Are Electronic Signatures Legally Binding?

Legal e-signatures are rapidly transforming the way we get documents signed. Forget the days of printing, scanning, and mailing – they offer a faster, more convenient, and surprisingly secure alternative to traditional paper methods.

Chances are, you've already encountered e-signatures in your life. The pandemic accelerated this trend, as more businesses embraced digital solutions. A key statistic that underscores the security of these platforms is that 83% of current e-signature users report increased security as the most common benefit of the technology​​. More than 63 percent of Americans now believe that companies lacking eSignature options are behind the times.

With a multitude of benefits like improved efficiency, enhanced security, and streamlined workflows, paperless operations are becoming increasingly popular. This trend positions e-signatures as a clear winner for growing businesses.

In this blog post, let’s unlock the secrets of e-signatures! We'll answer questions like what makes electronic signatures legal, what documents can be signed electronically, and how robust security measures prevent tampering. But first, let's understand what e-signatures are and the many benefits of it.

What is an electronic signature?

An electronic signature, often shortened to e-signature, is a digital way to indicate your intent to agree to the terms of a document. It functions similarly to a traditional handwritten signature but exists electronically on a digital document.  Anyone can electronically sign a document on devices such as desktops, laptops, tablets, and mobiles.

Beyond convenience, e-signatures offer a secure and versatile alternative to traditional "wet" signatures. They are legal and enforceable under regulations like the E-SIGN Act in the US, making them a reliable option for various agreements. In our day-to-day lives, we encounter them frequently when signing everything from sales contracts to job offers and invoices.  

In practice, an electronic signature can take many different forms, such as clicking an "I Agree" button, typing your name in an online form, signing with your finger on a mobile device, or using a dedicated e-signature platform.

What makes an electronic signature legal?

Concerns about the legal validity of electronic signatures are a thing of the past. E-signatures have been legalized in many countries for decades now.

 In the United States,  in the year 2000, the federal government passed the Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA) which confirms that electronic signatures constitute legally binding documents if all parties choose to sign digitally. 

In the  United Kingdom, a similar law called the Electronic Communication Act  was passed to legalize electronic signatures. 

Similarly, the European Union also recognizes electronic signatures under the Electronic Identification and Trust Services Regulation. It was established to standardize the rules around electronic signatures, further promoting their adoption.

What makes an Electronic Signature legal?

We've established that e-signatures hold legal weight, but what makes them truly binding?  Here are the requirements that ensure an e-signature is valid and legally binding to all parties involved.

1. Intent to sign: E-signatures must demonstrate the signer's clear intention to agree to the document's terms. This can be achieved through various methods, such as clicking "I Agree," using a digital certificate, or entering a unique code.

2. Consent of all parties: All parties involved in the document must agree to use e-signatures. This consent can be obtained electronically through the signing platform itself.

3. Verifiable signature attribution: E-signature platforms maintain a secure audit trail that links the e-signature to the signer's identity. This audit trail typically includes details like timestamps, IP addresses, and other information that helps demonstrate the signer's involvement.

4. Secure signature protection: E-signatures should be securely attached to the document and not stored separately. Signed documents should be stored in an encrypted environment and access should be restricted to authorized parties.

5. Copies for signers: After signing, a copy of the signed document, including the e-signature, should be sent to the signer for their records.

6. Record retention system: E-signature platforms should have a system for securely storing signed documents and ensuring their retrievability when needed.

7. Opt-out option (Optional):  While e-signatures are gaining widespread acceptance, some legal jurisdictions or specific situations might still require the option to opt out and use a wet signature on a paper document.

Why should I use electronic signatures? 

E-signatures offer a multitude of benefits for businesses and individuals alike. But let's take an example to truly understand how they can revolutionize the signing process.

Let’s imagine a scenario where you are an Account executive and you’re trying to close a critical deal. For weeks you’ve done countless calls, emails, and presentations that have finally culminated in a final agreement. Except, there's one last hurdle: getting your client's signature. The problem? They're located halfway across the country.

