Working from home and hybrid working are now commonplace – even more so in the wake of the Covid19 pandemic. One effect we’ve seen as commercial lawyers is the significant rise in the use of electronic contracts and e-signatures. In a commercial world where physical contact and use of physical documentation have been so restricted this is unsurprising. But electronic execution of contracts that create significant legal obligations is not without risk. E-signing may be a quick and simple process. But it’s important to remember that the e-contract you sign is governed by the same rules of interpretation as more traditional forms of contract.
At Bahamas law firm ParrisWhittaker our award-winning commercial contract lawyers are on top of developments like the growth in the use of electronic documents. We understand the advantages and legal risks associated with them. Here we’ll look at what we mean by e-signatures, assess some of the risks if e-signing and we’ll use an English High Court decision from 2021 to illustrate some of the ways courts interpret e-contracts.
What Is An E-Signature?
As technology evolves e-signatures are becoming an increasingly common way to finalise a wide range of commercial transactions. It’s expected that their use is only set to grow. In England the Law Commission has confirmed the validity of e-signatures as a way to execute most kinds of documents, and the English Law Society has published a helpful Practice Note note. The note highlights that they can take a number of forms, including when someone:
Types their name into a contract or into an email containing the terms of a contract
Electronically pastes their signature (for example, in the form of an image) into an electronic version of the contract in the appropriate place
Accesses a contract through a web-based e-signature platform and clicks to have their name in a typed or handwriting font automatically inserted into the contract in the appropriate place
Uses a finger, light pen or stylus and a touchscreen to write their name electronically in the appropriate place in the contract
E-Signing: What Are The Risks?
As we’ve said e-signing of documents is particularly attractive to commercial clients operating in a post-pandemic environment where physical meetings are not as common as in the past. E-contracts are convenient and increasingly have the approval of judicial authorities and industry bodies. That said, they are not without risk, and your legal advisor should be able to highlight these risks to you before you make any legal commitments. Here are some of the main risks associated with e-signatures on commercial contracts:
The existence of the contract is denied because a third party or one party to the contract argues that an e-signature isn’t a valid way of executing a contract – in our view this is a very low risk. The courts have already decided that e-signatures are valid. As with any contact existence depends on the intention of the parties.
One side says it doesn’t actually sign the contract – that e-signature was made by someone else fraudulently. It’s essential for each side to carry out checks on who is signing for the other side, and to confirm that they have authority to do so. It’s common for businesses to delegate authority for signing documents (although as this case involving Gordon Ramsay showed that’s not without its own risk)
Blue Sky Solutions v Be Caring
We have already looked at the English High Court 2021 decision of Blue Sky Solutions v Be Caring in relation to what it says about incorporating standard terms into commercial contracts. But the case is interesting for another reason. It bolsters the legal recognition of e-signatures. And it serves as a warning to businesses: Pleading ignorance of the true legal nature of an e-signature is unlikely, in today’s legal and business environment, to be successful.
The case involved a substantial mobile phone contract between a phone supplier (Blue Sky Solutions) and a social care provider, Be Caring. An employee electronically signed an electronic document incorporating an order form and contract terms in the mistaken belief she was approving – or agreeing – to the terms that would eventually govern the Blue Sky/Be Caring contractual relationship. She failed to read the accompanying electronic documentation that made clear a contract was being entered into on e-signing the document. . The court rejected Be Caring’s argument it should not be bound by the contract. In doing so it emphasized that the onus was in BeCare to read through any supporting documents before e signing and committing the company to the contract.
The Blue Sky case highlights the need to be cautious when e-signing. By clicking through lengthy documentation and automatically imprinting an e signature you may be committing your business to something which, while subjectively you don’t think is a contract, will in fact be seen by the courts as a contract in light of all the objective evidence
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We advise on all aspects of contracts and dispute resolution. If you need advice please schedule a meeting with a lawyer at ParrisWhittaker today.
