Electronic execution

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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.

But does it work, legally?

Cue voluminous, sombre, tedious monographs on the legal effectiveness in different jurisdictions of electronic signatures. 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 instrument is a deed or lease or has such peculiar formal execution requirements — and most confirmations 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 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, Sir Jerrold Baxter-Morley, K.C. 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!”

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”

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.

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 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.