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E-SIGNATURES & E-CONTRACTS: THE NEW NORM?

Updated: Blogs No Comments8 Mins Read

INTRODUCTION

A completely new solution for using pen and paper for document validation and verification are digital signatures, or e-signature. It checks digital communications and documents for validity and quality by applying an advanced mathematical technique. It helps control concerns of identity and fraud in digital communications and guarantees that the contents of a message or document won’t be changed during transit. A model contract that is completed and signed remotely, often over the Internet, is called a digital contract, sometimes referred to as an electronic contract. The creation of the digital contract is identical to that of the conventional paper-based agreement, as is its general operation.

For example, in an electronic contract, the vendor intends to sell their goods and provides the potential buyers with information about their items, prices, and terms and conditions of purchase. If buyers opt to continue with the transaction, they will have the option to electronically sign or choose the “I agree” or “Click to agree” button to indicate their acceptance of the terms that the vendor offered.

 NEED FOR E-SIGNATURES AND E-CONTRACTS IN INDIA

E-contracts, which enable international deals and doing away with the requirement that parties physically be present at a certain location in order to sign the documents using traditional techniques, provide safety and convenience to the parties involved in the contemporary digital era.. Parties do not require paper-based evidence or physical signatures when using e-signatures to electronically authenticate agreements and documents. As a result, it’s critical to remember that e-contracts provide parties with flexibility and an easier platform to execute agreements on. E-signatures are more advantageous and economical to employ in the present day since they remove logistical barriers from the parties’ operations.

In addition, there has been a clear movement following significant global events like as the Covid-19 outbreak towards digital commerce and remote work. As a result, electronic contracts and e-signatures are now even more important for keeping continuity and resilience in companies.

APPLICABLE STATUES TO E-SIGNATURE AND E-CONTRACTS

The Information Technology Act, 2000 (ITA), the Indian Contract Act of 1872 (ICA), and the Electronic Signature or Electronic Authentication Technique and Procedure Rules, 2015 (ESEATPR) are the laws that regulate e-signatures in India. The applicable state stamp statutes as well as the Indian Stamp Act of 1899.

The main piece of legislation that governs e-signing in India is the Information Technology Act, 2000 (ITA). The ITA establishes fundamental guidelines for adhering to e-signatures requirements. 

Furthermore, because of the nature of E-Contracts, certain legislation include particular rules pertaining to E-Contracts. Each of these legislation must be interpreted in conjunction with the ICA’s provisions, not separately from them.

The Information Technology Act of 2000’s applicability Both e-contracts and e-signature are recognized by Indian law, and the Information Technology Act, 2000 (IT Act) governs their use. According to Section 4 of the IT Act, any information or matter that is in an electronic format and is accessible enough to be used for future reference will be deemed to have satisfied the legal requirement that it be in writing, typewritten, or printed. 

BENEFITS OF E-SIGNATURE AND E-CONTRACTS

In terms of e-signature, you may save time by not printing, scanning, and shipping more paper by using an electronic signature. An electronic signature simplifies daily tasks and provides a contemporary means of verifying the identity of the signing.

Contracts and orders in PDF format frequently utilize electronic signatures. Electronic signatures can also be used to other kinds of documents, such as emails or data files.

  • Independent of location and time

You may sign documents electronically at any time and from any location. It is crucial that papers be able to be signed remotely rather than requiring the signatories to physically be in the office, especially as the amount of work done from home grows. Location independence is helpful, particularly when many people need to sign the same document. The signatories can sign the document wherever they are; they are not need to agree to meet at the same location.

  • Fast and cost-effective

Electronic document signatures are nearly as quick as paper signatures, yet they save time, particularly during document handling: When papers are not scanned, printed, and submitted via paper mail, matters can be handled more quickly.

  • Less paper – an environmentally friendly choice

A document that has been electronically signed is also handled electronically. There is no need to think about the document’s physical storage because printing is not required. The document may be kept securely for a long time by using a variety of electronic workplace options. Cutting less on paper use is another ecologically beneficial decision.

