Are electronic signatures legally binding?

What makes an electronic signature legally binding?

In 2000, the U.S. federal government passed the Electronic Signatures in Global and National Commerce Act. The E-Sign Act confirmed that legally binding documents can use e-signatures if all parties choose to sign digitally. This ruling applies across the U.S.

For an e-signature to be considered legal or to hold up in court, the signature should have the following:

• A digital seal that can track its origins.
• Consent from all parties to do business electronically.
• Compliance with relevant laws associated with the document and its intent.
• Integrity of the signed document and its security.
• An audit trail back to the original signer.
• Strong authentication methods to confirm signers' identities.

People find e-signatures in their everyday lives when accepting terms and conditions on apps, e-commerce websites and computer software. E-signatures also appear in digital forms on webpages, PDFs and other intake forms that require users to sign their names. Many people also associate vendors like DocuSign or Adobe Sign with e-signatures, as they have assisted with the transmission of documents that require e-signatures.

Regulations for e-signatures

The most well-known regulations for e-signatures are the E-Sign Act, UETA and eIDAS.

• The E-Sign Act. This act gives electronic signatures the same legal standing as the traditional ink signatures on paper. This legal recognition makes all e-signatures legally binding, as long as they have the proper disclosures and all parties' consent, and the businesses retain the signed digital records for future reference.
• UETA. The Uniform Electronic Transactions Act (UETA) was established a year earlier than the E-Sign Act in 1999. It provided a framework for electronic transactions with states and addressed the use of signatures for legal documents, with the exceptions of wills, trusts and aspects of family law.
• eIDAS. The EU established electronic identification, authentication and trust services (eIDAS) in 2014 to address the framework for electronic identification and e-signatures.

These regulations provide the legal framework for using e-signatures and highlight what is legally acceptable and what is not.

Concerns around e-signatures

Concerns around e-signatures have raised some alarms for professionals. These concerns include the following:

• Potential fraud, if one party signs as a different party.
• Phishing attacks, which can result in unauthorized access and misuse
• The cost of implementation.

Organizations should take precautions to avoid fraud and ensure the successful implementation of digital signatures.

Some of the steps to take include the following:

• Use only approved e-signature tools or portals.
• Make sure users enable two-factor authentication.
• Evaluate the different subscription and cost models for e-signature software that fit the needs of the organization.
• Only trust signed documents that are expected, not documents that show up out of the blue.
• Check compliance requirements around the documents to ensure acceptance of e-signatures.

E-signatures continue to support document digitization that some businesses still struggle to handle. While not every organization is rushing to implement e-signatures across operations, this shift brings various benefits.

Reda Chouffani runs a consulting practice he co-founded, Biz Technology Solutions Inc., and is CTO at New Charter Technologies. He is a technology consultant with a focus on healthcare and manufacturing, cloud expert and business intelligence architect who helps enterprises make the best use of technology.