Are electronic signatures legally binding?

Let’s be honest: understanding the ins and outs of electronic signature legality probably isn’t something you’re excited to do in your spare time. We get it.

Like anything that deals with laws and regulations, there can be quite a bit of complexity, nuance, jargon, and dense documents. It’s not exactly light reading.

But even so, familiarizing yourself with the legality of eSignatures is crucial as a business owner. If you’re going to use this technology in your own business (which we think is smart, because eSignatures are super quick, easy, and secure), you want to do it right and get the peace of mind that all of your signed documents will hold legal water.

The good news is that you don’t need a law degree to get there because we have answers to all of your burning questions about electronic signature legality right here.

Are eSignatures legally binding?

Let’s start with the biggest question first: Are digital signatures actually legal? Or are they nothing more than convenient imposter signatures?

The answer to this question is actually surprisingly straightforward: Electronic signatures are legally binding. For nearly all intents and purposes, you can think of them as exactly the same as traditional, handwritten signatures (commonly called “wet signatures” as a reference to the ink used to write them).

In short, if you can use a handwritten signature somewhere, then the general rule is that a digital signature will be just as legal and adequate. However, every rule has its exceptions, and to avoid any legal grey areas, eSignature tools, including Papersign, prefer to use the term "compliant" to describe their services.

What do you need to make an eSignature legal?

With that said, not all eSignatures are created equal. For a digital signature to actually take the legal place of a traditional signature, there are a few important boxes to check during the signing process.

1. Intent

First things first, the signer needs to demonstrate a clear intention to attach their signature to a document. That might sound complicated, but the signer shows intention by willingly signing their name—whether they type it or draw it. That’s it.

Basically, forcing someone to sign against their will means the signature probably won’t hold up (but you wouldn’t do that anyway, right?).

2. Consent

Both parties also need to provide explicit consent to sign the document digitally. This is typically done with a checkbox or button at the top of the document where signers can quickly consent to electronic records.

3. Audit trail or identity verification

Security is understandably a big concern associated with digital signatures. How can you tell that the person signing the document is the real, correct person?

Most digital signature software uses a technology called Public Key Infrastructure (PKI). We’ll save you the eye-glazing tech lesson, but essentially this will generate a digital certificate during the signing process. This certificate uses encryption and algorithms to verify the signer’s identity as well as the authenticity of the document that they’re signing.

Many eSignature platforms (including Papersign) also offer audit trails. This is essentially a detailed log of important information about the signer and the process—including when it was signed, verification of who signed it, and any changes that were made to the document.

4. Opt-out

If people don’t want to use digital signatures, they have the right to opt out. To be totally legally compliant, your eSignature platform should give signers the chance to pass on the electronic signing process and receive real, paper documents to sign instead.

Put simply, they shouldn’t be forced into signing digitally if they don’t want to go that route.

5. Signed copies

Once both parties have digitally signed the document, they both should receive a completed, signed copy to keep for their own records. That’s another benefit of using reliable eSignature software—it will deliver those signed copies automatically.

6. Record retention

And speaking of keeping documents for your own records, that’s an important (and often overlooked) piece involved in the legality of the digital signing process.

The ESIGN Act in the United States (don’t worry—we’ll talk more about it in a minute) specifically states that businesses are responsible for maintaining accurate electronic records. So, you need to hang on to all of your signed documents, just in case you need to return to them later.

How long? While the retention of various business documents could range anywhere from one to seven years, it’s smart to hold onto any signed agreements or contracts indefinitely. Fortunately, your eSignature software will do that for you, so there’s no need to fill your office with towers of filing cabinets.

What rules and regulations apply to eSignatures?

Because eSignatures hold just as much legal water as traditional signatures, they aren’t without their fair share of regulations—and these can vary based on your location.

Various countries have passed legislation that establishes and reinforces the legal standing of digital signatures, including:

• ESIGN Act in the United States, states that any law with a requirement for a signature may be satisfied by an electronic signature
• E-signature Directive in the European Union
• Electronic Transactions Act in Australia and New Zealand

You don’t need to read through every last paragraph of those inevitably dry documents (unless, of course, that’s something you want to do). The gist is that they all confirm electronic signatures are legal in those countries, provided you check the boxes we mentioned in the previous section.

Are there certain documents you can’t use an eSignature on?

You knew it couldn’t be that cut and dried, right? In the vast majority of cases, you can think of digital signatures as exactly the same as traditional, handwritten signatures. If it’s acceptable to use a pen, then it should be acceptable to use a computer or other digital device.

However, there are a few exceptions where a handwritten signature is the only way to go. As the ESIGN Act explains directly within the law document, there are some instances when you’ll only want to use a traditional signature, including:

• Wills, codicils, and testamentary trusts.
• A State statute, regulation, or other rule of law governing adoption, divorce, or matters of family law.
• Court orders, notices, or official court documents required to be executed in connection with court proceedings.
• Notices for cancellation or termination of utility services.
• Notices of default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence of an individual.
• Notices for the cancellation or termination of health insurance or life insurance (this excludes annuities).
• Recall notices of a product or material failure of a product that risks endangering health or safety.
• Any document required to accompany any transportation or handling of hazardous materials, pesticides, or other toxic and dangerous materials.

You’ll also want to be careful with any document governed by the Uniform Commercial Code, a big set of laws that oversees and regulates commercial transactions in the United States, as there could be different signing nuances involved.

That list of exceptions might seem long, but all of the situations are pretty specific. For most of the signing needs involved with your business—like proposals and contracts—digital signatures will be more than adequate.

Take the guesswork out of eSignature legality with Papersign

Traditional signatures are clunky and time-consuming. But that doesn’t change the fact that they still feel reliable—you don’t have any doubts about whether you’re handling them right or if they’ll stand up to any legal scrutiny.

But, that’s no reason to default to the old standard. In the vast majority of cases, digital signatures are just as reliable as the old-fashioned version. They’re also easier, faster, and way more secure than scribbling your moniker on the bottom of a document.

Think that means you need to memorize the legal complexity of electronic signatures? Absolutely not. With the right eSignature software, all of the legal stuff is taken care of for you—without you needing to wade through any lengthy paperwork.

With simple workflows, encryption, audit trails, and robust security measures, Papersign has everything you need to streamline your signature requirements without sacrificing their credibility and authenticity. Use Papersign and you’ll end up with digital signatures that save you time and stress—not add to it.

Get started with Papersign for free today.

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