Subject: Digital Signatures - Legal Advice Wanted

From: "Anders Rundgren" <[email-masked]>
Date: Sun, 6 Aug 2000 22:57:49 +0200

Hi,
I am working with an e-commerce standard that features server-based, organization-signed orders.

However, server-based, organization-oriented digital signatures do currently not, to the my knowledge,
have explicit support in any legal system.  How to solve this?  One way (the current one) is to state
in separate agreements between the trading partners, that you will stand by these signatures in court.

I wonder if there could be a more general solution like: A company officer digitally signs (using a personal
certificate), a document where he/she states that signatures associated with a certain trading partner
certificate are to be considered as legally binding from the company’s point of view.
Such a document is preferably published on the company’s home-page for easy reference.

How does this sound in the ears of lawyers?

regards
Anders Rundgren

---

From: Adrian McCullagh <[email-masked]>
Date: Mon, 7 Aug 2000 07:00:27 +1000

Dear Anders

In the paper based environment a company does not have its own
signature.  Companies are artificial legal entities and as such can
only act through human agents. (Now this may change through the use of
software agents but that is another issue).  Hence for a company to be
bound to a commercial transaction the human agent must have some
authority either implied or express. 

A person digitally signing a digital document that attempts to bind a
company should use their own private key for such action.  The issue
then revolves around the concept of authority.  If the signer does not
have the appropriate authority then the signer may be liable for
"Breach of Warranty of Authority".  If the signer has express
authority to sign the document and thus bind the principal then the
issue is simple.

In Common law countries like the USA, Australia, UK and Canada, there
is a doctrine known as ostensible authority.  This provides that if a
person signs a document on behalf of another legal entity (the
principal) and the signer has some external reasonably perceived
authority such that a reasonable person looking at the transaction
objectively would believe that such person through his/her position
had such authority to bind the principal then the principal is bound
by the signers action.

So as I see it, a director could digitally sign the digital document
using the directors own personal private key and as part of the text
of the document state the following word "signed for and on behalf of
Company XXXX".  This would indicate to the world that the signer is
NOT signing the digital document so as to be personally bound but is
signing as an agent and as such is attempting to bind the principal
(company).

The recipient would on receipt verify the digital signature using the
signer's personal certificate that has the public key embodied in it. 
If the recipient is concerned about the authority then the recipient
can check the company records to determine if the signer has the
necessary implied/ostensible authority.   To accelerate the process of
verification of authority there may be some solution in the use of
role based certificates or attribute certificates but I have not
really give this issue sufficient thought.

If there is still some doubt then the recipient can always check with
the Company secretary or the Managing director as to such authority.

The Uniform Electronic Transactions Act that is forming part of the
Uniform Commercial Code of various US States does anticipate software
agents and thus server based organisation digital signatures.

But there are no cases that specifically deal with your issue.

The simple solution is for a company officer to digitally sign the
digital document and affix the words noted above in the text prior to
digitally signing.

I hope this is helpful.

Adrian McCullagh
Director of Electronic CommerceTel: 617 3231 1522
Gadens Lawyers                      Fax: 617 3229 5850     
level 39
Central Plaza 1
345 Queen Street
Brisbane Australia 4000

Ph. D. Candidate
Thesis "The Incorporation of Trust Strategies in Digital Signature
Regimes for Elec. Comm."
Information Security Research Centre
Queensland University of Technology

- -----Original Message-----
From: Anders Rundgren [ mailto:[email-masked]]
Sent: Monday, August 07, 2000 6:58 AM
To: PKIX-List
Subject: Digital Signatures - Legal Advice Wanted

Hi,
I am working with an e-commerce standard that features server-based,
organization-signed orders.

However, server-based, organization-oriented digital signatures do
currently not, to the my knowledge,
have explicit support in any legal system.  How to solve this?  One
way (the current one) is to state
in separate agreements between the trading partners, that you will
stand by these signatures in court.

I wonder if there could be a more general solution like: A company
officer digitally signs (using a personal
certificate), a document where he/she states that signatures
associated with a certain trading partner
certificate are to be considered as legally binding from the company's
point of view.
Such a document is preferably published on the company's home-page for
easy reference.

regards
Anders Rundgren

---

From: "Bob Jueneman" <[email-masked]>
Date: Mon, 07 Aug 2000 09:29:09 -0600

Anders,

I am not an attorney (IANA), but I would suggest that Adrian
has expressed a generally conservative view that would constitute
good defensive legal practice, but may leave the impression that 
without going through all of these steps, the transaction would
presumably  not be valid.

But there is a different danger, and that is that transactions that 
are digitally signed using a key that is apparently under the control 
of the corporation or organization, might very well be held to be binding
even without an explicit confirmation.

In other words, I would suggest that Adrian's recommendations
would almost certainly be sufficient, but they may not be necessary.

