Are eSignatures legally binding?

The tradition of ink signatures being over 5 centuries old, it’s hard to shake, as a majority of businesses still follow it and are unwilling to innovate. Still, eSignatures keep on gaining momentum every year, winning new markets. The main concern that different countries and domestic markets have over electronic signatures is their validity. This article will focus on the validity of eSignatures and the legislation that backs them up.

What is an eSignature?

An eSignature is an analogy to a handwritten signature and is used to show agreement to the content of a digital document. It evolved from signature telegraphing in the 18th century to the signature faxing in the 1980s and finally came into play in 2000 when ex-President of the USA Bill Clinton signed the ESIGN Act into the law.

The primary purpose of this new law was to ensure three things:

  1. Authenticity
  2. Data integrity
  3. Non-repudiation (the assurance that someone cannot deny something)

According to the statistics, transactions with electronic signature have increased 8fold (from 89 million to 754 million) globally over the last five years. They are proven to be more secure and reliable, compared to the handwritten signatures. In addition to being more secure, eSignatures help companies go paperless and save a lot of time and resources. It’s no wonder why eSignature continues to grow in popularity in every sphere. Everyone wants faster, better, cheaper.

What are the benefits of eSignatures?

In 2020 alone eSignatures are expected to grow by 39%. Apparently, eSignatures have a significant transformational influence on the global economy by offering new opportunities. Although companies are usually reluctant to go for innovations, they still opt for eSignatures as a prevailing part of business optimization. Multiple benefits that eSignatures solutions promise to bring are proven by the statistics. US businesses waste $8 million annually on handling paper. While companies that adopt electronic signature solutions reduce paper and paper-related expenses by 80% to 85%, respectively.

Below are 8 proven benefits of employing eSignature:

  1. Speeds up document workflows.
  2. Reduces paper-related waste.
  3. Saves on costs.
  4. Enhances security.
  5. Improves customer/employee experiences.
  6. Audit trail and time stamp for recording IP addresses.
  7. Legally binding.
  8. Sets an organization up as a future-forward leader/thinker.

As soon as eSignature becomes an integral part of a company’s workflow, it brings additional benefits, notably, speeds up payments and sales, unburdens customer reps by enabling direct access to documents. Moreover, companies that go paperless reduce human errors in their documents by 90%. Electronic signatures are now widely used in nearly every industry to sign contracts, rental agreements, waivers, tax forms, and financial documents.

What makes eSignatures legally binding?

While eSignatures gain momentum and solidify in more countries and markets, they can be applied and considered legally-binding only given particular criteria is met. About 32 countries, including those with a developed economy (USA, Canada, China) and with the developing ones (Ukraine, Ecuador, Philippines), have passed local laws to facilitate e-commerce and empower them with tools like electronic signature.

Let’s consider the factors below that make eSignatures legal and binding:

  1. An eSignature shows that a signer read and accepts the content in a document/agreement.
  2. An electronic signature shows that all parties involved agree to do business electronically.
  3. A good eSignature platform tacks everything that happens to a document during the signing process.

The mentioned criteria is recommended by the ESIGN Act for every electronic signature workflow. ESIGN also recommends that any law requiring signatures is satisfied by an electronic one; eSigned documents can be submitted to the court as evidence.

Are eSignatures legally binding in the USA?

Electronic signatures in the USA have been carrying the same legal weight for the last 20 years as handwritten ones. They came into power with the adoption of the US Electronic Signatures in Global and National Commerce Act (ESIGN Act). This legislation, in conjunction with a supplementary Uniform Electronic Transactions Act (UETA), provides a legal framework for the use of eSignatures and ensures that they are enforceable. While ESIGN refers to the states where the federal law applies, the UETA covers the states where the federal law doesn’t apply. Additionally, the states of Illinois, New York, and Washington have adopted their own laws in favor of the validity of an electronic signature.

Are signNow documents legally binding?

signNow signatures are legally binding and meet the requirements of the ESIGN Act in regard to security and authentication. We ensure the legal integrity of every unit created in our platform. You can confidently use it for your business and daily tasks knowing each action is legal. In addition, signNow also secures stored files with SOC Type II certification. Manage your documents securely, create legally-binding signatures, and avoid unnecessary risks with the most robust platform on the market for signature workflows of any complexity.
By signNow's Team
By signNow's Team
Digital content writer at signNow
May 13, 2020