Business

What is an e-signature?

May 21, 2020

Our world is becoming more and more electronic. We work from home. We shop online. We conduct business in the cloud. Adding an electronic signature to your document or transactions is becoming the new norm. It guarantees your documents and transactions are safe and legal. Let us explore what an e-signature is.

An e-signature confirms the authenticity and validity of your data, providing you a reliable sense of security.

What is a Signature?

A signature is a unique depiction of a person’s name attached to a document. A document is a mode of recorded information in either paper or electronic form. A signature legally verifies a document or transaction’s legitimacy and the signee’s agreement to the content of that document. 

Why go Digital?

Historically handwritten ink signatures have been the norm for approving documents, transactions, and records. An official stamp, a wax seal, sometimes an “X” inked on a piece of paper, was all that was needed to show approval or prove a document to be genuine. In the 21st century we have gone digital. We send electronic documents over email, store them electronically, and print them when needed, making E-signatures the next logical step to provide a fast and reliable signing process.

Digital transactions are rapidly replacing the old pen and paper way of how we communicate and do business.

What is an E-Signature?

The U.S Electronic Signatures in Global and National Commerce Act, defines an e-signature as  “electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign a record.” It is the digital representation of a record or transaction. An e-signature should indicate who signed the document, what they signed, their purpose for signing, and their agreement to the contents. An e-signature relates a document or transaction to a person or entity. This relationship can be associated with several methods including:

  • A digitally converted signature added to manual fax. 
  • A signature on an email.
  • A PIN (Personal Identification Number) used at an ATM or to approve a purchase.
  • A handwritten signature captured digitally on a smartphone, tablet, or another touchscreen.

Digital Signature versus E-Signature

A digital signature differs from an e-signature. It is important to understand that an e-signature is a type of digital signature, but a digital signature is not an e-signature. An e-signature is associated with a person. A digital signature uses an algorithm to encrypt and digitally secure a document. It guarantees the document is authentic and any alterations are noted and approved. A digital signature requires both parties involved to use the same method to encrypt and then decrypt the data. This can be difficult and costly. Using an e-signature to approve the electronic document or transaction and a digital signature to encrypt it, ensures data is legal and secure.

Is an E-Signature Legal?

E-signatures are indeed legally binding and determined by laws. In the U.S., there are two major laws or statutes that define an electronic document and an e-signature. The UETA (Uniform Electronic Transactions Act) was approved by the NCCUSL (National Conference of Commissioners on Uniform State Laws) in 1999. The Electronic Signatures in Global and National Commerce Act (E-Sign Act) was signed into law on June 30, 2000. Both statutes cover similar ground with some slight differences.

E-Sign Act versus UETA

The E-Sign Act is a Federal law creating a standard for electronic signatures across all fifty states. The UETA is a state law defining the online transactions and electronic signature guidelines for each state. The E-Sign Act covers all fifty states. Since the UETA is a state law, it can be adopted or declined by each state’s government. To date, the UETA has been adopted by 47 states.

Both the UETA and the E-Sign Act cover consumer and commercial transactions. It is important to note that because these guidelines cover transactions between two or more parties, they limit certain legal areas like family law, will creation, and court documents. In general, both the E-Sign Act and the UETA contain comparable conditions but may differ on the extent, or details of the laws. If there is a conflict between the two laws, the UETA is the default. UETA where in effect, outlines each state’s parameters for when and where e-signatures can be used. The E-sign Act confirms the legality of e-signatures across the whole of the United States when all parties involved consent to their use.

E-Signatures outside the US

In the EU, the eIDAS (Electronic Identification, Authentication and Trust Services) regulates e-signatures standards across the EU member states. While most countries have established their own guidelines and definitions for e-signatures and their use, the United Nations Commission on International Trade Law has developed guidelines and framework suggestions for use around the world.

In most countries, the e-signature and digital signatures used in the U.S. are legally binding, but it is recommended to research the laws in each region. 

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