Are electronic signatures a fantastic and efficient tool for running your business? Of course! But like most digital tools, there is some risk involved.
That’s why James Wilding, associate with Perley-Robertson, Hill & McDougall LLP/s.r.l., is sharing a few simple ways to help you avoid some possible pitfalls.
Know when you can use an e-signature
E-signatures have been legal for longer than you may think, but with some exceptions.
“The Electronic Commerce Act (ECA) was enacted in 2000,” said Wilding. “But there’s a lot of misinformation out there about what can and can’t be electronically signed. A lot of people aren’t aware that the ECA permits electronic signatures on almost any document that needs to be executed in writing.”
Explicit exceptions to the ECA currently includes wills, certain trust documents, powers of attorney, and negotiable instruments such as cheques, bank drafts and bills of exchange.
Use best practices for online security
When it comes to e-signatures, context is everything.
“When you’re getting a document electronically signed, you want to make sure it’s been done securely,” said Wilding. “That way, the other party cannot cast doubt on whether the signature on the document is valid.”
In practical terms, reading the document before you sign it is always the first step — which can be tougher than it sounds. In a digital environment, it can be tempting to quickly sign-off with a click or two.
Also, Wilding recommends using an email account that only you can access for signing electronic documents. If your spouse and kids can access the account, or if it is a general business account another employee can access, someone could sign a document accidentally or without understanding the full picture.
“If someone is going to claim they did not sign a document because their account was hacked, it is on them to prove no one else could have signed it,” said Wilding, adding it’s equally important to get a copy of an electronically signed document to ensure it wasn’t tampered with.
Trust your gut
If you can already check off the best practice boxes, don’t let your guard down just yet.
Most emails that contain a request to electronically sign a document will be associated with a chain of emails discussing what the document is for.
“Transactions don’t happen in the void and you should be careful if you receive a Docusign request with no context,” Wilding said. If you get something from an email address you don’t recognize — even when it looks like something you were expecting — pick up the phone to confirm before signing.
Another scenario that calls for vigilance is when you’re a silent partner who wasn’t a part of the whole discussion, but whose signature is required. Again, pick up the phone and confirm the details to make sure their account wasn’t hacked and that the request wasn’t sent by a scammer.
Take note of this gray area in the ECA
A type of negotiable instrument that is not explicitly handled in the ECA is a promissory note.
“A promissory note is an acknowledgment of indebtedness by one party to another,” said Wilding. “It is very common in transactions where there is a deferred payment or money was lent.”
It is a gray area because there is no explicit language in the ECA saying you can sign a promissory note electronically. But that does not necessarily mean an electronically signed promissory note is invalid.
Someone who owes you money could decide to exploit the gray area as a stalling tactic, and make your life miserable by challenging it in court.
“People should know to stand their ground if they are challenged,” said Wilding. “But it’s better to avoid this altogether by sticking with a wet ink signature for promissory notes.”
Do what makes you comfortable
In the end it is your comfort that matters the most.
If you want to look someone in the eye before you sign an agreement between you, never let anyone pressure you to do otherwise.