Wet, Electronic, and Digital: The Three Types of Signatures

Wet, Electronic, and Digital:
The Three Types of Signatures

Which ones are legally binding?

 

 

A signature is one of the most common and definitive ways of authentication. As it is unique to every individual, a signature allows transacting parties to verify each other’s identities and acknowledge each other’s consent. This is why signed documents are required for almost every kind of transaction.

 

With the advent of technology, signatures have evolved to be an essential part of digital transactions, with parties now able to sign these documents electronically. With the COVID-19 pandemic making it harder to transact in person and shifting the world towards a “new normal,” many businesses are looking at digital and contactless alternatives for their documentary needs, with their signatures following suit.

 

In this article, we will talk about the three main types of signatures, their pros and cons, and which signatures are considered legally binding in the Philippines.

Related: If you want to experience how e-signatures and electronic documents can make your business transactions easier, learn more about SignSecure.

 

Wet Signatures

The inked signatures we are most familiar with are called “wet signatures”. They come from an individual, by physical movement of the hand, using a writing implement with ink scrolling on a piece of paper. 

 

As wet signatures have been around far longer than their “dry” counterparts, they are considered the standard for any documents that need verification. Most Philippine laws that require signed documents contemplate the use of wet signatures, and it was not until recent years that laws and regulations made any distinction made between “wet” and other types of signatures.

 

While wet signatures do not have legal restrictions or limitations, they are increasingly becoming much harder to implement in the new normal. Strict quarantine and physical distancing requirements have made it difficult to set in-person meetings, and sending documents through couriers pose additional risks to all parties.

 

Electronic Signatures

Enter electronic signatures, or “e-signatures” as they are often called. As the name implies, e-signatures are any type of marks that an individual uses to signify their identity in an electronic document. While the most common example of this is an individual signing on a digital platform, e-signatures can also take the form of digitally scanned wet signatures or even an audio recording of the individual authenticating the transaction.

 

E-signatures were already growing in popularity even before COVID-19 hit, as businesses  began incorporating digital processes, but they are becoming indispensable tools in today’s business landscape. Instead of arranging physical meetings that may pose a health risk to the individuals involved, or mailing a document at the risk of loss, damage, or violations of confidentiality, many businesses are now creating electronic documents that can be verified through e-signatures. By using electronic documents, businesses are able to transact safely, quickly, and efficiently.

 

One common concern raised against the use of e-signatures is whether these are all recognized by law. However, e-signatures have already been accepted by Philippine law as legally binding, as long as they satisfy the requirements laid out in the Electronic Commerce Act of 2000, which revolve around presenting evidence that the party that provided the e-signature actually consented to the transaction. 

Related: Do you need to sign legal documents and ensure the validity of your e-signature? Click here.

 

Digital Signatures

Digital signatures are usually considered the strongest and most secure out of the different kinds of electronic signatures. These signatures use cryptographic technology to not only verify the identity of both parties, but also to authenticate the contents of the electronic document itself.

 

Digital signatures often rely on a set of private and public “keys,” which can be likened to digital fingerprints that represent the identities of the individual signing as well as the document used in the transaction. By encrypting a document with the sender’s public key, it ensures that only the recipient with their corresponding private key can decrypt the message and verify the authenticity of the document’s contents. Any outside tampering made to the document can be easily identified, thanks to this private key-public key dynamic, ensuring the security of the transaction.

 

 

As they are a subset of e-signatures, digital signatures are also recognized by Philippine law as legally binding, and they must also comply with the requirements of the Electronic Commerce Act of 2000. In addition, electronic documents signed by either e-signatures and digital signatures can also be admitted as evidence in any situation, by following the Supreme Court’s Rules on Electronic Evidence. This gives them the same legal effect and authenticity as physical documents.

 

Signing in the New Normal

With both electronic and digital signatures bearing the same weight as wet signatures, businesses can continue to transact digitally while worrying about fewer legal restrictions on their electronic documents. As the new normal brings new challenges, businesses can quickly adapt by digitizing their signatures and making their documents and transactions more efficient.

