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Lighthouse - September, 2021.

E-SIGNATURE FOR THE EXECUTION OF DOCUMENTS IN THE NEW ERA OF REMOTE WORKING

The current restrictions on travel, businesses and social distancing due to the current pandemic COVID 19 has made the simple process of signing and witnessing the legal documents or the business contracts very difficult, with the signatories either working from home or in isolation. In the last year, 2020, we see that most of the businesses have started to have virtual meetings instead of in- person meetings as it is not feasible to conduct business meetings in the same room, and then to circulate the hard copy of the signed documents in the current scenario. Since the traditional face-to-face meetings and signing of documents are no longer possible, the contracting parties had started looking for other alternatives to execute the agreements and contracts to take forward their businesses, and gradually, they have started thinking of using E-Signature to finalize/execute the deals, even when working from home.

An E-Signature or Electronic Signature is a legal way to get consent or approval on an electronic documents or forms by replacing a handwritten signature, virtually. The ESIGN Act of USA, defines the term electronic signature as “an electronic sound, symbol, or process attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the contract or the record.” The UNCITRAL Model Law on Electronic Signature was adopted in 2001, to enable and facilitate the use of electronic signature by establishing criteria of technical consistency for the equivalence between electronic and hand-written signature. This Model law applies where electronic signatures are used in the commercial activities and in order to legally recognize the electronic signatures, it should be reliable and appropriate for which the data message is generated and communicated. Further, to consider it as reliable, it should meet the 4 conditions – (1) it should be linked solely to the signatory; (2) it should be under the sole control of the signatory; (3) any alteration of the electronic signature, made after signing, shall be detectable; (4) where the purpose of the signature is to provide assurance as to the integrity of the underlying information, any alteration of that information shall be detectable. It also imposes a duty on the signatories to use reasonable care to avoid unauthorized use of their electronic signature.

Though most of the countries have adopted the UNCITRAL Model Law into their legislation, it is very important that the contracting parties are familiar with the law in the relevant jurisdiction to make sure that an agreement or contract bearing an electronic signature is legally binding in their respective countries. Most notable countries that have accepted the E-Signature through their local law: for eg., The Information Technology (Amendment) Act, 2008 in India; The Federal Electronic Signature in Global and National Commerce Act in the United States of America; The E-Commerce Law [Law No (1) of 2006 on Electronic Commerce and Transactions in United Arab Emirates; The Electronic Signatures and Certification Business (Act No. 102 of 2000) in Japan; Electronic Commerce Act, 2006 in Malaysia and considers E-Signatures as equivalent to the hand written signature.

When we note that almost all Countries have Statutes regarding E-Signatures, the Companies were/ are still hesitant in adopting electronic signatures mainly due to its legality, cost of implementation and effort involved in it. The legality of the E-Signature is one of the main reasons which stop the companies to fully trust the E-Signature.

When all these above mentioned countries confirms that the E-Signature is considered in the same legal capacity as that of a hand written signature, they also allows an electronically executed agreement to be presented as evidence in a Court and also prevents the denial of its legal effect, validity or enforceability solely because it is in electronic form. However, it is also very important to note that none of the aforementioned countries would accept documents or negotiable instruments like Promissory Note or a Bill of Exchange; Power of Attorney; Trust Deed, Wills or any other testamentary dispositions, Real Estate Contracts, or any other Agreements that requires Stamping/Attestation/ Notarization if it is executed electronically, with an E-Signature.

Further, when using an E-Signature, there is an underlying presumption that any document that is signed with an E-Signature is under the sole responsibility of the concerned party who has affixed the E-Signature. The owner of the E-Signature must be very careful because the E-Signature can be used to sign any legal transaction and the burden of proving the non- authenticity of the signature is on the person, who owns the E-Signature.

Usually, if a document with hand written signature is challenged before the Court of Law, the Court compares the copies of the signature along with the testimony of the handwriting experts or witnesses present at the time of signing the document to establish the validity of the signature. For E-Signature, there is no need for going through this expensive and time consuming process, since it can be proved with the help of IP address, Date, Time and Location, when the document was received, viewed and signed. As per experts, this is a more credible method of establishing evidence than a sworn statement of whether a document is sent through E-Mail.

This being the facts about the use of E-Signature, an emerging trend in the new era, while executing a commercial agreement, it is always suggested to include / fulfill the below points in the electronically signed agreements, for protecting the interest of the contracting parties.

  1. Include a clause that suggests the consent of the contracting parties to sign the Agreement electronically and that it shall be considered as hand written signature for the purpose of enforceability;
  2. Make available to the respective contracting parties, a fully executed copy of the Agreement.
  3. Include a suitable governing law and jurisdiction clause, which provides the widest protection for E-signature.

With the current drastic shift in the business environment, the use of E-Signatures provides a way to enhance and simplify work. Trust and relationships built up over time would play an important role as deals are structured while face to face meetings remain constrained.

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