Covid-19 has already transformed operating procedures on site, but how we draw up and sign contracts must also adapt
Despite the slowdown in new starts as a result of the pandemic, many projects are continuing. As contractors adopt new operating procedures to facilitate social distancing on site, for back-office personnel teleworking has become the norm. This can lead to logistical issues in getting new contracts signed. Organisations have rehoned administrative procedures, but what is now appropriate is often ordained by what is possible.
English law can be flexible when it comes to contract formation. Signatures are non-essential – as indeed is documentation. It’s not unknown to conclude minor construction agreements through exchange of emails.
Careful planning should mitigate the danger of a fully electronic or hybridised document being void as a deed
More consequential projects necessitate greater documentation and execution as deeds, to satisfy a market expectation for longer limitation periods. Notably, deeds must be in writing and executed in a prescribed manner. If the required formalities are not discharged, then an instrument may not take effect as a deed or constitute a fully binding agreement.
High-value construction contracts are voluminous and their preparation requires substantial collaboration between multiple construction team members. Their assembly remains obdurately old-fashioned, even as digital construction gains pace in the industry.
To comply with the government’s stay-at-home guidance, business resources have frequently been pared back, even shuttered. If parties are having problems assembling deeds, they can adopt the approach of a virtual signing endorsed by the Law Society, whereby emails including the agreed provisions within a PDF or Microsoft Word attachment alongside scans of “wet-ink” (hand-signed) signature pages are swapped. If it’s impractical to include terms – for example, due to file size – then a hyperlink to the document uploaded to a cloud storage system may suffice if there are grounds for confidence that it cannot be modified or compromised. Even so, it is advisable that the parties create paper copies as soon as possible afterwards, in case future access to the cloud is debilitated or lost.
It may appear anachronistic that currently court hearings can take place through live video link but English law requires witnesses to the execution of a deed to be physically present
Deeds have stringent requirements when it comes to execution. Many UK companies sign through two authorised signatories (which may include directors and the company secretary). The problem of both being in different locations during lockdown is resolved by having separate execution sheets.
Contrarily, it may be necessary for a signature to be witnessed, for instance, where one party is a general partnership. For signatories based at home, an adult member of their household should usually be acceptable as a witness. If a signatory lives alone, perhaps a neighbour could act as a witness, while keeping at least 2m away (assuming neither person is self-isolating or shielded). Doing so through an open window or doorway would avoid either having to enter the other’s home.
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It may appear anachronistic that currently court hearings can take place through live video link but English law requires witnesses to the execution of a deed to be physically present. Therefore, witnessing by virtual means, such as via a Zoom or Slack video meeting, is unsuitable.
Unsurprisingly, there is interest in executing deeds through electronic rather than wet-ink signatures. The typical product of e-signature providers, which include DocuSign and Adobe Sign, enables users to generate a digital version of a contract (or transmit a scan), which is hosted on the service provider’s servers. Encrypted communications and the incorporation of security features help authenticate signatories and prevent documents being compromised. Access to the electronic agreement is given to each signatory, who can review the document before signing virtually. Following completion, a copy of the contract is made available to each signatory and can then be saved or printed. Issues with witnessing persist, though; the witness must attend in person. Obtaining advance legal opinions is highly advisable if there are overseas elements, while limits on file sizes can be a nuisance (although commonly there are workarounds).
A degree of apprehension endures in the construction sector with e-signatures and, to a lesser extent, virtual signings. Much derives from the long-established law surrounding deeds, which fails to recognise the reality of modern-day electronic communications. The cogent view, nonetheless, is that careful planning should mitigate the danger of a fully electronic or hybridised document being void as a deed. Still, if virtual signings or e-signatures are proposed, it is sensible to either obtain the parties’ prior endorsement or explain this within the contract terms to alleviate the risk of any party later seeking to challenge the lawfulness of execution centred on the means employed.
In the past year, the Law Commission and the government have acknowledged that legal reform is desirable to promote greater confidence and certainty, including with regard to witnessing. This awful pandemic has only made this all the more crucial and palpable.
Francis Ho is a partner at Penningtons Manches Cooper