DIGITAL SIGNATURE AND LEGAL CONTRACTS

According to the basic definition of Contract, it's an agreement made when any two parties decide to conduct any transaction among themselves and if that transaction is valid and creates legal obligation it can be said that the parties have an interest in the contract. In general, the Contract is a kind of agreement between two parties who decide to do the transaction. Section 2(h) of the Indian Contract Act, 1872 defines a contract as an agreement enforceable by law.

However, an Electronic contract or E-contract is a legal agreement between two parties which is drafted and signed in electronic form. It is a type of contract entered between two parties to facilitate the business which is required to be done with the help of electronic means. For example, when you enter into an online transaction or while creating an e-mail account.

The electronic contract is drafted similarly as that of a normal contract. In a contract through hard copy, parties enter into an agreement through their physical signature upon the Contract. However, in the case of e-Contract, the parties agree in the electronic or digital form of communication like e-Mail wherein the requirement of physical signature is signed and authorized through Digital Signature. Also, in some cases like online purchase, etc., where there are pre-decided terms and condition, user just have to 'agree' with those conditions by mere clicking a button would constitute an e-Signature of the user where she/he has consented to the terms and conditions and that contract is legally binding as well.

E-Contract is recognized and regulated through various laws and regulations but mainly through the Information Technology Act, 2000 and Indian Evidence Act, 1872. The IT Act provides for various features of a legal contract like communication of proposals, acceptance of proposals, revocation of proposals and acceptances whereas Evidence Act gives e-Signature/ digital contract and electronic contract evidentiary value.

There are two important underlying legal principles for a signature to be legally enforceable. These are:
  • 1.It must carry out the function of a signature (this, rather than the signature's form, is paramount) an
  • 2.There must be an express or implied indication that the signer of a document has an intention to adopt the information contained in the document.

A signature performs three main functions: identification, evidence of personal involvement and attribution. In all, this means that unless a purported signatory provides the evidence of authentication of a document and his/her intention to adopt the information contained in the document, the signature will not be considered a valid signature.

Talking of legal contract, there it's a simple contract between two parties but for a legal purpose. For example, a non-disclosure agreement between a solicitor and client mentioning which allows clients to have open, confidential communication with counsel, which shall not disclose to third parties. If there's any breach of any clause in this non-disclosure agreement, the party is entitled to claim compensation for the same.

But where does the role of e-Signature comes in a legal contract? From a daily example, if you visit any website of a law firm, there's a mandatory disclaimer which mentions that information under the website is available solely at user's request for information purpose and not for soliciting or advertising purpose (which is banned As per the rules of the Bar Council of India). Once you click on the 'I agree' button, you agree and give your acceptance to the disclaimer which forms a basic ingredient of an agreement i.e. 'Offer and Acceptance'. There isn't much difference between a simple contract and legal contract apart from the content and context it's written in, for this article, the author would continue considering a legal contract as a simple contract.

Looking into an expansive definition of Sec. 10 of Contracts Act, 1872, even a Contract executed electronically is governed by the basic principles of free consent and lawful consideration between two majors. Therefore, the intent of the two parties is relevant. Also, Sec. 10A of the Information Technology Act, 2000, expressly provides for the validity of contracts formed through electronic means. the IT Act comprehensively covers electronic signature and under Sec. 5 of IT Act gives legal recognition to electronic signature.

The use of digital signature allows the legal organization to save costs and devote more time and attention to the clients. Given the workflow for the departments of tedious, Contracts between Solicitor and Client is made with greater agility, which can be done from a mobile or tablet, without client spending much time on it. The traditional method includes printing document, sign them by hand, scan them, send them by email or fax to the client and then, wait for the client to sign them and once received, one may proceed to file it. It not only resulted in the remarkable paper loss but also created a workflow that was dulled waiting to receive the document signed and validated by all the parties. Some law professionals who charge on an hourly basis, can't afford to spend much time than necessary in paperwork. Clients also demand more flexibility, without this affecting the confidentiality of the information

It's for all these reasons, legal departments and law firms are resorting to the digital signature as a tool to simplify the traditional process. However, digital signature, for all its advantages, is something of a double-edged sword. There certainly are advantages, but it does include disadvantages as well. Let's talk about the advantages followed by the disadvantages of using a digital signature as a substitute for the ink-based signature.

Advantages
  • 1. Ease of Access
    Getting documents done is now a few clicks away. Making attestation online is fast and saves considerable time for both, solicitor and client.
  • 2. Time and Money
    Nothing can be better if you are getting a chance to sit back and work from your home. Documents can be shared with the employees directly and get them signed in no time. It reduces the need for shipping hard copies via post which in turn is economical as well.
  • 3. Legal requirements
    Using an electronic signature, it satisfies the legal obligation of consent and is at par with an ink-based signature. e-Signature is providing the same rights and duties to the contracting parties as done by an ink-based signature.
  • 4. Improves Document Accuracy
    With the help of e-Signature, it is very easy to mark out a few mandatory fields which, if not signed, nullifies the whole agreement. For ex., Remember the disclaimer which we talked on a law firm's website, you won't be able to access the website unless you agree to the terms mentioned therein.
  • 5. Ensures Fast business
    Documents are signed spontaneously instead of waiting for the documents to be sent through courier