Companies throughout the world, across nearly all industries, spend millions of dollars every year to automate their workflows. One of the business processes that need automation is documentation. Electronic documentation has become a standard procedure in many businesses, as it contributes to greater productivity, workforce proficiency, and a decrease in operational costs in the long run.
For many companies, the objective to streamline nearly all business documentation procedures resulted in the prevalence of adaptive digital solutions, including the fruition of electronic signatures.
The constant improvement in technology continues to help digitize processes and benefits not only businesses but also professionals in accomplishing their tasks faster. In fact, according to a study conducted by a multinational corporation headquartered in Paris, France, that specializes in consulting, digital transformation, technology services, and outsourcing services, companies with employees who use digital solutions are more profitable by 26%.
In addition, electronic signature solutions do not only expedite transactions but also promote a reliable and more secure document signing.
Before electronic signatures were legally approved in the United States, professionals went through the laborious process of signing documents and collecting signatures manually to validate transactions. The manual signature workflows typically involve sending signature-requiring documents via fax, postal mail, or email.
Electronic and digital signatures
Both electronic and digital signatures improve signature workflows and reduce document turnaround, ensuring an optimal experience for all signatories.
Signing using electronic signatures can be as simple as using, among other options, a digitized image of a handwritten signature, a symbol, and a verbal authorization in the form of a voiceprint. Perhaps the easiest way to grant legal consent, it is ideal for low-risk transactions.
Digital signatures use Public Key Infrastructure (PKI) technology to verify the identity of a signer. It implements the highest levels of security and global acceptance, ensuring that copying, altering, and tampering of signatures are impossible.
This form of signature utilizes cryptographic algorithms, turning your signature into data that restricts unauthorized access. It creates a unique identification or private key for both the sender and recipient that they can use to access a document, helping to verify the identity of signatories, preserve integrity, and prevent the risk of deniability.
Other e-signature types
Electronic and digital signatures are perhaps the most popular types of electronic signatures in the U.S. Depending on your requirements, including the advantages of convenience and level of security, there are other types of electronic signatures you can utilize.
As the name suggests, signatories only need a single click to sign a document. This kind of electronic signature has legal conditions and the principles of intent, consent, attribution, and association apply. The law requires a verifiable trail of data directly associated with the signed document and attributed to the signatories; however, since click-to-sign signatures do not use cryptographic algorithms, it is not robust enough to prevent unauthorized access to the document. Such a limitation cannot protect documents from subsequent change.
While click-to-sign signatures are legally binding in most states in the U.S., it is advisable to review local laws relevant to its use to avoid any legal problem.
Biometric signatures use parts of your body to verify your identity. Among other methods to identify users, this type of signature uses fingerprint scans, hand geometry, eye scans, face recognition technologies.
The legality of electronic signature in the U.S.
Your unique signature is a powerful mark; it can turn a basic document into a legally binding one. Among its several legal capabilities include its ability to confirm your identity, authorize financial transactions, and certify your agreement to contracts.
While there are laws that govern the use of traditional wet signatures, the U.S. government also passed laws to ensure the proper use of electronic signatures.
E-SIGN Act of 2000
According to the U.S. Electronic Signatures in Global and National Commerce Act (E-SIGN Act) of 2000, an electronic signature is “an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign a record.”
The enactment of the E-SIGN Act granted electronic signatures legal recognition and set the legal landscape for its use. It established that the use of electronic signatures is enforceable in the U.S. This type of signature, as approved by the bill, now holds the same legal status as a handwritten signature, provided that it abides by the set regulations.
The U.S. Congress created the E-SIGN Act to facilitate the use of electronic records and signatures for transactions in or affecting interstate and foreign commerce, ensuring that documents and contracts delivered electronically are valid and legal, provided that it is compliant with the established guidelines to avoid legal problems.
- Intent to sign
Similar to traditional wet signatures, in electronic signatures, the signatories must show a clear intention to sign documents electronically. The intention must be explicit and not implied. Moreover, all signatories must be aware of their rights, including the right to withdraw consent without the pressure of any condition or consequence and the right to access the document for a period of time even after the transaction.
- Consent to transact electronically
All parties must declare their consent to transact and sign documents electronically. Before continuing the transaction, signatories must give a straightforward and unambiguous consent. Not denying consent or being unresponsive to an option to grant consent does not qualify as giving consent, and is inadmissible.
- Association of signature with the record
To qualify as a legally binding electronic signature under the E-SIGN Act, the system or software used for the transaction must keep a record that shows the process of obtaining a signature and restrict the use of the signatures outside its original purpose.
- Record retention
An electronically signed document should be kept for a period of time, in an unalterable format, and be reproducible, as stated in the E-SIGN Act’s record retention requirement, ensuring the validity of electronic signatures and enabling signatories to download a copy of the agreement as required.
UETA of 1999
The Uniform Electronic Transactions Act (UETA) of 1999 is a bill that secures the legality of electronic contracts and the validity of electronic signatures in both commercial and government transactions. While the E-SIGN Act is a federal act affecting all 50 states, the UETA is adopted only by 47 states, as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.
The UETA has been adopted on a state-by-state basis. Illinois, New York, and Washington are the only U.S. states that do not adhere to the aforementioned act and have their own acts on electronic signature, aside from the E-SIGN Act, in place.
The state of Illinois enacted the Electronic Commerce Security Act in 1999. According to the act, there are some types of electronic signatures that are more trustworthy than others. It states that the most reliable type of electronic signature is the “secure electronic signature.” For an electronic signature to be considered secure, it must meet the guidelines under the act, including the acknowledgment of signatories that the use of an electronic signature is safe.
- New York
The state of New York enacted the Electronic Signatures and Records Act (ESRA) in 2000, making electronic signatures legally binding in New York. The bill established the legal equivalence of electronic and handwritten signatures.
The state of Washington enacted the Washington Electronic Authentication Act in 1997. The bill aims to promote commerce by means of secure electronic messages, promoting economic development and trade by using digital signatures in electronic commerce.