Can an E-signature be legally binding? Insights and best practices
Surely you’ve heard that pirates used to seal deals with a blood oath? Back in the day, striking a deal meant more than just a handshake—it was all about blood, treasure, and danger. Pirates didn’t ask for signatures; they demanded oaths sealed in crimson. But in the modern world, we don’t need to get that dramatic. Enter e-signatures: no swords, no spilled ink, and definitely no tetanus risk. With a secure digital click, deals are sealed faster, smarter, and more safely than ever. It’s the 21st-century version of a pirate's "X marks the spot," but instead of treasure, you're unlocking smoother transactions and better cash flow. Ready to ditch the old ways and dive into seamless, secure dealmaking? Grab your digital pen—your treasure awaits!
What are E-signatures and are they legal?
E-signatures, or electronic signatures, refer to any digital methods used to indicate a person’s intent to agree to or approve the contents of a document. Unlike traditional signatures made with a pen, e-signatures use digital methods like typed names, scanned images of signatures, or even verification tools like drawing a signature using a mouse or stylus.
For those wondering how e-signatures work, the process of applying them is straightforward, and it typically involves a few key steps:
Document preparation: the document is uploaded to an e-signature platform, where parties can review it, make edits, or customize it if needed.
Signatory authentication: the platform will authenticate the signer's identity. Depending on the platform, this may involve email confirmation, a one-time password (OTP), or multi-factor authentication (MFA) for added security.
Signature application: the signatory either types their name, uploads a scanned image of their handwritten signature, or uses a stylus or mouse to draw their signature electronically.
Document finalization: after all parties have signed, the document is encrypted, time-stamped, and an audit trail is created. This makes the document secure and ensures its integrity.
All of this can be done without hassle on Enty, a platform that simplifies the entire e-signature process, from document preparation to secure authentication and signing. Whether you're finalizing contracts, sending invoices, or managing agreements, Enty streamlines the process for faster, more reliable results.
But are E-signatures legal?
Absolutely. E-signatures are considered legally binding in many parts of the world, provided that they meet certain legal standards for authenticity, consent, and reliability. In the past, the notion of a valid signature was intrinsically tied to the physical act of writing. However, as the digital age progressed, it became clear that technology could facilitate more efficient and secure ways to execute contracts. Today, many jurisdictions have embraced e-signatures as legally binding, provided the parties involved agree to use them. These frameworks typically focus on three core principles:
Intent: both parties must demonstrate that they agree to the terms of the document, and the signature must reflect that intent.
Consent: all parties must consent to the use of electronic signatures, with many jurisdictions requiring explicit agreement to use digital methods for signing.
Security and authentication: the e-signature process must ensure that the document’s contents cannot be tampered with after the signature is applied, and the signer’s identity must be authenticated.
In most cases, as long as the e-signature meets these criteria, it will be legally valid. However, the specific regulations governing e-signatures can differ depending on the jurisdiction. That leads us to the next crucial point — the legal frameworks governing e-signatures.
Legal framework governing E-signatures
Several countries have enacted specific legislation to establish and regulate the use of e-signatures. Below are some of the major legal frameworks around the world that ensure the enforceability of e-signatures.
The U.S. — ESIGN Act and UETA
In the United States, the legal validity of e-signatures is primarily governed by two laws: the Electronic Signatures in Global and National Commerce Act (ESIGN Act) and the Uniform Electronic Transactions Act (UETA).
The ESIGN Act, passed in 2000, affirms that electronic signatures and contracts have the same legal standing as their paper counterparts. It applies to most types of contracts, including commercial and consumer agreements, and ensures that businesses and individuals can execute contracts online without needing physical signatures.
UETA, which has been adopted by most U.S. states, outlines the requirements for electronic transactions and e-signatures within state-level contracts. It provides a framework for how electronic records and signatures can be used in both consumer and business transactions.
Both of these laws have been pivotal in creating a legal environment that allows digital transactions to flourish across the U.S., particularly in the context of e-commerce, real estate, and financial agreements.
The European Union — eIDAS regulation
The eIDAS (Electronic Identification and Trust Services) regulation, which came into effect in 2016, provides a comprehensive legal framework for electronic signatures across the European Union. This regulation specifically distinguishes between three levels of electronic signatures: simple, advanced, and qualified.
A simple electronic signature can be a typed name, scanned image, or mouse-drawn signature.
An advanced electronic signature must be uniquely linked to the signatory, capable of identifying them, and created using secure tools that the signatory can maintain under their sole control.
