George Takach: McCarthy Tétrault LLP
We are used to ordering and buying all sorts of goods and services over the telephone. It's late on a Friday, you've had a rough week, you deserve a treat, pizza sounds good, and so you might dial 967-1111.
What if, however, you're a sophisticated financial institution and you're selling tax-effective registered savings plan accounts (RSP) to existing clients. It's late February, and the deadline for purchases is fast approaching, so you want to sell these accounts over the phone to be efficient (both for you and your time-strapped clients) and to expand the scope of your marketing and sales effort beyond the typical perimeter of your physical branch network.
Here's the question put in very practical terms: can you send out in the mail the application form for the RSP, then complete the application form while the client is on the phone (your call centre rep asks questions, the client answers them, the call centre rep inputs the answers into the form, all while the exchange is recorded), and then at the end over the phone have the client say the words “I agree,” and thereby create a binding contract?
> FIRST PRINCIPLES
To answer the question as to whether an electronically recorded voice signature is enforceable, it is worth considering first principles under the common law. There are multiple cases dealing with whether a particular new set of circumstances, or technologies, can create a binding contract. Judges have been confronted with this bedevilling question in the context of novel fact situations precipitated by the telegraph, fax and email, to mention just three of the key contractual communications technologies over the past 150 years.
From these judicial decisions, what can be distilled is that the a signature essentially serves three objectives. First, it identifies the signer. Second, it shows the signer's intent to be bound by the applicable document. And third, it links the signer with the applicable document.
Therefore, under the common law, courts have found to be enforceable signature messages produced by electronic-based systems that implement a trustworthy system for the exchange and recording of information, where the identity of the sender of the message is conveyed by a reasonably secure technical means, and the parties, through the applicable electronic commerce delivery system – including the telegraph of the late 1800s – clearly indicate an intention to become legally bound.
> THE GENIUS OF COMMON LAW
From the first principles of the common law, judges have been willing to approve a number of (at the time) novel signature protocols. For example, in the era of the telegraph, customers would routinely call in their message to a clerk at the telegraph office, who would dutifully transcribe it for onward transmission. Before sending the message, the clerk would also type the customer's name at the end of the message. Such a signature has been upheld by judges.
More recently, in a very interesting US case, the parties to a business transaction were pressed for time and wanted to conclude their deal in a real hurry. So they recorded their agreement with a tape recorder (by orally talking into the machine) and both made clear they were fine with using the tape recorder to record the terms of their transaction. The judge agreed to uphold their intention, however novel the situation.
> STATUTORY CONFIRMATION
The common law's approach to signatures has been statutorily codified in respect of electronic commerce. Almost 15 years ago, e-commerce law statutes were passed in Canada's common law provinces, and a statute to achieve roughly similar ends was enacted in Quebec.
The concept of “electronic signature” is contained in the common law jurisdiction e-commerce laws, with something like the following definition: “electronic information that a person creates or adopts in order to sign a document and that is in, attached to or associated with the document.”
You also need to understand that the term “electronic” is defined very broadly (and non exhaustively) in these statutes and “includes created, recorded, transmitted or stored in digital form or in other intangible form by electronic, magnetic or optical means or by any other means … similar to those means …”
Finally, it is worth noting that the standard e-commerce statute makes it clear that an offer or acceptance may be expressed by an act intended to result in electronic communication, such as “speaking.” Again, this is a helpful provision in the context of creating binding contracts through voice signature systems.
> A QUALIFIED “YES”
Given this legal context in the common law and the e-commerce statutes, it can be concluded that a recording of a voice signature can be enforceable; or, to put it more precisely, that under the law a recorded voice signature will not be unenforceable merely because it is in electronic form. It may seem like a tortured phrase, but the point is that using an e-signature doesn't guarantee that the contract formation process will produce an enforceable agreement. That is, all the other requirements for an enforceable contract must also be present.
For example, there must be certainty of terms — it must be clear that the two contracting parties were looking at the same provisions when the customer said “I Agree.” For the purposes of the RSP sign-up process discussed above, it means you have to provide the customer a copy of the RSP account application form, either by email (as a Word or PDF attachment) or by snail mail. Then you have to ensure that your telephone sales representative makes sure that the client is reviewing that exact form when the sales rep is concluding the contract (perhaps by asking the client to read out loud the first sentence of the first provision of the agreement, etc.).
The issue of certainty of terms is important. For some time now we have seen email cases where judges decide that the various emails back and forth between the parties do not create a contract — not because the communications are in electronic form, but rather because in the vast thicket of messages flying to and fro, the judge cannot discern the principal elements of the offer, or cannot make out an unqualified acceptance of that offer.
Put another way, with all the electronic technologies at our disposal for communicating and contracting, the law has not lost sight of the core foundation of the binding contract — that cardinal requirement all first-year law students learn in their first week of Contracts 101: namely, has there been a meeting of the minds of the purporting contracting parties over the key aspects of the deal? What is being bought and sold, at what price, and delivered when? No amount of electronic bells and whistles can obviate the need for a true and objectively discernible meeting of the minds in order for a contract to be concluded.
> INTENT TO BE BOUND
Indeed, sometimes various elements of the new technologies can raise new doubts about the old rules. For example, there is case law where one of the parties to the alleged contract concluded by fax or email argues that the automated name that appears in the header of the fax, or the automatically produced name that appears in the sender address line of the email, constitutes a signature for the purposes of the law.
To this argument, judges have sensibly said “no” — and with reason. These are merely “names” produced by the technology being used for the communication, but they are not “signatures” denoting an intention to be bound. So, can a name (or a PIN, or some other code) appearing in an email create an enforceable contract? Yes indeed, but not every such name in an email does so. The electronic signature tool is at your disposal — you now have to deploy it in a manner that creates a binding meeting of the minds of the parties.
> AFFIXING THE VOICE SIGNATURE
One last requirement. It's not enough merely to record your customer's oral “I Agree.” You have to then ensure that you have computer systems that can technically associate this recording with the related document (in our example above, the RSP application form).
One solution is to have the digital voice recording embedded in the digital version of the completed application form. And then to store these two together so they can never be disassociated or tampered with. Here is where some clever technology can come in handy. Other less sophisticated electronic storage systems would work as well, however, just so long as there is a secure technical association created between the recorded voice signature and the related document that is to be “signed.”
In conclusion, yes, your customers' recorded voice signatures will not be disqualified as signatures just because they are in electronic form, but such electronic signatures must be part of a carefully constructed contracting process for the resultant agreement to be legally acceptable (and you have to have consent from your clients to use such an electronic signature system in the first place).
This means, as a lawyer, you have to delve into the intricacies of the online and telephone-based customer experience that leads up to the final voice signature of “I Agree.” The objective is to ensure that all the elements required to create an enforceable contact are accounted for. The actual relevant e-signature – in this case the electronically recorded voice signature – is just one piece of this larger puzzle.
George Takach is a senior partner at McCarthy Tétrault LLP, the author of
Computer Law, and an Adjunct Professor in Computer Law at Osgoode Hall Law School.