Signing Contracts in a Distanced World
When many people think of signing a contract, the traditional picture is a meeting, a pen and paper, and handshakes at the end.
With current social and physical distancing protocols in place, all of these traditional images are jarring. Now, everything has shifted and electronic contracting is not only more convenient, it’s essential.
What is the current state of the law in Canada for electronic signing of contracts and legal agreements?
Electronic methods of signing contracts are not new in Canada, but are now being embraced across the business world. At the consumer level, we’re all familiar with e-commerce transactions where a contract is completed with the click of a button. Can more sophisticated commercial transactions be completed the same way?
The answer is yes. In Alberta, the Electronic Transactions Act dates from 2001, when most provinces and territories enacted a largely uniform statute giving legal effect to electronic signatures in a technologically neutral way.
The use of electronic signatures is optional – the parties are not compelled to use electronic signatures by the Electronic Transactions Act. But the Act makes clear that, unless otherwise agreed by the parties, any contract may be expressed by means of an electronic document, or any electronic information that indicates assent to the terms of that agreement, including an email exchange, or touching or clicking on an appropriate icon on a computer screen.
In Canada, electronic documents are generally considered to be the functional equivalent of their paper counterparts, except for certain types of documents:
- wills and codicils, and trusts created by wills or codicils;
- powers of attorney for an individual's financial affairs or personal care of an individual;
- in some jurisdictions, any transfers of an interest in land.
There are a few other exceptions listed in the legislation.
Other than the listed exceptions, any electronic means of applying a signature to a commercial contract, shareholders resolution, director resolution, or other agreement will generally be acceptable to create a legally binding document.
The courts have even shown flexibility for affidavits to be signed remotely, which is a significant departure from the long-accepted practice that a person swearing an affidavit must appear in person before their lawyer. On March 25, 2020 the Alberta Court of Queen's Bench published Notice to the Profession & Public (NPP) to provide for remote commissioning of affidavits for use in court. The language of the Notice, and the procedure prescribed, is identical to that of the BC courts, which permits commissioning an affidavit by video conference.
This illustrates how courts are flexible to adapt to new circumstances. Generally speaking, business owners should have confidence that the use of electronic signature tools, or the use of scanned signatures on a PDF, will be given legal effect. However, take care to seek advice on each situation. For example, a clause that notes the parties’ consent to the use of electronic signatures will help dispel any argument that the use of electronic signatures was not approved by one of the parties. The parties should also consider what information is stored with or linked to the electronic signature to enable verification after the fact.
Field Law has a number of tools available to enable the use of electronic signatures. Talk to your Field Law advisor on strategies to streamline electronic contracting for your business.