In a recent case, the use of a signature machine by a company director to sign a personal guarantee and indemnity on behalf of a personal guarantor brought the execution of contracts back into the spotlight.
The specific signature requirements for different types of finance documents are many and varied and deserve a post of their own (tune in soon for part 2). For now, we will put the Ramsay judgment into the context of signatures generally and the purposes they serve.
Why are signatures to contracts required?
Technically speaking, many types of contract can be made without the need for the parties to sign on the dotted line. A signature, however, helps to demonstrate an intention to be bound by the terms of the relevant contract (which is a key requirement for a contract to be enforceable), assuming the signatory had the authority to sign.
A dive into history
Back in the days before widespread literacy, most signatures were simply a generic ‘X’ expressed to be ‘the mark of [Joe Bloggs]’. The mark was usually accompanied by the signature of a literate witness present at the signing who could vouch that the ‘X’ was in fact [Joe Bloggs’] and not [John Smith’s]. In other words, the witness authenticated the mark.
The use of seals as a means of authenticating documents was also more widespread in the past – the unique impressions made in wax were seen to be harder to forge than a simple ‘X’. The job of sealing documents was often delegated to the ‘keeper of the seal’ who had authority to apply the seal to illustrate his employer’s intention to be bound.
Back to the future
In the case mentioned above, the circumstances surrounding Mr Ramsay’s entry into the personal guarantee highlight the issues of intention and authentication in a modern context. It was held that a signature applied by a signing machine and not by hand is sufficient to bind a party to a contract, provided the person using the machine had the appropriate authority to do so. In that case, sufficient authority was established.
And it’s not just signing machines that can bind a party to a contract. It is possible for electronic and digital signatures to do the job of a traditional ‘wet ink’ signature as well, provided the other key elements to establish the contract are satisfied (i.e. offer, acceptance, intention to create legal relations and consideration) and no other legal formalities are required.
So why is it that most finance documents are still signed by the parties being asked to print the agreement and apply a ‘wet ink’ signature? The answer, in most cases, is due to the documents being signed as deeds. More on this in part 2…
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 Ramsay v Love 
 Electronic Communications Act 2000; Electronic Signatures Regulations 2002 (SI 2002/318)