electronic signatures in commercial practice

Electronic Signatures in Commercial Practice

May 27th, 2014

Dentons Canada LLP Document reference #7960406

Dentons Canada LLP Document reference #7960406 2

The Signature: A Primer

May 27th, 2014

• Four foundational purposes for a signature:• EVIDENCE

• CEREMONY

• APPROVAL

• EFFICIENCY

• LOGISTICS


The Signature: A Primer (continued)

May 27th, 2014

• EVIDENCE:• The need to authenticate certain writings by identifying the signor with the

signed document.

• CEREMONY:• The act of signing; calling to the signor’s attention the legal significance of the

signor’s act.

• APPROVAL:• Speaks to the signature’s expression of the signor’s intention.

• EFFICIENCY and LOGISTICS:• A signature on a written document often imparts a sense of clarity and finality to

a transaction and may lessen the subsequent need to inquire beyond the face of the document.



May 27th, 2014

• The Interpretation Act (Alberta):• The words “writing” and “written” or any similar term as including words

represented or reproduced by any mode of representing or reproducing words in visible form. [emphasis added]

• Black’s Law Dictionary (5th ed.):• defines the word “signature” as “the act of putting one’s name at the end of an

instrument to attest its validity; the name thus written. A signature may be written by hand, printed, stamped, typewritten, engraved, photographed, or cut from one instrument and attached to another, and a signature lithographed on an instrument by a party is sufficient for the purposes of signing it; it being immaterial with what kind of instrument a signature is made.” [emphasis added]

Dentons Canada LLP Document reference # 5


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• Beatty v. First Exploration Fund 1987 & Co. 1988 CarswellBC 158:• “…the law has endeavored to take cognizance of, and to be receptive to,

technological advances in the means of communication. … The conduct of business has for many years been enhanced by technological improvements in communication. Those improvements should not be rejected automatically when attempts are made to apply them to matters involving the law. They should be considered and, unless there are compelling reasons for rejection, they should be encouraged, applied and approved.” [emphasis added]


An Electronic Signature vrs. A Digital Signature

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• There is a tendency to use the terms interchangeably, however:• An electronic signature is any symbol created electronically which is intended to

be a signature. [emphasis added]

• A digital signature is a means of verifying and authenticating a document by having a computer create a unique identifier through the application of encryption or encoding.

• Re Newbridge Networks Corp. 2000 CarswellOnt 1401• “If I execute an electronic signature, that too is my signature as I intend it to be

my signature (and the recipient is so advised of that intention in the context).”


The Legislative Framework

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• The Electronic Transactions Act (Alberta) (the “ETA”)• The legislation seeks to legally empower an electronic signature with the same

standing in law as a traditional signature.

• Pursuant to the ETA:• “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.

• “record” means a record of information in any form and includes notes, images, audiovisual recordings, x-rays, books, documents, maps, drawings, photographs, letters, vouchers and papers and any other information that is written, photographed, recorded or stored in any manner. [emphasis added]


Some Notable Exceptions…

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• The ETA is not an overriding statutory instrument and it does not limit the operation of any law that expressly authorizes, prohibits or regulates the use of electronic documents. The ETA specifically does not apply to:• WILLS, CODICILS OR TRUSTS;

• ENDURING POWERS OF ATTORNEY;

• PERSONAL DIRECTIVES;

• RECORDS THAT CREATE OR TRANSFER INTERESTS IN LAND;

• GUARANTEES; and

• NEGOTIABLE INSTRUMENTS.


Some Notable Exceptions… (continued)

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• But why?• The foregoing documents, or document classes, have been excluded from the

scope of the ETA “because they were seen to require more detailed rules, or more safeguards for their users, than could be established by a general purpose statute.”


Some Notable Exceptions… (continued)

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• NEGOTIABLE INSTRUMENTS:• There have been calls to revise legal structures to permit the use of electronic

promissory notes [Newell, J. and M. Gordon Electronic Commerce and Negotiable Instruments (1995), 31 Idaho L. Rev. 819 at pg. 820]

• WILLS, CODICILS AND TRUSTS:• The State of Nevada allows for wills to be written, created and stored in an

electronic record [N.R.S. 133.085 (2013/2014R1)]

• RECORDS THAT CREATE OR TRANSFER INTERESTS IN LAND:• The registrar is obligated to accept for registration, among other things,

“certified copies” of any registrable instrument relating to title to land situated in a national park. [Land Titles Act, s. 30]


The Best Evidence Rule

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• The best evidence rule requires that the original of a document be tendered when a party seeks to prove the contents of that document.

• The analysis has, however, changed:• Consider s. 41.4(3) of the Alberta Evidence Act:

• “An electronic record in the form of a printout that has been manifestly or consistently acted on, relied on or used as the record of the information recorded or stored on the printout is the record for the purposes of the best evidence rule.”


Practice Considerations

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• Include an explicit authorization in resolutions drafted for commercial transactions that electronic signatures will be delivered, and accepted, in respect of all transactional documents for which the ETA applies.

• Consider providing for an acknowledgment in documents that the parties intend to rely upon and use copies executed and delivered in this manner for the purposes of s. 41.4(3) of the Alberta Evidence Act.


