UK: FAQs - Covid-19 - Signing Contracts While In Isolation?

Executing contracts during the Covid-19 pandemic.

Whilst the COVID-19 pandemic continues to significantly disrupt every day life across the world, much business activity continues (such as negotiating, agreeing and executing contracts for the provision of goods and services to be delivered at a time when some degree of normality has returned) - albeit in a largely remote environment.

Traditionally, many contracts have been executed using "wet ink" signatures (i.e. the contract is the document which has on it the original penned signatures of the signatories), but this may not be possible in a remote working environment. In addition, there are added complications if a party's execution of a contract requires two signatures (e.g. if the party is a company).

This article seeks to answer frequently asked questions about executing contracts whilst social isolation and distancing measures are in place. For the purposes of this article, we use the example of a contract that is required to be signed as a deed, by its two parties - Party A (a company) and Party B (an individual).  This article does not cover specific requirements which may apply to validly execute certain documents (e.g. a will), for which specific legal advice must be taken. It also does not cover how contracts are completed (i.e. the steps that need to be taken to bring an executed contract into force and effect (e.g. dating it)), because different steps are required in respect of different types of contract.

Companies and other corporate bodies can in general, but subject to any specific requirements of their constitution, sign contracts by use of a seal, two officers (directors and/or the company secretary) or a director in the presence of a witness.  Care should be taken to ensure that any contract contains the most convenient signature format. Certain corporate bodies and corporation sole will have separate and quite specific requirements not covered here.

1.       Do parties to a contract have to execute the same physical document?

Not necessarily. If the contract contains a "counterparts clause" then separate copies of the contract may be executed by different parties and each copy will be considered to be an original. The contract will therefore constitute the counterpart signed by Party A and the counterpart signed by Party B.

2.      Great. Party A is a company and is required to sign the contract by two directors. Can the directors execute separate copies of the contract? 

No. It is not possible to split a party's execution of a contract in this way.

3.      That's all good and well, but the director signatories for Party A are in different locations and are socially isolating. How are they supposed to sign the same copy of the contract?

 There are two options.

The first involves the first director signatory signing a copy of the contract and posting the contract to the second director signatory for signature. If this option is taken, note that care should be taken to ensure that the contract is safely and securely posted to the second director signatory (ideally by some form of secure delivery service if available). Of the two options, this is best practice.

The second involves the use of electronic signatures. Executing documents with electronic signatures was the subject of a report published by the Law Commission in September 2019 (https://www.lawsociety.org.uk/support-services/advice/articles/signing-and-exchanging-documents/). In summary, electronic signatures can be used to execute a contract provided that the person(s) signing it intend to authenticate the document, and any execution formalities are satisfied. Where legislation, contractual arrangements, constitutional requirements or case law provide that specific execution requirements must be satisfied, an electronic signature may not be valid. Examples of this include where a party is a company or similar corporate body and its constitution requires its signatories to use handwritten signatures; or the execution of wills or lasting powers of attorney. If in doubt, seek legal advice.

If the electronic signature route is being used for contracts that must be signed by a party in the presence of a witness (e.g. Party B's signature of the contract as a deed), the contract must be electronically signed in the presence of the witness, meaning the witness must be physically present with the person when they electronically sign. The witness may also sign using an electronic signature.

It is the "physically present" aspect that can create difficulty under current social distancing guidance.  As matters stand this does not allow for remote witnessing, e.g. via video conferencing, even where it is possible to 'see' the signature being applied.  However, social distancing does permit a witness to be sufficiently present in person; for certainty (and not just in case of any short-sightedness) the person signing the contract can make a clear statement to the witness to acknowledge their signature.    

If, in the unlikely event, that a contract is required to be executed by way of the use of a party's seal (which is most likely to apply to public authorities and other public bodies), it is unclear whether electronic seals can be used.

If it is intended that electronic signatures be used, it is advisable to get approval from all the parties to the contract in advance, and to make it clear to all involved that the contract will not contain a "wet ink" signature.

4.      Party B is an individual who is required to sign in the presence of a witness. The individual lives at home with her husband. Are there any requirements as to who can witness Party B's signature? Do they have to be independent?

 There is no statutory requirement for the witness to a party's signature to be independent or disinterested. There is no prohibition on a signatory's spouse, co-habitee or civil partner from acting as a witness. It is also generally acceptable for an employee or director of a party to witness that party's signature. However, given that the purpose of requiring a party's signature to be witnessed is to provide, if necessary, unbiased evidence of what was signed, by whom and when, independent witnessing should be used/required as a matter of best practice. In practice, this may be difficult, but it would (for example) be possible to witness a signature though a window or otherwise maintaining recommended social distancing (e.g. 2 meters separation).

5.      Can Party A and Party B exchange signatures over email, rather than via the post?

 Yes, but care must be taken. It is common practice now for many executed contracts to be exchanged over email, but usually this will involve a party either:

(a) printing off the final form version of the contract, signing it and scanning/emailing the whole signed contract back to the other party (best practice, particularly for contracts signed as a deed); or

(b) printing off the relevant signature page only, signing it and scanning/emailing it back to the other party, attaching to that email a copy of the final form version of the contract (so it is clear to which version of the contract the signed signature pages relates).

Once  the contract has been completed, it would be best practice (after both events) for an original of each party's signed contract/signature page to be sent to the other party for safekeeping.

Ideally legal advice would be taken as to the email (and signing instructions contained within it) which sends the final form version of the contract to Party A and Party B for execution.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.