Over the course of this series of articles it has become apparent to me that there is a wide and generally held misconception of the purpose of and requirements for signatures on agreements generally and what actually constitutes an electronic signature. I hope both of these will be clarified by this article; it will also provide an explanation of the additional rules which apply to contracts formed electronically.

This is one of those fundamental questions which is often overlooked. It is overlooked because it seems to fall within the ambit of contract law; but, in fact, usually it does not. Questions of signature will usually fall to be dealt with together with other questions of evidence. This is because a signature, in the normal run of things, is just that; a piece of evidence to be used in support of a submission. A signature is NOT usually a basic requirement for the formation of a contract.

So what is a signature evidence of? It is not evidence of the fact that a contract has come into being, as this is a question of law. A signature is actually nothing more than a tangible sign of one party's intent. Therefore, a signature at the end of a contract will evidence that the signing party intended to be bound by the terms of the contract. However, as this is evidence, it can be contradicted and may even be rebutted by other, better evidence. The basic, underlying purpose of signing an arbitral award is in fact the same; the arbitrator wants to provide evidence of the fact that he has made this award. However, this basic principle has been taken further in the case of arbitral awards, and other particular types of contract, as discussed later.

So, if a signature is just evidence of an intention, is there any form it needs to take? The answer to this, except in certain circumstances, is quite simply no; a signature can take almost any form. For example the courts have found (in Morton –v- Copeland (16 C.B. 535)) that a "signature does not, necessarily, mean writing a person's Christian and surname, but any mark which identifies it as the act of the party … provided it be proved or admitted to be genuine, and to be the accustomed mode of signature of the party." Perhaps the biggest question in relation to an electronic signature is what " identifies it as the act of the party".

The question of what makes an electronic signature is twofold. First the question of what, legally, is required must be addressed; and then one must look at what, in practical terms, can achieve this.

Essentially, the legal position is the same for an electronic or hand-written signature. However, the Electronic Communications Act 2000 (the "ECA 2000") provides some useful further guidance and gives a very full definition of what, legally, is required. Section 7 of the ECA 2000 provides:

This then defines what an electronic signature is for the purpose of relying on it in legal proceedings. The difficult question is: what actually does "so much of anything in electronic form" actually mean? As the definition suggests it could, quite literally, be anything at all from a scanned hand-written signature, to a graphic, to an encryption code. The practical point is not so much about providing an electronic signature as ensuring its authenticity. The ECA 2000 goes part way to achieving this by requiring a statement from the signatory that he will be using a specific form of signature. Therefore, if you elect to use a scanned copy of your written signature you must give a statement to that effect. Although this gives good evidence of an intention to use the signature it does not address the problem of initial security to any great degree. It should of course be remembered that signature security and the effect of a signature are two separate questions even for hand-written documents. However, the best way to try and ensure security and authenticity of an electronic signature is to use some form of encryption or digital signature.

Now, this is where it all starts to get a bit tricky. An electronic signature is not the same as a digital signature. "Electronic Signature" is, if you like, a general description of a range of signatures; and a digital signature is just one possible type of electronic signature. A digital signature is in fact an encryption sequence, which will not necessarily leave any visible mark on the document it is verifying but, in accordance with the ECA 2000, will be logically associated with that document. There are many types of encryption available with varying degrees of security, but a discussion of them is beyond the scope of this article.

In the first section above I set out the general presumption and position of signatures, their purpose and effect. However, there are a number of significant exceptions to this general proposition – for example, the signing of deeds, and the signing of arbitral awards. In both of these examples the need for authentication goes beyond a mere desire for evidence of intent.

The nature of a deed is that it is a complete and formal document. The same can also be said of an arbitral award. In these circumstances a signature is a legal requirement (see section 52(3) of the Arbitration Act 1996 and section 1(3)(a) of the Law of Property (Miscellaneous Provision) Act 1989). However, in relation to arbitral awards this must also be taken a step further.

One purpose in making an arbitral award is to allow the enforcement of that award on the terms made by the arbitrator. Domestically this is dealt with by the Arbitration Act 1996 as noted above. Internationally, however, one also needs to consider enforcement procedures such as the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958. In order to fall under this convention an award must be duly authenticated (Article IV(1)(a)), which effectively means it must be signed at the time it was made or ratified on enforcement.

This then takes us one step forward in as much as a signature is required; but does not help with what a signature is and whether an electronic signature will be sufficient to comply with these formal requirements. From a technical perspective I do not believe that the wording of either the Arbitration Act 1996, the New York Convention, or the Law of Property (Miscellaneous Provision) Act are incompatible with the use of an electronic signature. Therefore, as long as your electronic signature is identifiable, its use should not cause any problem with the formal requirements set out in the statutes and convention mentioned above.

However, a note of caution should be sounded, as this principle has not yet received any judicial consideration. Today any judicial consideration would be in the light of Directive 2000/31 on Certain Legal Aspects of Information Society Services, in particular Electronic Commerce, in the Internal Market. Article 9 of the Directive sets out that Member States shall ensure that their legal requirements do not create obstacles to the creation of electronic contracts. Therefore, a court in England (or any other Member State) is unlikely to find that an electronic signature does not meet the requirements of a signature. Indeed, the Practice Direction for the Pilot Scheme for Money Claims Online states that any Part of the CPR requiring a signature can be complied with by a person entering their name on an on-line form. This again gives reasonable evidence of the way the court is likely to view electronic signatures, at least within this jurisdiction.

The Directive also sets out, at Article 10, certain information which is to be provided before an order is placed if an electronic contract is to be used. This minimum level of information includes -

These requirements do not, however, apply to contracts concluded exclusively by exchange of emails. These requirements are really aimed at on-line traders. It is highly unlikely that these provisions would apply to, say, an arbitrator's appointment (unless referring to his standard terms on his own web-site), whereas they could quite easily apply to the arbitration agreement itself. In any event, all of the above can be ousted by agreement of the parties, as long as the contract is business-to-business and does not involve a consumer.

The next part of this article will continue the progression from the straightforward question of electronic contracting to the question of practical use of electronic documents in hearings. The next part will therefore aim to cover how electronic documents and evidence can and should be used and any special rules and/or concerns which should be addressed if they are to be used in an arbitration hearing.