Making the Jump to Electronic Signatures

Posted by Dan Puterbaugh, Director, Associate General Counsel

Electronic signatures have been legal and enforceable in the United States since the passage of the ESIGN Act in 2000.  Yet despite the tremendous improvements in speed, efficiency, and reliability, many still feel wary of electronic signatures.

In fact, the paradox of e-signatures in 2014 is that many people know that they are legal and enforceable in the United States, yet some unease appears to prevent really robust adoption.  This unease seems to hinge on the belief that written signatures are trustworthy and reliable and the fear that electronic signatures are new and untested.  Neither of these beliefs is entirely accurate.

First, let’s explain our terms.  Written signatures are the handwritten signatures we are all familiar with.  Digital signatures, sometimes also call authenticated electronic signatures or (in the EU) advanced electronic signatures, use secure public/private key encryption to authenticate the identity of the signer as well as the integrity of the signed document.  They are highly secure but also quite cumbersome to implement and use since each participant in the process must first obtain a digital certificate or physical token from a certificate issuing authority.

On the other hand, electronic signatures are any electronic symbol reasonably related to a contract created with the intent to sign that contract.  This can range from electronically checking a box that indicates acceptance, typing one’s name into a data field or hitting an “Agree” button to a software license.  Because of their speed and ease-of-use, it is electronic signatures that represent the greatest opportunity to speed contracting processes for the largest number of businesses, governments and individuals.

Often, our reliance on written signatures is not warranted.  A simple examination of a typical written signature process makes this clear.  How does this process usually progress?  An agreement is finalized by phone or email.  The agreement is sent via email, fax or regular mail to a provided address.  Hours pass.  Days.  Weeks.  The seasons flicker by and at last the contract is returned.  Upon opening the envelope one sees a document that appears to be version sent, possibly from the same address, email address or fax number that it was sent to with a scrawl that might be from the person whom you believe has signing authority in what may or may not be his or her actual signature.  Yet, this is the process on which we rely.

If this weren’t reason enough to leave written signatures in the dustbin of history, they are also wasteful, slow and costly.  They delay business while the parties wait for signed documents to be returned.  It is often challenging to get signatures from people who are remote or traveling.  It is difficult to know the status of a document during signing process.  And once the agreement arrives, it inevitably has to be scanned so that it can be archived.  Assuming, of course, that it has not been lost along that way.

So, we find ourselves in an era where document generation, editing, exchange, routing and archiving are all done electronically.  It is only for this single act of signing that we are suddenly transported to the pre-digital age, print out a hard copy, pull out our ink wells, flourish our quills and sign.  Small wonder then that this fundamentally anachronistic process is so slow, clunky and prone to failure.

Compared to written signatures, electronic are much safer and easier to use.  Contracts can be signed from tablets and smart phones, allowing executives to sign documents while traveling or on vacation.  This eliminates the common problem of business grinding to halt while key signatories are tracked down.  Further, e-signatures allow all involved to maintain visibility into the real-time status of where each document is in the signing process.  Digital rights management can be enabled in documents giving all involved peace of mind that no alterations were made in the final versions.  Finally, electronic signatures are good for the environment and the bottom line.  Every time one can avoid a paper signing process, there are tremendous savings in paper, power, and reductions in carbon emissions from the jets and trucks of the express carriers that are so often used in getting paper-based deals done.

Considering the endless licensing agreements, partnership agreements, travel approvals, supplier contracts, business compliance agreements, non-disclosure agreements, offer letters, corporate policy acknowledgements, benefits enrollment forms, insertion orders, creative approvals, and other documents that even a moderately sized organization must execute, these incremental environmental and financial savings quickly add up.

Because of these facts, electronic signatures have become one of the primary mechanisms for executing agreements.  Those who use them not only find them a safe, effective way of doing business but they often remark that they could not imagine returned to paper-based processes.  For those who have not moved to electronic signatures, all that is required is that one swallow hard and make the leap.

 

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