May 27, 2024
Home » Digital Signatures in Contract Law: Authenticity and Validity
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This article has been written by Aparajita Singh a first-year BBA LLB (Hons) student at Symbiosis Law School, Pune.

INTRODUCTION

In recent world, the concerns regarding the falsification risk of standard signatures have led to a shift into electronic signatures or digital signatures  as a means of protecting crucial possessions and documentation within the present legal system. This study examines the complexities of digital signatures in the framework of contract law, emphasising their reliability and legitimacy.

According to the Information Technology Act of 2000, a digital signature is a technique of validating digital documents via digital processes.  The procedure entails getting a Digital Signature Certificate (DSC) from a Certifying Authority (CA), which requires applicants to provide certain information and confirmation of identification. The DSC is valid for one or two years, with the possibility of renewal, and its stringent validation procedure by the CA makes digital signatures difficult to forge.

As organisations digitise and convert to totally digital contracts, digital signatures are critical to assuring the security and legitimacy of these documents.

This Study additionally differentiates between electronic and digital signatures, highlighting the former’s higher security due to encryption techniques and the legislative structure that governs their issuance. Electronic signatures, while commonly used, are considered less secure and lack established restrictions.

The significance of digital signatures in the validity of e-contracts is emphasised, emphasising the IT Act’s clauses that recognise e-contract enforceability. Section 4 of the IT Act authorises e-contract authentication by digital signatures, which are handwritten signatures that are electronically affixed. The use of digital signatures acknowledges e-contracts’ enforceability. Digital signatures are consistent with international norms, notably UNCITRAL’s worldwide best practices.

Finally, the study emphasises the growing importance of digital signatures and e-contracts, as seen by the COVID-19 epidemic and technical improvements. The Inform digitalisation Act of 2000 acts as a catalyst for altering business structures and contractual obligations. The worldwide conformity with UNCITRAL principles emphasises the necessity for a legal framework to address questions about the legal validity of digital signatures. Embracing digitisation is promoted as a new standard necessary for remaining relevant in a fast-changing world.

Validity

An agreement enforceable by law is a contract.[1] One requirement for conducting daily operations or business is a contract, even for subjects we overlook. Hence, it is imperative to comprehend the contract’s legitimacy in the current age. Every business is moving towards digitalisation, including but not limited to signing an electronic contract. Additionally, the government is working to promote the partnership vision of digital India across various government channels. Furthermore, E-contracts are legitimate under section 4 of the IT Act, which compares the enforceability and performance of e-contract to the signing of the physical contracts; however, several types of documents such as trust deeds, power of attorney and negotiable instruments are not covered under IT Act.[2]

In section 2(1)(p) of the Information Technology Act of 2000, a digital signature means authentication of any electronic record by a subscriber using an electronic method or procedure by the provision of the section.[3]

As the foundation of this verification procedure, a digital signature consists of two keys: a public key and a private key. When a subscriber shares a private key in secret, the public key is generated publicly using the private key. A signature is an irrevocable piece of information that certifies that the signer was the document’s author or that they otherwise gave their consent.

Additionally, by the guidelines outlined in section 2(1) (zg), the term subscriber has been eliminated; this clause specifies that a subscriber is an individual on whose behalf a digital signature certificate has been issued. As such, the subscriber is authorised to use their digital signature to authenticate an electronic record granting its validity subject to a thorough review by the appropriate authority.[4] Following the issuance of the DSC by the certifying authority, the aforementioned certificate will be valid for one or two years, after which it may be renewed in accordance with the guidelines outlined in the certifying authorities rules[5]The usage of these digital signatures is much the same as that of handwritten signatures however it is difficult to forge the digital signatures because of the strict authentication procedure used by CA while providing the DSC, these electronic or digital signatures are acceptable in court as well.[6] 

However, if we see a digital signature and an electronic signature, a digital signature allows one to associate their identity with the fingerprint on a document. For example, it serves as a channel that enables messages to be transferred over unsecured channels but with complete security because of the encryption. However, an electronic signature is mainly used by individuals to sign papers, similar to attaching one name at the end of the mail.

