Electronic Signatures: How and When They Are Valid

________________
By Paige Zandri
| Contracts

E-Signatures

Most business and legal professionals are at least curious about (if not already using) electronic signatures to execute contracts. Those of you who have not yet migrated to e-signature may be concerned about whether using one is binding or enforceable. With the continued proliferation of digital technology in business and legal operations, ranging from execution of complex international contracts to managing a high volume of standard commercial lease agreements, you should know how and when using electronic signatures is good for your business.

Are Digital Signatures Valid?

Simply put, yes, digital signatures are valid and enforceable. As long as certain requirements are met, they have the same legal effect as their written equivalents. Like a traditionally signed contract, one of the most important elements of validity is the signing party’s intent to be bound. In addition to intent, keep these requirements in mind when considering whether an e-signature is legally valid:

  1. The parties must consent to the electronic signature. In a B2B context, consent can be circumstantial, but for consumers it must be affirmative.

  2. The process by which the signature was created must be recorded by the software used to create the signature.

  3. Records of the electronic signatures must be retained and available for accurate reproduction.

Understand that this does not give any special credibility or weight to electronic signatures. An electronically signed contract will face the same scrutiny in a court of law as would its paper counterpart.

What Cannot Be E-Signed?

For all of their convenience, e-signatures are lacking when it comes to documents that need an extra layer of identification, notarization, or one or more witnesses. Often, these documents involve a greater risk of fraud due to a false or forged signature. Wills, sworn declarations, and powers of attorney generally fall into this category. In the corporate setting, major business dealings or financial transactions may require a notarized document.

Whether To Use An Electronic Signature Service

Electronic signature services provide a variety of ways to simplify the signature process and improve document management. Sending a negotiated contract to be signed in mouse-drawn script is perfectly acceptable if both parties agree to it, but here are some other services that might make the process smoother:

  • Mobile applications that allow finger-drawn signatures via smartphones or tablets.

  • Cloud-based “sign and deliver” services which permit your company to easily store and retrieve agreements.

  • Software that works across business applications to provide seamless integration of documents.

Although pricing for these services varies, there are numerous options available for your organization’s particular needs. A few popular products often used by enterprises include DocuSign, DropBox Business, RPost, and Contractually.

The products and services available are designed to fit a wide range of needs – whether you have one important contract that needs to be signed or digital signatures are part of your everyday business. If your company regularly enters contracts that require digital signatures, it may be worth investing in a monthly user plan.

You may also be interested in...
Like what you're reading?
Sign up to get updates.