Are Electronic Signatures Legally Binding?

While electronic signatures, or eSignatures, have been around awhile, their use has become increasingly common (and necessary) with the continuing COVID-19 pandemic, as companies try to conduct as much business as possible without in-person interactions. In fact, in 2020, the global e-signatures market reached $2.8 billion, and it continues to expand.

If you’re looking to start offering eSigning for your organization’s contracts and agreements or to make it possible to onboard employees virtually, you’re likely wondering if electronic signatures are legally binding.

Indeed they are. And in most industrialized countries, eSignatures establish a legally binding and enforceable contract. They also provide greater security than paper-based signatures, which are more easily subject to forgery. eSigning is not only convenient and simple to implement, it can also help reduce contract and agreement errors and save your organization on resources (both paper and people) normally employed in paper document processing.

Still feeling uncertain about eSignatures and whether or not they’re right for your organization? Not to worry. We’ve got all the answers on the nuts and bolts of eSigning as well as information on what makes electronic signatures legally binding.

 

The first electronic signatures were developed in 1977, but there was no widely marketed software that companies could use to create and accept them until the late 1980s with Lotus Notes 1.0. By 1999, developers had created the technology allowing for embedding of digital signatures into PDF documents.

Then, a year later, in 2020, electronic signatures gained status as legally binding in the United States with passage of the E-Sign Act. The E-Sign Act established a uniform, national standard for electronic transactions, including eSigning and the generation of electronic contracts and records. The law provided individuals and businesses certainty that electronic documents and eSignatures would be legally binding when those documents and signatures comply with the E-Sign Act’s standards. This means electronic contracts became equivalent to paper ones.

Today eSignatures hold status as the most secure and trusted way to sign documents. Unlike the digital signatures of 40 years ago, modern eSigning technology is simple to use and requires nothing more than an internet connection and easily available eSigning software.

 

With passage of the E-Sign Act and comparable laws and standards in many other countries, no individual or business can deny the legality or enforceability of a contract or other agreement because it was eSigned. In the United States, if a state or federal law demands a written record, then an electronic record will satisfy that law. The same goes for signatures. ESignatures carry the same legal weight as wet signatures.

 

Contrary to what you might think, eSignatures have more force as legally binding signatures than wet ones when provided via a service that offers multi-factor authentication, security, and an audit map. In fact, e-signatures are routinely used as court admissible evidence.

However, it’s important to check the laws in your country, state, and locality, as oftentimes, eSignatures must meet additional legal requirements in order to be enforceable.

 

In order for an electronic signature to be legally binding, it must meet several requirements:

• It must be unique to the person signing the document.
• It must be generated using a technology or process that is under the exclusive control of the individual who is eSigning.
• The eSignature technology must have the ability to identify the person making the electronic signature.
• The electronic signature must be able to be linked to the document being eSigned in a way that ensures the document cannot be and has not been changed since the eSignature’s attachment to it.

 

While eSignatures are widely accepted and enforceable in industrialized nations for conducting personal and business transactions, you may be wondering what kinds of legal documents you can sign electronically. There are quite a few, including the following:

• Deposition transcripts
• Pleadings
• Motions
• Affidavits
• Settlement agreements
• Closing documents
• Disclosures
• NDAs
• Real property transaction documents
• Financing agreements

Always be sure to check your local court rules about the permissibility of electronically signed documents, however.

 

Electronic signatures are not enforceable for all legal documents, however, as some are not covered by the E-Sign Actor other nation-specific requirements. Seek legal counsel before relying on the enforceability of e-signatures on the following documents:

• Wills and other estate documents
• Family law documents
• Court orders 
• Foreclosure notices
• Termination notices for utility service and health or life insurance
• Health and safety recall notices

 

Under the Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA), e-signatures gained official recognition throughout the United States as legally binding and enforceable. All U.S. states, except Illinois, have adopted UETA, as have the District of Columbia and the U.S. territories of Puerto Rico and the Virgin Islands. Illinois has its own e-signature laws, but they mostly mirror those of the UETA.

Thus, you can feel confident eSignatures carry the same legal status as handwritten (or wet) signatures.

 

Electronic signatures carry the same legal weight as traditional handwritten signatures in the United Kingdom and Ireland as well under the terms of the Electronic Identification and Trust Services Regulation(eIDAS).

 

Electronic signatures are also legally recognized in Australia under the provisions of the Electronic Transactions Act of 1999 and its affiliated regulations, the Electronic Transactions Regulations 2020. ESignatures are enforceable at both the federal as well as state and territory levels.

 

Federal and provincial governments in Canada recognize electronic signatures as legally binding as well, though there are some documents (as is the case in most industrialized nations) where wet signatures are still necessary. Those include wills and land transfers. For more specific guidance, you can consult Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA).

 

Nitro offers its customers rigorous security controls and secure infrastructure with multiple layers of defense to ensure authentic and enforceable eSignatures on contracts, agreements, and other documents. Among our protocols for ensuring the legality of eSignatures obtained through Nitro SignⓇ are the following:

• Verification of signer identities with multiple forms of authentication
• Confirmation of the signer’s intent to sign electronically
• Linkage of signatures to signers and documents
• Maintenance of an audit trail for all document and signature activities
• Protection of documents through tamper seals that use a combination of secure system processes and PKI
• Single sign-on and two-factor authentication

Interested in learning more about how youv can create, send, and track documents and obtain eSignatures? Nitro offers unlimited eSigning capabilities for organizations as well as the ability to track and manage documents and eSignatures in real time. We also let you try before you buy. Explore our unlimited eSigning capabilities for free.