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Valid Execution of Contracts: Electonic Signature

Health and wellness considerations following the outbreak of coronavirus disease have led to a significant shift in the day to day operation of small and large businesses and the manner they used to conduct their affairs; and due to this outbreak, most of the businesses around the globe have resorted to remote working. Have you ever thought about electronic signatures? In this article, the importance of electronic signatures will be explained.

However, changing the work environment from offices to homes has brought along challenges related to conducting some business processes which have been done easily before in an office. One of these processes, which is now facing a challenge, is performing the necessary formalities in order to validate a negotiated contract, i.e. to execute the contract through signing it by the parties thereto.

Normally, parties to a contract express their consent to its terms by signing it manually in the presence of the other party, and each party retains a signed copy of the contract. This is known as the wet ink approach. However, the wet link approach requires that the parties come together in one place to sign the contract or exchange a printed and signed copy of the contract by mail, which at moment might not possible and more importantly is against the recommendations on health and avoidance of gathering.

Electronic Signature

In this situation, the electronic signature is a reasonable and practical option that can be used to execute contracts. With the advancement of the information technologies, laws, and regulations should conform to new developments, and currently, many jurisdictions have accepted electronic signature as a valid form to express consent to a contract.

The Iranian legal system has recognized electronic signature in the Electronic Commerce Act (“ECA”) of 2004; so that wherever the law requires a signature, an electronic signature may suffice and will have the same validity as a manual signature.

Electronic signature in the ECA Act

Furthermore, the ECA has divided the e-signature into two types: simple electronic signatures and secure electronic signatures. A simple electronic signature means any sign or inscription appended to or attached to an electronic document indicating that the document has been signed by a specific person. For example, even appending the name at the end of a contract, which is sent to the other party via e-mail in PDF format, is considered as electronic signature confirming the consent of that person to the contract’s terms; or sending an e-mail with the contract in its attachment, in which, it is stated that “… I am satisfied with the terms of the attached contract …” with the name and detail information of the sender, as it is customary in the business emails.

In addition to the simple electronic signature, there is a secure electronic signature that is an electronic signature with the following features:

a) Is unique to the signatory;

b) Identifies the signatory;

c) Is signed by the signatory or under the signatory exclusive will;

d) Is affixed to “data message[1]” in a way that any change in data message can be detected and identified.

Execution of contracts by electronic signature

The advantage of a secure electronic signature over a simple electronic signature is that when a contract contains a secure electronic signature, the parties to the contract can have full confidence that the contract has been signed by the intended person and the provisions of the contract are binding upon the signatory and its legal successors in such a way that any denial or doubt about the signing of the contract will not be acceptable.

Mindful of the above, in the current situation where it is not possible to hold a meeting with the presence of the parties to execute contracts like it used to be, electronic signature, especially the secure electronic signatures, is the best option that businesses can use to conduct transactions without any concerns about the validity or enforceability of the executed contract.

Conclusion

In the end,  the validity and acceptance of expressing consent to the terms of a contract by electronic signature are subject to the law governing that contract. Therefore, in case that the laws of the Islamic Republic of Iran govern a contract, expressing consent and accepting the terms of such a contract may be done via e-signature, as described above. However, if the law of another country governs the contract,  one must consider the validity of these types of signatures, as a means for expressing the parties’ consent to the terms of the contract,  under that law.


[1] Any representation of facts, information, and concepts generated, sent, received, stored, or processed by use of electronic, optical or other information technology means.

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