Electronic signatures: not yet a substitute for the 'wet' signature in corporate transactions

Electronic signatures: not yet a substitute for the 'wet' signature in corporate transactions

Published:

Author: Cole Stacey

Signing a document is a simple method of confirming the agreement of contracting parties.

It provides comfort and certainty as to the personal involvement of that person and means that signatures can be checked, for example, against bank mandates.

Finding an electronic equivalent is necessary to the continued growth and development of e-commerce. However, it is difficult to find a nationally accepted fraud-proof process. Therefore, we are some way off the widespread adoption of electronic signatures as the basis for closing corporate transactions.

The position is clear: electronic signatures can, in principle, satisfy the requirements for signing a document under hand (as demonstrated in Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd [2012] 1 W.L.R. 3674) and systems have been developed, especially in relation to consumer contracts, that are being used effectively.

However, the widespread adoption of electronic signatures in corporate transactions depends on whether the process used to "sign" gives sufficient certainty that the individual or company has agreed to be bound by the contract in question.

For example, proof is required that the person "signing" the document is who he/she says he/she is. Any electronic signature process must be able to verify the identity of the person signing, and the secure storage of the signing process for future review is a must.

The law has tried to advance and encourage the use of electronic signatures, as evidenced by the EU legislative framework (the Directive on a Framework for Electronic Signatures (99/93/EC)) implemented into UK law under the Electronic Communications Act 2000 (ECA) and the Electronic Signatures Regulations 2002 (SI 2002/318).

The ECA means that electronic signatures, and any certification of that signature by a certification authority or other person, are admissible in evidence in respect of any question regarding the authenticity or integrity of an electronic communication or data. The ECA does not make electronic signatures legally effective where the law requires a traditional method of signing to be used (for example, documents required to be signed as a deed).

The most commonly used methods of signing electronically are cryptography technology (symmetric or public/asymmetric) and certification of the electronic signature by an independent third party. Both are notably less accessible, and more expensive, than physical signing even when following the "print, sign and scan" approach.

The physical act of signing (under various guises) is standard across many jurisdictions and is an easy and well established route of signing documents. Until the electronic signature process is standardised (requiring cheaper and simplified technology and methods) and is as reliable and as simple as just printing, signing and returning a document, it is unlikely that physical signatures will be replaced in the near future in the corporate world.