Are Electronically Signed Documents Legally Binding?

Male hand using stylus to sign

Electronic signatures, also called e-signatures, have provided businesses all over the world the convenience to sign contracts and documents wherever, whenever. Before, shipping contracts and documents to signees and sending them back to the sender took several weeks.

Now, however, the entire process only takes a few seconds. It’s likewise more efficient than faxing back and forth or emailing papers, printing them out, scanning all the signed documents, and sending them back through email.

However, are contracts that are signed electronically legally binding like contracts that are signed physically?

What Makes Electronic Signatures Legally Binding?

Electronic signatures are becoming increasingly prevalent in the digital financial industry and e-commerce transactions. Executed properly, a document with an electronic signature will have the same legal heft as one with a traditional signature signed with ink.

But it’s critical to note that there are certain guidelines that individuals and organizations should adhere to when creating a contract that will contain an electronic signature. This means that when your small business lawyer or attorney in Denver is drafting an agreement or document for your small business that will be electronically signed, he or she must meet the following requirements for your contract to be considered valid:

  • Permission to conduct business electronically. The agreement between the sender and signee should include a clause clearly stating that all relevant parties agree to conduct their transaction electronically.
  • The intent to electronically sign a document. Intent in this instance can be expressed by clicking an “accept” button, typing the signee’s name, and electronically drawing the signature.
  • A clause for opting out. Signers should always have the choice to opt-out of signing electronically, and if they do, you should provide the option of signing documents the traditional way.
  • All parties must have their own copies of the document.
  • The agreement should be accessible to all relevant parties and maintained in the exact same form when it was signed electronically.

A Crucial Note on Privacy and Security

Stylus in hand

Reputable software for electronic signature transactions typically employs security measures to make sure that the agreement is secure, legally binding, and not fraudulent. To ensure optimum privacy and security, select software that enable the use of different authentication methods.

You should ideally also select one that implements a digital signature coupled with the electronic signature. Digital signatures are basically utilized in a host of e-commerce and security applications and are based on private/public key cryptography.

Utilized with an electronic signature program, this encryption method will adequately secure the document. If the document were tampered with, the digital signature would be able to detect any changes.

Also, audit trails, which are records embedded in e-signed documents that contain details about the e-signing, could be used for verifying the legitimacy of documents.

In this day and age, electronic signatures can really offer convenience to all kinds of businesses, provided that you choose a reputable and reliable electronic signature application. You just also need to make sure that your document follows the rules and requirements for writing documents and that it’s secure to be deemed legally binding.

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