Are Electronic Signatures Legally Binding?

Contracts are the backbone of your small business. Whether you’re collecting signatures or signing yourself, you want to be sure the documents will hold up. 

You might wonder if you can trust electronic signatures. The answer is yes — electronic signatures are legally binding in the United States, Canada, and many other foreign countries. They allow you to sign documents on a smartphone or computer and are usually as acceptable as “wet” signatures made with ink on paper. In fact, they’re often preferable in modern business transactions.

This guide discusses e-signatures and what you must do to ensure they’re enforceable. We’ll also talk about the benefits of e-signing.

What is an e-signature?

E-signatures are a way to sign or collect signatures on electronic devices. You can use them on many types of legal contracts, such as contractor agreements or customer contracts.  

You can ask people to e-sign in several ways:

• Checking the “I agree” box on a website
• Typing their name or PIN into an online form
• Using their finger or a mouse to sign their name
• Using an e-signing software tool that routes a document to all parties and tracks signature progress 

Are electronic signatures legally binding?

U.S. and  many international laws make e-signatures as legally valid as wet signatures. These laws also lay out what you must do to ensure an e-signature is legally binding. When you know and follow the laws, e-signatures can be an easy and inexpensive way to handle document signing.

It’s a good idea to get contracts reviewed by a professional before you send them out for a signature. LegalShield® Small Business Plans include e-signature services to help you sign electronic documents securely.

What laws regulate electronic signatures?

Several laws make e-signatures legal and binding in the U.S. 

The Electronic Signatures in Global and National Commerce (ESIGN) Act is a U.S. federal law that makes e-signatures valid in interstate and international commerce. This means that e-signatures can be enforceable for transactions between parties in the same state, two different states, or even two different countries.

The Uniform Electronic Transactions Act (UETA) is a law adopted by 49 states, Washington, D.C., the U.S. Virgin Islands, and Puerto Rico that validates e-signatures at the state level. Where ESIGN doesn’t apply in the U.S., the UETA usually does. These laws standardize the rules for e-signing.

New York is the only state that opted not to adopt the UETA. Instead, New York adopted its own Electronic Signatures and Records Act (ESRA). It is similar to the UETA and makes an e-signature valid in New York.

Federal legal signature requirements

As of 2000, ESIGN makes e-signatures legal to collect everywhere federal law applies. The law outlines what you must do to make sure an e-signature is legally binding.

First, e-signatures must show a clear intent to sign. You usually have to ask signers to do something like check a box or draw their name with a mouse. There also needs to be a way for signers to opt in to signing electronically, such as by checking an “I agree” box next to a standard consent clause.

If someone doesn’t want to e-sign, they don’t have to. The document should give them clear instructions on how to get a paper copy.

You and anyone else who e-signs should get a digital copy of the signed  document. There must be a way for all signers to keep a copy of the document for their records, typically by downloading and printing it. 

What documents can be signed electronically?

You can use an e-signature on many personal and business documents. These are some of the types of paperwork where you can use an electronic signature:

• Account opening paperwork 
• Insurance policy agreements and claims
• Lease agreements and rental applications
• Loan applications
• Offer letters and employment contracts
• Non-disclosure agreements
• Patient intake forms
• Purchase orders
• Real estate documents
• Service agreements
• Sales contracts
• Waivers and release forms

What documents can't be electronically signed?

You can’t e-sign all documents. There are exceptions under ESIGN and state laws, which can vary by location. Paperwork you can’t e-sign may include these kinds of documents:

• Court orders
• Deeds and mortgage documents
• Birth certificates
• Death certificates
• Marriage certificates
• Healthcare documents, like “do not resuscitate” orders
• Powers of attorney
• Testamentary trusts
• Wills and codicils
• Documents that must be notarized

If you have questions about electronic signature policy and when you can or can’t e-sign, you can get access to a knowledgeable LegalShield provider lawyer with a LegalShield Membership.

Are electronic signatures legal outside the U.S.?

Electronic signatures are legal in many places outside the U.S., but each country has its own e-signature laws. It’s a good idea to speak with a lawyer before signing international agreements. 

What are the benefits of electronic signatures?

Electronic signatures have many benefits that can make them an even better option than wet signatures when the law allows you to use them.  These include:

• Convenience: You can usually send, sign, and return electronic documents almost immediately. You don’t have to meet in person or mail documents back and forth. 
• Management: You don’t have to print or file paper copies. With e-signed documents, you get an easy-to-manage digital copy sent to you, usually right after everyone signs. 
• Security: Many e-signing services include built-in security features. These include steps that verify the signers’ identities. 
• Clarity: E-signatures are often easier to read than handwritten signatures. 
• Audit trails: Electronic documents have timestamps when you open and e-sign them, leaving a clear audit trail. 
• Costs and consumption: Not having to print or ship paper copies cuts down on costs and consumption. Also, you don’t need physical storage space for electronic documents.

Sign with confidence with LegalShield

Contracts and legal documents are an important part of setting up a small business and keeping it running smoothly. With help from an affordable LegalShield Small Business Plan, you can make a sound small business contract strategy. 

A LegalShield Business Plan allows you to consult with a provider lawyer about drafting, signing, and enforcing contracts. Planks also come with secure e-signature services.

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Sources:

• Adobe. (n.d.). Cloud-signatures legality. https://www.adobe.com/trust/compliance/cloud-signatures-legality.html. 
• Electronic Signatures in Global and National Commerce Act, 15 U.S.C. § 7001 (prelim. ed.). https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-chapter96&saved=%7CZ3JhbnVsZWlkOlVTQy1wcmVsaW0tdGl0bGUxNS1zZWN0aW9uNzAwMQ==%7C%7C%7C0%7Cfalse%7Cprelim&edition=prelim 
• N.Y. State Tech. Law art. 3 (Electronic Signatures and Records Act). https://www.nysenate.gov/legislation/laws/STT/A3 
• Uniform Electronic Transactions Act. (1999). Uniform Electronic Transactions Act [PDF]. https://euro.ecom.cmu.edu/program/law/08-732/Transactions/ueta.pdf