Dating back to before the American Civil War in 1861, inventive methods of communication have been used to create enforceable contracts. Back then, of course, the methods were a little less high-tech than today’s offerings – we’ve swapped Morse code for digital contracting platforms. But, as always, there are those battling the shift from old-style ‘wet ink’ signatures to a quicker, simpler process of e-signatures. Implementation of a new EU Regulation may hasten the move.
What is an E-Signature?
Electronic signatures (e-signatures for short) are exactly what you might expect – a digital signature which, under the right circumstances, has the same legal standing as any traditional signature. The majority are very basic – an uploaded pdf contract document with digital text input boxes for a signature and a date.
Here at Devant, we’ve been using Adobe EchoSign to execute our contracts with clients by e-signature for years, and the benefits are plain to see. Firstly, unlike traditional contract signings, using a digital platform means that there’s no need to gather all of the signatories together which can be difficult, particularly in cross-border deals. Secondly, the contracting process from offer to acceptance can be completed almost instantly. As you can imagine, using our Contract Automation platform (based on industry-standard Exari software), together with EchoSign, enables us to generate a tailored client contract and have it signed by both parties within minutes. In a digital world where business is moving at a constantly accelerating rate, anything that makes the contracting process more convenient is surely a profound step forwards.
Now becoming more widely used, you may well have come across e-signatures and might have even used one to accept a contract yourself. Here in the UK, digital contracting methods have been legally recognised since the Electronic Communications Act 2000 (ECA), section 7 of which makes e-signatures both admissible as evidence in cases of litigation and as a valid means of signing (and therefore accepting) a contract. Whilst in Britain there haven’t been too many hurdles to cross in adopting this new technology, international contracting has been much slower on the uptake. Sixteen years on from the ECA 2000, there is finally a common standard for e-signatures across the EU.
Green Light for International E-Signatures
Active from July 2016, the EU regulation on Electronic Identification and Trust Services for Electronic Transactions in the Internal Market (eIDAS) may be a mouthful, but provides the EU-wide certainty needed to implement changes that make contracting much simpler.
Article 25(1) of eIDAS states that:
“An electronic signature shall not be denied legal effect and admissibility as evidence in legal proceedings solely on the grounds that it is in an electronic form or that it does not meet the requirements for qualified electronic signatures.”
In essence, across the EU electronic signatures constitute valid evidence in legal proceedings regardless of whether they meet the standards of proper acceptance, provided that the opposition fails to submit evidence to the contrary. Courts in EU member states cannot refuse to accept e-signatures as evidence to prove that parties entered into an agreement.
“But hold up, why does eIDAS stop at admissibility as evidence; why not validate e-signatures outright?”
At this stage, the honest answer is that it seems that the EU as a whole is not yet ready for uniform acceptance of digital contracting. Like the UK, some jurisdictions such as Poland and Spain were quick to adopt domestic legislation recognising e-signatures as valid forms of acceptance. But others such as Italy still prefer to put their faith in more traditional, ‘wet-ink’ contracting.
The good news is that even whilst e-signatures aren’t strictly valid forms of contract signature in every EU state, you can still use them to streamline your contracting process and not have to worry about the system coming back to bite. By making your contracts subject to English law and jurisdiction (or another jurisdiction that accepts e-signatures), you can ensure that any digitally formed acceptance of a contract is valid.
Taking the UK as an example, there have now been enough cases hashing out these issues that a decent body of precedent has formed. In Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd, the courts upheld the use of electronic signatures as a valid way of signing a contract even where it required acceptance to be “in writing”. If you provide a contract that for all other purposes is valid, there is no reason (in the UK) that using digital e-signatures should hold you back.
The Revolution is Coming
Universal recognition of e-signatures might still be some way off, but eIDAS represents a move in the right direction, especially in Europe. Embracing a new technology is difficult for any industry, not least the legal world, and the move from analogue to digital contracts will not be the quickest transition. With more jurisdictions moving to accept e-signatures every year, including emerging markets such as Costa Rica and China, it seems that in the future paper contracts might take a back seat to digital versions.
At Devant, having used digital contracting since 2006, we are confident that this next step in the ever-modernising realm of contracting can only serve to make the process more slick, simple and accessible. And anything that makes it easer to do good business, and reduces the cost of legal transaction, gets a bit tick in our book.
If you’re thinking about implementing contract automation and/or digital signatures in your business, give us a call. We’d be happy to share our experiences over coffee!
The Butler, Devant