Legal Problems With Electronic Signatures

Mary Ellen Power, April 23, 2014
Legal problems with electronic signatures

Some businesses considering a move to e-signature technology can become worried that they will turn to electronic signatures only to find that contracts won't be backed up in court. This concern is understandable as some people may have heard e-signature legal horror stories in the past. However, the industry has evolved substantially in recent years. As such, the legal guidelines surrounding e-signatures have matured and solidified, creating clear regulations as to what needs to be done to make electronic signatures legally binding. Because of this, there is nothing for businesses to worry about when it comes to the actual technology. Most of the legal problems with electronic signatures are those of the past

While e-signature technology and software is sound, every business has some wiggle room to customize the process on its own. A recent Lexology report details some of the legal fine points that come into play in this process and provides some tips on how organizations can use e-signatures without risk.

Considering the legal problem of electronic documentation and e-signatures


It is important to recognize that getting somebody to sign something electronically and completing an electronic signature process are not one and the same. The report highlighted a hypothetical scenario to explain how organizations need to be careful about how they look at e-signatures.

Imagine for a moment that you are working for a company that wants to get all employees to sign an arbitration agreement, the news source begins. The company doesn't want to deal with printing all of the forms out, collecting signatures and storing the documents. Instead, it creates an electronic document, emails it to workers and asks them to read it and then type their name into a fillable portion at the end of the form. The document then needs to be sent back to the group managing the process for storage. Chances are, this document would not hold up in court.

The report explained that establishing electronic signature capabilities depends on following a set of prescribed regulations that have been established by the Uniform Electronics Transaction Act. An e-signature platform that complies with the act can help organizations establish legally valid solutions. The key, at least when it comes to understanding the nuances of e-signatures, is to look at why handwritten signatures are so valuable.

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A well-designed electronic signing ceremony helps mitigate risks in legal problems


Although handwritten signatures provide some level of forensic proof that can assist in authenticating the validity of a document and signatures, the process remains imperfect.

In fact, in the event of a regulatory audit, market conduct exam, settlement conference or court case, producing convincing evidence involves more than just presenting an authentic, signed record. A well-executed signing ceremony can and should also demonstrate the process used to establish the signer's intent. Further, a number of recent court cases underscore the importance of a well-designed process, backed by comprehensive evidence of the electronic transaction.

Ensuring Legal Validity for E-Signatures


Making sure that e-signatures are legal is about recording the entire signature process, which means tracking and logging the way that users move through reading agreements and handle the actual signature. Tracking the entire process and backing it with a digital signature for encryption gives businesses the protection they need to avoid problems when contract disputes are brought to court. 

Still worried about e-signature legality? Check out our E-Signatures in Court white paper to learn how to establish an electronic signature framework that is legally valid.