Practice Considerations (continued)

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• Some nature of certificate, delivered by directors, officers, or other authorized signatories, could become part of a package of standard commercial closing documents, and would include language that reads something along the lines of:• “In the course of the Transaction [I am assuming a definition of this term in the

certificate] and in circumstances where I have affixed my signature to a record (as that term is defined in the Electronic Transactions Act (“ETA”)), and delivered same by facsimile transmission or in electronic format, including in portable document format (PDF) or in tagged image file format (TIFF), I will be deemed to have adopted that signature as my electronic signature (as that term is defined in the ETA).”

• Consider that, pursuant to the ETA, “electronic” includes “transmitted in digital form” and, presumably, the adoption of “electronic information” could include the adoption of, say, a scanned copy of a signature in order to constitute an “electronic signature”.


Practice Considerations (continued)

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• In order to make a better cross reference with the ETA, standard language for facsimile / electronic execution should be revised as follows:• “This record may be executed by electronic signature and delivered by

facsimile transmission or in electronic format, including portable document format (PDF) or tagged image file format (TIFF), and shall be deemed an original thereof.”

• Where applicable, include this language on all of your transactional documents.

• Ultimately, information records to which the ETA applies “must not be denied legal effect or enforceability solely by reason that it is in electronic form.” [ETA, s. 10]

Categories of e-signatures

Signature Pads

Installed Software (Tablet & PC)

SaaS (Software as a Service)

Categories of e-signatures

Signature pad• In-person, on-premise

solution.

• Benefits:• Fast, controlled

• Drawbacks:• Inflexible.

Installed Software

In-person, on-premise solution for Tablets and PCs

• Benefits:• The ability to sign

documents created by others.

• Drawbacks:• Inflexible• Complex to verify

SaaS (Software as a Service)

Internet solution for computers and mobile devices

• Benefits:• Presence not required• Easy to verify

• Drawbacks:• Require Internet

connection

Authentication

• The authentication of a signature is a business problem …the same as is true with wet ink signatures.

• There are three factors of authentication:• Something you have (a token, card, key, chip, etc.)

• Something you know (a password)

• Something about you (biometric, fingerprint, retina, dna sequence, heartbeat)

• These factors can be used in combination to increase authentication

Single-Factor Authentication

• Similar to a signature.

• Most often validated to an email address.

= [email protected]

Two-Factor Authentication

• Significant reduction of fraud v. signatures (single factor biometric)

• Commonly seen as 3rd party verified token and password.

• IMHO: a good replacement for corporate seal when verified by corp.

Shared secret

• Assigning a temporary password to a signature process gives assurance that the person who signs was the person you were dealing with.

• IN MY HUMBLE OPION: The combination of a shared secret with a third party verified token would give the same level of assurance as a notarized transaction.

Archiving

• Electronic documents are superior for storage and retrieval. • Inexpensive (approaching free)

• A new ipad can store the equivalent of 10,000,000 pages of contracts or paper stacked 1km high

• When digitally as well as electronically signed, they have the benefit of non-repudiation.

• Searchable (unless they are scans)• A scan is a picture of a document. The words cannot

easily or reliably be read by a computer

Wet ink and electricity are a bad mix

• All electronic = easy & fast

• All paper = easy

• Some paper + some electronic = clunky

If we aren’t printing these… ?

…why are we making these files look like pieces paper?

• The paper paradigm will eventually become less important than electronic.

• E-signatures are not limited to static, 2-dimensional files like wet ink on paper.

• Examples of things that could be signed:

Signatures 2.0: HTML

HTML (Hyper Text Markup Language) files are web pages.

• Responsive to fit the device that is being used to view them.

• Semantic mark up empowers machine reading.• e.g. This section is a clause. This

clause is and indemnity clause, etc.

• Form inputs are powerful and unrestricted by page breaks.

Signatures 2.0: Timestamps

Best practices for electronic signatures include timestamps as part of the signature.

Manually entered date fields can be redundant or in conflict.

Signatures 2.0: Spreadsheets

When printed, the formulas behind the numbers are no longer described.

E-signing the original spreadsheet solves for that problem.

Signatures 2.0: Audio & Video

A conversation could be recorded and signed.

Signatures 2.0: Location

Location can automatically be included.

Signatures 2.0: 3D Renderings

Signatures 2.0: Workflows

Electronic Signatures can trigger events in a workflow.

Signatures 2.0: Permission tokens

Permission to access information can be given and revoked using electronic tokens.

These tokens can be logically associated with contracts and signatures.

Today’s Opportunities to use E-signatures

• Low value, repetitive documents, forms

• Examples:• Directors resolutions

• Sales Contracts

• Waivers

• Employment Agreements

• Code of Conduct

• “Approvals”

Layman’s View on Practice Considerations

• Your clients are getting their assistants to put an scan of their signature on a document when a handwritten signature is expected. Advise them accordingly.

• Don’t refer to page numbers in contracts. Use relative references such as the name of the clause or the paragraph number instead.

• Don’t scan text. You lose all the valuable text contained within.

• Foresee the workflow. Don’t assume you have to use paper. You may be the only one making that assumption …and look like a dummy.

• Support development of standards. It’s easier to advise your clients to follow a standard then to explain a process in it’s entirety.

Thank you

@greggoldringwww.inkdit.com Suite 221, 10113 104 Street Edmonton, Alberta T5J 1A1

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