This article discusses electronic signatures, their types, the legal status in different regions, and the associated regulations and compliance requirements. It also provides a step-by-step guide on creating an electronic signature and highlights associated best practices.
The continued shift towards a digital future has led corporate organizations and individuals alike to seek more efficient and cost-effective tools, one of which is the electronic signature. An e-signature provides a simple and secure way to electronically sign documents such as contracts, forms, and agreements while eliminating the need to physically print and sign. This allows signers to transact documents remotely.
An electronic signature is a digital image of a person’s handwritten signature. It is used to sign electronic documents in order to confirm a signer’s identity, consent, and agreement to the terms of a document. Legally recognized in many countries, you can create an electronic signature with specialized software or through an online platform.
Electronic signatures are widely used in modern business environments due to their convenience, security, and environmental benefits. The ability to sign and send documents electronically without a physical ink signature has proven essential for companies that want to remain competitive in a world gravitating toward a remote work culture.
Why electronic signatures are essential:
Electronic signatures play a key role for individuals and corporate organizations for the following reasons.
Electronic signatures eliminate the need for physical paperwork in the document signing process, allowing for an immediate signature and a faster process overall. With electronic signatures, documents can be signed and returned electronically, even if the signers are in different locations.
Reduction of paper use
With the growing clamor for waste eradication, sustainability, and green business culture, limiting paper usage has become vital. Additionally, paper documentation can be lost, destroyed, or damaged, leading to operational challenges for organizations. All of these concerns can be addressed by adopting electronic signatures.
Electronic signatures, due to their encrypted nature and use of authentication measures, are more secure than their traditional counterparts (which can be forged with ink). For example, some platforms require signers to provide additional information, such as a photo ID or a unique code sent to their phone, to confirm their identity.
Electronic signatures can be attached from anywhere and at any time. This makes it easier for signers who are not physically present or have mobility disorders to sign the necessary document. Electronic signature technology is also relatively simple and easy to use, meaning there is no steep learning curve for signing documents.
Electronic signatures help businesses reduce overhead and increase productivity as they can operate remotely. They also eliminate messaging, printing, and storage fees.
Types of electronic signatures
There are several types of electronic signatures, each with its own level of security and typical use cases. The most common ones are presented in this section.
Simple electronic signatures
A simple or basic electronic signature is a direct equivalent of a handwritten signature. It can be anything from a written name or a scanned image of a physical signature to a checkbox. Signers can even use a stylus or their finger on a touchscreen device to create an image of their signature.
Although the easiest to use, simple electronic signatures lack the security features offered by their more advanced alternatives. Therefore, they are best suited for low-risk, non-confidential documents, such as signing internal memos, accepting website terms and conditions, or confirming online purchases.
Advanced electronic signatures
An advanced electronic signature offers additional layers of security by implementing authentication and verification protocols. These electronic signatures are based on public key infrastructure (PKI) technology, which involves a digital certificate issued to a person or organization and a biometric component to prove the identity of the signer.
With this type of electronic signature, people can sign documents with unique digital identifiers that include secure digital signatures and seals. An advanced electronic signature will meet most regulatory requirements in various countries and is therefore considered legally binding. It is often used for compliance purposes, such as signing contracts or financial documents.
Qualified electronic signatures
These are based on PKI technology and are backed by a digital certificate from a trusted certification authority. A qualified electronic signature provides the highest level of identity verification and security, requiring digital certificates that meet specific legal requirements. It is superior to an advanced electronic signature in that it verifies the identity of the signer and must be issued by a qualified trust service provider (QTSP).
A qualified electronic signature is often used in legal transactions and other high-risk transactions, such as confidential agreements or financial transactions. Complies with the most stringent regulatory requirements globally, including the European Union’s European Electronic Identity Recognition System (eIDAS) regulation.
Your choice of electronic signature type will be determined by the sensitivity of the document, regulatory compliance requirements, and the level of security required. Therefore, organizations must carefully evaluate their electronic signature needs and select the appropriate technology to meet their specific requirements.
Legal frameworks for electronic signatures
There are several laws and international conventions that have established common standards for electronic signatures in different jurisdictions. The legal recognition of electronic signatures secures commercial transactions and improves commercial relations between countries. These are some of the existing legal frameworks on electronic signatures.
The Model Law on Electronic Commerce of the United Nations Commission on International Trade Law (UNCITRAL)
This instrument was developed to promote the expansion of electronic commerce and the uniformity of legal frameworks related to transactions throughout the world.
