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{{g}}Evidencing [[offer]] and [[acceptance]] of a [[contract]] using digital authentication technology. A topic that for all the current excitement relating to matters digital and artificially intelligent, receives less attention than it really should. For a properly implemented digital execution strategy will yield productivity and data control benefits out of all proportion to the simplicity of the technology, and certainly will have a bigger day-to-day impact on productivity then chatbots, natural language processing or machine learning.
{{a|contract|{{wmc|Fountain pen writing (literacy).jpg|}}}}[[Electronic execution]] is the process of gathering evidence of [[offer]] and [[acceptance]] of a [[contract]] using digital authentication technology. ''Not'' just pasting a jpeg of your scanned signature onto a [[Adobe Acrobat|pdf]].<ref>That, by the way, is ''une borné idée''.</ref>


===But does it work, legally?===
This unglamorous, but important, topic usually gets swamped by modish [[A.I.]] [[yogababble]] — though old [[Jolly Contrarian|Mystic Meg]] here predicts that might change in 2020, with the planet’s entire [[Negotiator|negotiation capability]] [[Coronavirus|sequestered in box rooms and attics]], without any other means of executing completed legal contracts.<ref>Without electronic execution, the completion-rate [[MIS]] is going to go to ''hell'', man.</ref>
Cue voluminous, sombre, [[tedious]] monographs on the legal effectiveness in different jurisdictions of electronic signatures.<ref>The [https://www.lawcom.gov.uk/project/electronic-execution-of-documents/ UK Law Commission], as recently as March 2020, for example.</ref> These are mainly confined to the specific issues arising where a local jurisdiction prescribes some form to the way one enters into a special ''type'' of contract — one relating to the coneyance of real estate, for example, or a deed.


But  — unless your [[Financial instrument|instrument]] is a [[deed]] or [[lease]] or has such peculiar formal execution requirements — and most [[confirmation]]s and instructions which pass between the operational teams of financial institutions don’t—it really needn’t be that complicated. Generally, digital signatures are fine and, in many respects, ''better'' than a handwritten signature, especially a scanned, emailed [[facsimile]] of a handwritten signature which could easily have been forged.  
For a properly-implemented electronic execution programme will not just keep your [[ISDA ninja]]s safe from [[Coronavirus|pandemic]], but will yield productivity and data control benefits exceeding all business projections.<ref>Until, after six months, everyone just takes them for granted, like usual.</ref> This, [[Jolly Contrarian|Mystic Meg]] feels, will be far more ''[[transformative]]'' than the slew of useless [[chatbot]]s the [[general counsel]] keeps wittering on about or, for that matter, the forthcoming [[Singularity]], in which said [[chatbot|chatbots]] will take over the planet and convert our weeping [[Meatsack|fleshsacks]] into juice for their batteries.  


For a signature – ''any'' signature — is simply a means of gathering and recording evidence and that your counterparty agreed to your transaction or gave the instruction that your records say it did. It is an [[audit]] trail. It is [[due diligence]]. You will only need thast evidence you wind up having an argument with your counterparty about your [[contract]]. The moment your counterparty ''denies'' signing your contract, or confabulates a claim that the terms of your bargain where different from the ones written down on this piece of paper — that is the moment where your counsel, {{jerrold}} pulls out your agreement, slaps it on the counter in front of him, pointing his spittle-flecked fat little fingers at your adversary’s ''signature'' and triumphantly declares, “Well M’Lud, this here unequivocal evidence of the defendant’s agreement says otherwise!”
That is to say, [[electronic execution]] is much-needed and long-overdue innovation. One we don’t talk about much. It’s just not ''sexy''.


The question for you is how would you feel were it not a dog-eared contract with a hastily-appended scribble on it, but a two-factor authenticated, time-stamped, [[distributed ledger]]-registered digital record of your counterparty’s authorised officer’s assent? Your answer ought to be, “rather better”<ref>Or will be until you learn about the courts’ Luddite comprehension of [[Greenclose v National Westminster Bank plc - Case Note|email]].</ref>
Now, before allaying the usual pat paranoid fears about it, a brief indulgence in the [[common law]] [[jurisprudence]] of the [[contract]]:


It doesn’t matter if it is a hand-inked signature scratched on onion skin with a quill and waxen seal, or a two-factor-authenticated digital signature or, for that matter, a series of unambiguous semaphore messages from a person atop a distant hill whom you sincerely and plausibly believe to be your client. If it ''is'' your client, and you have a record of its assent, however communicated to you, it will be hard for your client later to claim the contrary.
{{contract vs document}}


===The ''contract'' versus the ''written agreement''===
===But does [[electronic execution]] ''work''? Is it ''legal''?===
The [[contract]], ''[[consensus ad idem]]'' is an immaterial thing. It has no physical extension. It does not intrude on the mortal plane. Its best earthly representative is the ''written agreement'', a printed form wherein the parties do their best to set out in full the boundaries of their compact. If they have one of these, and have indicated their consent to it, a court will be disinclined to look beyond “the four corners of the document” when divining the parties commercial intentions. This is in part convenience, in part laziness, but in part the fair assumption that since the parties were bothered to write down the important parts of their agreement, something that they ''didn’t'' write down can't have been important. Since it is suddenly in issue, apparently against all expectation, the benefit of the doubt sides with the paperwork. God is not be your witness, so your written record will have to do.
TL;DR: ''Yes''.
 