Traditionally, this would mean printing the contract, meticulously reviewing it, and then rushing to a courier service to overnight it to your client. And, hoping they receive it promptly, sign it, and send it back just as quickly. This process is time-consuming and introduces 

Unnecessary delays and potential mishaps.

This is where the magic of e-signatures comes in. With a few clicks, you can upload the contract to a secure e-signature platform. Your client receives an email notification with a link to review and sign the document electronically.

Now, let's explore the many benefits they offer:

• Reduced paper usage: By adopting e-signatures businesses can significantly reduce their reliance on paper. According to The World Counts,  paper accounts for around 26% of total waste at landfills. Just not that, paper production itself entails cutting millions of trees and puts enormous pressure on energy and water. E-signatures offer a powerful solution to minimize paper usage and contribute to a more sustainable future for our planet.

• Enhanced security: Most e-signature platforms use encryption and authentication features to protect documents from unauthorized access or alteration. They typically comply with industry-specific security standards. 

• Digital audit trails:  E-signatures create a tamper-evident digital record of the entire signing process. This includes who signed the document when they signed it, and their IP address. This detailed audit trail adds authenticity to the process.

• Improved document workflow: With e-signatures, businesses can streamline and speed up the entire document workflow. On average, obtaining a physical signature takes 5 days involving printing, scanning, mailing, and waiting for physical copies to return. In contrast, e-signatures can get documents signed in just 37 minutes. With just a few clicks the whole process can be completed.  It helps businesses save time, doesn't require anyone to be physically present, and keeps the signing process moving smoothly. Additionally, e-signatures eliminate the need for physical document management, saving valuable office space and reducing the time spent searching for signed copies.

• Easier document management: E-signature platforms integrate seamlessly with document generation systems, allowing for easy creation, storage, search, and retrieval of signed documents. This not only reduces physical clutter but also streamlines your document organization process.

• Reduced costs and increased efficiency: Traditional wet-ink signatures often involve printing documents, mailing them back and forth, and potentially incurring courier charges. E-signatures eliminate these costs. Furthermore, e-signatures streamline workflows by eliminating the time spent printing, signing, and chasing physical signatures. This frees up valuable employee time, allowing them to focus on core business activities.

What types of documents can be signed using electronic signatures?

E-signatures are versatile enough to be used across various industries and are becoming the preferred method for signing documents electronically. 

Here are some examples of commonly e-signed documents:

• Business agreements: Contracts, proposals, NDAs, and other business agreements can all be electronically signed, streamlining deal closings and saving time.

• Employment documents: Offer letters, employment agreements, and benefits enrollment forms can be signed electronically, simplifying the onboarding process for new hires.

• Financial documents: Loan applications, account opening forms, and other financial documents can be e-signed, expediting approvals and improving customer experience.

• Real Estate documents: Leases, rental agreements, and closing documents can be signed electronically, facilitating faster move-ins and smoother property transactions.

• Healthcare forms: Patient consent forms, prescription refills, and other healthcare documents can be e-signed, improving efficiency and record-keeping within healthcare settings.

• Insurance documents: Policy applications, renewals, and other insurance documents can be signed electronically, streamlining the insurance process for both providers and clients.

• IT & Software documents: Software licenses, service level agreements (SLAs), and other IT-related contracts can be e-signed, expediting approvals and ensuring a smooth digital workflow.

When can e-signatures not be used in the US?

Certain types of insurance documents in specific jurisdictions might require a physical signature due to local regulations. It's always a good practice to consult with legal counsel if you have any doubts about the legality of e-signatures for a particular insurance document.

Here are some examples of documents that may require a handwritten signature in some US states:

• Wills and Testaments
• Marriage Licenses
• Birth and Death Certificates
• Real Estate Deeds in Some States
• Court orders or official court documents
• Family law documents (such as adoption papers or divorce decrees)
• Termination notice for health or life insurance policies

It's important to remember that these are just examples, and the specific requirements can vary by state.

What security measures do e-signature platforms offer to prevent tampering with e-signatures?

