E-Signatures: Is Handwritten Identification Dead?

You likely already know that electronic signatures are legally recognized within contract management as equivalent to their pen-and-paper predecessors. Thanks to the UETA and ESIGN Act, contracts signed over a computer are binding. But “it’s legal” is admittedly a low bar to clear. Taking a broader look at how electronic signatures impact modern business relationships is a better indicator of the bright future of e-signatures, and where the “old-fashioned” route might still be best.

Electronic Signatures Fit Modern Business Practices

These days, it’s hard to imagine how businesses managed to get things done before the Internet. Many people not only use email and Internet research in their day-to-day business operations, but check in from a smartphone or other mobile device when they’re away from the office as well. The speed of communication and depth and breadth of information available via online sources is difficult to match elsewhere.

Some estimates predict e-commerce sales for retail will double in the next few years, reaching $4 trillion in 2020. This growth isn’t restricted to retail sales. Organizations in virtually every industry can be found online. There’s every reason to expect that businesses will continue to seek more opportunities and negotiate relationships online.

Electronic signatures integrate seamlessly into the way many organizations do business, as well as multiple technology, such as CLM software. After using computers to draft, edit, and send versions of a contract back and forth, there’s no need to suddenly dust off the fax machine or send someone across town with a pile of papers to sign. Businesses can complete a contract agreement in a fast, secure format online.

Electronic Signatures Can Enhance Security

Reducing the need to chase stacks of paper doesn’t only cut down on time. A digital storage solution, with data encryption measures, user verification, and secure servers, may be a safer way to store contracts than bundled into a filing cabinet. You can more easily track who viewed contracts and when they signed them. This added control is important to protect proprietary information and to avoid legal disputes over precisely when a contract went into effect.

One of the key elements to using electronic signatures is being able to prove the identity of any signing party, and demonstrate that they knew what agreement they were entering into by providing an electronic signature. An article in Mississippi Business Journal recommends setting up dialogue boxes that reflect this (if customizing a dialogue box isn’t an option, your legal department may have suggestions about how to remind people that their electronic signature will constitute a legally binding agreement). A message saying something like, “I agree that my signature in a digital format will have full force and effect, and represents my participation in the contract agreement set out” may hold up better than a standard, “Click to proceed” message if any dispute should arise.

Going Paperless Saves Money and Improves Organization

Office supplies may not come up in conversation as a major expense for a business, but all those reams of paper add up. What’s more, so does the cost of space to store paper contracts, printers, and other equipment and supplies. Factor in the cost of the extra time needed to send paper contracts, opportunity costs, and any costs or penalties that result if a paper contract is misplaced, and the true cost could be many times higher than the office supply store bill says. Maintaining a more organized office helps businesses capture the benefits promised in their contract agreements. Working within an intuitive, well-integrated digital system can make it easier to locate files and meet deadlines. Starting out with electronic signatures within that same system eliminates the risk that a newly signed contract will languish in a forgotten corner of the office. Instead, contracts can get started within the same clearly organized system where they will remain throughout the duration of the agreement.

When Are Wet Ink Signatures Necessary?

While in many cases electronic signatures are an equally valid option, if not a preferable one, there are still some instances when a traditional handwritten or “wet ink” signature is still required:

1. In some instances, another party may request to use traditional signatures. Whether you think this is a sign of being behind the times or not, if the other signing party exercises their right to opt-out, you’ll have to get a pen handy.

2. Some industries have additional guidelines that must be upheld to ensure that an electronic signature is valid. HIPAA, for example, has strict privacy and security requirements to protect sensitive data. Organizations in the finance industry may pay close attention to the Dodd-Frank Act, which includes requirements for active consent from the signatory regarding e-signatures.

3. State regulations may also influence when electronic signatures are a valid option. As of 2015, New York, Illinois, and Washington were the only states that had not adopted the UETA, although New York and Illinois had enacted similar legislation. The ESIGN Act still applies in Washington. If your organization engages in business in these states, it’s important to review applicable regulations carefully.

4. Documents like wills, codicils, and beneficiary trusts may not be covered by the UETA. There are some additional exceptions, including any that an individual state may enact. Double-check with legal counsel before proceeding with electronic signatures if you’re not certain which options are legally recognized in your state.

While it seems that electronic signatures are here to stay, wet ink signatures aren’t completely dead, either. It’s possible that they’ll never become entirely obsolete. What is likely, however, is that coming years will see handwritten signatures increasingly relegated to certain specialized cases, while e-signatures may continue to rise as a preferred method of formalizing contracts between businesses across most industries.