Are Electronic Signatures Legal? What the E-Sign Act Means for Your Business

Savvy online business owners are always on the lookout for ways to simplify and streamline the contracting process with their clients. 

Being one yourself, you already know that’s why electronic signatures have become a gold-star online business practice. 

But those electronic signatures are only as legally binding as handwritten ones when they follow the rules and regulations set forth by The Electronic Signatures in Global and National Commerce Act (ESIGN Act) and the Uniform Electronic Transactions Act (UETA). 

Because it’s essential that you understand the legal framework that governs their use, let’s check out 5 criteria an electronic signature must meet to be considered valid. 

**Quick heads up: everything I share is legal education and information. It’s not business, financial, or legal advice, and it doesn’t create an attorney-client relationship between us. You should chat with an attorney in your area to make sure you’re protecting your business, okay? **

Your client must intend to sign electronically

You can’t require your client to do it. 

Signing a document electronically needs to be a choice made freely by the person signing it.

Because of this, they also have to be able to sign pen to paper.

In other words, your client should have the option to print off the document, sign it manually, scan it or take a picture of it, and send it back to you. 

Your client must expressly agree to do business electronically

This will likely come as no surprise, but as with most things legal, you’re going to want written confirmation that your client agrees to conduct business electronically.

Most e-signature providers have a click-wrap box that pops up automatically and says something along the lines of: “I agree to sign electronically.”

This is evidence (that could be used in a court of law if needed) that shows the person signing had the opportunity to read the terms and conditions and agree to do business electronically.

Your client must actually be the one to sign

You need clear evidence that the person whose name is on the document is the person who actually signed the document.

This is why I’m a huge proponent of using an e-signature provider like Dropbox Sign or DocuSign.

These platforms help protect you because they keep an audit trail covering everything from the time of day and date the document was signed, to your client’s IP and email addresses.

Your document must be connected to the electronic signature

The electronic signature must be “attached” or “associated” with the document in some way.

There should be no way for you to manipulate the electronic signature or attach it to another document. 

Another tick in the “plus column” for e-signature providers—the electronic signature is actually embedded into the document itself when your client signs through one. 

This means the document cannot be tampered with or changed after it’s signed. 

And once the document is fully executed (aka everyone who needs to sign it has signed it), it must be sent only to the signor.

You must keep records of the electronic signature

This one is pretty straightforward—you need to be able to produce evidence that an electronic signature was used if it’s ever called into question. 

The best way to do this is by storing all of your signed documents in a safe and secure location, like a password-protected file on your computer or in the cloud. 

This is 100% non-negotiable!

Electronic signatures can be just as legal as handwritten signatures

These simple guidelines set forth by the ESIGN Act and UETA help ensure your electronic signature is just as valid as a handwritten signature on a sheet of paper. 

So long as you meet the criteria outlined above: 

1. Your client intended to sign electronically.
2. Your client expressly agreed to do business electronically.
3. Your client was clearly the one who signed the document.
4. Your document is attached or connected to the electronic signature.
5. You’ve got thorough records of the electronic signature.

Then you’ve given your electronic signatures the best opportunity to hold up in a court of law.

If you’re just starting to dip your toe into the legal waters and this already feels overwhelming. Don’t stress. Just head here for a free guide so you can start navigating your legal strategy.