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Are electronic signatures legally binding?

In 2020, remote work fast-tracked many digital initiatives, including electronically signing legal documents. But e-signatures' legal background goes beyond the pandemic.

Electronic signatures eliminate the need to complete legal documents and contracts in person, improve efficiency and reduce paper waste. But people still question whether e-signatures are legally binding.

As the COVID-19 pandemic forced many nations into complete lockdown, business adoption of e-signature software surged. Organizations and government services had to restrict face-to-face interactions, which forced businesses that dealt with paper contracts and documents to resort to digital alternatives like e-signatures. None of this would be possible if e-signatures weren't legally binding.

Criteria for validity

In 2000, the U.S. federal government passed the Electronic Signatures in Global and National Commerce Act. The ESIGN Act confirmed that legally binding documents can use e-signatures if all parties choose to sign digitally. This ruling applies across the U.S.

For an e-signature to be considered legal or to hold up in court, the signature should have the following:

  • a digital seal that can track its origins;
  • an audit trail showing back to the original signer; and
  • strong authentication methods to confirm signers' identities.

People find e-signatures in their everyday lives when accepting terms and conditions on apps, e-commerce websites and computer software. E-signatures also appear in digital forms on webpages, PDFs and other intake forms that require users to sign their names. Many people also associate vendors like DocuSign or Adobe Sign with e-signatures, as they have assisted with the transmission of documents that require e-signatures.

Concerns around e-signatures have also raised some alarms for professionals because signing as someone else in the digital world is easy with the right tools. So, organizations should take precautions to avoid fraud. Some of the steps taken include the following:

  • Use only approved e-signature tools or portals.
  • Ensure that users enable two-factor authentication.
  • Only trust signed documents that you expect to get.

E-signatures continue to support document digitization that some businesses still struggle to handle. While not every organization is rushing to implement e-signatures across business operations, this shift brings various benefits.

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