Legally valid electronic signature

There is still confusion: different, often very similar, terms such as written form, written form, freedom of form, handwritten form cause confusion when it comes to handling contracts. For this reason, people unfortunately still often resort to pen, paper and cumbersome postal channels when there is something to sign.

In this article, we explain for which use cases the digital signature is 100% legally valid and guarantees the highest probative value and traceability. Small "spoiler": There are only very few exceptional cases where the electronic signature is not permitted. Otherwise, the digital signature process "trumps" the analog signature in every case due to technical unforgeability and the highest evidentiary value.

What is the function of contracts?

Basically, it is obvious: by signing a contract, all parties involved agree to the conditions and obligations set out in the contract. The conclusion of a contract ensures that all contracting parties fulfill their obligations and that their rights and interests are protected. In addition, a signed document can serve as evidence in the event of a conflict and help to stand up in court. The most efficient way to sign off contracts is to do so digitally.

Whether analog or digital: What does freedom of form mean for contracts?

In European countries, contracts are generally valid without a prescribed form. This means that there are no regulations regarding the way in which contracts must be signed. For example, electronic, written or even oral form is permitted (see Section 883 ABG). Ultimately, the contracting parties themselves can agree on a specific type of signature.

Although there are no legal requirements on how to sign contracts that are not subject to any form requirements, caution is advised for many business purposes! It would be a mistake to sign important agreements that are not subject to any formal requirements with a low electronic signature standard. If there are contracts with high negotiation sums or a high liability risk, a high digital signature standard should definitely be used.

Some contracts require the written form by law.

For certain types of contract, the protection of one of the contracting parties is of particular importance, which is why a written form is required by law. In legal terms, this is referred to as the written form. In order to fulfill the written form or written form, a handwritten signature of both contracting parties is required by law. In Austria, the written form is regulated in § 886 ABGB, in Germany in § 126 paragraph 1 BGB.

Here is the good news enshrined in the law: According to Section 126a BGB (DE), the legally prescribed written form can be replaced by electronic form, unless otherwise stipulated by law. In general, the eIDAS Regulation, which has been in force throughout Europe since 2016, regulates the technical and content requirements for e-signatures and takes precedence over national laws.

If the "written form" is specifically required, the qualified electronic signature (QES) can be used for legally compliant signing.

It is therefore important to understand that the terms "written form" or "written form", which tend to imply handwriting and paper, in no way exclude digital methods. The digital signature can be 100% equivalent to "handwriting".

Wills & Co. In rare cases, only a "wet signature" is sufficient.

A handwritten signature is only required for the conclusion of contracts and the signing of documents if this is expressly (!) prescribed by a legal provision or a contractual arrangement between the parties.

In addition to some inheritance law documents such as wills (which must even be handwritten) and some other notarial deeds, there are some prominent examples of types of documents that may only be signed by hand by law, particularly in human resources.

One example is the termination of employment relationships by notice of termination or a termination agreement pursuant to Section 623 of the German Civil Code (BGB) in German (!) law. No form of e-signature can replace the written form here, as the electronic form is expressly excluded by law in accordance with Section 623 BGB.

A major setback in German digitization policy has recently been the subject of controversial discussion in many media. Since 1995, employers in Germany have had to record the most important contractual conditions in writing and hand them over to the employee for signature in accordance with the German Act on Evidence (NachwG): The record of essential working conditions (§2 NachwG). Although the EU Directive (eIDAS Regulation) permits electronic transmission, it is not permitted in Germany to provide evidence of the essential contractual conditions in electronic form. Even a qualified electronic signature does not meet the requirements of the Verification Act.

Our personal assessment: It will only be a matter of time before the necessary digitization offensives, especially in the HR sector, will also have a positive impact on legislation and the Verification Act will be amended again very soon.

Furthermore, there are already "workarounds" even for this special case in order to limit the amount of paper and time required as far as possible and keep media disruptions to a minimum. This works, for example, thanks to additional documents that are signed analogously in accordance with the law, but a digital copy is still managed and stored centrally in the digital archive.

Completely risk-free: sign digitally and in accordance with the required formal requirements.

Regardless of whether analog or digital, national legislation primarily regulates whether and how a contract is subject to a formal requirement. Once you have gained an overview of this and decided to go down the digital, time-saving route, the eIDAS Regulation (Electronic Identification, Authentication and Trust Services) applies as a valid framework in all EU/EEC member states. This legal framework should drive forward the digital transformation throughout Europe, enable business processes without media discontinuity and facilitate secure electronic processes between 28 individual markets.

A large part of eIDAS regulates issues of secure digital identity and secure electronic signatures. So if, as mentioned above, an electronic signature is not explicitly excluded by national laws, contracts can be signed in accordance with the eIDAS guidelines. The regulation basically distinguishes between three types of electronic signatures: simple, advanced and qualified.

It is important for all business operators to get a good overview of the contract processes in the company in order to decide which signature standard is the right one for which contract process.

We recommend reading our overview article on signature standards in detail. In combination with this article, you will be able to decide which of your contracts you should sign with which standard.

Here is a common practical example of a non-legally valid signature:

Example e-mail: Decisions that are executed as text in an e-mail are subject to the written form in order to be legally valid. This means that a written signature must be affixed by all parties to the contract. It is often the case here that digital signatures are inadequate. The following procedures are not legally valid:

• Print out, sign, scan again, send (media break)
• Placing an image of a signature on the e-mail document (simple electronic signature)

Only the qualified electronic signature would be the legally valid method in this case.

Conclusion

Despite any digitization offensives and new methods of doing business paperless, we are convinced that the signature will always be an essential part of decisions and approvals of all kinds. This means that security and compliance must be guaranteed, especially in the professional sector.

This is where the strength of digital signature platforms such as sproof sign comes into play: the technically complex processes are handled in the background. For example, you only need to identify yourself once for the qualified electronic signature. The platform guides you through the 10-minute process.