Are Electronic Signatures Legally Binding?


When we talk about electronic signatures (“e-signatures”), we mean typing a person's name at the end of an electronic document, pasting an image of a person's signature, typing a unique code or PIN that can be associated with a particular person, clicking an ‘Accept’ button, or checking a box online - where the intent is to provide a signature for purposes of creating a legally binding contract or document. A signature is not always required to form a binding contract, but when one is required, whether an e-signature is legally binding depends on the ‘intent’ and the ‘consent’ of the parties. Generally, in both Canada and the U.S., if there is intent and consent, an e-signature is as legally binding as a hand-written signature.

There are several laws that govern the use of electronic signatures to create a legally binding contract. In Canada the primary federal law is Part 2 of the Personal Information Protection and Electronic Documents Act (PIPEDA). Every province has enacted a similar law (based on the Uniform Electronic Commerce Act, “UECA”). In the U.S., both the federal Electronic Signatures in Global and National Commerce Act (ESIGN) and Uniform Electronic Transactions Act (UETA) govern the use of e-signatures. Every state also has adopted an e-signature law, 47 of which are based on UETA.

These laws permit the use of electronic signatures for most types of agreements and provide that a signature will not be denied legal effect or enforceability solely because it is in electronic form. However, the prior consent to use an e-signature must be given. In most situations, consent can be inferred from the conduct of the parties - it need not be explicitly stated (see exceptions below).

Of course, for an e-signature to be valid and enforceable, the electronic document it is attached to must be valid and enforceable. This means that an unaltered, complete electronic copy of the document signed by all parties must be sent or made available to all parties in a form that can be saved and retrieved by them for later reference. It also must be printable. As with a contract signed by hand, it can be challenged in court on grounds that the document was altered after it was signed. In most circumstances the document along with the e-signature is presumed valid unless proven otherwise. This comes down to the strength of the evidence. Among other evidence, the steps taken to preserve the integrity of the signed document would be taken into account in deciding whether it has been altered.

It is worth noting that the legislation does not require anyone to use or accept an electronic signature or record - consent of the parties is necessary. Although in most situations implicit consent inferred from the conduct of the parties will suffice, it is nevertheless good practice to explicitly state in the contract or by email that an e-signature will be accepted.

 

Exceptions and Special Requirements

Depending on the province or state, documents required by government bodies are typically treated differently. For example, in Ontario, the “Electronic Commerce Act” states that where a government body is a party to a contract, explicit consent must be given by that government body that they will accept electronic documents, and therefore will accept an e-signature as legally binding. Consent cannot be inferred.

In addition, certain types of contracts and documents require a personal hand-written signature to be considered enforceable. The following documents are explicitly excluded from e-signature laws in many jurisdictions:

  • Wills and codicils.
  • Certain powers of attorney.
  • Real estate transfers and a few other real estate agreements.
  • Some legally required disclosures to consumers.
  • Some ‘family law’ matters such as adoption and divorce.
  • Various official court documents.

There also are some particular types of documents where a separate piece of legislation specifically authorizes or prohibits the use of e-signatures. For example, in Canada the federal Bills of Exchange Act (BEA) regulates promissory notes; a hand-written signature is required for a promissory note.

 

Lance Soskin
Attorney-at-Law
Contracts, Law & More




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