But cue voluminous, [[tedious]] monographs on its legal effectiveness in different jurisdictions and for peculiar contract forms.<ref>The [https://www.lawcom.gov.uk/project/electronic-execution-of-documents/ UK Law Commission], as recently as March 2020, for example.</ref> These are mainly confined to where a local jurisdiction prescribes some arcane ''form'' to the way one enters into a special ''type'' of contract — one relating to the conveyance of real estate, for example, or a [[deed]].
 
So  — unless your [[Financial instrument|instrument]] is one of those peculiar contracts with formal execution requirements — and most [[confirmation]]s, instructions and even master trading agreements which pass between the operational teams of financial institutions won’t be<ref>Exception: anything signed as a [[deed]]: [[security financial collateral arrangement]]s tend to be, for example, or [[trust deed]], [[guarantee]] or a [[master agreement]] ''containing'' a [[security interest]], such as a [[prime brokerage agreement]].</ref>  — it needn’t be that complicated. Generally, a [[digital signature]] will be fine and, really, ''better'' than a handwritten signature, especially a scanned, emailed [[facsimile]] of a handwritten signature which can easily be forged.
 
Now. ''Any'' signature is simply a means of gathering and recording evidence that the person providing it agreed to the contract or gave the instruction that it sits under. It is an [[audit]] trail. It is [[due dilly]]. You will only need it should your counterpart ''deny'' it agreed to the [[contract]], or gave the instructions. In most contexts that arise between professional financial services firms, this is highly unlikely to happen. The argument will not be to the ''fact'' of the contract, but to its ''terms'', the ''meaning'' of those terms, and what informal accommodations the parties subsequently made to each other that might ''modify'' those terms.
 
Parties tend not to deny the existence of contracts they have been happily performing until the moment of the dispute. The moment one does is the moment where the other’s counsel, {{jerrold}}, pulls out the contract, slaps it on the registrar’s desk and points his fat little fingers at the parties’ ''signatures''.
 
So how would {{jerrold}} feel were his dramatic reveal not a dog-eared [[contract]] with a hastily-appended scribble on it, but a time-stamped, [[distributed ledger]]-registered digital record auditable back to the two-factor authenticated assent of each counterparty’s authorised officer? Most well-adjusted [[legal eagles]] would say, “rather better”.
 
It doesn’t matter if it is a hand-inked signature scratched on onion skin with a quill and sealed with a waxen crest, a two-factor-authenticated digital signature or, for that matter, a series of unambiguous semaphore messages from a person atop a distant hill whom you sincerely and plausibly believe to be your client. If it ''is'' your client, and you have a record of its assent, however communicated, it will be hard for your client later to claim the contrary.
 
{{sa}}
*[[No oral modification]]
*[[Parol evidence]]
{{ref}}

Latest revision as of 16:45, 29 August 2024

The basic principles of contract
Formation: capacity and authority · representation · misrepresentation · offer · acceptance · consideration · intention to create legal relations · agreement to agree · privity of contract oral vs written contract · principal · agent

Interpretation and change: governing law · mistake · implied term · amendment · assignment · novation
Performance: force majeure · promise · waiver · warranty · covenant · sovereign immunity · illegality · severability · good faith · commercially reasonable manner · commercial imperative · indemnity · guarantee
Breach: breach · repudiation · causation · remoteness of damage · direct loss · consequential loss · foreseeability · damages · contractual negligence · process agent
Remedies: damages · adequacy of damages ·equitable remedies · injunction · specific performance · limited recourse · rescission · estoppel · concurrent liability
Not contracts: Restitution — quasi-contract — quasi-agency

Index: Click ᐅ to expand:
Contract
Tort
Restitution
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Electronic execution is the process of gathering evidence of offer and acceptance of a contract using digital authentication technology. Not just pasting a jpeg of your scanned signature onto a pdf.[1]

This unglamorous, but important, topic usually gets swamped by modish A.I. yogababble — though old Mystic Meg here predicts that might change in 2020, with the planet’s entire negotiation capability sequestered in box rooms and attics, without any other means of executing completed legal contracts.[2]

For a properly-implemented electronic execution programme will not just keep your ISDA ninjas safe from pandemic, but will yield productivity and data control benefits exceeding all business projections.[3] This, Mystic Meg feels, will be far more transformative than the slew of useless chatbots the general counsel keeps wittering on about or, for that matter, the forthcoming Singularity, in which said chatbots will take over the planet and convert our weeping fleshsacks into juice for their batteries.

