Nov 01, 2011

Electronic Signatures #450

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By Brian Taylor,
Norton Rose Fulbright LLP

As computer technology plays an increasing role in the real estate industry we are forced, from time to time, to evaluate these technologies in order to ensure they are consistent with the law and responsible practices.

Contracts of purchase and sale and other documents used by REALTORS® are already commonly delivered or transmitted by fax or email. Computer applications that allow electronic forms of these documents to be generated are also available. Some new technologies gaining increasing exposure in the marketplace are applications that enable individuals to affix electronic signatures to contracts.

Some of the commercially available electronic signature applications involve:

  • uploading documents to secure websites;
  • delivery of the contract to the one or more recipients via email;
  • recipients 'logging in' to secured websites and adopting electronic signatures;
  • affixing an adopted signature to contracts where required on the document; and
  • notifications being sent to various parties that the contract has been electronically signed and then distributed to each party in electronic form.

Generally speaking, contracts between individuals can be made orally or in writing. The practice of reducing a contract to writing is simply a way of creating evidence of that contract and its terms and conditions. However, contracts that deal with land or interests in land receive special treatment. For various reasons, including the historical significance of land and its commercial value, contracts that deal with land or interests in land, such as contracts of purchase and sale, leases, mortgages and easements, must be (1) made in writing and (2) signed by the individuals that are parties to them in order to be enforceable. These requirements arise out of the Law and Equity Act and are well entrenched in our legal heritage.

The Electronic Transactions Act (Act) provides for the validity of electronic signatures in British Columbia. Section 11(1) of the Act states that:

If there is a requirement under law for the signature of a person, that requirement is satisfied by an electronic signature.

As a result of this section, any contract which would be legally enforceable had it been signed by an individual, in person with a hand-written ink signature, will be equally enforceable if it is signed using an electronic signature. An electronic signature that complies with the Act will satisfy the second requirement of the Law and Equity Act that a Contract of Purchase and Sale, lease etc. be "signed."

Section 1 of the Act defines an "electronic signature" as:

…information in electronic form that a person has created or adopted in order to sign a record and that is in, attached to or associated with the record.

Electronic signatures created using many of the commercially available electronic signature applications will fall within the definition of "electronic signature" under the Act. Accordingly, contracts of purchase and sale and other documents used by REALTORS®, including service agreements, can be electronically signed and this method of signature will not affect their enforceability.

Despite the foregoing, the Act does not provide for electronic signatures to be used on certain types of documents such as:

 a. wills;
 b. trusts created by wills;
 c. powers of attorney; or
 d. documents that create or transfer interests in land and that require registration to be effective against third parties…

and certain other specified types of documents. As you may expect, the documents referred to in subsection (d) above would include the prescribed forms of Land Title Office documents such as the Form A – Freehold Transfer, the Form B – Mortgage, and so on, which are usually signed in the presence of a lawyer or notary public.

Although electronic signature applications are commercially available, it remains to be seen whether they will be preferred over the prevailing method of "putting pen to paper" and physically signing contracts and delivering or transmitting them by fax or email.

  See also Real Estate Council of British Columbia, Report from Council, August 2011, Volume 47, No.1, Page 4.

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Author profile photo
By Brian Taylor,
Norton Rose Fulbright LLP