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To sign or not to sign: Handwritten versus electronic signatures

A3We all know that a handwritten signature is legally binding on the party who made the signature. But what about an electronic signature? What is an electronic signature? Will a document be legally binding if signed electronically and not by hand? How easy is it to forge an electronic signature? Why should one consider using an electronic signature? 

What is an Electronic Signature or e-signature?

An e-signature is not an image of a scanned signature which is copied and pasted into a typed document.

E-signatures can be divided into three categories, being Digital Signatures, Digital Certificates and Advanced Electronic Signatures (AESs). All three of these types of signatures are very reliable. The requirements of your business will determine which one of the three to use. The rest of the article will convey information regarding AESs as they are the category of e-signatures recognised by South African Law whenever a signature is required. 

What are the benefits of using AESs?

Making a move to AESs can let things flow faster and smoother in your business while saving you time and money, and even the auditors will be happy because AESs leave an audit trail they can follow.

Once a business starts using AESs, there are certain costs which will be significantly reduced. Some of these costs are:

  • Printing expenses – the business as a whole will use less paper and ink.
  • Courier and postage – documents can be sent electronically via email.
  • Archiving and searching costs – documents can be stored in electronic format and searches can be done electronically when looking for a specific document, instead of filing and paging through piles of paper.

Shorter time delays in certain business processes (e.g. approving quotes for customers) can improve efficiency. AESs are significantly more secure than handwritten signatures due to them being almost impossible to forge, even with the help of powerful computers. The only circumstances where an AES is easily forgeable, is when the signer gives his/her private key out to someone. And finally, adopting AESs will result in your business being more environmentally friendly by saving paper and thus trees and other resources which are in limited supply. 

Why should I trust an AES instead of a handwritten signature?

Even when you are presented with an original document signed by hand, you can’t be 100% sure that it was actually signed by the right person or that the document hasn’t been tampered with, as a handwritten signature can be forged relatively easily. In contrast, AESs require that an accredited authority verify the signer’s identity in person before providing the signer with signing tools.

The electronic signing of a document involves two electronic keys: a private key and a public key. The private key is only known to the signer of the document and the recipient who wants to authenticate the signature. The recipient uses both the public and the private keys to confirm the identity of the signer and that the document was not altered in any way during the transmission process. 

Electronic Signatures and the Law

The laws of different countries have different requirements regarding the use of electronic signatures, which will influence which category of e-signature you will choose to use. AESs are recognised by South African Law as a reliable and valid form of signing legally binding documents for more than a decade already.

The biggest benefit of AESs is its low risk of forging and tampering with a document signed by an AES. Despite the fact that AESs offer better protection to users of documents than traditional handwritten signatures, and that the Law already recognises the validity of AESs, there are still those who are resistant to change. Resistance is often the result of ignorance and education about the benefits of AESs will go a long way to increase acceptance of this safer, cheaper and more convenient way of conducting business.

If you would like more information about this topic, feel free to contact us for professional assistance and advice. 

This article is a general information sheet and should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. 

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