What is an E-Signature? Are Electronic Signatures Legal?

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The legality of electronic signatures is not very confusing on its own: they are legal, valid, and fully enforceable. In fact, in most respects, an electronic signature is fully equivalent to a regular, physical one.

Do note, however, that the validity and legality of an electronic signature do depend on a few different features and conditions. Here, we’ll explain what those are, what you ought to know about e-signatures, and why it’s an area that surely warrants further interest for a modern business person.

What is an E-Signature?

The electronic signature is, at its core, a digital signing multi-tool that reliably “signs” items of interest for you. We used quotation marks specifically because signing – in this case – doesn’t necessarily have to equate to writing your name out on a document.

Electronic signatures come in all shapes and formats: from simple mouse-click macro commands all the way to literally drawing your signature with a mouse. Which one you end up using will depend primarily on the e-signing tool of your choice.

What makes an Electronic Signature Legally Binding?

Obviously, you can’t simply take a picture of the document you need an e-signature on, crop out the background, scribble three lines with a mouse, and be done with it. There are a few things you’ll need before you’re that cool.

At the most basic level, there are three elements to every e-signature which dictate if it’s legally binding or not.

Who has signed the document

Upon the execution of a valid e-signature, the identity of every signatory needs to be verified in some way. Options for doing so include (but are not limited to) the following:

  • SMS
  • E-mail
  • Valid electronic identification (e.g. BankID)

So, for example, you might use a payment token provided by your bank to confirm your identity. Naturally, this also means that there needs to be a system in place to interact with your token. The extent and security of these systems will vary greatly, and depend on the signatories themselves.

In any case, it’s not like you can perform an e-signature using nothing but an offline PC and a bit of imagination.

What was signed in the document

The content of the document you are attempting to e-sign matters, too.

What is it that you’re about to sign? Is there clear intent from all signatories to legally commit to the written word?

Every single party that partakes in the process of e-signing of a document needs to consciously and deliberately put their name down to validate the document. They need to agree on the common content of the document in question.

What the integrity of the document is

Perhaps the most important feature of an e-signature is its integrity. Once a document’s been signed with an electronic signature, it gets hashed and signed with a pair of asymmetric encryption keys.

What this does is that, in the case of someone tampering with a pre-signed document, its hash value will change. That way, your electronically signed documents are kept safe and sound: there’s just no way for anyone to make changes without affecting the hash values.

Bottom line

Yes, electronic signatures are legal, if you tick all the right boxes.

Keeping all of the above in mind, an e-signature will be valid and legally binding if the following conditions are met:

  • Signatories must be identifiable
  • The application of the e-signature must be verifiable
  • The document’s hash value must not have changed post-signing

If you can ensure all of the above, you can e-sign your documents without any concern whatsoever. For further information, you may also want to look into eIDAS and UETA protocols, as well as the ENSIGN Act, each of which will be relevant for those who wish to take their signature to the next level.

You can check this article about DocuSign alternatives to find the most suitable e-signature solution.

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