Electronic Signatures – are they legally binding?

With the advancement in technology many business transactions are now done electronically.  Parties to agreements may never meet in person to place their handwritten signatures on to contracts.  Documents can be signed fast from anywhere in the world, but is an agreement signed with an electronic signature legally effective?

What is an electronic signature?

An electronic signature is an electronic method of signing a document.  It is usually in the form of scanned person’s signature or a digitised image of a handwritten signature.  Another form of electronic signature is simply typing a name or a mark and identifying this mark as a signature.

Electronic signaturesare now commonly used to sign:

• Non Disclosure Agreements,

• Timesheets,

• Sales Contracts,

• Invoices,

• Leases,

• Housing Agreements, and even

• Permission slips,

• School Forms, and

• Releases.

E-signature vs. Digital Signature

An electronic signature may be confused with a digital signature.  The former is a broader concept and includes the term ‘digital signature’.  The latter is a form of ‘electronic signature’ which is a mathematical process designed to determine if a digital message is authentic.

Are E-signatures legally binding?

Unfortunately, there is no straight forward answer for this question.  Electronic signatures do not always make a legal document binding.  Some legal documents require handwritten signatures and only by handwriting a signature do they become binding.

There are a number of factors that will depend on whether or not an electronically signed document is legally binding, including:

• Jurisdiction

Different jurisdictions may impose different laws regarding the use of electronic signatures. The law that applies to the legal document depends on the jurisdiction which governs the agreement. So if the laws of the state governing your contract allow for electronic signatures, then parties can make such contract legally binding by placing their e-signatures.

• Transaction

If the state where the document was executed allows e-signatures, the next step is to check if that law does not exclude the particular type of transaction. If the exclusion applies to that document or transaction, the parties must then sign an original paper version. These exclusions vary in different jurisdictions, so the signing party should check before executing the agreement.

• Method in effecting the e-signature

E-signatures need to be applied in a method that can reliably identify the signatory. The question of reliability, however will depend upon the circumstances and may be agreed between the parties.

• Consent

In all commercial contracts, consent to electronically sign is a pre-requisite. This must be unconditional consent, and parties should agree that electronically signing the agreement is acceptable to them before the contract is signed.

Transactions all over the world use electronic signatures. When signing an agreement electronically parties should be cautious.

What should I do next?

Contact us to discuss the execution of documents via electronic signature at any time. We can offer legal advice and our lawyers at You Legal will be happy to assist you in whatever way we can.

  * This blog is for general guidance only.  Legal advice should be sought before taking action in relation to any specific issues.