What Makes an Electronic Signature Legal?

The legality of an electronic signature is an important concern while using electronic signatures. Let’s have a discussion on what makes an electronic signature legal.

Electronic signatures have completely revised the conventional notions surrounding many business operations. Nowadays, the drive towards digital transformation is gaining momentum, and the benefits of cost-effectiveness with digital transformation could introduce new avenues of competitive advantage for enterprises worldwide. However, the adoption of electronic signatures encounters many prominent setbacks.

One of the notable pitfalls in the adoption of electronic signatures is ‘what makes an electronic signature legal’. The signature is one of the most authentic indicators of the consent of an individual. Therefore, replacing the traditional paper and ink signatures with electronic signatures definitely creates doubt about the latter’s legality.

So, you need to clarify all important details regarding the legality of an electronic signature to ensure a comprehensive adoption. The following discussion aims to outline certain factors that answer your question of ‘what makes an electronic signature legal’.

There are a number of reasons to adopt the electronic signature. Here are the top 10 reasons why you should adopt Electronic Signature for Your business.

What are Electronic Signatures?

Before investigating the legality of electronic signature, it is essential to know what it is first! An electronic signature is a virtual representation of a paper-and-ink signature. You can use an e-signature tool for signing a document with a mouse click or drawing your signature digitally.

According to the legal definitions, an electronic signature is a form of electronic data that is associated logically or attached to a contract or other records. However, the definition of electronic signature does not shed adequate light on its legality as we would discover later in the following discussion. On the other hand, some readers might be wondering about the reasons to investigate into the legality of electronic signatures.

According to a Capgemini study, companies using digital solutions are capable of achieving 26% higher profitability and 12% higher market evaluations. With such benefits, it is inevitable to focus on the legality of e-signatures, isn’t it?

Legal Background for Electronic Signatures

The legal instruments for validating e-signatures can provide an answer to ‘are electronic signatures legally binding?’ perfectly. Electronic signatures have been legally valid like traditional signatures for quite some time now, with many laws and regulations worldwide.

The Electronic Signatures in Global and National Commerce (ESIGN) Act of 2000 in the US ensures that e-signatures are legally valid in all states subject to federal law. In the case of states where federal law is not applicable, the Uniform Electronic Transaction Act (UETA) serves as the legal precedent for validating electronic signatures.

Furthermore, countries all over the world have developed their own regulations for governing the use of e-signatures. For example, the Information Technology Act in India or the UN Model Law on Electronic Commerce showcases the diverse legal instruments for proving the legality of electronic signatures. These laws present important specifications that provide you clear answers on what makes an electronic signature legal.

Also Read: UETA and ESIGN Act

Understanding What Makes an Electronic Signature Legal

Now, let us arrive at the most important part of our discussion, i.e. the important requirements for the legal validity of electronic signatures. With the help of these factors, you can determine valid answers to questions such as ‘is a typed signature legally binding’.

  • Intent to Sign

The first requirement for an electronic signature to be legally binding is the user’s intent to sign. Just like a traditional paper-and-ink signature, an electronic signature is valid only if the signatory does it with a purpose. The signatory should sign the concerned document deliberately for establishing their intent to sign it.

In certain cases, you may have to type your signature and then click on a prominent ‘Accept’ button, thereby indicating your intent to sign the document. You can also draw your signature with a mouse and then click on the ‘Accept’ button in your chosen e-signature software. Regardless of the technology you use, the most critical factor is to communicate your ‘intent to sign’ clearly.

  • Consent for Electronic Transaction

The next important factor in ‘what makes an electronic signature legal’ is the consent of involved parties to participate in an electronic transaction. Many popular e-signature solutions notify users for confirming their consent before signing.

There are a number of myths associated with the use of electronic signatures. Let’s understand the top 10 Electronic Signature Myths and Facts.

  • Audit Trail

One of the foremost aspects of proving the legality of an electronic signature is the audit trail. The audit trail is also an essential requirement to have the assurance of a secure electronic signature. Therefore, you have to provide detailed attributes for an electronic signature.

The attributes can include the context and circumstances of signing a document. The audit trail helps in recording the details of the signer’s email ID, device IP address, signature timestamp and time of modifications in the document.

  • Association with Records and Documents

As per the legal definition of electronic signatures, the association with a document is what makes an electronic signature legal. A standalone electronic signature does not have any legal validity or significance of its own. Therefore, it is essential to ensure that electronic signatures are associated with required documents.

  • Record Retention

The final requirement for validating the legality of electronic signatures is the retention of records. You need to have ideal procedures and systems for reproducing the records associated with electronic signatures. Therefore, the e-signature solutions you use for capturing signatures should also have capabilities for the collection and storage of associated documents.

Also Read: Cost-Saving Benefits of E-Signature

Are You Ready to Adopt Electronic Signatures Now?

Therefore, you can find your answers to ‘what makes an electronic signature legal’ on the basis of the above-mentioned information. In the long run, electronic signatures would be the norm in business transactions worldwide. So, it is important for enterprises to review all the implications of using electronic signatures.

Alongside the effectiveness of different e-signature solutions, knowing the legality of e-signatures can strengthen and diversify your journey of choosing an e-signature vendor. For one, you would know the best practices and most important of all; you can be sure that your electronic signatures would stand in any court of law.

Start leveraging the power of e-signatures to transform your business right now!

Posted by Brian Felix

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