Even though both the US and Australia are Common Law countries,
there may be differences in the degree to which what Adrian refers to 
as ostensible authority is accepted.  My understanding is that in the US,
the concept is fairly widely applied, in order to facilitate commerce.

The closest analog I can think of to the corporate digital signature 
is the mechanical signature plate that is used to sign corporate checks.
Yes, because of the paper world precedents, the signature is a 
facsimile of the treasurer's manual signature, and the words on the paper
indicate that he is causing his signature to be affixed to that check
as a agent of the corporation.

But do you think that any recipient of such a check actually bothers to 
verify that the signature really is that of the treasurer, or that the treasurer
has been authorized to sign checks by the Board of Directors?  No way!

In simple language, apply the duck test:

If something looks like a duck, walks like a duck, and quacks like a duck,
it probably is a duck.  

In the case of a check, it was preprinted with the name of the corporation,
it was presumably tendered as a result of some consideration, debt, or
other obligation (it didn't just fall out of the sky), and to all intents and purposes
it appears to be in order.  Reliance on that treasurer's ostensible authority
would certainly be quite reasonable.  (Note that there is no claim being made that
the check was a forgery, which would be a different matter.)

So if I launch my browser to www.amazon.com, I see all sorts of stuff appear 
on my screen that would be consistent with the fact that I was connected to 
amazon, and the lock icon confirms that an SSL session has been established
with a server, on which a private key has apparently been installed that corresponds
to a public key certificate issued by a reputable CA (one whose root I have accepted),
then I have every right to believe that I am communicating with a server that is 
controlled by amazon.

Granted, an SSL connection does not provide nonrepudiation for a particular transaction.
But supposing that I enter my credit card number or other personal information over that
session, and later I can establish that that information was not handled properly.

Could I sue amazon for not protecting my information adequately, and be successful?
Almost certainly, even without the www.amazon.com certificate.  Certainly no judge in the
US would dismiss such a suite because I failed to provide satisfactory evidence that
the Board of Directors of amazon had in fact properly authorized the IT department to 
acquire a certificate, set up a server to conduct business, etc.

In this case, it sure sounds like a duck.

I suspect that your server-based organizational orders would fall into the same situation.
And in particular, once the first such transaction has been accepted without complaint, 
it is all downhill from there, since the commercial practice would then be increasingly 
well-established.

Regards,

Bob

>>> Adrian McCullagh <[email-masked]> 08/06/00 03:00PM >>>

Dear Anders

I hope this is helpful.

Adrian McCullagh

Ph. D. Candidate

Hi,

regards
Anders Rundgren

---

From: Tony Bartoletti <[email-masked]>
Date: Mon, 07 Aug 2000 11:20:42 -0700

>signing as an agent and as such is attempting to bind the principal

(Please correct me, Anders, if I am mistaken, but) I believe the
issue is a little different than Adrian supposes.

Rather than have a (company) individual sign on behalf of
"the company", I believe that the issue is whether a company
(ok, an individual acting on behalf of the company if you must)
can hold "customer's keys" and apply "customer's signatures",
given some trail of evidence that the customer, on a case-by-
case basis, has authorized that their signature be affixed to
a given transaction.

The primary goal being to keep the customer's "secret keys"
in an environment more secure than the customer may be expected
to maintain.

(The legal precedent for this might be "power of attorney"?)

If I'm wrong ... nevermind :)

___tony___

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Tony Bartoletti 925-422-3881 <[email-masked]>
Information Operations, Warfare and Assurance Center
Lawrence Livermore National Laboratory
Livermore, CA 94551-9900

---

From: "Anders Rundgren" <[email-masked]>
Date: Mon, 7 Aug 2000 22:37:48 +0200

Tony,
<snip>

>in an environment more secure than the customer may be expected

More or less.  Actually all authorized intranet users could then indirectly use
the "company cert/key" for things like orders and payments.  This simplifies
CA trust-issues considerably as company certs (unlike "employee/role/attribute"
certs) are suitable for TTP issuing which IMO is required for global e-commerce. 

Anders

---

From: Adrian McCullagh <[email-masked]>
Date: Tue, 8 Aug 2000 06:24:50 +1000

Dear All
 
I agree with Bob's analysis.   For a non lawyer Bob usually hits the
legal target with accurate precision.
 
My previous comments were generally conservative but as I am  lawyer
practising in this area I view things with from the position of:  - 
"what can go wrong in a legal sense".   I agree with Bob that through
a course of trade such communications will certainly have a strong
evidential bearing upon any case and thus the issues may be "downhill"
from there. 
 
But one transaction without complaint may not be sufficient.  It may
take a number of transactions without complaint before a course of
trade can be established.  If the transaction is not insubstantial
then my conservative approach is from a risk management point of view
probably the safest position to take.

