Electronic Signatures under Scots Law
MBM is able to complete transactions digitally through our chosen e-signature platform, Docusign. Signing documents electronically under Scots Law is completely valid as confirmed by the Law Society of Scotland in its recent guidance (see here). It has actually been valid for many years but it’s not been adopted by the legal profession generally – we would like that to change.
The current law for electronic signatures (or e-signatures) in Scotland is principally found in the Requirements of Writing (Scotland) Act 1995 (“ROWA”) and the Electronic Identification and Trust Services Regulation (EU/910/2014) (the “eIDAS Regulation”), which has direct effect in EU member states and the UK post-Brexit.
What constitutes a contract under Scots law?
Under Scots law, there is no requirement for a contract to be in writing other than where specifically listed in ROWA. A contract can be made orally and is essentially an agreement between two or more parties which creates or intends to create legally binding obligations between the parties to it. Despite the lack of formality required, parities usually want to agree to a document to achieve certainty between the parties regarding the terms and to provide a record of those terms.
Section 1.2 of ROWA states that a written contract is only necessary for the following:
- The creation and variation of:
a. a contract or unilateral obligation for the creation, transfer, variation or extinction of a real right in land; and
b. a gratuitous unilateral obligation, except an obligation undertaken in the course of business (i.e. a promise).
- The creation, transfer, variation or extinction of a real right in land.
- The condition of an agreement under s66(1) of the Land Registration etc. (Scotland) Act 2020.
- A trust where a person declares himself to be the sole trustee.
- The making of any will, testamentary trust disposition and settlement or codicil.
How are contracts executed under Scots law?
ROWA sets out the requirements for how documents are executed under Scots law. Where a contract requires to be constituted in writing under section 1.2 of ROWA, it must be subscribed by the parties in order to be valid. A written contract is subscribed by a party if it is signed by the party at the end of the last page. There are specific statutory rules for subscription and signing by partnerships, companies, limited liability partnerships and other bodies corporate which are set out under ROWA.
Where writing is not mandatory but the parties choose to enter into a written contract, the contract does not require to be probative. If it is signed but not subscribed, the contract can be used as evidence of the terms of the agreement; however, it will not be probative and cannot be registered in the Books of Council and Session (only applicable for certain documents).
What is classified as an electronic signature?
“Electronic signature” is defined in Article 3(10) of the eIDAS Regulation as “any data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign”.
This is a broad definition which covers most forms of e-signature from typing your name at the bottom of an email to signing documents via platforms such as AdobeSign and DocuSign.
The eIDAS Regulation came into force on 1 July 2016 and set out three levels of e-signature. These are as follows:
Standard or Simple Electronic Signatures
- the most basic form of signature which can be used for certain documents but will not be self-proving in Scotland or appropriate for certain documents as set out in ROWA
- it has a very broad definition which is data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign
- this could be signing for a parcel on an touch screen; clicking “I agree” or “Submit” or ticking “I accept the terms and conditions”; typing your name into an email; electronically pasting a signature into an electronic version or a contract; or a basic signature on an e-signing platform. A text message could also be an example.
Advanced electronic signatures (“AES”)
- For certain documents under Scots law, an AES must be used for it to be valid (see below).
- The four criteria to qualify as an AES are:
- it is uniquely linked to the signatory;
- it is capable of identifying the signatory;
- it is created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control; and
- it is linked to the data signed therewith in such a way that any subsequent change in the data is detectable.
- These criteria help prove the authenticity and integrity of the signature and the document being signed.
- Meeting these criteria is technically complex and requires the use of a third party service provider such as Docusign. However, it means the signature is far more robust and secure than just a standard electronic signature.
Qualified Electronic Signatures (“QES”)
- This is the highest standard of e-signature. It is the electronic equivalent of the probative (self-proving) document, and its use means that there is a presumption that the document is validly executed. The difference between a QES and AES is that a QES involves a more rigorous definition which requires the use of a particular type of signature creating device, and the certification by a particular type of third party provider which has been granted special status. A qualified electronic signature is an advanced electronic signature that is created by a qualified electronic signature creation device and which is based on a qualified certificate for electronic signatures.
- A key principle is that a QES is automatically equivalent to a witnessed handwritten signature and has the equivalent legal effect - this does not mean that a contract is validly executed -contracts can fail to meet execution requirements despite having a handwritten signature.
Unlike the eIDAS Regulation, which deals exclusively with electronic transactions, ROWA governs the requirements for written contracts (both paper and electronic) specifically under Scots Law.
Any document which does not fall within the categories of section 1.2 of ROWA noted above can be executed by any form of electronic signature, including a ‘standard’ one. However, for any material documents for significant transactions (eg. investment agreements, shareholders’ agreements or share purchase agreements), MBM Commercial will always use an advanced electronic signature as a minimum.
Witnessing an electronic signature
When e-signing, Scots law documents do not need a witness.The fact that a witness is needed to create a probative wet-ink signature, does not mean one is needed when using e-signatures. After all, the purpose of having someone witness a signature is just to add another layer of evidence. There is now a ‘witness’ who can help prove the document was signed. This is exactly what advanced electronic signatures and qualified electronic signatures do. They provide another layer of evidence. The difference is simply that the evidence this time comes from the use of technology.
Are electronically signed contracts legally enforceable under Scots law?
Yes, this was recently reconfirmed by the Law Society of Scotland in their guidance.
ROWA states that written contracts under section 1.2 of ROWA may be in paper or electronic form but if in electronic form must be signed using an advanced electronic signature or a qualified electronic signature. A standard electronic signature is not sufficient.For all other contracts, a standard electronic signature is sufficient. MBM has set out its house policy on the level of signature we will use for each transaction under our House Policy (see link).
It should be noted that for an electronic document to be probative (self-proving), it must be e-signed using a QES.However, it is important to remember that ROWA does not require any document to be probative, that is the parties’ choice. Equally, probativity and validity are separate matters. Just because a document is not probative does not mean it is not valid. Probative documents can be challenged just as much as non-probative documents. The only difference is that one has a presumption of validity to start with whereas the other requires validity to be proven.
By using an AES you are ‘validly’ signing the document, and an additional level of evidentiary support should a document ever be contested (although we acknowledge that corporate documents are rarely contested in court and we see this as a minor risk). It is therefore our policy not to seek a QES signature unless strictly required given the additional time and cost burden on signatories.