CONTRASTING SIGNATURES Various types of signatures in business transactions
There are several types of signatures in business transactions – and these can range from an original handwritten signature on a paper document to an electronic signature, and even an electronic qualified signature. Different types of signatures correspond to different forms of legal acts, and different forms of legal acts in turn are required in different types of contracts. While working with clients from all over the world, I have observed that issues relating to signatures are not fully clear, especially for entities from Anglo-American jurisdictions. From a legal perspective, one signature is not necessarily equivalent to another. So, it’s time to sort this out.
The basic form of legal action is a simple written form. In Polish law it is required, under pain of nullity, for many types of contracts, including, for example, a contract for the transfer of copyrights or other intellectual property rights (e.g. industrial property rights) – i.e. a key type of contract for entities from innovative industries, including start-ups, IT companies, technology companies or marketing agencies. Other types of legal transactions also require a written form, including, for example, a lease agreement, a debt assignment agreement, or a general power of attorney.
Written form requires a classic, handwritten signature. Therefore, in practice, in order to keep a written form, you need a handwritten signature on a paper document. While in local transactions involving entities from the same city or country, maintaining this form is possible and relatively easy, the exchange of paper documents in international contracts is extremely difficult, as well as completely impractical from a business point of view – why in the 21st century are we supposed to sign paper documents when we operate, for example, in the IT industry and employ contractors from all over the world? Is it really necessary to mail contracts out while the business world communicates online?
The answer to the impracticality of the traditional written form is the electronic form of legal transactions, which under Polish law has the same effect as the written form. In other words, signing a contract in an electronic form is equal to a contract in writing, on paper.
However, you should be very careful here – the electronic form requires a qualified electronic signature, i.e. a signature with appropriate certificates and technical security measures compliant with the eIDAS regulation. In Polish law, only a qualified signature can be equated to an electronic form in the meaning of the Civil Code. Common understanding of the electronic form may be deceptive and misleading here – unqualified signatures, e-mail forms or, for example, scans of a signed contract sent by e-mail are not an electronic form equivalent to a written form. This form would be maintained only if the document was signed with an electronic qualified signature.
Currently, qualified e-signatures are relatively easily available on the market and are not associated with high costs. Prices of qualified e-signatures start from several hundred PLN a year. They also do not require any validation devices or tokens – the latest versions of the electronic signatures work completely online, both on a desktop computer and on a smartphone. They only require authorisation and verification of the user’s identity at the initial stage, i.e. activation of a qualified electronic signature requires a meeting with the provider’s representative and verification of the user’s personal data and ID card.
Thanks to the initial verification of the user’s identity and security certificates, including time stamps (available in some versions of the qualified signature), the qualified electronic signature is safe and at the same time meets the business needs of innovative industries. However, in order to be concluded in an electronic form equivalent to a written form, a contract must be concluded with qualified e-signatures by both parties of the transaction.
How do you check that the contract has been signed with an appropriate electronic signature, i.e. a qualified one? It is enough to verify the document’s signature panel in PDF format – it specifies whether the signature is a qualified signature which complies with the requirements of the eIDAS regulation, or whether it was issued without the appropriate security certificates (e.g. by a “private” provider). Importantly, a document signed with a qualified signature does not have to have (but may have) a handwritten signature, such as in the scan of a handwritten contract. In fact, a contract signed with a qualified signature does not need to be signed in the traditional sense, i.e. by providing the name and surname at the end of the document – only the electronic tag matters here.
When using electronic signatures in practice, we should be very careful with electronic signatures in the common understanding, i.e. signatures that do not have a qualified security certificate. These types of signatures are very popular e.g. in the US or generally in industries using cloud-based document management or workflow software. Very often such cloud solutions are very practical and make business easier, but, if they do not have an in-built qualified electronic signature, but only an “ordinary” electronic signature, from the point of view of Polish law, they do not meet the requirements of the written form. In practice, this may mean for example that the transfer of IP rights using such systems will be invalid.
In legal terms, contracts signed with an electronic signature without a qualified security certificate are contracts concluded “only” in a document form, which is not equivalent to a written form. Of course, this form is sufficient in many business situations, and contracts in document form may be used as evidence, e.g. in court. Nevertheless, the legal significance of such documents is much lower than that of documents signed with a qualified e-signature. Many cloud services do not seem to notice this and ensure that the signature they offer is effective and legal. In my opinion, this is a half-truth and in practice it misleads users – a signature without a qualified certificate is valid, but de facto and de jure is not binding for a significant proportion of contracts, including, for example, contracts for the transfer of intellectual property rights.
Businesses need electronic document flow, and this is an undeniable fact, especially in the time of the COVID-19 pandemic. The use of electronic signatures facilitates running a business, signing contracts, concluding annexes, submitting terminations, communicating with public authorities, conducting court proceedings, etc., etc. However, when using the benefits of an electronic signature, we should be particularly careful – the multiplicity of solutions available on the market causes chaos and uncertainty. Therefore, to sum up – if you conclude an agreement that requires a written form for its validity, and you want to do it in electronic form, remember that it must be signed with a qualified electronic signature (it is not allowed to use a simple electronic signature in the common sense, and the exchange of scans of traditionally signed documents is also not sufficient).
Jakub Pietrasik, attorney-at-law, senior associate, WOLF THEISS
Last Updated on March 16, 2021 by Karolina Ampulska