Business Law: Electronic Signatures
In our business and real estate practice, clients sometimes ask whether DocuSign and similar apps are a good idea. They want to know if e-signatures are risky.
E-signing technology is becoming more and more prevalent, and there is no denying the convenience. Affixing your signature with a simple tap on your phone screen is a beautiful thing. After all, the alternative is to print the document, sign it, scan, and then email the scanned copy. Sometimes you have to go find witnesses, and, if notarization is required . . . well, now you really got yourself a project.
So, naturally, we would all prefer to e-sign documents. However, the convenience may not be worth it if e-signatures are not enforceable.
Here, the legal analysis is actually the easy part. The Electronic Signatures in Global and National Commerce Action (ESIGN) has been in place at the federal level for over 20 years. The same is true for the Uniform Electronic Transactions Act (UETA), which has been adopted at the state level by all but two States. Simply put, the legislation says:
A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.
So, from a legal point of view, an electronic signature has exactly the same validity as a handwritten signature.
Here, the analysis gets a bit more interesting. After all, the goal is to bind people to the rights and obligations in the agreements they sign. What we really care about is enforceability.
Is it easier for someone to weasel out of a contract with e-signing than it would be with a handwritten signature? The answer to that question turns on the ability to say: “Hey, that’s not my signature.”
In the end, what a judge wants to know is whether or not the parties intended to be bound by the agreement. Assume for a moment some people might be willing to lie in order to get out of a contract. Shocking, I know, but it could happen. So, now, you have to prove that person actually meant to sign the contract. How can you do that?
Traditionally, having witnesses and/or notarization was a pretty iron-clad way of proving that someone voluntarily signed a document. These methods of «acknowledgement» are still very good evidence nowadays, but they are not as undeniable as they once were.
The reason is that, with software available today, it is not particularly difficult to take a picture of someone’s actual signature and affix it to another document.
Someone looking to commit fraud could use PDF and/or JPEG manipulation software to fake signatures of both the signer and the witnesses. The same is true for notarization. All one would really need is a picture of the notary’s stamp. With that, and maybe a little old-fashioned forgery, a fraudster could put together a document that appears to have been signed, witnessed and notarized.
So, the traditional methods are good, but they are not airtight. In fact, they never have been (e.g. Catch Me If You Can). If someone wants to fake a document, they can.
That means the person you are trying to hold to a contract might say: “That does look like my signature, but I didn’t sign the contract.” So, now what?
Since there is no way to ever know with 100% certainty that a signature is authentic — even with witnesses and notarization — should we not take advantage of the convenience we get through e-signing?
Also, in some ways, e-signatures can be even more secure than handwritten signatures.
For one thing, the e-sign apps generate a Certificate of Authenticity showing when and where the electronic signature was affixed. That is certainly not proof positive, but it might be just about as good as notarization.
Now, I know what you are thinking.
E-sign apps depend solely upon email addresses, so it might be very easy for a person to get out of a contract by just saying “Someone hacked my email” or “Another person who has access to my email account signed, but I didn’t authorize that.”
That brings us to the crux of this article. What if, in addition to the other party’s e-signature, you also have an email thread showing discussions leading up to execution of the document? How is the other party going to wriggle out of that evidence?
Even if you only have a single confirmation email saying something like “I received the document you e-signed earlier today,” any judge would find that to be very compelling evidence . . . as long as the other side did not respond to your email with something like: “What are talking about? I didn’t sign anything.”
Therefore, when you get down to the actual purpose of a signature, which is to demonstrate a person willingly entered into an agreement, today’s e-signing apps are not only amazingly convenient and environment-friendly, but they also give you the ability — through written discussions before and/or after signing — to authenticate signatures more effectively than any of the traditional methods.
Of course, there are many agencies that have not caught up with the times. For example, we still have to submit immigration documents, loan documents, and others with wet ink originals. But, it is clear e-signing technology is the future, and we will all be better off for it.