The Finger Replaces the Pen: Electronic Signatures in the Wireless Age
As our daily lives shift online and to the cloud, so, too, do business transactions. Much of the transaction process can now be conducted online, but paper is still required for signatures. Recent efforts to reduce paper usage and to increase efficiency have led to the growing use of electronic signatures. In 2000, Congress passed the Electronic Signatures in Global and National Commerce Act (E-SIGN). E-SIGN’s purpose is to streamline business operations and eliminate paper burdens for consumers. To achieve this purpose, the Act authorizes the use of electronic signatures for interstate and international commerce. Wisconsin has enacted a similar statute: Wis. Stat. § 137.15
Use of electronic signatures provides many benefits to a business: speed of transaction, efficiency and reduced costs. However, while they are legally valid, electronic signatures are not yet the norm. Therefore, businesses must be aware of certain requirements before utilizing electronic signatures.This article provides an overview of electronic signature legislation and suggestions for businesses considering electronic signatures.
Electronic Signature Validity
E-SIGN and Wis. Stat. § 137.15 established electronic signatures have the same legal standing as pen-to-paper signatures. An electronic signature is an electronic sound, symbol or process attached to, or associated with, a contract or other record and used as the legal equivalent of a written signature. Specifically, it can be a typed name or, in some circumstances, an actual signature created by a stylus or a finger. If an electronic signature is used, the electronic contract is valid and enforceable in this electronic form.
Best Practice Tips
An electronically executed contract is valid even when the customer has not given electronic consent or confirmation of consent. To protect against potential challenges to the electronically signed contract, E-SIGN recommends businesses provide disclosures to the customer.
When a business offers a contract for the customer to sign electronically, it is best practice to ensure the following are accomplished:
- Ensure the customer affirmatively consents to such use and has not withdrawn consent.
- Provide the customer with a clear and conspicuous statement informing the customer of (a) his or her right to the record provided in non-electronic form; and (b) his or her right to withdraw consent.
- Provide the customer with instructions of how to access and retain the electronic records or document, particularly if the manner of access has changed due to hardware or software changes.
- Ensure the customer consents in a way that demonstrates he or she can access those records.
- Provide an agreement both parties sign and agree such electronic signatures are binding.
- After the documents have been signed electronically, follow up with a confirmatory email to the customer.
- Attach the electronically signed documents and include language confirming both parties agree and consent to the electronic contract.
- Retain evidence of contractual agreements to fulfill the legislative requirements and to clarify any future problems about the contract’s legitimacy or the contract details.
Electronic Signature Service Providers
To properly acquire an electronic signature from a customer, one should consider using an online service, such as RightSignature or EchoSign. Each of these services is commonly used and each complies with the E-SIGN requirements. These online services provide conspicuous disclosures to the customer to protect signatures and privacy and retain all the documents while tracking time and date stamping signatures. Customers may appreciate these services as they expedite transactions, reduce costs and allow the customer to access the documents anywhere with an internet connection.
The pen-to-paper signature is still the most common method of conducting business. However, electronic signatures have become an important tool as customers seek cheaper and faster ways of completing transactions. Online services simplify electronic signatures and provide a way for a business, small or large, to contract with its customers in a paper-less, efficient, and legal manner.
It is important to note electronic signatures are not the norm and are unacceptable for some transactions. For instance, electronic signatures are not accepted for wills, codicils, trusts, divorce decrees, adoption paperwork, notices of utility service termination and notices of default, foreclosure, repossession or eviction. Before your business considers electronic signatures, you should verify the range of electronic signatures that are valid or accepted in your industry.