Electronic Signature Binding, Rules Court

A High Court case which dealt with a longstanding uncertainty on the validity of ‘e-signatures’ in certain types of agreements was decided recently.

The case involved a professional musician who used a very valuable viola as collateral for loans and also for an advance made by a pawnbroker.

The viola was eventually sold for £230,000 and the dispute arose because the proceeds of sale were claimed in part by two different claimants, both of whom had advanced sums of money based on the viola being the security for the loan.

One key issue was the validity of an electronic signature on a loan agreement covered by the Consumer Credit Act 1974. Acceptance of the terms of the loan agreement had been given electronically by clicking on the ‘I Accept’ button. This generated a document bearing the musician’s typed name, which authenticated the document and communicated her agreement to be bound by the terms of the loan. It was claimed that the signature was not in the form prescribed in the Act and could not therefore be used to validate an agreement under it.

However, the High Court concluded that the e-signature did meet the requirements of the Act and was therefore valid.