Eleanor Finch
The use of electronic signatures, also known as e-signatures, has become an increasingly popular way to sign documents, with transactions conducted using this method skyrocketing to $754 million in the last five years. In the United States, the ESIGN Act grants electronic signatures the same legal status as handwritten signatures, and they are valid in all states and U.S. territories where federal law applies. Similarly, in the European Union, typed signatures are accepted as legally binding through a community framework directive for electronic signatures. However, it is important to note that while e-signatures are generally accepted in most industries, there may be specific instances or documents for which they are not legally valid.
| Characteristics | Values |
|---|---|
| Legal Status | Granted the same legal status as handwritten signatures under state laws in the US, the European Union, and many countries in Asia and the Middle East |
| Technology | A range of technologies can be used, from simple images of a signature attached to an electronic document to PKI-based signatures |
| Capture Methods | Email, corporate ID, password protection, or a PIN sent to a mobile phone |
| Audit Trail | Time-stamped history of every send, view, print, sign or decline action |
| Proof of Signing | A final tamper-evident digital certificate embedded into the completed signed document |
| Digital Signature | A digital certificate from a trust service provider (TSP) is used to authenticate the signer's identity |
| Electronic Seal | Provides strong legal evidence that the document has not been altered and originated from the entity identified by the digital sealing certificate |
| Exceptions | Not legally valid for documents governed by the Uniform Commercial Code (UCC) or transactions subject to laws governing wills, codicils, testamentary trusts, adoption, divorce, or other family law matters |
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What You'll Learn
Legality of electronic signatures
The legality of electronic signatures has been a topic of discussion since the early 2000s, with the advent of the Electronic Signatures in Global and National Commerce (ESIGN) Act in 2000. This legislation standardized the use of electronic signatures in the United States, granting them the same legal status as handwritten signatures. The ESIGN Act applies to all states and territories where federal law is applicable, and it covers transactions related to interstate or international commerce.
The Uniform Electronic Transactions Act (UETA), adopted by most US states, complements the ESIGN Act by providing guidelines for electronic signatures at the state level. Together, these laws ensure that electronic signatures are legally binding and enforceable, provided certain conditions are met. This includes obtaining the consent of all parties involved to conduct the transaction electronically and demonstrating the intent to sign electronically.
To verify the signer's identity, electronic signatures use various authentication methods such as email, corporate ID, password protection, or a PIN sent to a mobile device. Additionally, digital signatures employ digital certificates from trust service providers to further authenticate the signer's identity. These measures ensure the security and legality of electronic signatures.
It is important to note that while electronic signatures are generally accepted, there may be exceptions in certain industries or for specific documents. For example, in the automotive industry, some jurisdictions still require traditional signatures for vehicle title transfers. Additionally, the ESIGN Act specifically excludes contracts or records governed by the Uniform Commercial Code (UCC) and transactions related to family law matters, such as wills, divorce agreements, and adoption.
In conclusion, electronic signatures are legally binding in most cases, thanks to legislation like the ESIGN Act and UETA, which have standardized their use and ensured their legality across the United States. However, it is always advisable to review the specific laws and regulations in your jurisdiction, as well as consult legal professionals, to ensure compliance and fully understand the legality of electronic signatures in specific contexts.
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Authentication methods
- Email Authentication: This is the simplest and most common method. The signer receives an email with a link to access the e-sign ceremony. Authentication occurs when they successfully log in to their email account.
- Login Credentials: The signer's identity is verified by the sending party's system before accessing the transaction. This typically requires a valid user ID and password.
- SMS Authentication: The signer's identity is confirmed via a secure one-time SMS code sent to their mobile phone. They then enter this code into the login page to access the documents for signature.
- Secret Question Challenge: This method involves pre-selected challenge questions and answers, known as "shared secrets". The signer must successfully answer these questions to authenticate their identity.
- DIGIPASS: DIGIPASS® is a multi-factor authentication solution that generates one-time passcodes (OTP) to be used in conjunction with another authentication factor, such as a PIN or fingerprint.
- Smart Cards and Derived Credentials: Federal employees and contractors are required to use smart cards or mobile-derived credentials when e-signing. This is a form of multi-factor authentication, combining the smart card or mobile device with the user's PIN.