That is to say, electronic execution is much-needed and long-overdue innovation. One we don’t talk about much. It’s just not sexy.

Now, before allaying the usual pat paranoid fears about it, a brief indulgence in the common law jurisprudence of the contract:

The contract versus the written agreement

The contract, consensus ad idem is an immaterial thing. It has no physical extension. It does not intrude on the mortal plane. Its best Earthly representative is the written agreement, a memorial on parchment wherein the parties do their best to set out the boundaries of their compact. The document is not the contract; the contract is not the document — they are spirit and flesh; a Platonic ideal and its flickering shadow on the grotto wall.

But if there should be some executed paper — for most contracts there need not, but let’s just say there is — a court will be disinclined to look beyond its “four corners” when divining the parties’ commercial intentions in signing it. This is in part convenience, in part laziness, but in part the fair assumption that, since the parties were bothered to write down the important parts of their agreement, anything they didn’t write down either didn’t exist or can’t have been important enough to justify memorialising. In this way the Platonic form of the contract and its bodily extension into our decadent organic realm become one. It’s rather biblical.

Since an issue that has attracted the attention of the Queen’s Bench Division must be important, the Court’s doubt will benefit not one party or the other, but the paperwork both of them signed. The Lord is not your witness, so the signed written record will have to do.

This rule against extraneous evidence — as with so many historic principles of the common law, these days a diminished thing — is known as the “parol evidence” rule.

The unilateral contract

Curiously, the foregoing is less obviously true in the case of a unilateral contract which is signed by neither parties: for example the famous carbolic smoke-ball. In that unique case, the immaterial consensus ad idem and the written form of the contract, albeit unsigned, are coextensive. There is no other articulation of the agreement.

But does electronic execution work? Is it legal?

TL;DR: Yes.

But cue voluminous, tedious monographs on its legal effectiveness in different jurisdictions and for peculiar contract forms.[4] These are mainly confined to where a local jurisdiction prescribes some arcane form to the way one enters into a special type of contract — one relating to the conveyance of real estate, for example, or a deed.

So — unless your instrument is one of those peculiar contracts with formal execution requirements — and most confirmations, instructions and even master trading agreements which pass between the operational teams of financial institutions won’t be[5] — it needn’t be that complicated. Generally, a digital signature will be fine and, really, better than a handwritten signature, especially a scanned, emailed facsimile of a handwritten signature which can easily be forged.

Now. Any signature is simply a means of gathering and recording evidence that the person providing it agreed to the contract or gave the instruction that it sits under. It is an audit trail. It is due dilly. You will only need it should your counterpart deny it agreed to the contract, or gave the instructions. In most contexts that arise between professional financial services firms, this is highly unlikely to happen. The argument will not be to the fact of the contract, but to its terms, the meaning of those terms, and what informal accommodations the parties subsequently made to each other that might modify those terms.

Parties tend not to deny the existence of contracts they have been happily performing until the moment of the dispute. The moment one does is the moment where the other’s counsel, Sir Jerrold Baxter-Morley, K.C., pulls out the contract, slaps it on the registrar’s desk and points his fat little fingers at the parties’ signatures.

So how would Sir Jerrold Baxter-Morley, K.C. feel were his dramatic reveal not a dog-eared contract with a hastily-appended scribble on it, but a time-stamped, distributed ledger-registered digital record auditable back to the two-factor authenticated assent of each counterparty’s authorised officer? Most well-adjusted legal eagles would say, “rather better”.

It doesn’t matter if it is a hand-inked signature scratched on onion skin with a quill and sealed with a waxen crest, a two-factor-authenticated digital signature or, for that matter, a series of unambiguous semaphore messages from a person atop a distant hill whom you sincerely and plausibly believe to be your client. If it is your client, and you have a record of its assent, however communicated, it will be hard for your client later to claim the contrary.

See also

References

  1. ↑ That, by the way, is une borné idée.
  2. ↑ Without electronic execution, the completion-rate MIS is going to go to hell, man.
  3. ↑ Until, after six months, everyone just takes them for granted, like usual.
  4. ↑ The UK Law Commission, as recently as March 2020, for example.
  5. ↑ Exception: anything signed as a deed: security financial collateral arrangements tend to be, for example, or trust deed, guarantee or a master agreement containing a security interest, such as a prime brokerage agreement.
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