United Nations Convention on the Use of Electronic Communications in International Contracts
This convention establishes standards for the use of electronic communications, including electronic signatures, in international contracts. It seeks to establish the use of electronic signatures, reduce barriers to international trade, and promote legal security in digital transactions.
Regulation of the European Electronic Identity Recognition System (eIDAS) of the European Union
This regulation establishes a legal framework for electronic identification, authentication, and signatures throughout the EU. Among other obligations, it establishes requirements for the use of electronic signatures, provides a coherent legal framework for their recognition in the EU, and creates a secure and interoperable environment for their use.
The US Electronic Signatures in Global and National Commerce Act (ESIGN Act)
This law legalizes electronic signatures and contracts in all US states and the District of Columbia. Provides a legal framework for electronic signatures and electronic records in the context of interstate and foreign commerce. It also recognizes the electronic signature as legally binding and admissible in court.
The Uniform Electronic Transactions Act (UETA)
The UETA outlines laws related to electronic transactions, including the use of electronic signatures. It seeks to establish legal equivalence between electronic records and their paper counterparts. The UETA recognizes electronic signatures as equivalent to handwritten signatures and establishes the legal scope of their use in various industries in all US states. It declares that an electronic signature is valid if it is “attributable to a person” and is ” intended to serve as a signature”.
The UETA does not replace existing laws that require a physical signature. Therefore, the UETA does not apply to wills, title transfers, and other documents that legally require a handwritten signature.
Personal Information Protection and Electronic Documents Act (PIPEDA)
PIPEDA is a Canadian legal framework for the protection of personal information in the context of electronic commerce, including the use of electronic signatures. This law describes the rules for the collection, use, and disclosure of personal information in commerce. Includes provisions for electronic signatures and transactions, recognizing their legal validity in certain circumstances, provided they meet the legal requirements for best practices for electronic signature use.
Singapore’s Electronic Transactions Act (ETA)
The Singapore ETA is a codified law that guides the use of electronic signatures in Singapore. Several countries and continents have their own ETAs. An ETA recognizes electronic signatures as legally valid and enforceable. Within its framework, an electronic signature is defined as any electronic sound, symbol, or process that is attached to or associated with an electronic record and is intended to represent the author’s signature.
The ETA provisions are also technology-neutral, meaning that any technology can be used as long as it meets legislative requirements. A key feature of this ETA is that it provides for the creation of a “secure electronic signature”, which is a digital signature backed by a certification authority recognized by the Infocomm Development Authority (IDA) of Singapore. A secure electronic signature is also admissible as evidence in court proceedings.
Compliance with current electronic signature laws is essential as they assure all parties that electronic signatures are legally valid and can be enforced in court if necessary.
Steps to create an electronic signature
Creating an electronic signature is simple and straightforward if done correctly. Below are six important steps to follow.
Choose an electronic signature provider
Do your research to find an e-signature provider with a reliable and secure platform that meets your specific needs.
Create an account
Sign up for an account with the e-signature provider of your choice. Typically, they will ask for your name, email address, and password.
Verify your identity
Depending on your provider, you may need to verify your identity before you can start signing documents electronically. This could involve providing government-issued identification or answering security questions.
Upload or create your signature
You can type your signature or use your computer’s mouse or touchpad to create a signature that looks like your handwritten signature. You can also upload a photo or scan your physical signature.
Upload a document
Once you have created a signature, you can begin signing documents electronically. This is done by uploading a document to your e-signature provider’s platform. While preparing a document to sign, some platforms allow you to add other required signers. You will need to enter your names and email addresses for verification and authentication purposes.
Sign the document
You can add your signature to the uploaded document by dropping or dragging your saved digital signature into the signature box or other space provided. After this, you can send the document to the original party or, if you created it, send it to other parties to have their signatures attached as well. If you do the latter, they will receive a link to the document via email. Some providers may allow you to add additional information, such as your initials or other identifying information.
Save the document
After the document has been signed by all parties, it will be saved to your account so you can access and download it at any time. You can also print it if necessary.
Best practices for electronic signature security
For maximum electronic signature security, you should implement the five best practices presented below.
Choose a Reputable Electronic Signature Provider
It is essential that your provider has a proven track record of adequate authentication and encryption services. This ensures that your electronic signature solution is reliable and secure.
Factors to consider when choosing an electronic signature provider
Do thorough research and read reviews from other customers regarding the provider’s reliability and quality of their service.
The selected platform should have enough features to fit your company’s workflows. For example, bulk signing, cloud storage, and multi-signature workflow features are essential capabilities.