- Digital Certificates: These are electronic documents issued by trusted third parties, such as Certificate Authorities (CA) or Trust Service Providers (TSP). They contain information about the signer's identity and a public key for signature verification. When the user signs, their private key is hashed with the document, and the digital certificate is attached, authenticating their identity.
- Two-Factor Authentication: An additional layer of security is provided by asking the signer for two forms of identification. This could be a combination of a password, fingerprint, or one-time code sent to their phone.
- Biometrics: Advanced electronic signatures use biometric data to confirm the signer's identity. This provides a higher level of security and is commonly used for legal and financial documents.
- Timestamping: This method records the time and date of the signature, allowing for proof of when the signature was made. It helps prevent document falsification after signing.
It is important to note that the choice of authentication method depends on the specific requirements of the organisation or transaction. By using reliable service providers, implementing robust security measures, and maintaining accurate records, the security and legality of electronic signatures can be ensured.
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Audit trails
An electronic signature audit trail is a valuable tool that provides greater visibility across workflows, ensuring security and compliance. It is a record of all activities that take place during the e-signing process, including the identity of the signer, timestamps, document history, and authentication methods. This data is crucial for verifying the validity and authenticity of e-signatures, enabling interested parties to confirm that a document was signed properly and that the signer's identity was verified.
Additionally, audit trails enhance data integrity by ensuring that the document has not been altered after the signature was applied. This maintains the integrity of the signed document and provides peace of mind that the documents are secure and have not been changed once the signing process is complete.
Furthermore, audit trails improve efficiency by automating the document-handling process. They allow for the centralized storage of document history, eliminating the need for manual, repetitive tasks and reducing paper waste and associated costs.
Overall, audit trails are essential for ensuring the security, compliance, and integrity of the e-signing process, providing transparency and accountability in digital transactions.
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Digital certificates
In 2000, the U.S. federal government passed the Electronic Signatures in Global and National Commerce Act (ESIGN), which, in tandem with the Uniform Electronic Transactions Act (UETA), confirmed that electronic signatures constitute legally binding documents if all parties choose to sign digitally. The ESIGN Act grants electronic signatures the same legal status as handwritten signatures.
When using a digital certificate to sign a document, it is important to ensure that the certificate is current and not expired. Additionally, if a self-created digital certificate is used, recipients will need to manually trust the certificate to verify its authenticity. Digital signatures backed by digital certificates help organisations comply with regulations worldwide and provide a more secure and efficient way to manage agreements and documents.
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International use
The use of electronic signatures has become widespread internationally, with over a billion users worldwide. They are a fast, secure, and powerful way to sign documents, and are legally valid in many countries.
However, the laws and regulations surrounding their use vary between jurisdictions. For example, the United States, Canada, Australia, and New Zealand have minimalist laws for electronic signatures, which allow and accept all forms of electronic signatures as long as both parties agree. In contrast, countries like Brazil, India, Israel, and Malaysia have prescriptive laws, which are the strictest type of e-signature laws, with specific rules about how agreements can be signed online.
In the European Union, the eIDAS regulation allows for the use of e-signatures in cross-border agreements and ensures they are generally admissible as evidence in EU courts. The eIDAS regulation outlines three types of electronic signatures: simple electronic signatures, advanced electronic signatures, and qualified electronic signatures. Advanced electronic signatures fulfill additional requirements for signer ID verification, security, and tamper sealing.
To ensure compliance with international laws and regulations, it is important to use secure e-signature technology that allows for the creation and signing of legally binding documents. For example, DocuSign's eSignature Legality Guide offers a country-by-country summary of current e-signature laws and rules.
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Frequently asked questions
Yes, electronic signatures are valid in all US states and are granted the same legal status as handwritten signatures under state laws.
The ESIGN Act, or the Electronic Signatures in Global and National Commerce Act, was passed in 2000 by the US federal government. It legislated that electronic signatures are legal in every state and US territory where federal law applies.
A digital signature is a more secure type of electronic signature that is generated using a digital certificate and cryptographically bound to the document using public key infrastructure (PKI). It is considered the most secure type of e-signature.
Electronic signatures are valid in many countries outside the US, including the European Union and many countries in Asia and the Middle East. However, laws may differ, so it is important to research the specific laws and regulations of each country.
