as the witness, but it is best and common practice for the witness to be independent and of age. The witness is verifying that the particular document was signed, when and by whom, and not the contents of the document itself, and so the witness needs only to be capable of understanding those concepts.
The key point is that the witness must be physically located at the same place as the signatory at the time that the signatory signs. Again, there is no flexibility on this point. The witness cannot witness the signing in any other way, via live video for example.
The best practice is for the witness to then sign immediately after and in the presence of the signatory, although there is no statutory requirement for the witness do so and there is some authority to suggest that the witness can sign it later when the signatory is no longer physically present. (This is not advisable as a usual course of action, and it is mentioned only in case it happens accidentally.)
It follows therefore, that a signatory sitting in his home in Hampshire and a witness sitting in his home in Essex cannot together validly execute a deed, electronically or otherwise. But a signatory and a witness at the same location can sign by hand or electronically or a combination of both.
A signatory can sign a deed either by hand or electronically, provided that the witness and the signatory are physically located at the same place at the time of signing. Note the limited exception for deeds executed on behalf of UK incorporated companies,7 which can be executed by two directors or a director and company secretary in counterparts (i.e., in different locations) without any witnesses.
It is acknowledged that in the current remote working environment, it may not always be possible for a signatory and an independent witness to be physically located in the same place in order to execute a deed. First, consider if your document does actually need to be executed as a deed. Oftentimes, it is so executed because the precedent base document was executed as a deed, but changes made to the precedent could mean that it no longer needs to be (i.e., the imbedded power of attorney was removed) or it may be that the precedent was executed as a deed for other reasons that no longer exist (i.e., it was amending a primary deed).
By coincidence, on March 3, 2020, in response to the 2019 Law Commission report on electronic signatures noted above, the UK government via the Lord Chancellor endorsed the contents of the 2019 Law Commission report and agreed to convene an industry working group to consider, among other things, the validity of video witnessing of electronic signatures in relation to deeds. However, that is in the future.
This alert contains general advice only and is not intended to be comprehensive. The formalities to be followed for any contract governed by English law will in all cases depend on the type of contract and the specific circumstances that gave rise to and/or surround it, and on any one or more of the many common and statutory laws that may apply to it.
In addition, there will almost always be other factors in every transaction that could affect how documents are executed. For example, the constitution/corporate documents of a party might prohibit the signing of documents by electronic means, or special execution formalities may have to be followed if a document is being filed in a different jurisdiction.
Holland & Knight's Asset Finance Group advises and represents all types of aviation clients across all aspects of their business and operations. It advises clients on a daily basis on transactional, regulatory, investigations, litigation, employment, insurance, product liability, restructuring (including bankruptcy and workout) and repossession matters. If you have queries or concerns regarding the execution of documents under English law, please contact the author or another attorney in Holland & Knight's London office.
1 Section 4 of the Statute of Frauds 1677
2 Section 136 of the Law of Property Act 1925
3 Report on the electronic execution of documents (Law Com No 386, 2019) dated Sept. 4, 2019
4 Section 8 of the Limitation Act 1980
5 Section 1(1) of the Powers of Attorney Act 1971
6 Section 1 of the Law of Property (Miscellaneous Provisions) Act 1989
7 Sections 44 and 46 of the Companies Act 2006 (noting some different rules in Scotland beyond the scope of this alert)
DISCLAIMER: Please note that the situation surrounding COVID-19 is evolving and that the subject matter discussed in these publications may change on a daily basis. Please contact your responsible Holland & Knight lawyer or the author of this alert for timely advice.
Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.