  • Method of signing across borders

Another quick and easy way to transmit papers across borders is through electronic signatures, which are useful in situations like contracts or competitive tendering procedures.

However, e-contracts have been shown to be advantageous in a variety of situations, particularly in the context of business transactions. For instance, e-contracts can be particularly helpful when working with international partners (as paper contracts would be time-consuming and expensive due to geographical distance) or when you frequently need to sign a large number of new contracts. The following are some advantages of e-contracts:

  • Unlike a traditional contract, an e-contract is not time-consuming: 

By allowing your prospects to instantaneously examine and sign a proposal on a computer, smartphone, tablet, or on your e-commerce site, e-contracts solve this problem. Occasionally, all customers might have to do to finish the deal is click an “I agree” button.

  • Elimination of errors

A guy writes the contract in a typical form, which increases the likelihood that he will make several mistakes. However, there are templates for E-Contracts that are available that have been approved by solicitors and include all the information needed to ensure that there are no contract problems.

  • Low transaction cost:

The use of middlemen in paper contracts drives up the cost of contract implementation. In addition to intermediaries, labor and material expenses like paper, printing, and so on are also involved. Conversely, middlemen are removed from E-contracts, along with the expenses associated with paper, printing, and power. Low transaction costs are offered to the user or parties by using e-contracts.

  • Enhances security:

A traditional contract has a greater likelihood of being tampered with, such as by faked signatures, etc., but an electronic contract has digital signatures connected to it. This keeps the contracts from being tampered with. The meddling will be noticed and documented, no matter how hard they try.

CHALLENGES AND LIMITATIONS OF E-SIGNATURE AND E-CONTRACT

Digital signatures have become a safe way to authenticate electronic documents in the digital era, when efficiency and convenience are the driving forces behind technical improvements. But consumers should be aware that digital signatures have limitations and obstacles just like any other technology.

  • Key Management and Security Concerns:

One of the trickiest things in the field of digital signatures is effective key management. The secrecy of the private key is the primary factor that determines the security of a digital signature. The whole system is susceptible to fraud when the private key is stolen. In order to prevent unauthorized access to their private keys, users need to implement robust security measures.

  • Legal Recognition and Compliance:

Even though digital signatures are commonly used, different countries may have different legal requirements for compliance. There might be problems with the enforceability of electronically signed documents if certain areas do not fully recognize the legal validity of electronic signatures. For companies and people that depend on digital signatures, navigating the complicated web of global and sector-specific legislation is a constant problem.

  • User Adoption and Trust:

It’s still difficult to win people around to digital signatures, particularly those who are used to traditional pen and paper signatures. Gaining a general acceptance of e-signature requires persuading users of its dependability and security. To debunk myths and encourage trust in technology, education and awareness initiatives are crucial.

                        While electronic contracts offer several advantages, they also comeback with several drawbacks that need to be rectified-

  • Unassured security: 

One drawback of electronic signatures may be that you should proceed with extra caution when dealing with potentially harmful electronic software since there is no appropriate assurance that the suppliers would provide protection for commercial dealings.

  • Reliance on proprietary software: 

The reliance on proprietary software that comes with electronic signatures is one drawback, which might worry companies who prefer not to work with outside providers.

  • Restricted storage:

One drawback of using an electronic contract is that certain electronics firms you sign with may not have enough capacity, which makes it challenging for them to keep all of the papers on their servers. Because of this, these companies must rely on outside funding, which worries many about the safety of client data.

CONCLUSION

The development of e-contracts and e-signatures has marked a significant advancement in the digital transformation of business procedures. They are a popular option because to their numerous benefits and legal legality for companies looking to save costs, increase security, and streamline operations. Continuous legislative reforms and technological advancements are making greater usage possible, despite the remaining impediments. As our world gets increasingly digitally linked and networked, e-signatures and e-contracts are predicted to become the new norm, completely changing how we draft and execute contracts in the twenty-first century.

Authored by- Sougata Singha, Amity University, Kolkata

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