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Is an e-signature legally binding?

There is some misunderstanding in my firm about what an electronic signature is and whether it is legal. Can you shed some light on this topic?

Legislation supports e-signatures

Some people believe that an electronic signature, otherwise known as an e-signature, is a scanned-in version of a normal signature added to an electronic communication, such as an e-mail. In legal terms this is not an electronic signature.

An electronic signature is similar to a hand-written signature on a paper document in that it shows who the document is from and that it is "signed" by the "signatory". You could say it is like a digital stamp unique to the signatory. The main benefits of using electronic signatures are that they confirm the document is from the signatory and that it has not been tampered with.

One of the most sophisticated forms of electronic signature involves cryptology. It operates using public and private keys - a form of encryption. They act like a virtual combination lock and only work when both elements are present. When a document is sent to a recipient, the signatory's software and private key are used to scramble the contents and encrypt the document - the addition of the private key is effectively an electronic signature.

When the recipient receives the document, they must then use the sender's public key to unlock and decrypt the data - the same as putting the right key in a padlock.

Public and private keys are intended for use where documents contain highly confidential or secret information. To verify the authenticity of a signatory's public and private keys, certification authorities have been set up. Some companies may have internal certification authorities, which can provide certificates to verify that an individual's public key really belongs to them. However, some companies prefer to employ the services of a third party, such as a bank, to provide this certificate. The Electronic Communications Act 2000 Part I (which is not yet in force) makes provision for businesses and other organisations to register their business voluntarily as an approved provider of cryptography services, such as electronic signatures.

There are a number of pieces of legislation that support electronic signatures, but principally the Electronic Communications Act 2000 aims to build public confidence in electronic commerce and the technology underlying it and now, in many circumstances, electronic signatures will be legally binding.


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This was first published in February 2001

 

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