 

UNAWA can help you get started on setting up your electronic documents today. Find out more by clicking here.


We hope this article was helpful. To get more information, insight, and inspiration,check out the other articles in UNAWA Explainer for more tips on how your business can navigate the new normal.


Is Remote the Next Normal for Notarization?

The COVID-19 pandemic has rapidly reshaped Philippine society in the span of a few months, thanks to a combination of what has been reported as “the world’s longest lockdown,” ever-evolving travel and access restrictions from both the government and the private sector, and strong health and safety concerns from the public in general. These have forced various sectors to scramble for ways to go about their day-to-day dealings as approximately close to how they used to do so pre-COVID.

The legal services industry has been one of the sectors heavily affected. Notaries public have particularly been hindered, given the heavy reliance on face-to-face interactions with their signatories. 

 

Notarization, in the Philippines, is generally not a pre-condition for the validity of legal documents. However, many essential transactions require notarization, such as real estate dealings and submissions to the BIR, LGUs, and many other government agencies. Further, even when notarization is not required, the Philippine public tends to rely on notarization as a source of legitimacy for their transactions. Commerce has thus suffered, with parties finding themselves ready to sign a contract or document but unable to proceed with the transaction for lack of access to a notary.

 

The Supreme Court has thankfully noticed. In July, the Court issued the Interim Rules on Remote Notarization to address these concerns. The Interim Rules do not completely overhaul the notarization system, but they depart from the traditionally “analog” Rules on Notarial Practice in some meaningful ways.

 

The biggest change comes from the introduction of videoconferencing. Under the previous notarial practice, parties were required to appear before notaries and confirm that they voluntarily affixed their signature on a document presented to the notary (in the case of a notarial acknowledgment), or sign and swear to a document before the notary (in case of an affidavit or jurat). The Interim Rules dispense with this personal appearance requirement, in favor of an online appearance by way of videoconference. 

 

Under the Interim Rules, a signatory pre-signs the document and, together with their competent proof of identity (e.g., passport, driver’s license, etc.), couriers the signed document to their notary. Upon receipt, the notary schedules a videoconference with the signatory, during which the notary confirms the signatory’s identity, and requests the signatory to confirm that they voluntarily signed the document. The notary then affixes their notarial seal and certificate per usual practice, but with an annotation that notarization was done by videoconference.

 

An inherent difficulty with any online notarization process is that notarial commissions are necessarily geographical (a notary commissioned in Makati, for example, cannot notarize in Pasig). The Interim Rules have creatively addressed this problem by allowing signatories to present GPS location-enabled devices during the videoconference, in order to validate that they are located within their notary’s commission area. Interestingly, the Rules also allow location validation through landmarks. So if they happen to be in the right location, a signatory can put aside Waze or Google Maps, and instead show their notary the view outside the window.

 

Bowing to security considerations, the Rules include robust safeguards to ensure the integrity of the notarized document. At the outset, the pre-signed document must be sent to the notary in an envelope sealed with the signatory’s initials. The notary opens this sealed envelope only during the videoconference, and the document taken from the envelope must be kept in full view of the signatory throughout the videoconference. 

 

The Rules also have redundant measures for the notary to verify the signature on the document: (1) the signatory must send the notary a video clip of themselves signing the document, (2) during the videoconference, they need to sign a blank piece of paper and show this to the notary for comparison with the signature on the document, and (3) the notary is even required to pose searching questions to satisfy themselves that the signatory freely and voluntarily signed the document.

 

If there is one criticism of the Rules, it would be that they can only be used to notarize documents signed with traditional handwritten or “wet” ink signatures. While other government agencies such as the DICT have made a strong push toward digital methods of signing documents, the restrictions on notarization will undoubtedly dampen the momentum of this shift.

As their name implies, the Interim Rules are only temporary. Applying only to areas placed under Community Quarantine, the Rules will eventually lapse once travel restrictions are completely lifted by the authorities. The Rules, however, are the first step in the right direction. And hopefully the legal community, through the leadership of the Supreme Court, will use the intervening period as an opportunity to take stock of our notarial system and find ways to move it further towards digitization by accommodating electronic and digital signatures on a more permanent basis.


