Thinking | 3 April 2020
Execution of documents in isolation
We all know that best practice execution is wet-ink signatures, on the same page, with all the pages initialled and witnessed in the presence of an appropriately qualified person.
But that is not the reality we face today during the COVID-19 pandemic. What practical steps can businesses take to help ensure the enforceability of arrangements being entered?
Here are our best tips:
- Take strict, express measures to ensure that only the individual can apply their own electronic signature, so no ambiguity can arise about who might have applied the signature.
- Take strict, express measures about who has authority to sign in what circumstances.
- Prohibit delegation of signing authority.
- Enable functionality which provides for the electronic signing of a PDF document (we use Adobe Acrobat Reader and a stylus).
- Ensure electronic signatures are securely locked and accessible only by the signatory.
- If the signing page is attached separately, also attach the whole document to the email (even if it is the unsigned version) so there is no ambiguity about the terms agreed.
- When agreeing to a document, ensure it is attached to the email as a PDF, so there is no scope to edit a Word version.
- Include a broad counterparts clause that contemplates electronic execution in counterpart by each signatory, not just each party.
- Do your due diligence on your counterparty to be satisfied who you are dealing with and that there is proper authority for the promises being made, and document those efforts.
- Check internal documentation to ensure your authorised signatories have appropriate, express authority.
- Obtain express written statements at the time of exchange that the arrangement is entered in reliance on the assurances that:
o the signatory has the appropriate authority to enter the binding arrangement;
o the signatory has affixed their own electronic signature; and
o neither party will challenge the validity of the arrangement by virtue only of the remote electronic signing of the document,
and that each party is estopped from asserting otherwise.
- Where possible, enter arrangements via agreements not deeds (but remember to ensure consideration passes).
- Be vigilant about whether there is a risk of duress, given you will not be able to look the person ‘in the eyes’.
- Be creative about witnessing: eg, consider whether the signature could be witnessed by an independent witness remotely over video camera and recorded.
- Adopt traditional ‘wet ink’ measures depending on the risk/significance/nature of the arrangement being entered.
The above suggestions are by no means a perfect solution, but are practical ways to help ensure that once the virus passes your agreements remain.
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