In the digital age, pen and paper are out. Electronic signatures are the go-to method for signing agreements. But are electronic signatures legally binding in the U.S. and around the world? Let’s dive in to learn more about electronic signatures’ legal validity.

What is an electronic signature?

An electronic signature or an e-signature is an efficient and straightforward way to indicate approval or consent on a digital document. It is a verifiable and secure virtual process and replaces a handwritten signature. In simple words, it demonstrates a person’s agreement through electronic means. 

How are electronic signatures created? 

E-signatures use various solutions and technologies to electronically make signatures, such as PKI-based signatures to simple signature images attached to an electronic document. 

Some of the capturing methods include: 

• Signing with a finger on smart devices
• Clicking “I Agree” on websites
• Typing a PIN or name on online forms
• Using e-signature solutions such as eSign, DocuSign eSignature, etc

Is e-signature legal? 

The concept of electronic signature is not new. It has been around for quite a while. Many nations accept it. Across the globe, billions use it daily for varied purposes. If you are still in doubt about ”is electronic signature legal”, then the short answer is – YES, it is legal. 

An e-signature creates a binding and enforceable contract between the parties. In fact, it is easier and more secure than conventional paper-based signatures. Therefore, the chances of forgery are less. Many companies across the globe, irrespective of their size, prefer it due to this feasibility. 

What does a valid electronic signature have? 

• A digital seal that can track its origination
• An audit trail that links back to the original signer
• Robust authentication methods that confirm a signer’s identity

Is it valid in the U.S.?  

In 2000, the U.S. federal government passed the Electronic Signatures in Global and National Commerce Act (ESIGN). This act, along with the Uniform Electronic Transactions Act (UETA), authenticates that e-signatures are legally binding if all parties prefer to sign digitally.

Do all the states in the U.S. validate electronic signatures?

Yes, electronic signatures are valid in all states. They carry the same legal status as their counterparts – handwritten signatures. The same applies in the majority of European nations. 

How are electronic signatures enforced legally?

First and foremost, an e-signature must have strong authentication, tamper sealing, an audit trail, and other security features to have legal authority. It will have stronger court admissibility than a simple scanned image of a signature on a PDF or a wet signature if it has all these.

Typically for a wet signature, attribution and validity are confirmed by collating a signature copy and presenting affirmation from handwriting experts or witnesses who were present at the time of signing. This traditional validation method isn’t only time-consuming but is also expensive. 

With electronic signatures, the scenario is different. They remove the chances of human error and automate things with the help of audit trails and other data capturing processes. They can easily confirm the authenticity and resolve signature conflicts in state and federal courts. 

The courts consider all the technical processes involved in making an e-signature to enforce it legally. 

What kinds of documents can be electronically signed?

We can use electronic signatures for almost anything and everything, including personal and business purposes. Many people use this format to sign transactions and agreements. 

A few of the documents that are eligible for electronic signature include:

• Offer letters such as new hire paperwork and other employee policy updates
• Non-disclosure agreements such as sales contracts and statements of work
• Purchase orders and service agreements
• Accounts opening paperwork
• Real estate agreements 
• Insurance policies and claims
• Patient intake agreement forms
• Student services and others

What kinds of documents cannot be electronically signed?

Though we say everything and anything, there are some exceptions. The National Telecommunications Information Administration (NTIA) has outlined some rules where electronic signatures are not legally valid. These scenarios are: 

• Testamentary trusts and wills
• State laws related to adoption, divorce, or other family matters
• Official court documents or court orders
• Cancellation notice of utility serves
• Notice of foreclosure, eviction, or default for a primary residence of an individual
• Termination notices for life or health insurance policies
• Recall notices for items that have a sizeable risk to safety or health
• Any legal document that requires transporting hazardous materials such as pesticides or other toxic substances

However, despite the above information, it is always better to refer to the laws in your jurisdiction.

Risks of electronic signatures:

• Forgery – although the chances are less, it cannot be overlooked. Identity theft or fraud can happen with conventional paper-and-ink signatures or wet documents. The same applies to e-signatures as well. E-signatures must be secured with 2FA (two-factor authentication) and password protection to lessen this chance.
• Fraud – Fraud with e-signed documents is not common, but this too may happen. A person can modify a digitally signed paper. Hacking of files and software for duplicating the e-signatures are the perfect examples. To prevent this, one must send the document to be signed for the person directly instead of sending it through another person. Besides, there must be multiple authentication factors and a secured email platform.     
• Exclusions – some documents, such as wills, deeds, property transfers, etc., need third-party witnesses while signing. All such records are not signed electronically, and in rare cases, even if done, it is of no use and can easily be duplicated. 

Tips to avoid misuse of electronic signature:

Mitigating the legal risks associated with electronic signatures and avoiding court hurdles can only happen when they are not misused. Organizations and individuals can avoid electronic signatures’ misusage by following the below methods: 

• Make use of only approved e-signature portals and tools
• Make sure that users have two-factor authentication
• Open and download the signed documents that you are expecting to get.

Latest electronic signature trends: 

Irrespective of industry size and purpose, e-signatures are widely used. Here is what the future of e-signatures looks like:

• E-signature is essential and an expected procedure for all, including individuals and organizations. As per a survey in 2021, 95% of companies are either using it or planning to use it soon. By 2027 the size will be US$20.4 Billion. Currently, the U.S. is followed by China as far as the e-signature market is concerned.
• E-signature will no longer be a team-particular necessity but a companywide need. As of now, legal and I.T. teams stand at the forefront in using electronic signatures.
• New laws across the globe are also encouraging the usage of e-signatures. The need for in-person witnessing of some documents like affidavits and property wills is slowly changing, whereas, in the past, it was a mandate. Thirty-five states in the U.S. allow remote witnessing even for such document signatures. Australia is also on the same path. Remote witnessing will increase over time. 
• Electronic signatures will soon rope in new functionalities instead of just remote witnessing and inking electronic signatures digitally. The process will have more digital tools such as chats, videos, etc., enabling and stabilizing end-to-end workflow digitally. Revisions and collaborations will become more virtual and transform internal and external agreement signing procedures with such a method.
• The touchless experience will skyrocket with the usage of electronic signatures. According to McKinsey, there’s a 20% increase in contactless operations, which means the electronic signatures necessity will shoot up.
• With the wide usage of electronic signatures, agreement technologies will consolidate. Agreement (which means signature here) has both before and after procedures. There will be more amplified tools in the electronic signature software that will standardize these procedures.  

Conclusion:

To conclude, electronic signatures are valid in the majority of the countries and for the majority of agreements. Here, you can learn more about electronic signatures’ legal matters, e-signature uses, etc.