2021-10-11 - Dadflamingo Legal Department - by Hadi Kazemi

Is it legally binding to enter into agreements without a face-to-face meeting and wet ink signature?

In response to the COVID-19 health crisis and with recent technological advancement, there is an immense change in the standard practice of business and people tend to close agreements using electronic devices. Every day, all kinds of business transactions occur using the Internet, without any in-person interaction between the parties. Building a partnership, purchasing goods and services, signing contracts for real estate, and entering into financial agreements are just a few examples of the actions that parties perform electronically.

Even though electronic transactions are very common nowadays, many people when are doing business in different legal systems remain unsure about whether electronic signatures (e-signatures) and electronic contracts (e-contracts) are legally valid and safe. For the most part, e-contracts and e-signatures are safe and reliable methods for doing business and are accepted by the Iran Legal System.

Based on the basic rules of Iran’s civil code on remote contracts and the Electronic Commerce Act (“ECA”)-2004, the laws of Iran ensure that most e-contracts and e-signatures are valid regardless of where the parties live or sign the document. Therefore, wherever the law requires a signature, an electronic signature may suffice and will be just as enforceable and valid as a traditional paper contract signed in wet ink.

What Is an E-Contract?

An e-contract is an agreement drafted and "signed" by the parties in electronic format without using paper. For instance, when someone drafts a contract and emails it to a business partner and the business partner emails the contract back with an electronic signature indicating acceptance, they have formed an e-contract. Also, an e-contract can be in the form of a "click to agree" document, which commonly comes with a software. The user clicks an "I agree" button on a page containing the terms of the software license before being able to use the software or complete a transaction.

Online sale of goods and services also can be a form of e-contract. Commonly, without signing any document, the buyer agrees to pay the seller a certain amount of money in exchange for the seller's obligation to provide the buyer with a product or service.

What Is an Electronic Signature?

An e-signature is a digital file or symbol —such as a typed name or a scanned pen-and-ink signature—that someone attaches to or places on a document to show that person's intention and consent to be bound that document. People create documents with e-signature in different methods, including by pasting in a scanned picture of the signer's wet ink signature, typing the name of the signer into the signature area, using an "I accept" button, or employing cryptographic scrambling technology.

Some of the methods used for e-signing are more secure than others. The term "electronic signature" is commonly used to refer broadly to all forms of e-signatures, even the unsafe and unreliable methods. Typing the signer's name into the signature area and scanning the signer's wet ink signature are insecure signature formats. Although these types of e-signatures are legally binding, still they leave effectively no way of confirming that the person who placed the sign on the document is the person you intended to have his/her signature on the document.

On the other hand, "Digital signatures" are more complex and secure e-signatures. They use digital identification to authenticate the signer. The signature is then electronically attached to the document using encryption. You don't have to be a computer expert to create a digital signature—many software programs and online services make the process of securely creating and e-signing e-contracts simple and affordable. In Iran, you can use the e-signature service provided by Lawmingo _an online platform for generating contracts using A.I and a pioneer provider of e-signature platforms in the country_ via the following link: https://b2n.ir/lawmingoesignature

Limitations of Electronic Documents Admissibility 

E-Signature in the Electronic Commerce Act of Iran - 2004

According to the ECA, e-signatures are divided into two different types: simple electronic signatures and secure electronic signatures.

A simple electronic signature is any sign appended to or logically affixed to an electronic document indicating that the document has been signed by a specific person. The word ‘sign’ here could mean any letters, symbol, electronic sound, or process attached to or logically associated with a document used by a person with the intention to sign the document. For instance, even attaching the name of the signatory at the end of a contract, which is sent to the other party via e-mail in PDF format, is considered as an e-signature that confirms the consent of that person to the terms and conditions of the contract.

Secure electronic signature

A secure electronic signature is a sign that should be unique to the signatory. The ECA provides that a secure e- signature is a sign that can be used to authenticate the identity of the sender of the message or the signer of a document. It can also be used to ensure that the original content of the message or document sent is unchanged. In this regard, article 10 provides as follows:

‘A secure electronic signature must contain the following requirements: a) Be unique and exclusive to the signatory, b) indicate the identity of the signatory, c) Be created by the signatory or under his or her sole intention, d) Be affixed to a ‘data message’ in a way that any change in data message can be identified’.

The advantage of a secure e- signature over a simple e-signature is that when a document contains a secure e- signature, the parties to the document can have full confidence that the document has been signed by the intended person and the provisions of the document are binding upon the signer and its successors in a way that any denial or doubt about the signing of the document will not be acceptable.

Conclusion

Supported by legal validity, e-signatures have an important role to play in the promotion of e-commerce in Iran. The key aspect of the validity of e-signature is that the law has provided a suitable legal platform for the e-commerce market, enabling individuals, companies, and organizations to use them in commerce with confidence. E-signatures, particularly secure electronic signatures, can signify the approval of the terms of a contract or a document that is presented in an electronic format.

Online transaction is a much more efficient concept in the interest of time and money compared to the traditional method of paper contract and wet-ink signatures. While the current legal system of Iran supports e-contracts and e-signature, but to keep pace with the fast advancement of the technology, separate legislation for regulating new methods of creating e-contracts and e-signatures has to be enacted in Iran.