Since digitization has entered the everyday life of companies, the question has arisen more and more frequently as to whether the classic conclusion of a contract by means of a paper signature is still in keeping with the times and still legally necessary at all. Many German companies are increasingly asking this question as a result of the Corona pandemic for purely practical reasons. After all, working in a home office means that the presence of employees with signing authority in the office is becoming increasingly rare. The digital conclusion of contracts could be the solution and offer many advantages. Documents don’t have to be printed out, signed and sent back and forth by mail or e-mail. The process of signing a contract can be handled efficiently – even when the people signing are not in the same place. This is true both when contracts have to be signed by two people in a company due to the “four-eyes principle” and when joint presence in an office is becoming less and less common due to the increasing activity in mobile and home offices.
But it is even more necessary to maintain a certain form when concluding contracts in the company? And if so, can a digital conclusion of contract replace this form in a legally effective way at all and what would have to be considered here? This article deals with these questions.
Form Requirements?
Very few contracts that German companies usually conclude are subject to a statutory written form under German law. For example, a typical supply, purchase or license agreement does not require any legal form. Such contracts can therefore be concluded informally, orally, in writing or even implied (i.e. by conclusive action, e.g. acceptance of the goods without comment in exchange for money).
Nevertheless, the contracting parties „voluntarily“ agree to the written form in a large number of contracts. This applies to individually negotiated contracts as well as to sample contracts and general terms and conditions (GTCs). This is because most final provisions in contracts or GTCs contain the clause that “Amendments and supplements to this contract must be made in writing. This also applies to the amendment and cancellation of this written form requirement.”
Pursuant to Section 127 of the German Civil Code, the formal requirements of Section 126, Section 126a or Section 126b of the German Civil Code also apply in cases of doubt to the form agreed by legal transaction (i.e. primarily by contract). According to Section 126 of the German Civil Code, the written form generally requires a handwritten signature.
Digital Conclusion of Contract in case of contractually agreed Written Form?
However, contracts that are subject to the written form either by law (Section 126 of the German Civil Code) or by agreement of the parties (Section 127 German Civil Code) can be effectively concluded digitally: According to Section 126 (3) of the German Civil Code, the written form can in fact be replaced by electronic form. However, the electronic form is only fulfilled if the issuer of the declaration adds his name to it and provides the electronic document with a “qualified electronic signature” (Section 126a (1) of the German Civil Code).
What is meant as a qualified electronic signature has been regulated by the eIDAS Regulation since 2016. The qualified electronic signature is the most stringent form of electronic signature and must be based on the certificate (Article 3 No. 15 eIDAS Regulation) of a qualified service provider (Article 3 No. 17 eIDAS Regulation; list of German providers: https://webgate.ec.europa.eu/tl-browser/#/tl/DE) and created by a qualified electronic signature creation device (Article 3 No. 23 eIDAS Regulation, i.e. suitable software and hardware).
In addition to the qualified electronic signature, the eIDAS Regulation also recognizes a simple electronic signature pursuant to Art. 3 No. 10 eIDAS Regulation as well as an advanced electronic signature pursuant to Art. 3 No. 11 eIDAS Regulation. The simple electronic signature is guaranteed by electronic data attached to other electronic data, such as a scanned signature or the name addition to an e-mail address in the header of the e-mail. The level of forgery protection is low. An advanced electronic signature is an electronic signature that uniquely identifies the signer. A subsequent change to the file can be detected (cf. Art. 26 eIDAS Regulation).
However, the simple or advanced signature cannot replace the written form. But form-free contracts for which no written form was agreed could be concluded using a simple or advanced electronic signature.
It is also not possible to replace written form with electronic form if notarization is required or if electronic form is explicitly excluded by law, e.g. in the case of contracts on plots of land (Section 311b (1) of the German Civil Code), inheritance contracts (Section 2276 (1) of the German Civil Code), wills (Section 2247 of the German Civil Code), termination of employment (Section 623 of the German Civil Code), references (Section 630 p. 3 of the German Civil Code), declarations of surety (Section 766 p. 2 of the German Civil Code) or promises of debt (Section 780 p.2 of the German Civil Code). However, the last two exceptions do not apply if the transaction is a mutual commercial transaction (Section 350 of the German Commercial Code).
What should be considered when choosing Signing Software?
If contracts are to be concluded more efficiently by using electronic signatures, it should first be checked which category of electronic signature is required at all. If contracts are to be concluded predominantly that are subject to the statutory written form (Section 126 of the German Civil Code), for example, or that provide for the contractual written form (Section 127 of the German Civil Code), the strict “qualified electronic signature” is required in case of doubt.
This is where the use of signing software comes into consideration. Even if providers advertise that they can fulfill the requirements for a qualified electronic signature (see, for example, https://www.docusign.de/wie-es-funktioniert/elektronische-signatur/digitale-signatur), it should always be checked whether the signing software meets the strict requirements for a qualified electronic signature in the specific application. Otherwise, there is a risk that the contract will be invalid or, in the case of Section 550 of the German Civil Code, that the lease will be for an indefinite period of time instead of a fixed term.
Conclusion
The handwritten signature can be replaced digitally. If the contract is subject to the written form, a qualified electronic signature is required. This can be created using appropriate signing software. If the contract is not subject to written form, a simple or advanced electronic signature is generally sufficient.