As the majority of organizations now conduct business electronically, securing digital content is essential – as discussed in our blog post, “Secure Digital Content: How it’s Done.” And with the start of the European Union’s (EU) General Data Protection Regulation (GDPR) on May 25, 2018, data privacy has taken on even greater importance – the implications of which were covered in our blog post, “Document Management with GDPR.” The pivotal role of electronic signatures in secure document management for companies that “go paperless” deserves recognition.
So, what is an electronic signature in data management, how does it work, why should you adopt it, and what is the legal standing of electronic signatures?
What is an electronic signature, and how does it work?
Also called a digital signature, an electronic signature is any way of signing a non-printed document. It can be done with your finger, mouse or stylus. It also can be done by typing your name, accompanied by some proof of identification, such as the last four digits of your Social Security number.
Writing for PandaDoc, SEO specialist Eugene Zaremba makes the distinction between an electronic signature (also known as an eSignature) and a digital signature. The former “… doesn’t necessarily mean legally binding because it refers to any online signature, which can include a copy-paste of your own signature.”
However, Zaremba notes, “The somewhat less commonly used term digital signature is actually more of a correct term. Digital signature or standard electronic signature is actually a coded, encrypted, legally binding digital footprint. The digital signature is made of unique encoded messages — one for each signee — that join together to make a complete, legally binding, standard electronically signed document.”
Just like handwritten signatures, digital signatures are unique to each signer. An algorithm is used to generate two long numbers, which are known as keys. Of the two keys, one is public and the other is private.
With the signer’s private key – which is always kept securely by the signer – the signature is created when a signer electronically signs a document. Acting like code, the mathematical algorithm creates data that matches the signed document (called a hash) and encrypts it. The encrypted data that results from this process is the digital signature. The electronic sign also bears the time when the document is signed. The digital signature becomes invalid if any change in the document is made after it is signed.
Why your company should be using electronic signatures
Ease of use – One solution provider Alton references allows the user to upload a document, declare signers and recipients, and deliver a secure link to the recipient. The recipient signs the document to complete the process.
High level of security – Even more secure than traditional paper documents, electronic signatures not only contain a signature, but also traceable information on who signed the document, where the document was signed and when it was signed.
Convenience – In our geographically dispersed world, your business probably deals with clients and vendors in in various cities, states, and countries. Electronic signatures allow remote authentication, making it a convenient option.
Faster turnaround time – Businesses that don’t use electronic signatures have to scan, print, sign and send documents to one party, then repeat the process for each of the other parties in the transaction or agreement. With electronic signatures, all parties can sign within seconds.
Lower cost – The amount of money saved in paper, postage, mailing supplies and time make electronic signatures more cost-effective in the long run.
The legal standing of electronic signatures
In 1999, the Uniform Law Commission drafted the Uniform Electronic Transactions Act (UETA), which provides a legal framework for the use of electronic signatures. It has been adopted in 47 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. Exceptions are Illinois, New York and Washington. In 2000, the United States passed the Electronic Signatures in Global and National Commerce Act (ESIGN Act) to facilitate the adoption of electronic signatures.
However, questions regarding the legal standing of electronic signatures remain among many business people – who are justifiably warry of an unscrupulous client trying to get out of a contract by claiming it isn’t legally binding. Both of these acts confer the same legal status upon electronic signatures as given to those signed by hand on paper documents.
As outlined by SignEasy, an electronic signature must meet the following requirements per the two acts to make it legally binding:
A clear intent to sign – Just as with a hand-signed signature, electronic signatures are valid only if a user demonstrates a clear intent to sign. It means that you should also have the option of declining the electronic signature request.
Prior consent – The concerned parties must express or imply their consent of doing business electronically.
Clear attribution of signature – This can be determined based on the context and circumstances under which the document was signed.
Association of signature with the record – An electronic signature should be connected to the document that is to be signed.
Record retention – According to the ESIGN Act, the validity of the electronic signature is legitimate as long as the records accurately reflect the agreement and can be reproduced in a court of law as and when required. Leading electronic signature platforms provide users with a fully-executed signed copy, or allow you to download a copy of the signed document.
Making digital management safe and secure, DocuServe offers industry-leading cloud-based solutions for every aspect of your organization. With DocuServe, you get complete control over your content, right down to the document level. Contact us to learn more.