As Internet-based digital forms and contracts increasingly take the place of paper, electronic signatures are becoming standard practice over pen and ink signatures. But did you know that the use of electronic signatures goes as far back as the American Civil War? Legal contracts were frequently sent over Morse code, and electronic signatures to verify those contracts was just as enforceable as a regular signature. The same holds true today.
How Do Electronic Signatures Work?
When you put a signature on a document, it means that you confirm that the document you've signed is true, you agree to the terms of a contract, or the letter was written by you. Electronic signatures work exactly the same as pen and ink signatures, in that they are legally binding, according to the Uniform Electronics Transactions Act (UETA).
What Types of Electronic Signatures are there?
What are the Benefits of Electronic Signatures?
Electronic signatures can save time and expedite the process, since documents are not mailed through the postal system. They can also save a significant amount of money that would be spent on postage and delivery. Finally, in the case of digital signatures, can be more secure than traditional signatures, since encryption prevents forgeries.
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The proliferation of Internet applications for business and commerce has made paper records all but obsolete. When was the last time you sent a paper check? Still, there are often questions about how valid and enforceable an electronic transaction or contract is compared to a paper one. The Uniform Electronic Transactions Act seeks to answer those questions and get rid of those doubts.
What is the Uniform Electronic Transactions Act?
The Uniform Electronics Transactions Act (UETA), first proposed in 1999, has been adopted by 47 states plus the District of Columbia, Puerto Rico and the US Virgin Islands. Only New York, Washington and Illinois have yet to adopt it. (These three states have enacted their own laws on electronic transactions.) This act seeks to make a standard set of rules regarding the validity of electronic signatures on legal documents like checks, leases and contracts. The act also deals with storage of electronic records. In short, the Uniform Electronic Transactions Act:
What is an Electronic Signature?
Under the UETA, an electronic signature is "an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record." That phrase makes an electronic signature as binding as if you signed a paper contract with a pen.
Most documents can be executed with an electronic signature. Exceptions include wills, trusts and codicils; requests for canceling utility or health care services; many court documents; and documents dealing with evictions, foreclosures and repossessions.
Advantages to Electronic Signatures
In addition to the convenience of being able to sign documents in the comfort of your own house and having multiple parties sign without bringing them all together physically, electronic signatures are much more difficult to forge or tamper with, giving your transactions a greater degree of security.
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An electronic, or e-signature, is a signature that is applied to online documents using a professional electronic signature service. It is considered as legally binding as any written, stylized signature that endorses meaningful documents such as tax forms or contractual agreements. Signing documents using an electronic signature service is fast, safe and saves users the hassle of scanning, printing and mailing documents endorsed with traditional ink-based signatures.
History of the E-Signature
The concept of signing a document without using an actual writing device began with the invention of the telegraph in the 19th century. The prototype of electronic signatures emerged when members of the 1869 New Hampshire Supreme Court transmitted their signatures telegraphically to enforce state legislation and laws.
The second generation of electronic signature services appeared in the 1980s when fax machines allowed rapid delivery of time-sensitive documents. Although someone had to initially sign a document in the traditional manner before faxing it, the signature received by the recipient of the fax was actually an electronic image of the signature.
Legal Definition of an Electronic Signature
According to the U.S. Code of Laws, which is an assemblage of permanent and codified federal laws, an electronic signature is an electronic process, symbol or sound that has been attached to a document, contract or any other record and "executed or adopted" by an individual who has expressed intent to sign that document. This definition of an electronic signature is also found in the UETA, or Uniform Electronic Transactions Act released in 1999 by the National Conference of Commissioners on Uniform State Laws.
Benefits of Using a Free Electronic Signature Service
Businesses using e-signature services can execute, manage and expedite sales transactions under the protection of a highly secured virtual environment. Both business owners and customers will no longer have to deal with faxing, "snail mail" or excessive amounts of paper documents. By improving customer service, business will also increase customer satisfaction, reduce overhead costs and streamline the internal operation of the company.
Individuals with access to a personal electronic signature service account can transmit tax forms, open bank accounts, effectuate legal documents and, in general, simplify many tasks that require additional, time-consuming steps involving the conveyance of a signature.
By using a highly secure technology based on an encryption algorithm called PKI (Public Key Infrastructure), electronic signature services provide a safe, reliable method for people to quickly and legally sign documents online.
On January 3, 2012, the United States adopted the USC Chapter 96 Electronic Signatures in Global and National Commerce act that specifies principles governing the use of electronic signatures with international transactions. This legislation essentially reaffirms principles described in the Model Law on Electronic Commerce adopted by the United Nations Commission on International Trade Law in 1996.
Most industrialized nations have used standardized laws provided by UNCITRAL (United Nations Commission on International Trade Law) to guide them in creating regulations concerning the legality of electronic signature services operating in their own country. For example, the Law of the People's Republic of China on Electronic Signature took effect in April of 2005. South Africa also has its own law called the Electronic Communications and Transactions Act 25, 2002. Ireland, Japan and many others have also passed legislature that provides their government's interpretation of what an electronic signature constitutes and rules for disputing the legality of digital signatures.
