Since the Covid-19 pandemic, electronic signatures have become increasingly common. Even now that lockdown restrictions are firmly in the rearview mirror, the convenience of signing documents without a physical pen and paper is here to stay.
Under Scots law, electronic signatures are valid for the majority of documents, with a few exceptions for the likes of wills, power of attorney, property deeds and some trusts and guarantees.
This type of signature can only be used for electronic documents. Under the Requirements of Writing Act, an electronic document is never printed in hardcopy, instead it only exists in electronic form, such as a Word document or PDF. Printing an electronic document does not change this, it simply creates a copy of the electronic document.
Although completely legal and valid, when using electronic signatures for business purposes there are a few considerations to take in order to decide if it’s the right decision for the deal at hand, and with three different types of e-signatures, you should understand the differences between each.
Types of electronic signatures
Simple electronic signature – It’s likely that you experience this type of e-signature on a regular basis, such as when signing for a parcel or clicking an ‘I agree’ or ‘I accept’ box online. Pasting an image of an inked signature onto an electronic contract also falls under a simple electronic signature. This form of signature is often used for more menial things in life, as there is no way to verify that the document was signed by the signatory.
Advanced electronic signature (AES) – An AES is more secure than a simple electronic signature, and when examining the signed document you are able to detect whether the signature has been changed or tampered with in any way. An AES is uniquely linked to the signatory and is able to identify them at the time of signing, often through forms of metadata like the date and time of singing and their IP address.
Qualified electronic signature (QED) – This is the highest standard of electronic signature. In order to sign a document using a QED, the signatory’s identity must be verified by a qualified trust service provider.
Despite being less secure, a simple electronic signature is often enough for a wide range of documents. However, when signing a business document, such as a deal or a contract, you may need to take more consideration into which type of e-signature is best. With electronic documents, there’s no ‘witnessing’, meaning that even if a second party also signs the document, it does not prove that the first signature is legitimate. Only a QES is ‘self-proving’.
This becomes a concern if the signed document is needed to be used in court. For a simple electronic signature or an AES, it’s likely that additional evidence would be required in order to prove that it truly was the signatory that signed it. The strength of the evidence, along with the other circumstances of the case, will determine whether the document can be deemed legal in a court setting.
Using e-signatures for business purposes
Before creating an electronic document for your business, consider the following points:
- Is there a possibility of needing this document in court? Documents such as a new customer form are unlikely to be needed in a potential court case, whereas documents like a non-disclosure agreement may well be required down the line. Consider carefully whether you need the added security of a QES, even if a court case is an unlikely scenario at this point in time.
- Is there a chance that the other party could dispute this signature? Unfortunately, this point mostly comes down to the other party, rather than the document itself. You may hire a new member of staff who later down the line disputes that they ever signed their contract. Similarly, you may have a vendor sign a supplier agreement who then goes back on the deal.
- If the other party was to dispute the signature, what would be the impact of this on the business? Some documents or contracts can be easily dismissed if the other party changes pace and no longer wants to uphold the deal. In many instances, this can be brushed aside as a lesson and the business can continue moving forward. However, for bigger deals, contracts and documents, the other party disputing their signature could be detrimental to the business.
When using electronic signatures for your business, it is always safer to use a QES wherever possible. Most e-signing platforms can provide QES for an additional cost, which is often a small price to pay for peace of mind.
If you choose to use a simple e-signature or an AES for any documents, always keep supporting evidence. This could be email threads with the signatory discussing the signing of the document. You could also note down dates and times of phone calls regarding the document to assist your case.
If you’re unsure whether e-signatures are right for your business, seek legal advice. Similarly, if you’ve used e-signatures previously and have found yourself needing to open a court case related to the electronic document, contact a solicitor for guidance.
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John Roberts is a Partner and Director at Austin Lafferty Solicitors. John has been with the firm for almost 20 years, with experience in all areas of business law.
