Can Electronic Signatures Be Declared Invalid?

By Irvin Schein, Litigation Lawyer, Mediator, and Arbitrator
Originally published at irvinschein.com.

Our new reality over the last year and a half has meant that in large measure, documents of all kinds have been signed electronically rather than in person – including sworn documents to be filed in Court. But what if someone denies having “signed” an electronic document?

In Ontario, the Electronic Commerce Act, 2000, provides for the legal recognition of electronic information in documents. While there are exceptions, such as wills and codicils as well as powers of attorney relating to an individual’s financial affairs or personal care, for the most part, the Act provides that an electronic document will be as effective as an originally-signed paper document provided that the electronic signature is reliable for the purpose of identifying the person, and the association of the electronic signature with the relevant electronic document is reliable. The Act does not specify how reliability is established. If some doubt can be raised as to the reliability of the application of an electronic signature, the document may be rendered invalid.

The question of how one can best assure reliability was recently addressed in the Texas Supreme Court case of Aerotek, Inc. v. Boyd. In Texas, legislation similar to that of Ontario is provided by the Texas Uniform Electronic Transactions Act, which provides that an electronic signature is attributable to a person by showing the effectiveness of the security procedures in place when the document was electronically signed.

In Aerotek, Inc., a number of contractors were hired by the plaintiff through an online hiring application process. Upon request, the plaintiff sent the applicants an email that provided a link to a registration page. On that page, each applicant created a user ID and a password and set up security questions. Each time an applicant accessed the system, this information was required to be inputted.

As the process of making the applications developed, each applicant had to sign an Electronic Disclosure Agreement agreeing to be bound by electronic contracts as if they had been signed in writing.

The process could not be completed without all of the contracts involved in the process being signed electronically. As documents were signed, those actions were recorded electronically with a time stamp. The system was designed so that the plaintiff could not alter any of this information.

Ultimately, four applicants completed the process and were hired. They were terminated and proceeded to sue the plaintiff. The plaintiff responded by insisting that the disputes be referred to arbitration pursuant to an arbitration clause in one of the documents that had been electronically signed. Each contractor then denied ever having seen, signed, or been presented with the document containing the arbitration clause.

Accordingly, the Court had to determine whether or not the electronic signatures were valid.

The Court concluded that there would be several different ways in which a party relying on an electronic document could prove the connection between an individual and an electronic signature. This would include requiring personal identifying information to register for an account, assigning a unique identifier to a user, taking steps to prevent unauthorized access to electronic records, requiring users to complete all steps in a process before moving forward, and using time stamps to show when actions were completed.

In this case, the Court concluded that the security procedures used by the plaintiff were sufficient to demonstrate that the electronic signatures could be attributed to the four contractors notwithstanding their sworn denials about ever having seen, signed, or been presented with the relevant contract. Accordingly, where documents are to be exchanged electronically, it is important to establish security procedures along the foregoing lines in order to be able to demonstrate reliability as required by the Ontario statute. If there are any gaps in the process that might give rise to a question as to its reliability, the document may well be invalidated.

If you would like more information on the topic in this blog or on litigation, mediation, and arbitration services from Irvin Schein, please contact ischein@mindengross.com.