Online contracts: formation and terms

An electronic signature is the digital equivalent of a written signature. They provide assurance that the authors and signatories of e-mails or electronic files are who they claim to be.

Why use electronic signatures?

All parties involved in any commercial transaction or messaging activity need to have confidence that the communications they send reach their destination without being changed in any way. They might also want them to reach their destination without being read by anyone else.

Electronic signatures can:

• prove the origin of a message
• prove whether a message has been altered
• prove that a message was sent, and at what time with time stamping
• keep messages secret by using encryption

The Electronic Communications Act 2000 has made it clear that electronic signatures are admissible as evidence about the authenticity or integrity of electronic communication. A European directive has ensured the effectiveness of electronic signatures across Europe. Legislation in the USA and in many other countries has done the same elsewhere.

How the technology works

An electronic signature can be attached to anything recorded digitally, including documents, images, e-mails and web pages. Some standard software, for example, Microsoft Outlook, includes the appropriate functions. You and your partners will each need a digital certificate to read encrypted communications.

Off-the-shelf software packages offer robust security for signing and encrypting files, instant messages and web pages. They can offer additional options such as control over message history, multiple users signing and alteration checking.

Implementing electronic signatures

To implement an effective electronic signature system, follow these key steps:

• understand what you want to achieve and ensure that it's realistic
• understand the projected total costs and the benefits
• identify the partners with whom you want to exchange signed information
• consult - seek professional advice, and talk to your trading partners and similar organisations
• experiment with low cost or free introductory versions
• provide staff training or familiarisation, if necessary
• encourage staff involvement and feedback
• monitor and review the impact on your business and against your objectives