Typically, countries other than the U.S. have adopted similar principles that delineate laws regarding the use of electronic signatures on international contracts and documents. These laws involve one or more of three approaches:
1. A technologically minimalist approach that allows the implementation of any technology for initiating an electronic signature provided that this technology satisfies a signature's legal function concerning what it is intended to denote
2. A specifically technological approach that identifies and recognizes the utilization of electronic signatures
3. A bi-directional approach that affords a presumption based on evidence that the electronic signature is binding and valid if the parties involved in the transaction have used technologies capable of issuing established certification authorities for said electronic signatures.
Because laws regarding electronic signatures differ slightly among many countries, electronic signature services suggest businesses maximize the principles of international e-signature use by including a separate reference in the body of all contracts that state each party is agreeing to the implementation of electronic signatures. In addition, it is recommended that another paragraph should be inserted affirming that all parties involved are agreeing to the provisions of the U.S. E-Sign Act.
When dealing with a country that may not have specific guidelines concerning the legality of e-signature use, always ask your electronic signature service provider for instructions about what to include in a document or contract to avoid any delays or cancellations in important transactions.
Electronic signature technology has dramatically expedited the way we conduct business and formalize contracts by omitting the hassle of mailing or hand-delivering documents that require personal signatures. Before the development of electronic signature software, faxing was the quickest option available if something needed signed and returned as soon as possible. However, even faxing had its drawbacks. First, the receiver of the document had to have a fax machine. Second, if the person whose signature was needed wasn't available to sign the document and return it in a timely manner, businesses had to wait sometimes for as long as it took to mail the document. Finally, the chance that a faxed signature may have been forged remained a distinct possibility, since no one could vouch de facto for the validity of the signature.
Safe, quick and convenient, the use of electronic signatures is now the preferred method of conducting business by progressive companies that want to consistently stay ahead of the competition. The discovery that integrating electronic signature technology accelerates the ability to complete transactions and empirically increase a company's Return On Investment (ROI) has generated a worldwide demand for electronic signature services.
Other benefits of using electronic signature technology include:
Digitally encrypted documents and signatures greatly improve the security of completing business transactions on the Internet.
Reduction in transaction costs that were formerly vulnerable to human error. With digital signature technology, transactions are never delayed or canceled and electronic signature software is capable of detecting even the most subtle error or compliance issue.
Reduction in overhead costs such as paper, copy machine maintenance, shipping charges and even legal expenditures resulting from forgeries or illegally altered documents.
Employing an electronic signature service allows businesses to create and retain an archive of signed documentation that is conveniently accessible via the service's secure database.
Businesses with busy clients that use an electronic signature service permits clients to digitally sign documents using a smart phone, saving clients the hassle of booting up a laptop.
By taking advantage of an electronic signature service, businesses will no longer have to waste valuable time chasing clients for necessary signatures. In addition, people not involved in business activities will also avoid the delays and frustration that frequently surrounds contract and document signing initiated through fax or mail. Instead, all you will need to do is download the document, digitally sign the document through an electronic signature service and email the document to the company or individual requiring the document. It is a quick and easy process that is entirely legal and recognized by U.S. law as valid proof of your intent to honor a contract.
Back in 2000, when many people were still signing paper documents with a pen, and waiting days for said documents to get where they needed to go, the United States Congress passed the Electronic Signatures in Global and National Commerce Act (ESIGN) which ensures that documents which are signed electronically are valid and legal. This law is also know as the “Millennium Digital Commerce Act” and the “E-SIGN bill”. While each state has their own laws about electronic signatures, interstate commerce follows federal law which declares that a contract signed electronically cannot be denied as being legal, valid or enforceable simply because it is in electronic form.
While the law protects those who use electronic signatures, it also protects those who chose not to sign documents on their computer, tablet or smart phone. Consumers are allowed to opt out of signing electronic documents in favor of paper ones. Additionally, they must consent to signing electronically per a disclosure that must accompany all documents. Records must be retained so long as they are still relevant and the substance in the contract is still able to be accessed by the individual who is entitled to the information. In 2010, after computer use became mainstream and the use of technology entered nearly everyone's life, Congress declared June 30, as "National ESIGN Day" as a way to increase awareness of the law.
Since the ESIGN Act is valid in all 50 states, it's easy for companies to do business with anyone, anywhere. Signatures that are signed online are tamper-proof and can stand up as legal evidence in court, should ever a need arise. While the act was primarily instituted for the benefit of government agencies, it's become more valuable to individuals and businesses who need the occasional signature on short notice.
Third-party services are making it easier for everyone to sign documents almost instantaneously. Because of the ESIGN Act, busy people who don't have time for using the postal service can simply upload, sign and share any document in a matter of minutes. Gone are the hours wasted running from store to store looking for a fax machine, or spending money overnighting important documents, just so signatures can be obtained. Electronic signatures make signing contracts and making purchases easier on both the consumer and the business. Neither party loses out on any time that could be better spent elsewhere.
As time passes, it's likely that e-signing will become used by more people out of sheer convenience and concern for the environment. Documents stored electronically take up minimal space on a hard drive and reduce the amount of space needed in offices, as well as the costs associated with printing and mailing documents. It's possible that the next generation will hardly know what to do if given a pen and asked to "sign on the dotted line."