In today’s professional environment, electronic signatures are fast becoming a fundamental digital tool. Many individuals and companies alike would like to see the old paper processes they grew up with evolve into a more intuitive and efficient digital system, and electronic signatures provide just such an opportunity.
Electronic signatures are simply a secure way of ensuring the authenticity of a document or transaction sent electronically.
The days of handwritten signatures and putting wet ink-stamped seals on important documents may soon be over for good, as electronic signatures offer many significant advantages to both businesses and professional individuals.
To help you better understand what electronic signatures are, as well as how they can benefit your business or career, we have put together a list of the most common questions asked about them.
What are electronic signatures?
Electronic signatures, also known as digital signatures or e-signatures, are digital equivalents of handwritten signatures. They are most commonly used to verify the authenticity of a document, file or transaction sent electronically. This is done through an electronic method that offers authentication and integrity without compromising the privacy of users.
Moreover, the Electronic Signatures in Global and National Commerce (E-SIGN) Act defines electronic signatures as “an electronic sound, symbol, or process attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”
What are examples of electronic signatures?
The most common example of electronic signatures are signatures affixed to electronic documents, be it in .pdf, .txt, or other electronic document formats.
Moreover, in today’s increasingly digitized environment, many forms of electronic signatures exist. They include a variety of biometric signatures, such as voiceprints or retina scans, which are used for high-security applications where manual authentication is not practical.
Likewise, there are cryptographic digital signatures that make use of mathematical algorithms to develop a unique signature key that can be linked back to a user’s private key or other identity credentials. The more complex and secure the signature is from a technological perspective, the better.
What are the legal requirements for electronic signatures in the United States?
In the United States, based on the E-SIGN Act, there are four major requirements: Intent, Consent, Accuracy, Retention.
Intent
The signing party must intend to sign the contract, order, or agreement. This is proved by showing that they were aware of its terms, and affixed their electronic signature willfully. Furthermore, if a non-electronic equivalent of a signature exists (such as for faxed documents), then those should be used instead.
Consent
Consent must be obtained from both parties before the signing takes place. This means that any pre-existing agreements on which the document is based do not count as consent unless it states so specifically in the document itself.
Accuracy
The data content of any electronic record or signature must remain intact and unaltered. Any changes made should be detectable and recognizable as such by all involved parties.
Retention
The data content must be accessible to all parties for the duration of the agreement, as well as any litigation that may arise from it. Additionally, each party should have access to any previous versions of the document which they were a part of; these are known as ‘non-repudiation’ records.
Are electronic signatures legally binding in the United States?
Yes. The Electronic Signatures in Global and National Commerce (E-SIGN) Act, along with the Uniform Electronic Transactions Act (UETA), establish that electronic signatures are legal under US federal law, provided that they meet the four requirements: Intent, Consent, Accuracy, Retention. Moreover, under the E-SIGN Act, electronic signatures are binding for business-to-business contracts. In addition, specific activities, such as wills and real estate documents, are governed by state laws that may allow electronic signatures.
Are electronic signatures and digital signatures the same?
Not exactly. A digital signature is a subset of electronic signatures and uses cryptographic functions to prove authenticity. On the other hand, electronic signatures are legally binding, while digital signatures can be used for non-legal purposes such as authentication or the creation of hash values. In either case, though, they both require a unique identifier that can be linked back to an individual who holds the relevant private key.
How can electronic signatures be used in international transactions?
Electronic signatures are extremely useful when conducting business across borders, as contracts remain enforceable under them even if a given region was not the intended primary audience. This is because a contract cannot be denied validity based on where it was signed – only where it is being enforced. Moreover, there is no need to seek out and secure notarization of contracts from a formal authority within the signing country.
There are important things to keep in mind when using electronic signatures abroad. First, it is vital that both parties understand that an electronic signature does not replace the legal requirements which must be fulfilled for any valid contract, such as intent, consent, accuracy, and retention. Therefore, if e-signatures are used incorrectly, they may end up creating an invalid contract with unexpected consequences. Second, while electronic signatures can meet most countries’ legal needs, some others, particularly developing nations, still do not have laws that specifically address them. Most cases like these will simply fall back on existing paper-based norms; however, this should still be researched.
Are e-signatures likely to be forged?
E-signatures are no more likely to be forged than wet-ink ones. Their authenticity cannot be undermined on the basis of where they were signed – only where they will be enforced or brought to bear if a dispute arises. Instead, e-signatures are only as reliable as the originator’s reputation. Nonetheless, electronic signatures have earned the trust of users because they are easy to use, self-authenticating, and convenient. Advanced technologies such as biometrics and electronic agents used in combination with advanced cryptography create an ultra-secure environment for signing.
How do you opt-in to use e-signatures?
In practice, there are no specific ‘opt-in’ laws for signing documents electronically. However, the use of electronic signatures is governed by specific contract laws. In the United States, some of the laws that govern the use of electronic signatures are the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and International Commerce Act (E-SIGN).