Signing Construction Contracts in Scotland: a quick guide
Construction contracts are signed every day, from complex building contracts to straightforward sub-contractor warranties.
The way those contracts are being signed is changing.
There are three ways to sign construction contacts in Scotland:
Before coronavirus the shift to counterpart signing had started. The pandemic has accelerated that shift, with electronic signing also becoming an increasingly popular option for contracts to be signed quickly but safely.
Our Construction & Projects team is at the cutting edge of these changes, particularly in the field of electronic signing.
Here is a quick guide to your three signing options (which lawyers tend to call “execution” notwithstanding its unfortunate connotations).
Option 1: Traditional signing
The document is printed off or the standard form contract (eg. SBCC) is purchased in paper format.
It is signed in what lawyers tend to call “wet ink”, but most other people would call “a pen”.
All the signatories sign the same physical document.
This can be done in a meeting of all the signatories or by posting the document to them sequentially.
Option 2: Counterpart signing
The document is usually sent electronically to all the signatories who each print if off in its entirety, sign it in pen, and email a scanned copy of it to a nominated person.
The nominated person then compiles all the different parts (each called a counterpart) into one document.
The secret to success is agreeing the process in advance of signing to make sure that all the statutory rules have been complied with.
This includes reaching agreement that delivery can be by email, otherwise everyone needs to post their counterpart to the nominated person.
Option 3: Electronic signing
Electronic signatures are valid signatures - just like wet ink/pen signatures.
There are three types of electronic signatures: simple, advanced and qualified. Nearly all the signatures which we see are simple electronic signatures.
An electronic signature is legally valid, but parties also need to be satisfied that they can rely on it if later challenged.
For that reason, we prefer to use third party platforms such as DocuSign or Adobe (usually with two factor authentication) which provide additional evidence of the signing process.
Which option is best?
It depends on the circumstances, so you should consider the following:
- Covid-19 restrictions
Physical meetings may not be possible. Postal circulation to home addresses may be time consuming if there are multiple signatories. Availability of suitable witnesses (if required) may be limited. Access to printers and scanners may also be limited. Collectively, these could be good reasons for preferring Option 3 subject to the legal restrictions noted in the following paragraph.
- Legal restrictions
Some documents require to be signed in what is called a “self proving” manner for either commercial or legal reasons. A document signed in this way benefits from a presumption that it is validly signed in the (rare) event of the signature being challenged at a later date. To benefit from that presumption, certain additional signing formalities must be complied with. Most construction documents do not legally require to be signed in a self proving manner but market practice (for now) is that they often are.
An electronic signature is capable of being self proving but it has to be a specific type of electronic signature called a “qualified electronic signature”. This type of electronic signature is not widely available – yet. Until that happens, a requirement for self proving signatures is a good reason for preferring Option 1 or 2.
- Practical reasons
Shorter documents are more suited to Option 3 provided there is no requirement for self proving signatures. However, larger documents with multiple annexures, such as building contracts, can be less suited to Option 3, but it is not impossible. In truth, the move to electronic signing of building contracts has been slower than for other documents – for just now.
- Risk analysis
Ultimately, agreeing the best option for signing a contract requires an analysis of risk. The question to ask is – what is the risk of one of the parties later disputing that they signed the document at all, or that they had signed this particular version of it? Such cases are rare but they can be costly and problematic to resolve.
Time to change?
Changing well established market practice takes time. Not everyone in the construction sector is comfortable yet with electronic signatures.
However, there is no doubt that electronic signatures are here to stay – and they are quicker than traditional or counterpart signing.
If you would like more information on using electronic signatures, links to additional reading material are provided below.
If you want to discuss the pros and cons of changing your standard practice for signing contracts, please do not hesitate to contact us.
Law Society of Scotland Guide on the Use of Electronic Signatures (ensure you use the current version)
31st March 2021
How can housebuilders mitigate the risk of rising costs and shortages of construction materials?
25th March 2021
Lessons for contractors, developers and designers following multiple insolvencies in a dispute.
25th March 2021
The Scottish Government's plans to establish 'green ports' and their role in achieving Net Zero.