Most contracts are able to be set up by word of mouth and don’t really require a signature at all. Forget the jokes you’ve heard about a verbal contract having no legal standing, as the reality was, is and likely always will be, that lots of ordinary commerce and private bargain is underpinned by oral undertakings - promises.

Of course, many deals and contracts require some form of paper trail to confirm the agreement. A signature represents a person's unique proof of identity and intent, confirming that the signatory acknowledges and understands the document and they are willing to enter into a binding legal agreement.

Despite becoming more common during the pandemic, electronic signatures were not a product of Covid laws and changes. Scotland has formally recognised e-signatures since 2002.

What are electronic signatures?

Electronic signatures are designed solely for use on electronic documents. The Requirements of Writing Act states that an electronic document is never printed in hardcopy, only existing in electronic form, such as a Word document or PDF. Even if printed, the document remains as such, simply creating a copy of the electronic document.

The signature itself will be a digital impression, markup, or element which signifies that the signatory agrees to the terms set forth in the electronic document. There are three types of electronic signatures:

Simple electronic signature: This is the most common type of e-signature, used on a regular basis for the more menial things in life. For example, signing for a parcel or clicking an ‘I agree’ or ‘I accept’ box online. There is no way to prove that a document signed with a simple electronic signature was actually signed by the signatory.

Advanced electronic signature (AES): An AES is more secure than a simple electronic signature as it is uniquely linked to the signatory. Using forms of metadata, like the IP address and the date and time of signing, the signatory can be identified. The electronic document can be examined to detect if an AES has been changed or tampered with in any way.

Qualified electronic signature (QED): The signatory’s identity must be verified by a qualified trust service provider in order to sign using a QED, making it the highest standard of e-signature.

Are electronic signatures legally binding?

Under Scots law, e-signatures are valid for most documents. The few exceptions include wills, power of attorney, property deeds and some trusts and guarantees. A simple electronic signature is often enough for low-level documents, but business documentation such as deals or contracts may require an AES or even QES for additional security. There is no such thing as ‘witnessing’ an e-signature, meaning that a second party countersigning the document does not prove the first signature’s legitimacy - only a QES is ‘self-proving’.

If an electronic document needs to be used in court, the type of e-signature used will play a big role in the court’s decision. Both a simple electronic signature and an AES will most likely require additional evidence to prove that it was actually signed by the signatory. The strength of this evidence, combined with the other circumstances of the case, will determine whether or not the document will hold up in court.

The use of electronic signatures for businesses

E-signatures are rife within the business world, with companies in a wide range of industries and sectors adopting this digital approach. Being completely legal and valid, there’s little reason to not make the switch with your own business. However, there are a few considerations to take when deciding what level of e-signature is best suited for the deal at hand.

If there is any possibility of needing this document in court, you may require the added security of a QES. Lower-level documents such as a new customer form are unlikely to end up in a courtroom, but documents like a non-disclosure agreement could be flagged up in a legal battle somewhere down the line.

If there is a chance that the signatory may dispute the signature, it’s advised to use a QES. You may have a vendor sign a supplier agreement who later backs down on the deal or refuses to meet the terms set out within the agreement. Lower security e-signatures will provide little protection against this possibility. Similarly, consider what the impact on the business would be if the signatory did dispute the signature. Some situations could be brushed aside as a learning curve and the business can keep moving forward, but for bigger deals and contracts, a dispute of this nature could be detrimental.

Lots of e-signing platforms can provide QES for an additional cost, which is likely a small amount to pay for potential protection in the future - view it as a form of insurance. Whenever using a simple electronic signature or an AES, keep any supporting evidence you can. Dates and times of phone calls discussing the document, or email threads regarding the signing can be used to back up your claim that the signature did in fact come from the signatory themself.

As with all legal commitments, seek legal advice if you’re uncertain about whether e-signatures are right for you personally and/or your business.