Where is it possible to go fully digital in your contracts?
A signature’s primary function is to confirm the consent of the parties about the contract.
Electronic contracting / signing is generally allowed for the business, unless special regulations (like in fin or telecom sectors for example) require paper forms in certain cases.
European and Bulgarian law establishes three types of electronic signatures:
- (simple) electronic signature is data in electronic form which is used by the signatory to sign. For example, something as simple as writing your name under an email is an electronic signature.
- advanced electronic signature is an electronic signature which is additionally (i) uniquely linked to and capable of identifying the signatory; (ii) created in a way that allows the signatory to retain control; (ii) linked to the document in a way that any subsequent change of the data is detectable.
- qualified electronic signature is an advanced electronic signature which is additionally (i) created by a qualified signature creation device, and (ii) based on a qualified certificate for electronic signatures issued by a qualified trust service provider.
Qualified electronic signatures are created and maintained by certified agents.
All types of electronic signatures are recognised as a valid form to sign a contract.
- A qualified electronic signature is equivalent to a handwritten signature by virtue of law. No further formalities are required.
- A simple or advanced signature equals to a handwritten one only if this is agreed between the parties. The material questions in this respect are: (i) how to fix this consent in your contract; and (ii) technically, how could the author of the simple or advanced signature be made clear and undisputable.
Generally, any business can use simple and advanced electronic signatures when signing contracts with its clients, if proper measures are taken to cover the above requirements. Due to its technical qualities, advanced electronic signatures are usually deemed to be more reliable than simple ones.
The second function of a signature on a contract is to identify the parties.
It does so, by linking to a combination of other personal information declared upon signing the contract. This usually means parties’ names, PIN or a company’s unique commercial number, address etc.
Identification of the parties is important for both (i) validity of the contracts, and (ii) prevention of identity fraud.
In digital environment, several options for identity verification are (or will be) possible:
- Identity is currently best validated by qualified electronic signature. The qualified trusted service provider would have checked and verified the parties’ identity prior to providing the respective qualified certificate for electronic signature.
- A mechanism for online verification of identity will be developed in near future as part of the national electronic identification scheme in Bulgaria, which will be recognised in other Member States.
- Mechanisms for electronic identification are currently provided by qualified trust providers, who offer solutions for online identification. They can generally be used as reliable means of identity verification.
- If you wish to use advanced or simple electronic signatures, you may adopt technical and practical means to verify and be able to prove your clients’ identity. Practical examples of identity data are: (i) provision of the unique personal or commercial data of the party; (ii) payments from a credit card/bank account of the person; (iii) using other various technical solutions developed in compliance with the law; (iv) use of a personal account with your services or similar Internet space or application; (v) rely on information as part of your KYC process. In practice, a combination of several methods of identification would be efficient. Moreover, there are readily available identification tools, which we advise you to integrate with your contract automation tools.
Digitial (bio) signing
Many vendors let us sign a contract or declaration on a tablet. This is not an electronic signature, but a handwritten signature made in a digital format. Courts recognise the validity of such signing. You need to make sure your bio-signing software and hardware would allow a graphologist to identify the typical handwritten characteristics of the signature - pressure points, flow, inclination, etc.
Certain other precautions should be also taken care of. You need to show your counter party what he or she is signing. You must also ensure the contract signed is permanently saved for all parties. Other legal considerations are to be included in the contract too.
How to best benefit from electronic signing
Your electronic contracting should integrate all necessary elements in a seamless flow to serve you best. Start with parties' identification, get the information auto-populated in the contract, finish the details about the deal, and share with all by a click. Review, approve digitally, and sign electronically. You can do it on your phone, tablet, or desktop. All is shared and saved for everyone. You would need to modify a bit your contract templates and clauses to work better in a digital environment. What we always say to clients is: don't be afraid to go digital if you do it diligently!