We hope this article was helpful. To get more information, insight, and inspiration,check out the other articles in UNAWA Explainer for more tips on how your business can navigate the new normal.


List of Documents Requiring Notarization

As a general rule, notarization is not required for the validity of contracts and other documents. Hence, contracts are considered validly executed even if signed electronically. However, the following documents listed below must be notarized (and hence physically signed).

 

DOCUMENT NAME LEGAL BASIS PURPOSE
FAMILY CODE     
Marriage License Application Article 11. Where a marriage license is required, each of thecontracting parties shall file separately a sworn application for such license with the proper local civil registrar x x x  Necessary to implement the transaction
Marriage Advice Article 15. Any contracting party between the age of twenty-one and twenty-five shall be obliged to ask their parents or guardian for advice upon the intended marriage. If they do not obtain such advice, or if it be unfavorable, the marriage license shall not be issued till after three months following the completion of the publication of the application therefor. A sworn statement by the contracting parties to the effect that such advice has been sought, together with the written advice given, if any, shall be attached to the application for marriage license. Should the parents or guardian refuse to give any advice, this fact shall be stated in the sworn statement. Necessary to implement the transaction
CIVIL CODE    
Donation of real property Article 749. In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor.If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments. For validity
Wills Article 806. Every will must be acknowledged before a notary public by the testator and the witnesses. The notary public shall not be required to retain a copy of the will, or file another with the office of the Clerk of Court. For validity
Granting/revoking rights over real property Article 1358. The following must appear in a public document:(1) Acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property x x x Necessary in order to take effect against third persons
Renouncing rights of spouse or heir(s) Article 1358. The following must appear in a public document: x x x (2) The cession, repudiation or renunciation of hereditary rights or of those of the conjugal partnership of gains; x x x Necessary in order to take effect against third persons
Power of attorney over property Article 1358. The following must appear in a public document: x x x (3) The power to administer property, or any other power which has for its object an act appearing or which should appear in a public document, or should prejudice a third person; x x x Necessary in order to take effect against third persons
To revoke rights previously granted in a notarized document Article 1358. The following must appear in a public document: x x x (4) The cession of actions or rights proceeding from an act appearing in a public document. x x x Necessary in order to take effect against third persons
Assignment of a credit, right or action Article 1625. An assignment of a credit, right or action shall produce no effect as against third persons, unless it appears in a public instrument, or the instrument is recorded in the Registry of Property in case the assignment involves real property. Necessary in order to take effect against third persons
RULES OF COURT    
Extrajudicial settlement by agreement between heirs Rule 74, Section 1. If the decedent left no will and no debts and the heirs are all of age, or the minors are represented by their judicial or legal representatives duly authorized for the purpose, the parties may, without securing letters of administration, divide the estate among themselves as they see fit by means of a public instrument filed in the office of the register of deeds, and should they disagree, they may do so in an ordinary action of partition. For validity
PROPERTY REGISTRATION DECREE    
Dealings with land Section 112. Deeds, conveyances, encumbrances, discharges, powers of attorney and other voluntary instruments, whether affecting registered or unregistered land, executed in accordance with law in the form of public instruments shall be registerable: Provided, that, every such instrument shall be signed by the person or persons executing the same in the presence of at least two witnesses who shall likewise sign thereon, and shall acknowledged to be the free act and deed of the person or persons executing the same before a notary public or other public officer authorized by law to take acknowledgment. Where the instrument so acknowledged consists of two or more pages including the page whereon acknowledgment is written, each page of the copy which is to be registered in the office of the Register of Deeds, or if registration is not contemplated, each page of the copy to be kept by the notary public, except the page where the signatures already appear at the foot of the instrument, shall be signed on the left margin thereof by the person or persons executing the instrument and their witnesses, and all the ages sealed with the notarial seal, and this fact as well as the number of pages shall be stated in the acknowledgment. Where the instrument acknowledged relates to a sale, transfer, mortgage or encumbrance of two or more parcels of land, the number thereof shall likewise be set forth in said acknowledgment. For validity
