Electronic Signatures: Utility & Limitations
This article discusses and ranks the different types of e-signatures, and discusses their limitations.
What is an Electronic Signature? What are the Legal Implications?
Electronic signatures are markings, letters, numbers, or other symbols, created in electronic form, to indicate the signatory’s acceptance of an electronic document.
Electronic signatures create binding effect in agreements related to, for example, sales/purchase, loan, agency, distributorship, and employment, and in other instruments, such as, powers of attorney. The Act clearly states that any contract, concluded by way of electronic offer and electronic acceptance is legally valid between parties, provided that one party can prove a counter party ascribed its electronic signature with the intent to create a legal relationship.
Therefore, verification by the contracting party or related person of the identity of the signatory is key of the electronic signature’s binding effect and to its admissibility as evidence in legal proceedings.
Types of Electronic Signatures
Electronic signatures, according to the Act, can be classified into the following three types:
- General Electronic Signatures (Section 9 of the Act), e.g. names left at the end of, or images of signatures affixed to, documents; and signatures made to electronic devices via stylus pen.
- Reliable Electronic Signatures (Section 26 of the Act), e-signatures made via Public Key Infrastructure (PKI).
- Reliable Electronic Signatures with Certificate Issued by Service Provider (Sections 26 and 28 of the Act), e.g. e-signatures created using PKI and accompanied by a certificate issued by the service provider authorized by the Electronic Transactions Development Agency or ETDA.
Types 1 and 2 can bestow binding effect on transactions or contracts, but not without risks. For example, they have lower degrees of reliability in assuring the identity of the signatory.
Type 3, however, offers superior reliability as they carry endorsement by the ETDA, the agency duty-bound to regulate businesses involved with electronic transactions and establish related standards. Type 3 also tends to chronical document activities and create digital hallmarks. For example, these service providers or applications often provide a platform for users to create electronic documents, and digitally send those documents to users’ related parties requiring their electronic signatures. Their system will collect and record details in relation to documents, identity of signatories, date and time of signatories, and store this data in the cloud where access is given to users at all times. Where contract disputes arise, users can admit data stored in the system as further evidence during lawsuits or prosecutions.
Limitations of Electronic Signatures
- The Act does not reach out to cover any electronic transactions related to family or succession as binding upon the parties, by virtue of Section 4 of Royal Decree prescribing civil and commercial electronic transactions excluded from the application of the law on electronic transactions B.E. 2549.
- Certain instruments may restrict or condition the use of electronic signatures. Parties to a contract should study whether electronic signatures on certain contracts are acceptable, as they may be subject to specific rules and regulations of the particular government agency. For example, the particular contract must be in written form and registered with a competent official, such as those for the sale of immoveable property, mortgage contracts, and hires of immoveable property for periods exceeding 3 years.
- Government entities may also restrict the use electronic signatures. The Department of Business Development (“DBD”), for example, still requires an applicant’s physical signature in case of submitting physical applications for the registration of companies, modification of memoranda of association for changes in capitalization, and liquidation. This is, unless applicants electronically submit applications or required documents through the DBD’s website, or so-called “e-Registration,” according to DBD rules and guidelines.
Readers may now comfortably and conveniently use e-signatures to enter into legal documents and contracts for its business operations. To this end, readers must ensure that they can verify the identity of the owner/counter party of such electronic signature for the prevention of disputes. In addition, readers must also examine whether the particular contracts and government entities explicitly restrict or condition the use of e-signatures