Companies are constantly being challenged to review their existing operating models and improve the processes and technology that support them. The COVID-19 pandemic, and the related explosion in remote working, has fuelled the need for innovative solutions that can radically improve the efficiency and security of those models.
Contract management is one such case. The emergence of distributed ledger technology (blockchain), as well as significantly improved e-signature platforms and multi-party digital web-browsers, has made the document execution elements of contract management more efficient and flexible than ever before. When different technologies are adopted collaboratively, important legal contract requirements, such as authorised signing and witness signatures, can be met quickly and securely.
Obtaining a valid witness signature during lockdown
Every legal contract requires an authorised signature or witness signature but some of these rules have been relaxed due to COVID-19 to facilitate business continuity. A recent personal experience illustrates the challenges faced in obtaining a valid witness signature.
Lockdown restrictions prevented me from finding an appropriate witness to help with the execution of a multi-party document. Given the circumstances, I was advised that my signature could be witnessed by a family member within my household. However, as I live alone, this was not possible.
Due to the urgency of the matter, my only option was to have my signature “witnessed” by a friend in another country, via an e-signature platform. Technically, my signature was not witnessed but it was accepted in the circumstances. Although this is a minor example, it raises questions about the legal challenges that might lay ahead if similar workarounds are being implemented by commercial organisations.
Here are some practical alternatives to these workarounds.
Managing authorised signatures
Authorised signatory lists housed in out-of-date paper or PDF files are a serious problem for the contract management process. Real-time, secure and cost-effective platforms that allow users to update and share names, signatures and levels of authority are now being used by a growing number of companies.
With data secured on distributed ledger technology, users can have confidence that signatory information cannot be tampered with, unlike paper or PDF formats. Equally importantly, the digital authorised sharing of the information eradicates other problems such as version control, and the posting or emailing of signatory data.
The lockdown has boosted the use of electronic signatures but existing law on “acceptable e-signature protocols” is still evolving. It is therefore important to consider the available options to ensure that document execution is both secure and practical. There are generally three classes of e-signatures, which offer progressively more security:
- Simple. This is a digital signature in its simplest form because it is not protected by any encryption method. The most common example is a wet signature scanned by an electronic device and then inserted into a document.
- Advanced. This offers a higher level of assurance and requires an accreditation of identity. For example, this could be done by validation against an email address or phone number owned by the signatory.
- Qualified. This class offers the highest level of security. It is similar to the advanced method, with the addition of being validated with a trusted third party service provider.
For further information, see The 3 types of electronic signatures – Which one would you rather?
Although e-signatures have increased the flexibility for contract signing, they must be used in conjunction with a signatory management platform to verify that the e-signatory is authorised to sign the contract.
Multi-party web-based browser sharing
Another new technology development allows multiple parties to a contract to control the same web browser. Essentially, this means a digital web-based contract can be signed simultaneously by more than one party, without them being in the same room. Additionally, each party who has access to the shared, web-based contract can be live on video as part of the same application. This means that the identities of the signatories and witnesses can be validated remotely at the same time.
Key attributes of contract management technologies
Through the collaboration of these technologies and applications, it is possible for:
- Multiple parties to review a document collaboratively, via a shared web browser.
- Multiple parties to sign (and witness) a contract via a shared web browser, using an advanced or qualified e-signature protocol.
- Each action to be time-stamped and recorded.
- ID to be validated.
- Signatory authority to be checked.
- All actions to be recorded and logged.
- The contract and the actions to be locked, so that they are tamper-proof (and recorded on a distributed ledger).
COVID-19 restrictions have highlighted the opportunity for change and eliminated the need to compromise the robust rules and procedures around the signing and witnessing of commercial contracts.