Thoroughly evaluate the platform’s security features. Check authentication, encryption, and access control features. Make sure the service provider has certifications that ensure data security, such as SOC 2 Type II, HIPAA, and PCI DSS.
Compliance with requirements and standards. Make sure the provider meets all compliance requirements and standards, such as the General Data Protection Regulation (GDPR) and the Uniform Electronic Transactions Act (UETA).
Ensure your existing business systems, software, databases, workflows, and APIs integrate seamlessly with e-signature software.
In case of any problem, the provider’s customer service should be fast and responsive. Check their response time and support hours by phone, email, and chat. Also take a look at their support guides, tutorials, and forums.
Authenticate the identity of a signer
When using electronic signatures, take steps to ensure that the person signing the document is who they say they are. As such, e-signature solutions must provide multi-factor authentication, including digital certificates and biometrics, to ensure the signer is verified.
Establish and enforce access policies
Access to electronic signatures should be strictly controlled to limit access to only authorized persons. This will prevent unauthorized persons from accessing electronic signatures and potentially using them fraudulently or maliciously.
Create a strong password
Signing or accessing documents through an electronic signature platform requires a password. There should be a strong password policy that requires passwords to be sufficiently long and complex.
Encryption is an essential security measure when adopting electronic signatures, as it converts data into an unreadable form that can only be accessed and decoded by authorized persons.
Frequently asked questions about electronic signatures
What types of documents can be signed electronically?
Any document that can be legally signed by hand can also be signed electronically, as long as the documents meet certain legal criteria. Electronic signatures are used for sales and employment contracts, benefit enrollment forms, rental agreements, and healthcare-related documents, as well as real estate documents such as purchase agreements, disclosure forms, and leasing agreements.
They can also be used for financial documents, including loan applications, investment agreements, and insurance policies. However, it is worth noting that certain documents may be subject to specific laws or regulations, depending on the industry and jurisdiction.
How are electronic signatures different from digital signatures?
The terms “electronic signatures” and “digital signatures” are used interchangeably, but they are, in fact, two different types of processes for validating and securing electronic documents.
While electronic signatures use symbols, sounds, or electronic processes, digital signatures use a specific type of digital certificate issued by a trusted third party. Digital signatures are considered more secure than electronic ones because the associated digital certificate guarantees that the document has not been altered in any way and verifies the identity of the signers. They are used for highly sensitive documents that electronic signatures cannot handle due to their lack of legal framework.
Therefore, in some countries, electronic signatures may not meet the legal requirements for certain types of documents, such as wills or real estate transactions. Digital signatures that conform to technical standards under international laws, such as eIDAS, can be used for such transactions, while electronic signatures are more commonly used for everyday documents, such as employment contracts and agreements between people.
Can the electronic signature be manipulated?
Electronic signatures are secure, but, like any digital information, there is always the risk of manipulation or fraud. However, tamper-proof measures can be implemented, including the best practices discussed above.
Most e-signature providers create a detailed record of all signing events, including who signed, when they signed, and what changes were made. This way, inconsistencies can be quickly identified and cases of manipulation or fraud can be tracked and addressed.
How do you ensure that an electronic signature is valid and legally binding?
To ensure that an electronic signature is valid and legally binding, it is important to take the following steps.
Yo. Make sure you choose a reputable provider that offers easy-to-use e-signature solutions backed by reliable technical, governance, and security standards.
ii. Make sure your e-signature solution meets the relevant legal requirements in your jurisdiction.
iii. Be sure to provide clear consent or obtain consent from other signers before signing the document. This can be achieved by including a clear statement in the document requesting the signer’s consent to use an electronic signature.
iv. Ensure the identity of the signer is verified through an authentication process.
v. Make sure your e-signature provider offers an unalterable audit trail that records all actions taken on the document, including when the document was signed, who signed it, and any changes made to it.
Do electronic signatures have the same legal value as handwritten signatures?
Electronic signatures have the same legal value as handwritten signatures in most countries. This is because these countries have enacted laws and regulations that recognize electronic signatures as a valid means of signing documents. Electronic signature solutions that meet the best practice criteria of a given country’s laws are considered legally binding, and documents signed with them are considered admissible in court.
The adoption of electronic signatures has significantly transformed the way individuals and corporate organizations approach document management. The legally binding nature of electronic signatures has been established by various laws worldwide. With electronic signatures, companies can focus on their core functions, manage processes with ease, eliminate human errors, and ensure faster turnaround times when signing documents.