Adrian McCullagh 

level 39 
Central Plaza 1 
345 Queen Street 
Brisbane Australia 4000 

Ph. D. Candidate 

- -----Original Message-----
From: Bob Jueneman [mailto:[email-masked]]
Sent: Tuesday, August 08, 2000 1:29 AM
To: [email-masked]; [email-masked];
[email-masked]
Subject: RE: Digital Signatures - Legal Advice Wanted

Anders,

But there is a different danger, and that is that transactions that 
are digitally signed using a key that is apparently under the control 
of the corporation or organization, might very well be held to be
binding
even without an explicit confirmation.

Even though both the US and Australia are Common Law countries,
there may be differences in the degree to which what Adrian refers to 
as ostensible authority is accepted.  My understanding is that in the
US,
the concept is fairly widely applied, in order to facilitate commerce.
 
The closest analog I can think of to the corporate digital signature 
is the mechanical signature plate that is used to sign corporate
checks.
Yes, because of the paper world precedents, the signature is a 
facsimile of the treasurer's manual signature, and the words on the
paper
indicate that he is causing his signature to be affixed to that check
as a agent of the corporation.
 
But do you think that any recipient of such a check actually bothers
to 
verify that the signature really is that of the treasurer, or that the
treasurer
has been authorized to sign checks by the Board of Directors?  No way!

If something looks like a duck, walks like a duck, and quacks like a
duck,
it probably is a duck.  
 
In the case of a check, it was preprinted with the name of the
corporation,
it was presumably tendered as a result of some consideration, debt, or
other obligation (it didn't just fall out of the sky), and to all
intents and purposes
it appears to be in order.  Reliance on that treasurer's ostensible
authority
would certainly be quite reasonable.  (Note that there is no claim
being made that
the check was a forgery, which would be a different matter.)
 
So if I launch my browser to www.amazon.com, I see all sorts of stuff
appear 
on my screen that would be consistent with the fact that I was
connected to 
amazon, and the lock icon confirms that an SSL session has been
established
with a server, on which a private key has apparently been installed
that corresponds
to a public key certificate issued by a reputable CA (one whose root I
have accepted),
then I have every right to believe that I am communicating with a
server that is 
controlled by amazon.
 
Granted, an SSL connection does not provide nonrepudiation for a
particular transaction.
But supposing that I enter my credit card number or other personal
information over that
session, and later I can establish that that information was not
handled properly.
 
Could I sue amazon for not protecting my information adequately, and
be successful?
Almost certainly, even without the www.amazon.com certificate. 
Certainly no judge in the
US would dismiss such a suite because I failed to provide satisfactory
evidence that
the Board of Directors of amazon had in fact properly authorized the
IT department to 
acquire a certificate, set up a server to conduct business, etc.

I suspect that your server-based organizational orders would fall into
the same situation.
And in particular, once the first such transaction has been accepted
without complaint, 
it is all downhill from there, since the commercial practice would
then be increasingly 
well-established.
 
Regards,
 
Bob

>>> Adrian McCullagh <[email-masked]> 08/06/00
03:00PM >>>
- -----BEGIN PGP SIGNED MESSAGE-----
Hash: SHA1

Dear Anders

I hope this is helpful.

Adrian McCullagh

Ph. D. Candidate

- - -----Original Message-----
From: Anders Rundgren [ mailto:[email-masked]]
Sent: Monday, August 07, 2000 6:58 AM
To: PKIX-List
Subject: Digital Signatures - Legal Advice Wanted

Hi,

regards
Anders Rundgren

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---

From: "Bob Jueneman" <[email-masked]>
Date: Mon, 07 Aug 2000 15:16:12 -0600

And I completely agree with Adrian's comments, at least from the 
perspective of what I would do if I wanted to be sure that a 
given transaction WOULD be binding.

But as an attorney once told me when I proposed using PKI 
some 7 or 8 years ago, "I only have two concerns with respect to
this new technology.  The first is that it won't be binding when 
I want it to be. And the second is that it will be binding when 
I don't want it to be!"

So if you want to be sure that a signed transaction will almost surely
be binding, do what Adrian suggests.

On the other hand, if you are concerned that one of your employees 
might set up a server, create or go get a certificate, and start signing code 
or who knows what, and that his actions MIGHT be held to be
binding against your company without your CFO or General Counsel 
even being aware of an obligation,  then you might well have reason 
to worry, and you might want take positive steps to bring that
situation under control.

Murphy's law hasn't been repealed, and the one time that something
will be found to be binding is when you least want it to be!

Bob

>>> Adrian McCullagh <[email-masked]> 08/07/00 02:24PM >>>

Dear All

 

Adrian McCullagh 

level 39 
Central Plaza 1 
345 Queen Street 
Brisbane Australia 4000 

Ph. D. Candidate 

Anders,

 

 

 

 

 
Regards,
 
Bob

Dear Anders

I hope this is helpful.

Adrian McCullagh

Ph. D. Candidate

Hi,

regards
Anders Rundgren