ezine

19 Jun 2012

No Pen? No Paper? No Problem(?)!

Electronic signature (e-signature) providers DocuSign[1] and RightSignature[2] both announced in April that they had paired up with Google to bring their services to Google users the world over. Users of Google Drive, Google's new cloud storage service, are now able to electronically send documents requiring a signature to another party, have them signed with an e-signature and returned by the signing party directly from their accounts via browser or mobile device.

Signatures have long been universally recognised as a way to identify a person, associate that person with a document's contents, and provide proof of the person's intention to be bound by that document's contents. However, while the internet and electronic communications have become globally used and are often the first choice for communications on a day-to-day basis, the use of e-signatures has not generally replaced the practice of manually signing documents. The new offerings available for Google Drive users could be the start of more widespread adoption of this method of contracting.

How it works

DocuSign and RightSignature generally operate in the same manner. After downloading the relevant application, a user can choose to open a document that the user has uploaded to Google Drive with the application and is stepped through the process of adding virtual tags to the sections of the document that need to be signed. The user can then email the document, incorporating the tags, to the signing party.

The two applications differ slightly in their approach to the actual signing of documents. The recipient of a DocuSign document is presented with a window showing a range of "mock-ups" of his or her signature - being his or her name depicted in various handwriting styles from which one can be chosen to represent the signing party's signature. The images of the possible "signatures" are accompanied by a small button marked "adopt and sign" and a statement setting out that by clicking "adopt", the recipient agrees that the image will be the electronic representation of his or her signature on documents, including legally binding contracts. If the adopt button is clicked, the chosen image of the recipient's name is inserted into the document.

When signing a RightSignature document, instead of there being a range of images from which to select a "signature", the recipient must (using his or her finger or stylus on a touchpad, or mouse on a screen) "sign" his or her signature under the statement "I agree to the contents of all pages above with an electronic signature" and is requested to review the document before submitting the signature. The image of this signature is then affixed to the document.

E-Signature law

New Zealand's Electronic Transactions Act 2002 (Act) provides that a legal requirement for a signature can, subject to a few exceptions, be met by electronic means. So long as certain requirements are met, an electronic signature will be considered just as valid as a written signature. While the provisions of the Act relating to e-signatures are concerned with situations where there is a legal requirement for a signature on a contract, the Act can be a helpful standard to work from even where there is no legal requirement for a signature in order for a particular contract to be binding.

The Act follows two principles advocated by the United Nations Commission on International Trade Law (UNCITRAL): functional equivalence and technological neutrality. In terms of signatures, the principle of functional equivalence means that an e-signature fulfills the same function and purpose as its manual counterpart. Being technologically neutral means the Act doesn't specify any particular technology that might be used to satisfy the requirements, minimising the risk of legislating for a particular type of technology that may become outdated or inadequate.

Section 22 of the Act provides that an e-signature must:

  • adequately identify you as the signatory and adequately indicate your approval of the information to which your signature relates, and
  • be 'as reliable as appropriate', given the circumstances in which the signature is required.

Increased certainty

To help in providing certainty to users of e-signatures, the Act gives users a (rebuttable) presumption of reliability if certain requirements are met. Section 24(1) provides that an e-signature will be presumed reliable as appropriate if:

  • the means of creating the e-signature is linked to the signatory and to no other person;
  • the means of creating the e-signature was under the control of the signatory and no other person;
  • the purpose of the signature is to provide assurance as to the integrity of the information to which it relates; and
  • any alteration made to that information (or the e-signature itself) after the time of signing is detectable.

If the reliability of an e-signature becomes contested, whether or not an e-signature satisfies the above requirements will be a question of fact. Other considerations when determining the reliability of an electronic signature will include:[3]

  • the sophistication of the equipment used by each party;
  • the nature of each party's trade activity and the frequency with which commercial transactions take place between them;
  • the kind and size of the transaction;
  • the function of the signature requirements given the statutory and regulatory environment;
  • the availability of alternative methods of identification and the cost of implementation; and
  • compliance with trade customs and practice.

E-Signatures in the courts

The issue of what would satisfy the requirements for e-signatures under the Act has not yet been fully examined by the New Zealand Courts. However, in the judgment of Welsh v Gatchell the High Court provides some useful commentary on what may satisfy a legal requirement for a signature.[4] This particular case involved a communication by fax with the fax header including the sender's name.

Miller J noted that a name written on a fax could amount to a signature, but a fax header printed using a fax machine's capacity to add writing to a document as it is copied and sent cannot serve as a signature unless there is evidence that it was "specifically inserted for the transaction concerned".[5]  In that particular case, there was no such evidence. The printed name identified the person sending the fax but did not establish the necessary intention to be bound by the transaction recorded in the fax.

Increased options and what this may mean for you

Perhaps one of the principal impediments that has affected the use of e-signatures has been the lack of readily accessible, reliable and tested methods of electronically signing documents. While various encryption technologies have been available for some time, the technology has not always been readily accessible or understood. With the use of electronic communications continuing to grow, more people becoming comfortable with entering into online transactions, and user-friendly technologies such as DocuSign and RightSignature becoming available with services such as Google Drive, the level of resistance or reluctance to use electronic signatures may be breaking down.

When considering use of, or reliance on, an e-signature (particularly where the signature is a legal requirement) it is important to have regard to the requirements in the Act for e-signatures and be satisfied that the form of e-signature being relied upon meets those requirements. For example, can you be satisfied that the e-signature identifies the signatory, indicates approval or agreement to the content of the document being relied on and is in fact the signature of the person it purports to be? If the document is particularly important or if the transaction it relates to is of a high value or comes with a high level of risk, the level of sophistication in the technology used for the e-signature may need to be greater than other cases.

Be aware also that what may satisfy those requirements will not necessarily be the same in every circumstance.

Key contacts:

Karen Ngan

Elizabeth Fox

Other articles in this issue:

Cloud Developments: "TV Now" - Creating a Storm Across the Tasman?

Open Source in the Cloud



[1]"DocuSign Integrates with Google Drive™", April 24 2012, http://www.docusign.com/content/docusign-integrates-google-drive%E2%84%A2, last accessed 5 June 2012.

[2] Daryl Bernstein, "Google Drive Electronic Signature Integration", April 27 2012, http://blog.rightsignature.com/2012/04/google-drive-electronic-signature.html, last accessed 13 June 2012.

[3] UNCITRAL Model Law on Electronic Commerce with Guide to Enactment" 1996 at [58]: http://www.uncitral.org/uncitral/uncitral_texts/electronic_commerce/1996Model.html, last accessed 14 June 2012. Section 6 of the Act provides that in interpreting the Act, reference can be made to the UNCITRAL model on Electronic Commerce and any related documents provided by UNCITRAL for the preparation of the model law.

[4] Welsh v Gatchell [2009] 1 NZLR 241 (HC).

[5] Welsh v Gatchell at 258.

Author

Karen Ngan

Karen Ngan

Partner - Corporate & Commercial

DDI: +64 9 977 5080

Mobile: +64 21 648 977

Email:

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