Electronic Signatures

Until recently, all executed contracts were produced in hard-copy and signed by hand. Many businesses and individuals now embrace a ‘paperless’, digital approach to conducting business. Examples include ‘click to accept’ online contract.

Many contracts require notices to be given “in writing”. The law allows a document to be executed by an electronic signature and this satisfies any requirements for it to be “in writing”.  This is made possible by the Electronic Transactions Act (1999). This Act also states that transactions are not invalid simply because they have been communicated electronically. Therefore, a party may agree to be bound by an email saying so, by forwarding a scan of a signed document or simply inserting a ‘picture’ of their signature into the document and returning it to the other party.

There are still exceptions and situations where a document must be on paper and cannot be satisfied by any electronic equivalent. The Act expressly excludes wills from being validly executed digitally. Wills  are specifically required to be signed in the presence of witnesses.

Risks will arise if contracts are signed electronically without a witness as it becomes easier for signatories to deny that they actually signed the document. This doesn’t mean the document is not binding, but it may be more difficult to prove the other party agreed to it if they later deny executing it. The efficacy of digital execution will be determined on its merits in each case. However, parchment and ink is not immune from such challenges.

A further evolution of digital execution is the use of another variety of digital signatures- a mathematical technique used to verify the sender and recipient of documents. We will explore that process in a separate post.