CONDUCTING BUSINESS IN THE AGE OF SOCIAL DISTANCING: ELECTRONIC SIGNATURES TO THE RESCUE?

As governments around the world move into lock-down states to mitigate the spread of COVID-19, businesses have been increasingly adopting the use of technology to maintain appropriate levels of social distancing while still carrying on business. In doing so, many businesses are facing a question that hasn’t received much attention to this point: Can we rely on electronic signatures for legal purposes? Having received several inquiries from clients in recent weeks, we are pleased to provide the following general overview of the law respecting electronic signatures in Alberta.

What is a Signature, Anyhow?

The word “signature” has several meanings and is used in various contexts as a verb (“the documents are ready for signature”), a noun (“it has her signature”) and an adjective (“their signature style”). Pen-and-ink written names, copies of signatures applied by rubber stamps or Autopens (signing machines), wax seals, and “marks” (the drawing of an “x” by the signor) have all been used over the centuries to indicate an intention to approve, accept, or endorse a document. The method of signing and the degree of formality required depends on the type of document being signed. For example, wills, other testamentary documents, and documents dealing with registration of interests in land require adherence to strict formalities of signing – including the witnessing of signatures by other parties – to create a valid document. Outside of the realm where statutory requirements determine a signature’s validity, the courts are left to make that determination as a question of fact. In doing so, the courts will consider whether the purported signature:

1. identifies the source and authenticity of the document; and

2. establishes the signatory’s approval of the document’s contents.

(see, e.g., Girouard v Druet, 2012 NBCA 40 at para 28).

The Alberta Act

In response to developing commercial practices in the Internet age, the Alberta Electronic Transactions Act was enacted in 2001. That Act defines “electronic signature” as follows:

“electronic signature” means electronic information that a person creates or adopts in order to sign a record and that is in, attached to or associated with the record. (s. 1(1)(c))

Also important is the definition of “record,” which includes paper documents as well as “any other information that is written, photographed, recorded or stored in any manner…” (s. 1(1)(i)). The effect of the Electronic Transactions Act is to put most electronic signatures (again with some important exceptions) and the electronic records they’re affixed to on the same legal footing as pen-and-ink signatures on paper. Whether a signature is applied by pen or by mouse-click, the validity of the signature will depend on whether the source and authenticity of the record, and its approval by the purported signatory, can be proven on the evidence. This rule is spelled out in section 16 of the Act.

Current Practices

Because of the broad definition in the Act, an electronic signature can take a variety of forms. Examples include:

• “I Agree” buttons on webpages and End-User Licence Agreements

• Signature blocks appended at the bottom of e-mails

• Scanned images of handwritten signatures

• Sophisticated encrypted, certificate-based digital signatures such as those produced using products like Adobe Sign and DocuSign

Adobe draws a distinction between “electronic signatures” - using its own definition - and “digital signatures,” the latter being a sub-set of the former with added security such as encryption, digital certificates, and advanced cloud-based tracking and audit capability. Some of these forms are more likely to be found to be valid signatures than others, if tested by a court (the list above is arranged from lowest to highest likelihood of acceptance).

Treatment of Electronic Signatures by Courts

There have been few cases in Canada dealing with the validity of electronic signatures. Somewhat surprising to the authors of this post, in cases where the factual test set out above has been applied (i.e. the reliable establishment of the source, authenticity, and approval of the record), courts have found valid signatures in the form of an e-mail signature block appended automatically at the end of the sender’s e-mails (see 1353141 Alberta Ltd. v Roswell Group Inc., 2019 ABQB 559 and IDH Diamonds NV v Embee Diamond Technologies Inc., 2017 SKQB 79). The IDH case and a case from the British Columbia Supreme Court, Johal v Nordio (2017 BCSC 1129) implicitly suggest that more sophisticated digital signatures (i.e. with encryption and perhaps other security measures) would be accepted as valid with few reservations. In these cases, and others, it seems that the courts would have been prepared to find that the electronic signatures in issue were valid, even if the applicable electronic transactions legislation was not in force. That said, the legislation could conceivably save a signature that could not be found valid at common law (see Essa v Mediterranean Franchise Inc., 2016 ABQB 178; note, however, that certain statements at para. 131 about the validity of rubber-stamped signatures without the aid of the legislation by the honourable Justice in that case arguably went further than warranted by the case cited for those propositions).

Should You Use an Electronic Signature?

It’s worth noting that signatures of any type on legal documents are, with few exceptions, intended to be used against the person signing and not for that person’s benefit. Accordingly, if the party opposite is content to accept a signature in any particular form, there should be little hesitation in providing it. As always, and particularly where the stakes are high, it would be prudent to obtain legal advice before signing any documents if you have any concerns.

Should You Rely on an Electronic Signature?

Despite the trend towards acceptance of various forms of digital signatures by the courts, there is no universal rule that can be applied. As noted by the Court in the Druet case at para 29, “there does not appear to be consistency in the treatment of email signatures.” The same could be said of other forms of electronic signatures.

For these reasons, businesses dealing in high-stakes transactions should insist on adopting sophisticated technological measures when engaging in electronic commerce. The high-level security provided by commercial digital signature services provides reassurance that the signatures in contracts and other records exchanged digitally will be found valid and enforceable if litigation becomes necessary.

As a business policy, it would be prudent for organizations engaged in electronic business to establish a rule to the effect that any contracts with a value above a certain threshold should be signed with an encrypted digital signature, if not traditional pen and ink. Questions about what type of signature is appropriate for any given record should be discussed with a lawyer. Please feel free to contact our team for legal advice.