Contracts in a digital age

In general, there is no prescribed method of entering into contract. With limited exceptions such as employment, borrowing and credit, dealings in real property and share transfers, a contract need not be in writing as long as the essential elements for a contract can be established.

Those essential elements are that there is an offer, acceptance, agreed terms, consideration and an intention to be bound.

However, having the contract in a form agreed between the parties and signed by individuals with authority to do so goes a very long way in meeting these requirements.

Authenticated electronic signatures are further proof that the parties intended to be bound by the document.

Inserting a DRAFT watermark into a document during negotiation or heading correspondence “Subject to contract” are clearly inconsistent with an intention to be bound at that stage of the matter.

Common law does not prescribe a type of signature, but in an increasingly digital world, where home working is now a reality and on the increase, it is obviously of benefit to use the enhanced security electronic signatures afford.

Developments in law and practice

Electronic communications and signatures are now regulated by the electronic signature regime introduced by Regulation (EU) No 910/2014, which has been incorporated into English law.

As is always the case, applicable legislation needs to be carefully considered as the need arises, but this article gives a very high-level view of the practicalities of electronic signatures.

Electronic signatures

The essential element of business is trust, and in the digital age this can be enhanced by using electronic signatures and trust services. Generally, electronic signatures and trust services can prove the origin of the communication or document, show whether a message has been altered and ensure messages remain confidential.

An electronic signature delivers a way to sign documents in the online world.  They come in many forms, such as:

• Typewritten
• Scanned
• An electronic representation of a handwritten signature
• A unique representation of characters
• A digital representation of characteristics such as a fingerprint or retina scan
• A signature created by cryptographic means.

High value transactions need better quality electronic signatures and this can be achieved using trust services.

Trust services can offer:

• Electronic time stamping – this is data in electronic form which binds other electronic data to a particular time, providing evidence that such data existed at that time.
• Electronic seals – the electronic equivalent of a seal or stamp which is attached or incorporated into a document to guarantee its origin and integrity
• Electronic registered delivery service – this is a service enabling parties to exchange electronic data securely by protecting the data against risk of loss, theft, damage or any unauthorised alterations. The service also provides evidence relating to the handling of the transmitted data, including proof of delivery and receipt.
• Website authentication – a certificate that allows users to verify the authenticity of the website and its link to the entity/person owning the website

Electronic identification

This is becoming increasingly important as services move online and should be used to establish that the person you appear to be dealing with is actually the person you want to be dealing with.  GOV.UK Verify is the new way to prove the identity of persons online.

For advice and support to ensure that a contract is entered into correctly or any other commercial matters, please contact David Ashcroft (david.ashcroft@bpe.co.uk or 01242 248490) or visit www.bpe.co.uk/commercial.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.