Where can (and can’t) electronic signatures be used?
In Canada, other than in fairly limited circumstances, electronic signatures are permitted for most documents and records where a “wet ink” original signature would be accepted. In order to assess whether an electronic signature can be used, it is important to consider both the applicable legislative framework and common law considerations. Set out below are certain general considerations relating to the use of electronic signatures, and specific information regarding the use of electronic signatures for certain types of documents and records.
Where there is no legal requirement for a particular document to be “in writing” or to be “signed”, there is no need to resort to provincial legislation to determine that the electronic document or signature is valid and enforceable. Courts have generally indicated a willingness to conclude that the electronic document or signature is valid if it satisfies requirements under the general law for an enforceable document and/or signature.
Where there are provincial legal requirements for a document to be signed, most provinces exempt certain types of documents from the application of their general electronic commerce legislation. Although these exceptions vary by jurisdiction, they generally include certain types of documents where additional formalities are required. In Ontario, the ECA provides that electronic signatures are expressly not available for:
- wills and codicils;
- trusts created by wills or codicils;
- powers of attorney, to the extent that they are in respect of an individual’s financial affairs or personal care; or
- negotiable instruments (which can include cheques, promissory notes and bills of exchange).
The exclusion of these documents from the ECA does not necessarily mean that electronic signatures are prohibited on those documents. It does mean, however, that it is necessary to look to the specific legislative environment that applies to those documents to determine whether an electronic signature is acceptable and if so, under what circumstances.
In Canada, contractual relationships are generally governed by provincial law. Electronic signatures will generally be acceptable for many most contractual arrangements, including corporate/commercial agreements and many consumer contracts. As a general matter, most such documents are not subject to any legal requirement to be signed and therefore, are not subject to specific statutory requirements. The common law has evolved over the past decade to recognize the growing use of electronic signatures. In any event, as discussed above, most, if not all, provinces have statutes of general application facilitating electronic contracting and the use of electronic signatures where a signature is legally required, with certain exceptions.
PIPEDA contains a section addressing the use of electronic documents and signatures in relation to documents or other records within Canadian federal jurisdiction. However, PIPEDA is not drafted as a law of general application, subject to certain specific exemptions, as the provincial electronic commerce statutes are. Instead, PIPEDA’s provisions facilitating the use of electronic documents and signatures apply only to records or documents created under those federal statutes specifically listed in the Schedules. To date, very few federal statutes have been included in those Schedules. It remains to be seen whether, in the era of COVID 19 and remote work environments, the federal government will take further steps to expand the application of PIPEDA to documents to which other federal statutes apply.
Unless and until such steps are taken, it is necessary to look to the variety of federal statutes that have been specifically amended to recognize electronic signatures in certain circumstances (such as the Canada Business Corporations Act, the Bank Act, the Insurance Companies Act and the Trust and Loan Companies Act). The result is that there are gaps at the federal level in which no legislative mechanism applies to facilitate the use of electronic documents or signatures – for example, assignments of copyright under the Copyright Act.
Outside of Canada, care should be taken when considering the use of electronic signatures. While many countries have adopted laws relating to the use of electronic signatures, adoption is not universal and requirements differ from country to country. While many jurisdictions recognize and permit electronic signatures, applicable requirements should be investigated prior to use. Consideration may also need to be given to conflicts of laws issues.
Corporate Law Considerations
Where applicable corporate law requires the signature or execution of a document (for example, a written resolution of the board of directors or the shareholders or a form of proxy), the applicable corporate statute should also be consulted. Since the signatures and documents to be executed under the corporate statutes relate to the governance of the entity in question, these statutes generally impose their own requirements with respect to signatures and the execution of documents. These requirements can be more restrictive regarding the use electronic signatures than the ECA and its equivalent in the other provinces.
For example, there are detailed provisions in the Canada Business Corporations Act (the “CBCA”) regarding the use of electronic signatures and records. Several of these provisions are similar in wording to the equivalent provisions in PIPEDA. The CBCA requires that the electronic signature result from the application by “a person of a technology or process” that permits the following requirements to be proven: that the signature is unique to the person, that the technology or process was used to incorporate, attach or associate the signature to the document, and that the technology or process can be used to identify the person using it.
While a scanned copy of a physical signature has long been accepted to satisfy these requirements as a matter of practice, the ability of any particular “technology or process” to satisfy these requirements, or those under other applicable corporate law, should be considered to ensure the validity of the signature in question (and the corporate actions that may be taken in reliance on it) for purposes of corporate law. Most digital signature technology platforms contain features that can be activated for these purposes.
