Are electronic signatures legally binding is a common question among parties entering into contracts. Many people often question the legitimacy of such signatures, as some parties might feel as though such a signature could be legally disputed in court. Specifically, in 27 countries, including the U.S., China, Russia, Canada, and Australia, electronic signatures are legally binding. While they are in fact legally binding, it is important for companies to do their research to find out what is required of them when having contracts that provide for such signatures. In fact, simply having an electronic signature in a contract might not make it legally binding, which is why you need a trusted and certified software provider of eSignatures.

Electronic Signature: An Overview

An electronic signature, also referred to as a digital signature, is a way in which people can sign a non-printed, electronic document. It can be done in several ways, including with your finger, mouse, or by typing your name in along with the date, your date of birth, or the last four digits of your social security number. Today, eSignatures are very common for a lot of companies. It makes it easier and quicker to enter into agreements and contracts with customers to avoid the hassle and time of having a customer physically sign an agreement and mail an original copy back to the business.

The electronic signature itself is like an electronic marker that is attached to the agreement that indicates your intent or approval of the contract for legal purposes. It is a coded and locked electronic footprint that is made up of several encoded messages. But, as previously noted, the electronic signature itself won’t necessarily make the agreement legally binding, particularly because your eSiganture could simply be copied and pasted onto an agreement without your knowledge. That is why it is crucial to ensure that a proper software program is being used when having customers sign such agreements. Without it, your company risks several legal suits in which people can claim that they were not the ones who digitally signed the agreement. While companies can still risk having this issue, especially in cases of fraud and identity theft, most well-established companies have complex and highly advantageous software programs that use coding and encryption for documents and agreements that are electronically signed by business partners and customers.

How Do You Know if an Electronic Signature is Valid?

There are several criteria that is used to confirm the legitimacy of the electronic signatures, including the following:

  1. The signor of the document must be validated and related to the signature
  2. The person signing the agreement must be the only person with access to the private encrypted key that the company utilized to create the signature
  3. Company’s data must be able to identify whether or not the signature has been tampered with after signing
  4. If the data has in fact changed after signing, the signature must be voided so that the changed data can be reviewed by the consumer and eSigned again

How Can You Determine if it is a True Signature?

There are many ways in which companies can reduce risk by confirming that the person signing the agreement is the actual intended recipient of the contract. For example, businesses can verify the authenticity of a signatory’s public and private keys. This can be done by providing certificates to verify that the person’s public key really belongs to them. However, other companies might prefer to use an actual third party to verify the person’s identify, i.e., financial institution.

Limitations of Electronic Signatures

There are some instances in which an electronic signature isn’t allowed, including the following:

  1. Wills
  2. Powers of attorney in some instances
  3. Real estate agreements
  4. Family law matters, such as adoption and divorce
  5. Official court documents
  6. Disclosure to consumers in some instances

In any of the aforementioned contracts, you will need a written signature as opposed to an electronic signature. Furthermore, any documents that have to be presented in court cannot be electronically signed, as most courts prefer written signatures.

If you need help learning more about the legality of electronic signatures, or if you need legal assistance in determining if your electronic signature is valid, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law, and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.