Electronic Signature Legality

David Gaudio, March 11, 2020

Around the world, financial service organizations, insurance companies, healthcare providers, and more, are shying away from handwritten signatures on contracts and other legally binding documents in favor of electronic signatures due to the immediate efficiency and customer experience benefits. Financial institutions are seeing a 66% reduction in missing files and 92% reduction in errors from scanning paper documents. What’s more, electronic signature technology is now able to be easily integrated into many business applications and process further expanding the benefits to the business workflow

The law applicable to electronic signatures is clear in many countries and has been for some time, and e-signature adoption has increased in the last few years. It is a secure and legally binding solution in most cases, yet there is still some confusion in the market about legality. Here, we’ll review some key information about e-signatures and provide resources where you can learn more. 

So, what is an electronic signature? What is a digital signature? Are they the same? 

An electronic signature fulfills the same function as its wet signature equivalent but through a digital medium. Both forms of signature stand as lasting records of the signer’s intent, which is typically expressed as the intent to comply with the terms of the signed document. The US Federal ESIGN law passed in 2000 defines an electronic signature as “an 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”. 

However, electronic signatures are also often confused with “digital signatures”. Though the two concepts are related, they are distinct from each other. A digital signature refers to the encryption technology used in creating an electronic signature. In short, organizations want an electronic signature application built on digital signature security. 

Is an eSignature Legally Binding? 

Yes! Electronic signatures are valid and legally binding in court in many countries around the world. Just a few examples are: 

  • United States: The federal Electronic Signatures in Global and National Commerce Act (ESIGN) and the state Uniform Electronic Transactions Act (UETA) give legal recognition to electronic signatures. They are technology neutral and allow organizations to utilize a standard e-signature process across 50 states. 
  • Canada: In a report titled Electronic Signatures in Canadian Law, Stikeman Elliot LLP states, “ While there are some variations, the provincial e-commerce statutes generally stipulate that signatures, documents and originals are not invalid or unenforceable by reason only of being in electronic form.” 
  • European Union: The 2016 eIDAS regulation serves as the prevailing legislation on e-signatures in the European Union. It defines three types of electronic signatures: Basic, Advanced, and Qualified E-Signatures, that can be used in member states and provides additional regulation dictating their use. 
  • Japan: In 2001, Japan’s Law Concerning Electronic Signatures and Certification Services went into effect, recognizing the legal enforceability of two types of electronic signatures used around the world: the Advanced E-Signature and the Qualified E-Signature. 
  • Singapore: The Electronic Transactions Act of Singapore (ETA) was passed in 1998 and provides a legal foundation for electronic signatures. 

What Makes an Electronic Signature Legal? 

Not all electronic signatures have the same legal value. Depending on the country in question, the relevant legislation may only accept electronic signatures if they possess certain qualities to ensure their validity. Some of the criteria that is often used to make this assessment is: 

  • The signer must be the only person who possesses the private cryptographic key used by the application to create the e-signature. 
  • If the document is tampered with after the signature is applied, this tampering must be able to be identified and the signature made void. 
  • The e-signature must be uniquely linked to the signer through various user authentication methods. 

Furthermore, there are additional requirements that are generally used to ensure the validity and enforceability of the e-signature: 

  • Electronic signatures are only valid if all parties apply their signature to the document willingly. 
  • All parties must also consent to conduct the relevant business electronically. 
  • All parties must be able to retrieve the e-signed document for reference. 
  • The application used to create the electronic signature should also create an associated record, or audit trail, of the signing ceremony.  

Do Electronic Signatures  Hold Up in Court? 

Over and over again, electronic signatures have been proven to hold up in court as evidence of a signer’s intent. Here are just a few examples of electronic signatures winning the day. 

  • Long v. Time Insurance Company: The court ruled in favor of Time Insurance, validating the company’s use of e-signatures for health insurance contracts, with the evidence generated being deemed admissible in a court of law.  
  • Vinhee v. American Express: American Express lost a bankruptcy proceeding, because it failed to lay a proper foundation for computerized records being submitted as evidence of the defendant’s credit card statements. 
  • Barwick v. GEICO: This case questioned the validity of the UETA law. The Arkansas Supreme Court sided with GEICO, noting that UETA could not be more straightforward in allowing the plaintiff’s electronic record to satisfy the law that requires a record to be “in writing” (i.e., on paper). 
  • Lorraine v. Markel American Insurance Company: This case demonstrates how capturing electronic evidence without laying the proper foundation can deem the evidence inadmissible. Judge Paul W. Grimm would not admit electronic records into evidence, because neither party could demonstrate record and process reliability. 
  • Bar-ayal v. Time Warner Cable inc.: In this case, the court upheld an “I Agree” online contract that required arbitration, based on the defendant re-creating the electronic process from its software in court to demonstrate acceptance of its agreement by the plaintiff. 

Creating an E-Signature 

Sending and signing a document is as easy as the e-signature application you choose to deploy. For businesses that want a solution ready to provide a secure e-signing experience out-of-the-box, OneSpan Sign provides rapid deployment and an exceptional user experience. In addition, OneSpan Sign can integrate its e-signing capabilities into your existing application with the help of our development team. 

If you’d like to learn more about the legality of electronic signatures and OneSpan Sign, download our ebook, Electronic Signature and the Law: Global Legislation Review

The information in this blog is for informational purposes only and does not constitute legal advice. We recommend that you seek independent professional advice. OneSpan does not accept liability for the contents of these materials. 

David Gaudio is the Content Writer for all things security and e-signature at OneSpan with nearly ten years’ experience in digital marketing and content creation. Prior to OneSpan, David earned his BA in Publishing and Creative Writing and has worn almost every hat in the digital marketing closet