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Electronic signatures – uses and risks

Published: 30th January 2019

Author: Jess Collett, Norris Ward McKinnon

Published in: Commercial e.Speaking

With the rise of technology, it is usually easier and faster for an agreement or terms to be accepted electronically, as opposed to the traditional signing of a physical document. However, how reliable is that electronic signature/acceptance if a dispute arises between the parties?

An ‘electronic signature’ can take many forms including a scanned image of the signature, a mouse mark on a screen, a signature signed by way of a stylus, or by a person agreeing to the terms and conditions by ticking a box on a web form which expressly provides that the person ticking the box agrees to be bound by all the relevant terms. For an agreement to be binding, the person agreeing to the terms must be able to read the terms before accepting them.

Electronic signatures are, arguably, less secure than a traditional signature because of the possibility of a third party intercepting the electronic document and extracting and using that signature. There is also no verification of who actually signed it.

The electronic transaction provisions of the Contract and Commercial Law Act 2017 provide that an electronic signature needs to be ‘as reliable as is appropriate’. This is assessed by whether:
• The means of creating the electronic signature is linked to the signatory and to no other person
• The means of creating the electronic signature was under the control of the signatory and of no other person
• Any alteration to the electronic signature made after the time of signing is detectable, and
• Where the purpose of the signature is to provide assurance of the integrity of the information to which it relates, any alteration made to that information after the time of signing is detectable.

Whether an electronic signature ‘is as reliable as appropriate’ depends on the circumstances. Where the sums involved are large and you have concerns about the enforceability of an agreement, it’s likely you would want to reduce the risks attached to electronic signatures. In this case, a ‘digital signature’ which incorporates increased security measures, is likely to be more appropriate.

A digital signature is a form of electronic signature which is more secure (less likely to be copied and the document less likely to be changed when emailed) than the above-mentioned forms of electronic signatures. A digital signature is produced using identity verification and is bound to the document with encryption.

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