Promissory Notes and other negotiable instruments
As was noted above, the ECA, and other jurisdictions, expressly exclude negotiable instruments from the types of documents for which electronic signatures are expressly authorized. Cheques, bills of exchange and promissory notes are generally governed by the Bills of Exchange Act (Canada). On one hand, the Bills of Exchange Act expressly contemplates that an instrument or writing is not required by be signed by a person’s own hand (and that it is sufficient if the signature is written thereon by another person or under the person’s authority). On the other hand, there is some uncertainty as to whether negotiable instruments can be valid and enforceable if executed with digital signatures (though it is possible that other types of electronic signature, such as image signatures attached to a document could be valid). As such, “wet ink” signatures are likely the safest method of execution for negotiable instruments for the time being. It remains to be seen whether the COVID-19 era will spark more rapid evolution of the law in this area.
Affidavits and Attestations
Court documents represent a category in which specific rules regarding the use of electronic signatures are likely to apply. Such rules will no doubt vary across jurisdictions and depending on the type of document at issue. One major category of such documents to emerge as a subject of urgent discussion in the wake of the COVID-19 lockdowns is affidavits and attestations, which have historically required specific formalities in order to be validly executed.
Commissioning of affidavits has traditionally required that the oath or confirmation be attested in person. However, as a result of the COVID-19 pandemic, certain courts (such as the Superior Court of Justice (Commercial List) and the Superior Court of Justice (Civil and Family)) have expressly acknowledged that affidavits may be sworn virtually in accordance with the Law Society of Ontario’s Corporate Statement regarding COVID-19, which states that:
However, as a result of COVID-19, until further notice:
- The Law Society will interpret the requirement in section 9 of the Commissioners for Taking Affidavits Act that “every oath and declaration shall be taken by the deponent in the presence of the commissioner or notary public” as not requiring the lawyer or paralegal to be in the physical presence of the client.
- Rather, alternative means of commissioning such as commissioning via video conference will be permitted.
- If lawyers and paralegals choose to use virtual commissioning, they should attempt to manage some of the risks associated with this practice as outlined below.
Managing the Risk of Virtual Commissioning:
If a lawyer or paralegal chooses to use virtual commissioning, the lawyer or paralegal should be alert to the risks of doing so, which may include the following issues:
- Identity theft
- Undue influence
- Client left without copies of the documents executed remotely
- Client feels that they did not have an adequate opportunity to ask questions or request clarifying information about the documents they are executing.
This is an express exception in the circumstances to the Law Society’s general advice that in-person commissioning continues to represent a best practice. A number of courts and law societies across Canada have also implemented measures to facilitate virtual commissioning of affidavits. However, the specific rules may differ across the country by jurisdiction and by court. Parties who need to create and rely on sworn documents should expressly review their particular circumstances before tendering a virtually-sworn affidavit.
Other Electronic Signature Considerations
Apart from the above specific documents and situations, parties seeking to use electronic signatures should consider the following:
- Irrespective of whether electronic signatures are available, certain parties may insist on wet ink signatures on commercial agreements. Common examples are banks and financial institutions (particularly for loan agreements), though this expectation may soften in light of current circumstances. It is recommended that parties discuss the potential use of electronic signatures to avoid any misunderstandings.
- Documents required to be filed with a government regulator may need to be a “wet-ink” original. For example:
- Many corporate registries across the country that still require paper forms (some are exclusively electronic) have temporarily permitted the filing of PDF documents. However, certain governmental offices (the Ontario Ministry of Consumer and Business Services, in particular) still require certain corporate filings to be in “wet-ink” original.
- Certain intellectual property assignment documents are still required to be filed in original.
- In Ontario, real estate transactions may generally use electronic signatures (a fairly recent change to the ECA). Land registry offices outside of Ontario may still require “wet-ink” originals.
- Parties in secured lending transactions may still require originally executed “wet ink” signatures on securities transfer powers and other similar documents in order to ensure they have sufficient control to perfect a security interest in the underlying collateral.
- Transactions with consumers are generally subject to enhanced obligations (particularly in the context of certain borrowing transactions) and may require express consent to the use of electronic signatures.
- We note that it may be prudent to include language in all agreements that are to be electronically signed indicating the parties’ consent to use electronic signatures and to obtain delivery of the document electronically.
Most provincial evidence legislation, as well as the Canada Evidence Act, contains provisions providing for electronic records to be admitted as evidence in court proceedings. When creating and retaining electronically signed records, it is important to be mindful of the standards in these provisions for supporting the future admissibility of the record in a court proceeding.