Digital signatures – the future of contracting?

30 July, 2019

In the digital age it is far from uncommon (and indeed, may even be the norm for some) for businesses to enter into contracts by electronic means. Electronic contracts have a range of perceived benefits which have seen them gain traction for customer and supplier relationships alike whilst digital signatures are also rising in popularity. Dan Badham, associate at Cripps Pemberton Greenish, considers what the future may hold for contracting processes in the food services industry. 

Electronic versus digital

Whilst it is possible for most contracts to be made without committing them to writing, it is generally preferable for the parties to use a written form. This affords the parties greater certainty and documentary evidence of the terms they are entering into. The addition of each party’s signature acts as an additional check that they acknowledge and intend to be bound by the terms of that contract.

Put simply, an electronic signature is any signature which is made in electronic form (as opposed to a traditional “wet ink” or handwritten signature). The term “signature”  is itself somewhat misleading: the law recognises a variety of valid electronic signatures, from scanned wet ink signatures to clicking on an “I accept” button on a website.

A digital signature, on the other hand is different. It is a subset of electronic signature which is, using the definition of the Law Commission (an independent body which reviews and recommends legal reforms), “produced by using asymmetric or public key cryptography”. At a high level, this involves the use of public and private “keys” which are created using mathematical algorithms and assigned to a document. The private key is encrypted using hashing technology and can be decrypted using a corresponding public key. This gives the parties comfort that the document has not been changed since it was signed.

Assessing digital signatures

Digital signatures have been held to be a valid means of executing contracts within England and Wales, paving the way for food services business to harness a range of associated benefits. The ability to contract more quickly and securely may give businesses the confidence to explore opportunities with alternative suppliers across their supply chain (subject to the legal validity of digital signatures in that supplier’s jurisdiction).

Digital signatures will invariably be conducted through digital signature platforms (e.g. DocuSign, PandaDoc). Such platforms can offer a smooth contracting process and will also help businesses keep better track of their contracting management processes by maintaining a central repository of documents.

For customers and suppliers alike, speed and efficiency are prized assets within the food services industry. It is therefore easy to see the attractions of a more streamlined electronic contracting system. However this is not without its drawbacks. For example the Law Commission still considers it best practice that, where a document requires a witness (for example a deed), the witness should be physically present at the time of signature. This mitigates some of the flexibility of using an electronic contract.

Looking to the future

Digital signatures may at first be met with scepticism, but this should fade as their use becomes more popular and familiarity grows. This could create synergies with other exciting and fledgling technological advancements, particularly in the realms of smart contracting and other blockchain platforms (which already make use of public key cryptography). With a little time and understanding, digital signatures and electronic contracts can help to make your businesses’ contracts future-ready.

For more information contact Dan Badham on 01732 224 096, dan.badham@crippspg.co.uk.

This article first appeared in Out of Home magazine in July 2019.