More than ever, individuals are likely to enter into an agreement or contract without shaking a hand or meeting someone in person. Although unheard of twenty years ago, this is now commonplace.
Electronic signatures are governed in Alberta by the Electronic Transactions Act (the “ETA”). Section 7 of the ETA lists a number of legal documents that cannot be signed via electronic signature (for example, wills, personal directives, and enduring powers of attorney to name a few). Other than the listed exceptions, the ETA is clear that electronic signatures will be legally binding for the purpose of entering into a contract or agreement.
Although not mandatory under the basic requirements of the ETA, it is best practice to include in any agreement language that confirms the parties have consented to electronic signatures and that the act of signing electronically is understood to be legally binding.
Different methods of electronic signing have emerged which vary in their respective levels of security and verifiability. Common methods of electronic document signing include digitized signatures, electronic signature companies, digital certificates, and the emerging technology of blockchain, all of which are described below.
A digitized signature is a digital image of a signature. If you print a document, sign it, and then scan or fax it, that is a digitized signature. Digitized signatures can be applied directly to a Microsoft Word or PDF document.
Although legally binding for most documents, digitized signatures are easily forged. That being said, it is illegal for anyone but you to apply your signature to an agreement, even on your behalf. For a contract to be legally binding, you must apply your signature whether it is digitized or not.
Some companies, such as DocuSign, act as an intermediary between two or more signatories. A document is created for signing and DocuSign sends it to each party, typically via email, to be signed using a web or mobile application. Once all the parties have reviewed the document and signed it, the final version is then sent to all the parties and it is considered an executed document.
Many companies provide electronic signature services for a fee, typically through a monthly subscription. This type of service is very secure, it is only subject to security issues that exist on your own computer, and it is increasingly being used by banks and other financial institutions.
A digital certificate is most commonly used on a website to verify its secure nature, but it can also be used to verify many forms of communication, including a document and document signature. A certificate is created with a private and public key (or “code”) that is verified by a globally recognized certificate authority. This certificate can then be applied to a PDF as a signature.
Digital certificates are very secure and verified signatures cannot be forged. However, digital signatures are not as commonly used due to several challenges. There is an annual cost associated with verification and relatively few people have a verified signature.
Blockchain, while very common in the digital currency industry, is still emerging for other applications. The technical allure of blockchain is the public distribution of verification of a transaction. DocuSign and ZoHo Sign have blockchain verification, and IBM also has an application for this. However, these applications are privatized which deflates the allure of blockchain.
Society may depend more on blockchain in the future, but it is not yet a common method for electronic signing.
With the proliferation of technology, electronic signatures are now commonplace in everyday life. Although they impose legally binding obligations in the same way as a traditional signature, they do pose unique concerns with respect to verifiability and the prevention of fraud. Individuals and businesses who regularly use electronic signatures should ensure they understand the legal implications and consider best practices to prevent other parties from calling into question the validity of electronically signed agreements.