In our fast-moving digital world, electronic signatures (“e-signatures”) have become a convenient, expeditious and cost-efficient tool that can provide a tremendous competitive advantage for smart entrepreneurs!
The e-signature approach serves to accelerate the signing of key business documents such as sales contracts, commercial transactions and funding agreements, to name a few. It can also be used for real estate transactions such as agreements of purchase and sale that create or transfer an interest in land - provided that the technology used has been proven as secure and effective.
Certain exceptions, key protections and trade-offs when using e-signatures
Certain legal documents are specifically excluded in the Act and continue to require a handwritten signature, including wills and codicils; trusts created by wills or codicils; powers of attorney with respect to an individual’s financial affairs or personal care; and negotiable instruments such as promissory notes. It is also good practice to verify whether or not there are specific laws, such as the Evidence Act or the Canada Bills of Exchange Act, governing a document that may either authorize or prohibit the use of e-signatures.
The Act also provides for some fundamental protections with respect to the involvement of electronic agents. If a person or business makes a material error in a transaction done through an electronic agent, parties who mistakenly bound themselves could ultimately back out of the transaction and reclaim or return any value exchanged. These protective legislative features have often already been embedded in the latest e-signature interfaces.
As per the Act, another trade-off for using E-signatures is the requirement to provide reliable assurance as to the integrity and unaltered state of the original signed document being kept electronically.
Points for consideration and best practices
While most corporations will want to capitalize on the administrative efficiency that stems from the use of e-signature solutions, smart entrepreneurs will adhere to legislative requirements and endeavor to follow best practices, such as:
- seeking advance written authorization of consent (e.g. an email) that an e-signature will be accepted by the other party with respect to each specific transaction;
- performing compliance verification for the specific signature and legal document in each jurisdiction where their business is carried out;
- as with physical documents, care must be taken to ensure that all parties are signing a copy of the exact same documents and that no alterations are made after execution; and
- ensuring that the signed electronic document will be accessible (including in printed format) and usable for subsequent reference by all parties who are entitled to access, despite future technological changes.
At MDK Business Law, we have proactively acquired state-of-the-art commercial e-signature software that allows our clients to take full advantage of this convenient and cost-efficient administrative tool while meeting security, easy access and retention requirements. Please contact us if you wish to discuss if electronic exchange and e-signatures would make sense for your specific business transaction.