E-signing for me started on typically crazy day with the arrival of a tenancy agreement that I needed to sign in my inbox. I sadly accepted that I was going to spend the next 30 minutes printing, signing and scanning; most likely cursing the printer as it jammed, the scanner as it sent the document to the “other” Mark Nuttall and why it wasn’t possible to find a pen that worked in an office full of pens.
I refused to accept that user error would play any part in these events. My trainee wisely noticed a shift in the wind and slid quietly out of the office before the coming storm. It didn’t turn out like that. Two minutes later the tenancy agreement was signed, sent and saved. A few minutes after that I received notice that the tenants had signed too, we had a done deal; fully formalised and the blood pressure hadn’t blipped. Then the blood pressure blipped. Why weren’t we at Linklaters doing this for our clients?! We have a vision to be the leading global law firm built on a focus on clients and we’re being passed on the inside for slick client service by estate agents in an overly flash mini… The need to try and make progress in this area was shown just that evening with a client unhappy at staying late into the night waiting for documents and then frantically scanning, followed by a paralegal sitting into the early hours compiling all of the pages from all of the different parties – not something the client wants to pay for, not something we want to charge for, and (I’m sure) not something the paralegal wants to do.
We started then to check whether there were any legal difficulties with e-signing and to see whether there was appetite amongst clients to use it. A positive Linklaters house view was quickly established and, anticipating that others might be reluctant to be convinced, we approached Mark Hapgood QC who – in an anti-climatic conference with counsel – thanked us for providing him with one of the easiest questions in his long and distinguished career. It turned out that with e-signing platforms (DocuSign being the platform that Linklaters trialled) signing was simply a more robust process than “scan signing” and even “difficult” areas such as deeds (following the Mercury Tax case) and witnessing were in fact easier to prove and manage on an e-signing platform. We also had good feedback from some open minded clients who were keen to give it a go.
As a quick re-cap, under English law most agreements do not require any formalities – a contract can even be formed orally – though a few agreements, such as guarantees and contracts in respect of land, do have a requirement to be in writing and/or to be signed. Applying this to e-signing, even for those contracts having the requirement of being in writing or being signed, it would be hard to argue (without a red face and much shuffling of feet) that words on a screen are not writing or that clicking on a “sign here” tab is not signing. There are even some helpful cases – with Gordon Ramsay being held bound by guarantees signed by a “signing machine” operated by his father-in-law. Most disputes as to whether a document has been signed come down to a question of fact and the simple truth is that it is much easier to prove and track who actually signed a document electronically (and exactly when and where they were when they did it) than it is by scan (or even physical) signings. DocuSign has a series of levels of security for example which include codes and even voice call backs for sensitive transactions. This is then codified into a security certificate showing times, dates, IP addresses and the security checks applied and passed. Pretty convincing evidence in court should it come to that – and not something that is available for traditional signings.
Yet, if there is one thing lawyers like, it is precedent. If it has not been done before it cannot not be done! This is a bit problematic in making advances of course. We were delighted when the Law Society and the City of London Law Society gave Linklaters the opportunity to co-chair with Allen & Overy a committee to produce a guidance note on e-signing, which is available on the websites of both the Law Society and the City of London Law Society. The Guidance Note provides some very reassuring advice as to the potential for English law documents to be validly executed with an e-signature and hopefully will encourage the use of e-signatures and discourage some rather academic arguing in the face of the plain facts of life in the 21st century. English law is famously pragmatic and it gives those who practice it a great opportunity to be pragmatic too.
With the legals resolved, the question remains as to whether there will be take up from large banking and corporate clients. Interestingly as institutions many of these clients are actually already using DocuSign for compliance tracking, procurement and HR contracts. It is, however, understandably quite a different thing to have the confidence (perhaps boldness) to sign a single very high value deal (maybe in the hundreds of millions) using e-Signing as opposed to a high volume of low value contracts. Furthermore, most institutions have a system of authorisation and procedures that will need adapting to accommodate e-signing. So it is unlikely that change will happen immediately, but as with other technologies once one or two large players make the move it will then very quickly become the norm with those not able to take advantage of the technology seeming outdated (and frustrated at the scanner).
One feature of DocuSign that will aid adoption is that not all parties have to use it – a signing can be executed on a “mix and match” basis, with some signing in person, some by scan and some by DocuSign. Thanks to the Guidance Note there should not be any legal issues with due capacity and authority opinions (as often required in high value transactions) being given – or accepted – in respect of those that do take advantage of the technology. Linklaters has already adapted its house due capacity and authority opinion to cater for DocuSign and the platform (and opinion) has been used on a number of high value finance transactions – thanks to some forward thinking (and efficiency aware) clients. The only wrinkle at this stage, is that many high value transactions are cross-border and in such cases it will be necessary to check that e-signing would be acceptable in those other jurisdictions in which the parties are incorporated and under the constitutional documents of those companies; but as with the lead set by the Law Society and the City of London Law Society we expect that leading law firms in other jurisdictions will convene to produce similar guidance (we expect that Scotland and the Republic of Ireland will likely be next). Indeed, in European jurisdictions the question may be even easier due to the new eIDAS Regulation (EU 910/2014).
Why should law firms bother with change? Law firms are nothing without their clients, and almost the last experience that a client has of a transaction is the signing. That is the impression that will be left – the negotiations, the intricate drafting, the well won points, may all pale in respect of that last good (or bad) experience. And, of course, there is one final client experience – the bill. Using e-signing will make signings faster, more efficient – and cheaper. Clients rightly demand that lawyers seek efficiencies without compromising service or standards. Lawyers should embrace this – technologies such as artificial intelligence are cutting through some of the tedium of due diligence and e-signing can cut through the tedium of compiling the signature pages of tens of clients on tens of documents. Not what any of us joined up for. Let the computer do that.
Mark Nuttall is a London finance partner at Linklaters.
See also:
Magic circle giant Linklaters rolls out electronic signatures in deal with DocuSign
eSignatures: Law Society practice note a major milestone