As it becomes increasingly common for contractual documentation to be concluded electronically, we examine the pros and cons of e-signatures against traditional wet ink signatures.
In light of the rise of e-commerce in in a variety of markets we are seeing more and more cases where the validity of documents signed electronically is being called into question.
When done properly we do not consider that the risk of forgery with an e-signature is any higher than a traditional wet ink signature. In fact if the correct procedures are in place, an e-signature can be significantly harder to forge than a traditional signature.
The question we are increasingly being asked is - how does one conclude a contract electronically?
The short answer is that - unless a specific form of writing is required by law - an electronic signature need only be as effective as a handwritten signature in order to survive scrutiny, and some reasonably simple steps can elevate an electronic signature beyond a handwritten signature.
What are electronic signatures?
Legislation provides for two levels of electronic signature, the first designated as 'simple', the second as 'advanced'.
A simple signature merely requires something to be placed within the electronic document with the intention that it be used to indicate the authenticity of the document.
In one recent case, the court accepted that the ticking of an 'I accept' button on an online application form would be sufficient to constitute an electronic signature. In another, the court held that an exchange of emails containing a guarantee obligation was duly signed by the author of the email placing his first name at the end and that the guarantee was accordingly binding.
An Advanced Electronic Signature (AES) goes beyond this 'simple' process and must meet the following requirements:
- it is uniquely linked to the signatory;
- it is capable of identifying the signatory;
- it is created using means that the signatory can maintain under their sole control;
- it is linked to the data to which it relates in such a manner that any subsequent change in the data is detectable.
In all cases where a dispute arises - both simple and advanced signatures - the question of whether the electronic signature is valid will depend entirely upon the quality of the evidence linking the signature to the purported signatory. This is no different to the standard of evidence which would be required where a wet ink signature is claimed to be a forgery, and generally the standard of evidence in an online system will be better than a hard copy document which often goes out with the grantee's control at the time of signature.
It is suggested that IP addresses and location data should be part of that information gathering at the time of signature, as well as more mundane data to be provided by the customer to verify their identity. The more evidence which can be gathered, the stronger the case will be if a dispute arises in the future.
The internet has opened up a wide range of possibilities for retailers and suppliers to trade in new ways. Electronic documents have a number of advantages over traditional hard copy contracts. For one thing, the documents remain within the parties' control to a far greater degree, and there is no need to send hard copy documents away for signature and await their return.
As with any innovations, the law can be slow to catch up with commerce, however the recent case law in England (referred to above) shows a clear trend towards recognising the commercial realities of modern business where agreements are regularly made by email or via online forms.
There are still some contracts which - by statute or otherwise - require wet ink signatures and formal writing. For all other contracts electronic signatures can be a very convenient method of doing business. For clients who use this method to conclude their contracts, the evidential difficulties they might face where a customer denies that they have signed a document do not appear to us to be any more onerous than was the case under a wet ink signature.
Ultimately the choice for clients involved in such agreements is between the evidential risk of proving that the party e-signing a document is who they say they are (which is a risk they would bear regardless of the method of execution), balanced against the convenience and commercial advantages of concluding a contract in this way.