A qualified electronic signature is the highest standard and requires the use of a qualified certificate issued by a trusted service provider. This is equivalent to a handwritten signature in terms of its legal standing within the EU.
This regulation provides businesses and individuals within the EU with a clear, standardized process for e-signing, ensuring that contracts signed digitally are recognized and enforceable across all member states.
Other jurisdictions
Canada's legal framework for e-signatures is governed by the Personal Information Protection and Electronic Documents Act (PIPEDA), which allows businesses and individuals to use e-signatures for most types of contracts and agreements. Under PIPEDA, electronic signatures are recognized as legally valid, provided that they are paired with secure, verifiable methods of authentication.
Australia’s Electronic Transactions Act (ETA) was passed in 1999 and established a legal foundation for the use of electronic signatures in Australia. Under ETA, electronic signatures are legally valid, provided they meet certain criteria such as the signatory’s intent and the integrity of the document. ETA also allows the use of digital certificates, encryption, and other tools to ensure the security of electronic signatures.
Using Enty ensures that you’re always compliant, as it adheres to these global regulations. With customizable options tailored to your legal needs, you can trust that your contracts meet the highest standards of compliance, offering peace of mind no matter where your business operates.
Benefits of using E-signatures over traditional signatures
The shift from traditional signatures to e-signatures is not just a "tech trend." It offers tangible benefits for businesses of all sizes. Below are the key advantages of adopting e-signatures for your organization.
Efficiency and time savings: e-signatures eliminate the delays associated with printing, scanning, and mailing documents. Contracts that once took days or even weeks to finalize can now be signed and completed in a matter of minutes. This also streamlines workflow by removing bottlenecks from the document-signing process.
Cost-effectiveness: save money on paper, ink, envelopes, postage, and storage for physical files. The need for manual processes like printing and mailing is also removed, which leads to further cost savings. These financial savings can be redirected to other areas of the business, improving the overall bottom line.
Security and audit trails: e-signature platforms come equipped with advanced encryption and authentication features to protect the integrity of the document. Detailed audit trails, including time-stamps, IP addresses, and logs, track the entire signing process, ensuring transparency and accountability. These features make e-signatures more secure than paper signatures, reducing the risk of document fraud or unauthorized alterations.
Convenience: e-signatures allow users to sign documents from anywhere, as long as they have an internet connection, eliminating the need for in-person meetings. Signatories can review and sign documents at their convenience, speeding up the process and allowing businesses to make quicker decisions. This convenience is particularly useful for global or remote teams, where physical signatures would otherwise be difficult or time-consuming.
Eco-friendly: e-signatures reduce the reliance on paper, which contributes to a significant decrease in paper waste and environmental impact. By reducing energy consumption associated with printing and mailing, businesses also lower their carbon footprint. Choosing digital signatures is a step toward adopting more sustainable business practices, aligning with growing environmental concerns.
Legal validity and compliance: e-signatures are legally recognized in many countries and jurisdictions, ensuring that signed contracts are enforceable in court. They comply with laws like the ESIGN Act in the U.S. and the eIDAS regulation in the EU, making them suitable for international business transactions. By using e-signatures, businesses reduce the risk of compliance issues and legal disputes related to document authenticity.
Improved collaboration: e-signatures facilitate real-time collaboration, allowing clients, suppliers, and partners to sign documents without the delays associated with physical signatures. This ease of use enhances business relationships by providing a smoother, more efficient way to get agreements in place. This is especially useful for businesses with global teams or clients, as e-signatures remove the need for physical presence or time zone coordination.
Enhanced document management: e-signature platforms often include built-in document storage and management tools, making it easier to organize and retrieve signed documents. Businesses can quickly search for and access signed contracts, reducing time spent hunting for physical files or managing complex filing systems. This streamlined approach reduces administrative overhead and makes it easier to keep track of important documents.
Reduced risk of lost documents: digital documents are less prone to loss or damage compared to paper records, which can be misplaced or destroyed. Cloud storage ensures that signed contracts and other important documents are safely stored and easily accessible at any time. This reduces delays caused by lost paperwork and ensures that agreements are not held up due to missing or damaged documents.
By adopting e-signatures, businesses can streamline operations, save costs, ensure security, and stay compliant with legal standards, all while adopting more sustainable practices and improving collaboration. Using Enty ensures that you’re always compliant, as it adheres to global regulations. Crafted by professional lawyers and offering customization tailored to your legal needs, you can trust that your contracts meet the highest standards of compliance, offering peace of mind.
