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Combined wet-ink and e-signatures may be used for contracts

02 Apr 2020 / Law Society Print

Combined wet-ink/e-sigs may be used for contracts

The Law Society Business Law Committee has prepared detailed guidance on e-signatures and electronic contracts and transactions, for corporate entities and their legal advisors.

The guidance is limited to the position under Irish law and it should be carefully reviewed where contracts have been entered into under the laws or regimes of  other jurisdictions.

Electronic contracts  between corporate entities and consumers give rise to separate issues of consumer law.

Landscape

The e-Commerce Act provides for the legal recognition of e-signatures in Ireland, but the EU Electronic Identification and Trust Services for Electronic Transactions in the Internal Market Regulation 2014 (the “eIDAS”)  changed the landscape significantly.

A particular document may require specific execution formalities or may specify restrictions, so every transaction must be approached on its own facts.

The valid execution of documents in Ireland depends on a number of issues, including the type of execution required, any legislative requirements, and the governing documentation of the company and the powers of the individuals concerned.

Security

Some forms of electronic signature will be more secure and resilient to fraud, and therefore may carry greater evidential weight, the Committee points out.

There may be an increased risk of repudiation when using a simple electronic signature over an advanced electronic signature or qualified electronic signature.

Wet-ink signatures, however, carry many of the same risks.

An advanced electronic signature or qualified electronic signature is capable of providing a digital audit trail in relation to the signatory.

Processes

Electronic signatures are only as secure as the business processes, systems and technology used to create them, the Business Law Committee points out.

It is also possible for  a combination of execution methods to be used:  one party to the contract may use an electronic signature and another party  may execute it using a wet-ink signature.

The eIDAS provides for a common EU-wide framework requiring Member States to mutually recognise and accept electronic signatures, electronic seals, electronic time stamps, electronic documents, electronic registered delivery services and certificate services for website authentication.

The eIDAS has had a direct effect throughout the EU since 1 July 2016 and prevails over national legislation.

However, privacy legislation Recital 49 states “it is for national law to define the legal effect of electronic signatures”.

Definition of e-signature

The eIDAS defines an electronic signature as “data in electronic form which is attached to, or logically associated with other data in electronic form and which is used by the signatory to sign”.

Article 25 of eIDAS provides 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 requirement for qualified electronic signatures”.

In addition, section 19 of the e-Commerce Act provides that an “electronic contract should not be denied legal effect, validity or enforceability solely on the grounds that it is wholly or partially in electronic form, or has been concluded wholly or partly by way or an electronic communication”.

It is unlikely that an Irish court will seek any additional evidence where an electronic signature has been applied using a recognised platform.

Definition

The eIDAS defines three key types of e-signatures:

 1. Electronic signature (the “simple electronic signature”): “data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign”.

 2. Advanced electronic signature should be:

(i) uniquely linked to the signatory;

(ii) capable of identifying the signatory;

(iii) created using electronic signature creation data that the signatory can use under his/her sole control; and

(iv) linked to the data signed in such a way that any later change in the data is detectable.

In practical terms, the use of advanced electronic signatures involves the encryption of an electronic document using an electronic code (similar to a PIN number) which is unique to the signatory. The fact that the document can  be encrypted, and then decrypted, only by the recipient, provides reassurance about  the identity and unaltered nature of the document.

E-seals

Electronic seals are available only to legal persons, such as corporate entities, to ensure the origin and integrity of data or documents.

However, an e-seal is not an e-signature of the legal person.

Electronic time stamp

An electronic time stamp is defined in the eIDAS as ”data in electronic form which binds other data in electronic form to a particular time establishing evidence that the latter data existed at that time”.

Under the eIDAS,  an electronic time stamp will not be denied legal effect and admissibility as evidence in legal proceedings just because it is in an electronic form.

Adobe has been granted qualified status forelectronic time stamp services in Ireland.

Contracts in writing

In the absence of any regulatory or statutory requirements, there is no need for a simple contract to be in any particular form.

Once exchanged, the contractual nexus is complete, the Business Law Committee points out.

Therefore, unless the particular contracts provide otherwise, simple contracts can be completed using an electronic signature (including a simple electronic signature) as there is no need for them to be in any particular form.

Legislation may  require, however, that a contract be executed in “writing”, “signed” or “executed under hand”, so it is necessary to consider the statutory definition of those terms.

Original documents

Original documents may exist solely in electronic form and there is no requirement for an additional wet-ink version of the document to be executed or for the document to be printed in hard copy.

 Where the electronic version is to be retained as the sole or “original” copy of document, there is a requirement under sections 17 and 18 of the e-Commerce Act 2000 that the electronic copy be kept in a permanent format which, in practice, would mean saving it in pdf form in an online depository, whether bespoke platforms or open-source.

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