Leveraging e-signatures for your business can streamline workflows and boost efficiency. But with any digital solution, security is crucial. Choosing an eSignature solution with robust security and authentication measures ensures the integrity of your signed documents and provides peace of mind for all parties involved.

Consider the following key features when evaluating eSignature platforms: 

• Encryption: Look for e-signature platforms that utilize strong encryption algorithms to redact or encrypt the document's content during transmission and storage. This makes it extremely difficult for anyone to intercept or alter the document without detection.

• Certifications: For example, in the legal sector, platforms must adhere to standards such as the ESIGN Act in the U.S., which ensures that electronic signatures are legally binding. Popular e-signing platforms, comply with ISO 27001:2013, SOC 1 Type 2 and SOC 2 Type 2, PCI DSS, and the Cloud Security Alliance (CSA) Security Trust Assurance and Risk (STAR) program, ensuring that their services meet the highest levels of security and privacy best practices​.

• Multi-factor authentication: This is very common these days and offered by most e-signature platforms. Multi-factor authentication (MFA) goes beyond simple passwords. It requires users to enter an additional verification code, often sent via text message or generated by an authentication app when signing a document. This extra step helps prevent unauthorized access to signing accounts, even if someone manages to steal a user's password. 

• Audit trails: If the e-signature platform you choose offers an efficient audit trail system then you can easily capture information like who signed the document, when they signed it, and their IP address. It enables you to ensure accountability and a transparent signing process.

• Secure document storage: Ensure the e-signature platform you employ offers secure servers to store signed documents. These servers use robust security measures to protect against unauthorized access, data breaches, and other security threats.

How do e-signatures help with faster document generation and delivery?

The traditional document generation process often grinds to a halt when it comes to signatures. Once you have your document ready you have to scan it, print it, mail and then even wait for the signatures. E-signatures eliminate these tedious steps, offering a powerful solution that streamlines the signing process and accelerates the entire document generation and delivery cycle.

Here's how e-signatures accelerate document turnaround times:

Effortless routing and signing: As mentioned above traditional methods involve multiple steps to acquire e-signatures from relevant parties. With e-signatures, once documents are generated, they can be electronically routed to recipients for signing from any device,  significantly reducing turnaround times.

Real-time visibility and tracking: Most e-signature platforms offer real-time tracking functionalities. You can monitor the signing process and see where each document is in the workflow. For example, if a document is stuck waiting for a specific person's signature, you can proactively reach out to them and expedite the process. This proactive approach helps avoid delays and keeps the document moving forward.

Reduced delays and bottlenecks: E-signatures eliminate physical barriers and geographical limitations. Signers can review and sign documents electronically, regardless of location. This streamlines the signing process and removes potential delays caused by waiting for physical signatures.

Docupilot & Legal E-Signatures: How Does It Work

Document generation platforms like Docupilot empower businesses to create and deliver documents faster and at scale by using pre-defined templates and rules. It seamlessly integrates with various e-signature platforms. This means you can generate documents within Docupilot and then route them for immediate electronic signatures, all within a single, streamlined workflow. 

You can create custom templates using Docupilot’s user-friendly template builder and use them to generate new documents. It automates associated repetitive tasks such as data entry, formatting, collaborating easily on template design, and more. Docupilot is widely used to generate documents like sales orders, reports, proposals, agreements, invoices, and more.

Frequently Asked Questions (FAQs):

1.Are e-signatures legal and enforceable in court?

Yes, e-signatures are legal and enforceable in most countries, including the United States and the European Union. Specific regulations may vary by jurisdiction. It's always recommended to consult with legal counsel for situations involving complex legal matters or international agreements.

2.What evidence is required to prove the validity of an e-signature?

Most e-signature platforms employ various methods to ensure the validity of a signature. They offer features such as digital certificates, audit trails, and tamper-evident seals. 

3.What types of documents can be signed electronically?

A wide range of documents can be signed electronically, including contracts, agreements, NDAs, proposals, invoices, and more. However, some exceptions might exist for certain highly regulated industries or specific legal requirements in certain jurisdictions.