We are sometimes asked if the process of creating a proposal and the subsequent acceptance can constitute a legally binding agreement.
Our short and simple answer is YES, it can!
Legally binding agreements can emerge in the most informal of ways, by handshake, by oral agreement or, more commonly, by signing a formalized contract on paper. However, the basis for how legally binding agreements emerge is not the handshake, the oral agreement or the actual signing itself. They all merely express the mutual will of the parties to enter into an agreement and it is the mutual will that is the foundation of the legally binding agreement.
This informal view of how legally binding agreement takes form is very similar around the world. Concluding legally binding agreements easy and efficient is necessary on any free market and legal experts have recognized the importance of informality to support business transactions for a long time. Of course, agreements of any importance are usually both formalized in writing and signed by the parties. However, main reasons for that are not that they would not otherwise be legally binding but for other obvious reasons. Also, local exceptions do exist where some sort of formality is necessary, but in general these exceptions are few.
A common and recognized way of concluding a legally binding agreement, especially for frequent business transactions, is through the exchange of proposal and accept. In all its simplicity the model can be explained by the first party expressing its will to form a legally binding agreement on the terms specified in the proposal and the second party expresses its mutual will by accepting the proposal. Proposales draws upon this principle which means that Proposales offers both an efficient and sufficient procedure to conclude legally binding agreements by internationally recognized and accepted standards.
Electronic Signatures
Just as often we are asked whether the accept of the proposal is legally binding. Our short and simple answer to that question as well is YES, it is! The accept is regarded as an electronic signature which, almost everywhere in the world, has the same legal status as a physical signature.
Electronic signatures are not a new phenomenon and basically, they have been regarded as legally valid for a long time. However, through various legislative actions around the world electronic signatures have gained even stronger recognition as the “legal equal” of physical signatures.
There is no admitted definition of an electronic signature. In general, it can be described as a digitalized process used to verify the identity of the signee. The verification of identity usually depends on several different types of data such as e-mail, IP-address, passwords or similar, all linked to the identity of the signee in one way or another.
In general, electronic signatures are divided into three categories, Standard Electronic Signatures (“SES”), Advanced Electronic Signatures (“AES”) and Qualified Electronic Signatures (“QES”) (QES are sometimes referred to as “digital signatures”, not to be mistaken for the more generic word “electronic signatures”). Each category depends on the level of verification and security the electronic signature offers. For most ordinary business transactions, SES are enough to create legal validity. AES and QES are only required in a minority of cases.
Laws related to electronic signatures may vary from country to country, but in general they are based on the same principles. Those principles generally equate QES with physical signatures and recognize SES and AES as legally binding and enforceable. This means that SES forms an excellent alternative to unnecessary paperwork and at the same time supports efficient business transactions.