Electronic signatures have been recognized federally under the Personal Information Protection and Electronic Documents Act (PIPEDA).
Under PIPEDA, an electronic signature is defined as, “a signature that consists of one or more letters, characters, numbers or other symbols in digital form incorporated in, attached to, or associated with an electronic document.”
Electronic signatures are also recognized under specific provincial legislation in each of Canada’s provinces and territories. For example, in Alberta, British Columbia and Ontario, legislation is based on the Uniform Electronic Commerce Act of Canada model. Quebec has adopted its own legislation governing electronic transactions and commerce.
In many ways, the increased use of electronic signatures has simplified document execution in cases where the parties give consent.
Paul Conrod of Construct Legal told the Daily Commercial News that “consent can be expressed by a specific agreement that a document may be signed using electronic signatures, or implied through conduct, such as by accepting a document that has been signed using electronic signatures.”
There is a wide range of commercial agreements that can be executed between construction project partners using electronic signatures. These include purchase orders, order acknowledgements, invoices, procurement documents and component supply agreements, to name a few.
Conrod observes that although COVID-19 spurred increased adoption of electronic documents and signatures, their use is still mixed across Ontario’s construction industry.
“We see electronic signatures used most often in more routine types of documents that are generated during projects, for example to sign off change orders.”
Once parties consent to the use of electronic signatures, definitions can be quite broad. This allows many methods to satisfy legislative requirements.
As far as security, under the provisions of PIPEDA and similar provincial acts in Alberta, B.C. and Ontario, companies are advised to enact a best practices approach to electronic documents and signatures beyond mere consent. Processes should ensure the document is rendered clear of any after-the-fact tampering and by creating an audit log of all signing actions taken.
However, Conrod concedes while electronic signatures can help speed up paperwork processing, physical “wet ink” signatures remain the preferred manner of signing larger documents like contracts and subcontracts.
Of course, “wet ink” documents have a long history of tampering and forgery. But that isn’t to say tapering or misuse of electronic signatures hasn’t been attempted.
For example, Jordan Katz, associate with McCarthy Tétrault LLP in Toronto, writes how a former staff director of a charitable centre was also the head of two companies. These companies billed the organization more than $200,000 for work performed by other employees or subcontractors of the centre, in violation of its Code of Conduct regarding conflicts of interest.
The accused presented only documentary evidence of contracts allegedly signed by both him on behalf of the companies plus the centre’s executive director. However, the executive director declared the contracts as fakes.
The court agreed.
“The court examined evidence that the accused’s computer and flash drive contained electronic versions of the executive director’s signature, and also found that the accused would have had access to the signature.”
In another example, Global Legal and advisory firm Ashurst describes a $700,000 fraud case where an individual’s online document signing program had no account password protection and lacked provision to alert them that a new device had accessed their account.
These cases emphasize the importance of setting up multi-factor authentications and ensuring the integrity of the corporate email systems so that accounts are secure and cannot be accessed by others.
Don’t look to legislation for solutions.
As Katz writes: “Most legislative acts regulating the use of electronic signatures do not impose any specific standards for reliability or security. As a result, the person relying on the electronic signature or making a decision based on it determines its reliability or effectiveness. Organizations should consider whether their document management and security systems are sophisticated enough to track the use (and possible misuse) of electronic signatures for everyday transactions and documents.”
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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