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Digital signatures - can they be relied upon?

With the growth in electronic communications, documents can now be signed in a number of ways including by digital signature and by simply typing one's name into the document. In this article, Keystone Law's Chief of Operations, William Robins and Albert Mennen explain the types of electronic signature that can be used and how they are viewed by the courts.

Signing a document is the universally understood method of demonstrating one's intent to be bound and parties can rightly draw much comfort that a signed document is likely to be legally binding. But before focusing on the reliability of an e-signature, one should, first, examine the matter of what constitutes a legally binding document.

Legally binding

The key legal question to be addressed before a document can be definitively legally binding is: was the party signing in order to evidence his intention to be bound by the document in question and its terms? The method used to sign a document is simply instrumental to this question and with the exception of certain specific types of document, such as deeds or guarantees, documents do not necessarily have to be signed.

The courts draw a distinction between the writing, typing or otherwise inserting of a name in a document and signature of a document. To constitute signature, a person must add his name intending that in so doing he is giving authenticity to the document and its terms and agreeing to be bound by the terms set out in the signed document.

Additionally, the courts will enquire into whether the person executing the document had the requisite authority to do so and was competent to do so. Exceptions include minors and those acting under duress.

Practical considerations

A number of practical issues are raised in relation to documents being executed remotely by digital means, including whether the person signing the document was who they purported to be, and whether the signed document being presented was the same document that was signed or whether it could later have been modified.

Therefore the courts look at the facts of the matter before them and in particular for evidence that the signature applied to the document belongs to the party intended to be bound by the document and whether there is any room for argument that the insertion of a name did not amount to signing a document.

For example, the case of Mehta v J Pereira Fernandes SA relates to a guarantee which was given by email and it carried the name of the person sending the email. By law all guarantees must be in writing and signed. The recipient of that email thought that the insertion of the name was sufficient to be treated as a signature and relied on the guarantee. In evidence, it became clear that the name was not intended as a signature, but was inserted automatically by email software. As a result there was no legally binding guarantee.

Electronic signatures

There are a number of methods of electronically signing documents. Almost all of these require active steps to be taken by the signatory, to remove any doubt that there is adequate intention for the signature to be legally binding. Some of these also deliver the signed document in such a way that it cannot be altered once signed.

However, the issue of proving that a signature has been added by the intended person remains a key concern. This was initially recognised by the EU Commission in the Electronic Signature Directive (1999/93/EC) and by the UK Government in the Electronic Communications Act 2000. The legislation introduced simple electronic signatures, advanced electronic signatures and qualified electronic signatures. However because this came in the form of a Directive, EU Member States were free to interpret and implement their own national laws causing varying degrees of interoperability between the Member States, thus affecting consumer confidence.

The Directive and any incompatible national laws were repealed by Regulation 910/2014 (eIDAS Regulation), which came into effect on 1 July 2016 with the aim of harmonising the digital signature framework across all EU Member States. The provisions of the eIDAS Regulation are implemented in the UK by the Electronic Identification and Trust Services for Electronic Communications Act 2016 (2016 No 696) and s7 of the Electronic Communications Act 2000, and appoints the Information Commissioner’s Office (ICO) as the supervisory body for trust service providers.

The eIDAS Regulation introduces some notable changes to the scope and definition of electronic signatures. For example, electronic signatures are only available to individuals and not to corporate entities where previously both natural and legal persons could make use of electronic signatures. This is due to the change in definition of ‘signatories’ in the eIDAS Regulation.

The advanced electronic signature under the eIDAS Regulation has also been re-defined to recognise that a signatory may not in practice be able to exercise sole control over electronic signature creation data, as required under the Directive. Advanced electronic signatures are applied in accordance with a signature certificate and a signatory wishing to have an advanced digital signature may register with one of a number of Certificate Authorities (CA). The certificate, as issued by the CA, is recognised by software such as Adobe and Outlook, which a signatory can insert into a document digitally in preference to physically signing it. The digitally signed document bears a unique signature watermark and embedded in the signed document are the details of the signatory and the provider of the signature certificate who identified the signatory initially. CAs offer a range of certificates that vary in the degree of certainty of the signatory’s identity. For example, the CA would use one or a combination of the signatory’s email address, name, organisation or department as a form of identity in the certificate. These are generally offered on a subscription basis at different price points depending on the level of certainty of the signatory’s identity.

Finally, qualified electronic signatures are essentially advanced electronic signatures created by qualified electronic signature creation devices, using qualified certificates. Qualified electronic signatures have equivalent legal effect to hand written signatures and a qualified certificate created in one Member State will be recognised in all Member States. Importantly this scheme is regulated and each Member State is required to keep a list of trusted service providers, which is available centrally on the European Commission website. Qualified certificates can only be issued by a CA that has been approved by the supervisory body in each Member State. Further, each certificate is backed by an insurance policy (subject to certain limitations), under which any person relying on a certificate can claim for their loss where a certificate had been negligently or incorrectly issued.

Conclusion

For most documents a signature is not required, but having a signature is highly advisable as a presumption that the document has been validly executed and that the signatories are bound. In reality electronic signatures offer great speed and flexibility and should be used. An electronic signature will not be denied legal effect by the courts based solely on the fact that it is in electronic form, however there may be evidential difficulties which mean they cannot be relied on.

The use of an advanced signature or qualified electronic signature addresses this issue, but it is impractical and not cost effective for anyone who is not regularly signing documents digitally. Therefore, use of a reputable e-signature service that locks the document on signature and ensures the signer can be in no doubt that signing the document evidences intent to be bound by its terms is advisable.

As the Department for Business concludes "signatures are as good as the business process and technology used to create them. High value transactions need better quality signatures." Accordingly, using a digital signature would be most appropriate for low value transactions, transactions with trusted parties and as a stop-gap measure in urgent cases where a hard copy signature is en route.


This article is for general information purposes only and does not constitute legal or professional advice. It should not be used as a substitute for legal advice relating to your particular circumstances. Please note that the law may have changed since the date of this article.

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