An Introduction to Electronic Signatures

The physical signing of agreements is a typical scene at the end of a transaction and is frequently thought of as a necessary step for contract formation. However, this is not the case.

The purpose of a signature?

In the majority of cases a signature is not required to finalise a contract. Indeed, contracts can be unwritten and agreed via a conversation or a short exchange of emails.

In certain circumstances, such as the sale of land or powers of attorney, a manual signature is required to complete the document. However, the more common purpose of a signature at the end of an agreement is to provide evidence of the parties’ intent to enter into the transaction on those terms and conditions.

What is an electronic signature?

With an increasing number of contracts being concluded electronically (by email and online), it is an often overlooked fact that in many circumstances an electronic signature will suffice (for evidential purposes) in place of a manual one.

An electronic signature is anything in electronic form that is incorporated into or “logically associated” with an electronic communication, and is used to establish the authenticity or integrity of that communication.

Some common examples of electronic signatures are:

Electronic signatures (and certificates that verify the authenticity of such signatures) are admissible as evidence in legal proceedings in respect of any question regarding the authenticity or integrity of an electronic communication. Notably, however, the use of electronic signatures does not remove the requirement to follow the necessary formalities for the proper execution of documents which may be set down in legislation, for example who has authority to sign on behalf of a company.

How does this affect me?

The admissibility of e-signatures as evidence of the authenticity or integrity of the party signing the electronic document or their intention to enter into the transaction provides a great amount of security to those concluding contracts electronically. In an online marketplace, an e-signature offers added comfort about the identity of suppliers.

The practice of signing documents developed to achieve certainty of the identity and authority of the contracting parties, and it is a great benefit that the law now gives the users of electronic documents and communications the same comfort.

However, users of e-commerce should still be aware that there are certain circumstances where writing will be required and the legal formalities of signing documents must continue to be adhered to. In addition, it is ultimately for the Courts to decide how much weight shall be given to an electronic signature in any given case. Therefore, for important high value/ high risk contracts, you may gain more comfort from continuing with the tried and tested method of concluding your contracts...the manual signing room.