Electronic signatures are often, but not always, valid. Legal problems can emerge. It depends on the type of document. We explain how to avoid issues.
The problems with modern deals
The days when parties physically met to sign a contract with wet ink are over. These days, both parties can sit either side of the globe and electronically sign their agreement. Nevertheless, your agreement may be invalid if you execute a document using an electronic signature.
What counts as an electronic signature?
Not every form of electronic signing is a valid electronic signature. A sign or a combination of signs must satisfy statutory requirements to be valid. It is a valid electronic signature if it is a:
- Sign which is typed; or
- Picture inserted in an appropriate place in a document,
- With the intention of authenticating the document.
Hence, valid, and probably acceptable, electronic signatures, include a person:
- Typing their name into a contract or email that includes the agreement’s terms;
- Electronically pasting their signature, e.g. a .jpg or .png image, into an electronic version of the contract, in the appropriate place;
- Accessing a contract through a web-based e-signature platform and,
- Clicking to have their name, written in a typed or “handwritten” font, automatically added to the contract in the designated place;
- Using a finger or light pen with a touchscreen to electronically write their name,
- In the appropriate place in the contract.
Documents that can be executed electronically
Legal documents require varying degrees of authentication. The more important the document, the greater the required degree of diligence. Below, we describe which documents you can execute with an electronic signature, and which require additional formalities.
You can conclude a contract using an electronic signature, if the contract is not subject to specific statutory requirements.
Documents subject to statutory requirements
Some documents are subject to statutory requirements, e.g. contracts for land. Here the document is required to be in writing and/or signed and/or under hand.
However, if you insert an electronic signature with the real intention to authenticate the document, that is usually sufficient for a document to have been executed in writing and under hand.
A deed cannot be electronically signed and delivered, since a validly executed deed needs to be:
- In writing; and
- Executed and delivered as a deed.
So an electronic signature is a valid signature if a witness genuinely observed it. In practice, the signatory and witness must be physically present, in the same place, whatever the signature method. The witness can attest to an electronic signature’s authenticity, using their electronic signature.
However, if a company is only authorised to execute deeds by affixing a seal, then you cannot execute valid documents using an electronic signature. Checking the company’s articles will go some way to satisfying due diligence.