Common use cases and examples of E-signatures
E-signatures have revolutionized the way documents are signed across various industries, enabling faster, more secure, and more efficient business processes. Below are some common scenarios where e-signatures are particularly beneficial, highlighting how they can be leveraged across different business functions.
Contracts
Employment contracts: e-signatures streamline the process of signing employment contracts, ensuring a faster and more efficient onboarding experience. By using e-signatures, employers can send employment agreements to candidates, who can sign and return them instantly, reducing waiting times and administrative overhead. This is particularly beneficial for remote or international hires, where sending physical contracts would otherwise be a time-consuming task.
Non-disclosure agreements (NDAs): e-signatures are commonly used to facilitate the quick signing of NDAs, which are vital in industries dealing with sensitive information. Legal teams and companies can instantly send NDAs to parties involved, ensuring that confidentiality is upheld from the very beginning of a business relationship.
Sales agreements
Speeding up deal closures: e-signatures help expedite sales agreements by allowing quick digital signatures from prospects. Sales teams can email agreements to potential clients and receive signed documents back in minutes, cutting down on the long delays associated with traditional paper-based signatures. This can be particularly helpful in fast-moving industries like tech, where closing deals quickly is crucial to staying competitive.
Streamlining B2B and B2C transactions: whether you’re finalizing a deal with a large corporation or an individual customer, e-signatures enable businesses to offer a seamless and professional experience. Instead of waiting for paperwork to be signed and mailed, companies can collect signatures online, ensuring faster sales cycles and reducing the risk of losing business due to delays.
Human resources
Onboarding paperwork: the HR department can save significant time by using e-signatures for a variety of onboarding forms, including tax documents, employee handbooks, and policy agreements. New employees can electronically sign all necessary paperwork before their first day, so they can focus on their work instead of filling out forms on-site. This also ensures that documents are returned quickly, reducing delays in employee integration.
Performance reviews and employee agreements: e-signatures can be used for signing performance reviews, employee agreements, and other important HR documents that require signatures from both managers and employees. This reduces the back-and-forth associated with physical signatures, keeping employee relations running smoothly.
Legal documents
Powers of attorney: legal documents like powers of attorney can be signed electronically, which is especially valuable for clients who may be located far away or unable to meet in person. With e-signatures, the principal can authorize an agent to act on their behalf from anywhere, ensuring that critical legal processes are not delayed.
Settlement agreements: e-signatures are frequently used for settlement agreements in both civil and commercial cases. Since settlements often require prompt resolution, e-signatures facilitate quick approval from all involved parties, ensuring that the case is closed faster and more efficiently.
Trusts and wills: in some cases, e-signatures can be used to sign documents related to the creation of trusts, wills, and estate planning. This provides a convenient option for individuals who need to make legal decisions but cannot meet with an attorney in person.
Healthcare and medical forms
Patient consent forms: healthcare providers often use e-signatures for obtaining patient consent, whether it’s for medical procedures, surgeries, or the release of health records. E-signatures make it easier for patients to sign consent forms remotely, improving workflow and reducing administrative burden on medical staff.
Health insurance documents: e-signatures allow patients to sign health insurance documents digitally, which is often required when making claims or when enrolling in a new plan. This eliminates delays and ensures that insurance forms are processed more efficiently.
Telemedicine agreements: with the rise of telemedicine, e-signatures are commonly used to sign agreements for online consultations, privacy policies, and consent to treatment. This enables healthcare providers to offer services to patients across a wide geographical area, without requiring in-person visits.
Government and public sector
Tax forms: governments have embraced e-signatures for filing taxes and submitting required forms, including personal income tax returns, corporate tax filings, and other public documents. This eliminates the need for in-person visits and allows for faster processing of forms and documents.
Permits and licenses: many local, state, and federal agencies use e-signatures for applications involving permits, licenses, and regulatory submissions. This enables faster approval processes and reduces delays associated with traditional paper-based applications.
By utilizing e-signatures, businesses and professionals across industries can streamline their processes, save time, reduce costs, and enhance security. Whether you’re closing a real estate deal, finalizing a sales agreement, or processing legal documents, e-signatures provide a fast, convenient, and legally binding solution to improve operations.
Best practices for ensuring legal validity of E-signatures
To ensure that your e-signatures are legally valid and enforceable, it's crucial to follow best practices that not only comply with legal requirements but also enhance the security and reliability of your digital agreements. Below are key steps to take to safeguard the integrity of your e-signatures and ensure their legal standing.