REVISED CORPORATION CODE    
Amendment of Articles of Incorporation Section 15. x x x The original and amended articles together shall contain all provisions required by law to be set out in the articles of incorporation. Amendments to the articles shall be indicated by underscoring the change or changes made, and a copy thereof duly certified under oath by the corporate secretary and a majority of the directors or trustees, with a statement that the amendments have been duly approved by the required vote of the stockholders or members, shall be submitted to the Commission. x x x For validity
Sworn statement for increase of capital stock Section 37. x x x the Commission shall not accept for filing any certificate of increase of capital stock unless accompanied by a sworn statement of the treasurer of the corporation lawfully holding office at the time of the filing of the certificate, showing that at least twenty-five percent (25%) of the increase in capital stock has been subscribed and that at least twenty-five percent (25%) of the amount subscribed has been paid in actual cash to the corporation or that property, the valuation of which is equal to twenty-five percent (25%) of the subscription, has been transferred to the corporation: Provided, further, That no decrease in capital stock shall be approved by the Commission if its effect shall prejudice the rights of corporate creditors. x x x Necessary to effect the transaction
Resolution authorizing the amendment and/or adoption of new bylaws Section 47. x x x Whenever the bylaws are amended or new bylaws are adopted, the corporation shall file with the Commission such amended or new bylaws and, if applicable, the stockholders’ or members’ resolution authorizing the delegation of the power to amend and/or adopt new bylaws, duly certified under oath by the corporate secretary and majority of the directors or trustees. x x x Necessary to effect the transaction
Voting Trust Agreement Section 58. One or more stockholders of a stock corporation may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote and other rights pertaining to the shares for a period not exceeding five (5) years at any time: Provided, That in the case of a voting trust specifically required as a condition in a loan agreement, said voting trust may be for a period exceeding five (5) years but shall automatically expire upon full payment of the loan. A voting trust agreement must be in writing and notarized, and shall specify the terms and conditions thereof. For validity
Foreign corporations’ application for license to do business Section 142. Application for a License. — A foreign corporation applying for a license to transact business in the Philippines shall submit to the Commission a copy of its articles of incorporation and bylaws, certified in accordance with law, and their translation to an official language of the Philippines, if necessary. The application shall be under oath and, unless already stated in its articles of incorporation, shall specifically set forth the following:   x x xAttached to the application for license shall be a certificate under oath duly executed by the authorized official or officials of the jurisdiction of its incorporation, attesting to the fact the laws of the country or State of the applicant allow Filipino citizens and corporations to do business therein, and that the applicant is an existing corporation in good standing. If the certificate is in a foreign language, a translation thereof in English under oath of the translator shall be attached to the application.The application for a license to transact business in the Philippines shall likewise be accompanied by a statement under oath of the president or any other person authorized by the corporation, showing to the satisfaction of the Commission and when appropriate, other governmental agencies that the applicant is solvent and in sound financial condition, setting forth the assets and liabilities of the corporation as of the date not exceeding one (1) year immediately prior to the filing of the application.x x x For validity
LOCAL GOVERNMENT UNITS    
Barangay Clearance Application for securing Business PermitCertificate/Letter of AccommodationBoard Resolution and Secretary’s Certificate, if applicable Requirements may vary for every Local Government Unit. Notarization is not expressly required under the Local Government Code. For validity
Locational Clearance ApplicationCertificate/Letter of Accommodation For use of the government agency concerned
Sanitary Permit ApplicationAffidavit of No Employee (if without employee) or Certified list of Employees (if with employees) For validity
Tax DeclarationSworn StatementAuthorization Letter (if applicant is not the owner) For validity

 

 

 


We hope this article was helpful. To get more information, insight, and inspiration,check out the other articles in UNAWA Explainer for more tips on how your business can navigate the new normal.