Electronic signatures


The Manchester District Registry recently refused to enforce a personal guarantee given by e-mail on the grounds that the e-mail had not been signed (Nilesh Metha v J Pereira Fernandes SA (2006) EWHC 813 (Ch)). The case is a useful reminder of the scope of electronic signatures - and suggests that care is sometimes needed as to how they are framed.



The key legislation on electronic signatures comprises the Electronic Signatures Directive, the Electronic Communications Act 2000 and the Electronic Signatures Regulations 2002. The relationship between these three is a little complicated - the Bill for the Act pre-dated the directive, but the directive was adopted before the Act. Although they are not entirely consistent, the government took the view that the Act was sufficient to cover part of the directive, and the rest it swept up in the regulations. The intention of all of this was to encourage e-commerce and e-communication in Europe by ensuring that electronic transactions would be considered as legally valid as pen-and-ink transactions.



The key provision in the Act is that an electronic signature is admissible in evidence in relation to any question as to the authenticity or integrity of a communication or data. An electronic signature is defined as 'anything in electronic form as is incorporated into or logically associated with any electronic communication or... data... for the purpose of being used in establishing the authenticity... or integrity of the communication or data'. The legislation gives no practical examples of what an electronic authentication might consist of, but examples could include inserting the sender's name or PIN code in an e-mail; a bitmap scan of a handwritten signature or a bitmap created using a light pen; or authentication techniques such as biometrics or retina scans.



Of course, for the majority of transactions, signatures are not needed at all. Common law requires an intention to create legal relations. Certainly, a signature is good evidence of this intention, but a signature is not usually an absolute requirement. An electronic exchange between two parties may well be good evidence of an intention to create legal relations, regardless of whether those exchanges are electronically 'signed'.



But there are some instances where English law does require a signature. For example, the formation of a will, the sale or lease of land, the assignment of certain intellectual property rights such as patents, trade marks, and copyright, where a signature is required under contract (for example, 'this agreement may not be varied except in writing signed by both parties'), and when giving a personal guarantee. It was the requirement for a signature in the context of giving a personal guarantee that the court came to consider in Metha.



Mr Metha was a director of a company called Bedcare, which purchased bedding supplies from J Pereira Fernandes, a Portuguese company. Bedcare failed to pay for the products it received, so J Pereira presented a winding-up petition against it. Mr Metha then asked a member of his staff to send an e-mail to J Pereira's solicitors to say that he would stand as personal guarantor in the sum of £25,000. The e-mail was not signed, but was described in its header as having come from nelmehta@aol.com, which was Mr Metha's e-mail address.



On receipt of the e-mail, a clerk at J Pereira's law firm telephoned Mr Metha, accepted his proposal and agreed to adjourn the hearing of the winding-up petition against Bedcare. An agreement regarding the personal guarantee was sent to Mr Metha. However, Mr Metha did not sign it.



Mr Metha did not dispute that he had authorised the offer of a personal guarantee, or that it had been accepted on behalf of J Pereira. But section 4 of the Statute of Frauds Act 1677 states that a personal guarantee for the debt of another person must be in writing and signed by (or on behalf of) the party to be charged with the guarantee. The main issue before the District Registry was whether the e-mail from Mr Metha's e-mail address was 'signed' by Mr Metha for the purposes of the Statute of Frauds. Mr Metha's name was not written in the body of the e-mail, and so lawyers for J Pereira argued that Mr Metha's e-mail address was a sufficient signature for these purposes.



The court held that it was not. The e-mail was in writing and contained the essential terms of what was being offered, but the bare inclusion of an e-mail address, without more, was not a signature. A person's e-mail address is inserted automatically on the e-mails they send out. It is not 'intended for signature', nor does it indicate an 'authenticating intention'. If Mr Metha had typed his name in the body of the e-mail, then that would have been a sufficient signature, but in these circumstances the guarantee could not be enforced.



Was the judge right? It is at least arguable that an e-mail address fits firmly into the definition of 'electronic signature' set by the Act - 'in electronic form... logically associated with an electronic communication... for the purpose of being used in establishing the authenticity or integrity of the communication'. But that definition has no direct application to the Statute of Frauds, or to any statute other than the Electronic Communications Act 2000 itself. One might argue, though, that the distinction that the judge drew between an e-mail that has the sender's name in the body (signature) and the sender's name in the e-mail address (not signature) is a fine one.



The judge might say that the line has to be drawn somewhere. The express requirement for signature in the Statute of Frauds and certain other statutes suggests that the law wants these agreements treated with special care, perhaps in order to underline the seriousness of the commitments that are being entered into. An unsigned letter would not be sufficient under the Statute of Frauds, so why should an unsigned e-mail be treated any differently?



The judgment also highlights the difficulty of applying pre-electronic statutes in an electronic age. Take the use of 'accept' click boxes. For most ordinary on-line transactions, to click on an 'accept' box will show the necessary intention to create legal relations. But will it be enough in situations where the law requires a signature? When the Act and regulations were introduced, most commentators (including the Law Commission) took the view that it would. It is well established in English law that a manuscript X can constitute a signature, and the bit of information (a 0 or 1) that is transmitted by clicking on 'accept' is arguably the electronic equivalent of a manuscript X.



But Metha may suggest otherwise. When the e-mail 'send' button was pressed, a great deal more identifying information was transmitted than the one bit of information transmitted by pressing the 'accept' button, but still the court did not see this as comprising a signature. Why, then, would clicking on an 'accept' button be any different? That said, the problem may not arise if other identification details (say, name and address details in an on-line form) are transmitted in the same session, since the inclusion of these details may give the 'authenticating intention' that the judge in Metha was looking for.



Electronic transactions still do not enjoy the level of use that they might do and, on its face, Metha sends out the wrong message about their safety. But, again, we should not get too carried away. For most transactions, an unsigned e-mail will be good evidence of the necessary intention to create legal relations. And where the law requires more, electronic transactions are usually a secure and efficient way of forming legal relations - so long as the parties make sure that the electronic communication is electronically signed.



Richard Taylor, DLA Piper, Sheffield