Legal Aspect

In sections 66C, 71, 73, and 74[7] of the IT Act 2000, provisions are made regarding the penalties for identity theft which include imprisonment for up to three years or a fine of one lakh or both misrepresenting a material fact or suppressing it from the controller of the authority which carries a two-year prison sentence and a fine of one lakh; publishing a false signature and creating or supplying a certificate for fraudulent purposes which has a two-year prison sentence and a fine of one lakh rupees only.[8] Furthermore, act section 2 also defines confirmation of any electronic record by a supporter by methods for the electronic procedure determined in the subsequent timetable and incorporates advanced signature.[9] And section 2(p) defines advanced signature for electronic signature.[10] Under criminal law, a person faces a two-year sentence and a fine under section 465 of IPC 1860 if there is reason to believe that they have dishonestly fraudulently signed, communicated or sealed a legal record using an electronic or digital signature.[11] In the case of Adams v. Quicksilver, in which an agreement had been sent to the offended party using a hyperlink in an email where the party had to sign one was towards the part of the arrangement. Later on, the question that arose was the legitimacy of the party’s electronic mark on the contract.[12]

Significance of UNCITRAL Model Law

The UNCITRAL Model Law on Digital Signatures has had a significant impact on the legal environment around electronic authentication systems, particularly in light of India’s Informational Technology Act of 2000. The Model Law emphasises enabling international trade and business by establishing a Uniform legal framework for electronic signatures, which is consistent with India’s objective of encouraging digitalisation and adoption of digital signatures.

India’s dedication to conforming with international norms is demonstrated by incorporating the UNCITRAL into its legislative framework. This convergence underlines the global character of digital transactions and lays the groundwork for cross-border harmonisation worldwide.

Furthermore, the UNCITRAL Model Law tackles concerns about the legal validity of digital signatures. By drawing on the Model Law’s essential principles, India hopes to overcome misunderstanding and hereby create a legal framework that promotes the use of digital signatures both locally/nationally and internationally. This alignment with international standards is critical for facilitating cross-border transactions and assuring the enforceability of digital signatures worldwide.

UNCITRAL Model Law also serves as a foundation for nations seeking to build a legal infrastructure that can handle the changing nature of electronic transactions. India’s ratification of the Model Law not only will boosts its reputation in the international legal community but also set an example for other countries to follow suit in developing a cohesive and globally recognised legal framework for digital; signatures. This effect emphasises the importance of a consistent approach to electronic authentication, which promotes legal certainty and allows for the smooth flow of digital transactions across borders.

CONCLUSION

Finally, the value of digital signatures in contract law cannot be overstated, especially given the forgery risk associated with traditional signatures. The Information Technology Act of 2000 sets a legal framework for digital signatures, highlighting the demanding authentication procedure required to receive a Digital Signature Certificate (DSC). These certificates, which are valid for a set amount of time, provide a safe method of authentication and are commonly used in a variety of transactions and legal processes.

The importance of digital signatures in e-contracts is emphasised, particularly given the contemporary scenario defined by the Covid-19 epidemic and the push for Digital India. The Information Technology Act acknowledges the legality of e-contracts and offers alternatives for authentication using a Digital Signature Certificate or electronically attached handwriting signatures.

Digital signatures are important in a quickly changing environment by providing efficiency, security, and flexibility. The Information Technology Act and comparable legal frameworks establish digital signatures as the new standard, encouraging individuals and businesses to accept this paradigm change in order to remain relevant in an increasingly digitalized world.


[1]The Indian Contract Act, 1872, s.2(h).

[2]The Information Technology Act, 2000.

[3]The Information Technology Act, 2000.

[4] The Information Technology Act, 2000.

[5] The Constitution of India, 1950, Article 253.

[6] The Information Technology Act, 2000, s.2(1)(zg).

[7] Information Technology Act, 2000, ss. 66C, 71, 73, and 74

[8] Yogesh Prasad Kolekar, ‘Electronic Signature-Legal and Technical aspect’ (Legal Service India) <http://www.legalservicesindia.com/article/1827/Electronic-Signature

[9] Information Technology Act, 2000, s. 2(ta)

[10] Information Technology Act, 2000, s. 2(p)

[11] Indian Penal Code, 1860, s. 465

[12] Adams v. Superior Court (Quicksilver, Inc.), (2010) L.A. No. 24621


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