1. Use a trusted platform
Choose a reputable e-signature platform like Enty to manage your e-signature processes. Trusted providers ensure that your documents are secured with encryption, authentication, and verification methods, ensuring both the signers' identities and the integrity of the signed document are protected.
These platforms typically provide audit trails, timestamps, and logs to ensure the authenticity of the signed document. Relying on a secure and reliable platform is essential for reducing risks of fraud and ensuring that your e-signed documents are enforceable in court.
2. Verify consent and intent
Always ensure that both parties explicitly consent to using e-signatures and have the intent to sign the document. This can be done by providing a clear and concise disclosure agreement during the signing process.
Make sure the platform you use prompts the signer to acknowledge and agree to the terms, ensuring that they understand the process and willingly engage in the agreement. This explicit agreement supports the legal validity of the document.
3. Maintain a clear audit trail
One of the strongest protections for the legal enforceability of e-signed documents is the ability to prove that the signature was legally obtained. Ensure that your e-signature platform provides an audit trail that records critical details of the signing process.
This includes timestamps, user IDs, IP addresses, and other identifying information. Having a detailed and transparent audit trail helps demonstrate the authenticity of the signature and can be crucial in case of disputes. With Enty, you can request audit trail for any document you require, and we’ll provide it in no time - track every stage of the signing process, ensure compliance and obtain evidence of the transaction.
4. Ensure compliance with laws
Different jurisdictions have different legal requirements for e-signatures. Familiarize yourself with the applicable legal frameworks governing e-signatures in your region, such as the ESIGN Act in the U.S. or the eIDAS Regulation in Europe.
Enty ensures compliance with global e-signature laws, automatically adapting its processes to meet jurisdictional requirements. Always double-check the laws in the region where the document will be enforced to ensure your e-signature process adheres to local standards.
5. Secure the document
After a document has been signed, it is essential to protect its integrity. Use Enty's encryption methods to safeguard your signed documents, preventing unauthorized alterations. Encryption ensures the accuracy and legitimacy of the agreement, protecting it from tampering and maintaining the trust and reliability of your digital agreements.
6. Make documents read-only after signing
Once a document has been signed, it should be locked to prevent any future changes. This makes sure that both parties can refer to the exact same version of the document throughout its lifecycle. Locking the document once signed protects it from alterations, maintaining its integrity and preventing disputes over modifications to the content post-signing.
7. Ensure clear instructions for signers
Provide clear and easy-to-follow instructions for signers to ensure that they understand the e-signing process. If signers are confused or unsure of how to sign electronically, it can lead to errors or delays.
With Enty, users receive an intuitive and simple interface that guides them through the e-signing process, making it easy for them to understand exactly what they need to do, and ensuring that each document is signed correctly.
8. Regularly review and update your E-signature process
Periodically review your e-signature process to ensure it remains compliant with changing regulations and industry standards. Staying updated on new legal developments or platform enhancements ensures that you are always following the best practices for legally valid e-signatures.
9. Keep signed documents accessible
It’s essential to have a secure and accessible method for storing signed documents for future reference. If a dispute arises, you may need to present the signed document as evidence. Enty provides a centralized document storage solution, ensuring that all your signed agreements are securely stored and easily accessible whenever needed.
10. Educate your team
Ensure that all stakeholders, including employees, partners, and clients, understand the importance of using e-signatures and following best practices. Providing training on secure and compliant digital signing helps prevent errors or oversights that could compromise the validity of your e-signed documents.
Educating your team ensures consistency in the way e-signatures are handled, which helps maintain compliance and prevents legal issues down the line.
By following these best practices, you can ensure that your e-signatures remain legally valid, secure, and enforceable. Enty offers an all-in-one solution, allowing you to streamline the entire e-signature process from document preparation to signing. With customizable templates and secure authentication methods, you can ensure that your agreements are executed quickly and reliably, no matter where you are in the world. Enty also integrates invoicing and financial management, helping businesses send, track, and manage invoices, as well as automate payment collection. Plus, with the added benefit of secure e-signatures, businesses can confidently close deals faster and with a higher level of compliance, reducing administrative costs and improving overall financial transparency.
Final thoughts
There’s a world of difference between an ordinary dealmaker and a top-tier closer. The former juggles paperwork, waits for signatures, and hopes for the best. The latter uses e-signatures to simplify their workflow, secure payments faster, and let their tech do the heavy lifting. Want to join the elite ranks of dealmakers who never miss a beat—or a payment? You can in no time, with Enty.
