In today’s digital age, businesses and individuals rely heavily on electronic documents and signatures to conduct transactions and solidify agreements. With the advent of eSignature platforms, the act of signing contracts, agreements and other legal documents has become far more accessible and convenient than ever before.
Yet, to guarantee the legality of these eSignatures, certain requirements must be met.
In this post, we discuss the elements that make an eSignature legally binding. When you understand these requirements and apply them to your signing processes, you help ensure that all of your eSignatures are enforceable and protected.
eSignatures for Small Business
Small businesses typically have limited resources and budgets, which makes it a challenge to manage paperwork to conduct business transactions. Traditional paper-based systems can be time-consuming, error-prone and costly — and they may not be sustainable in the long run (this is where eSignature software can come in handy).
With eSignature software, small businesses are able to streamline their document signing processes, reduce manual errors and save themselves time and money. eSignatures can be signed and executed from anywhere, anytime and on any device, which eliminates the need for business travel and in-person meetings. These advantages can be especially beneficial for small businesses that have remote employees or work with clients located in different regions.
Furthermore, eSignature platforms like jSign provide a safe, compliant way to sign documents and make sure that they meet any necessary legal requirements.
The technology used in eSigning provides an added layer of protection and tracking to help small businesses avoid legal disputes and penalties that could otherwise arise from using non-compliant signing methods:
- Blockchain technology — tamper-proof signature tracking
- Audit trails — event recording of the entire signing lifecycle
- Certificates of completion — electronic proof of document or image signing
eSignature software can be a game-changer for small businesses as it helps them to streamline their document signing processes, save time and money, reduce manual errors and ensure legal compliance.
5 Uses of eSignatures for Small Business
Here are a handful of examples that show common uses of eSignatures for business:
- Sign contracts — Small businesses often need to sign various types of contracts with vendors, suppliers and customers. E-signatures can help them expedite the processes and avoid physical meetings and paper-based systems.
- Approve invoices — Business owners can opt to use eSignature software to approve invoices from vendors and suppliers, which can help ensure timely payments and avoid the risk of fraudulent invoices.
- Collect signatures on legal documents — Legal documents such as non-disclosure agreements (NDAs), liability waivers and employment or freelance contracts can be eSigned, which helps ensure compliance with legal requirements and to mitigate future disputes.
- Sign and file tax documents — Tax documents such as W-9 forms, 1099s and tax returns can be more timely and accurate when signed and filed with eSignature software (this can help business owners avoid penalties for non-compliance or late filing).
- Agree on proposals and quotes — Proposals and quotes can be agreed on and signed faster and more accurately with eSignature software to expedite the sales process and avoid delays.
eSignature software can be used for many common small business tasks to help streamline otherwise lengthy and potentially non-compliant methods.
The Factors That Make an eSignature Legally Binding
So, what makes eSignatures legal?
First of all, eSignatures can not be used to sign last wills and testaments, court orders, health or life insurance termination letters or notices of default, foreclosure or eviction; in these cases, a signature must be handwritten.
On the other hand, eSignatures can be used for many other use cases:
- Accounting paperwork
- Purchase orders
- Patient intake forms
- Real estate transactions
- Contracts and invoices
- Offer letters
- And more
If you’re in doubt about whether a certain type of document can be eSigned, speak to an attorney in your jurisdiction. Let’s explore the factors that make an eSignature legal, according to the Electronic Signatures in Global and National Commerce Act (Esign Act).
1. All Legally-Required Disclosures Must Be Presented
It is important to disclose legal rights and responsibilities to signing parties before they sign electronic documents (eSignature). The specific rights and responsibilities that need to be disclosed can vary depending on the location and industry of the transaction.
For instance, if someone is signing a document related to healthcare (such as a consent form), they need to be informed of their rights and responsibilities under HIPAA (a U.S. law related to protecting patient privacy). Without this disclosure, their eSignature would not be considered legally valid.
So, the key takeaway here is that in order for eSignatures to be considered legally valid, consumers need to be informed about their rights and responsibilities before they sign any electronic documents.
2. Document Accessibility Requirements Must Be Revealed and Updated as Needed
With eSignatures, all signing parties must be aware of the software and hardware requirements needed to access information about the documents they sign, as well as any future changes to those requirements.
For example, if someone needs to sign a document electronically or see a record of a past eSignature, they need to know what kind of software or hardware they need to access the document (and any records related to the signature process). Moreover, if those requirements change later on, everyone who signed the document or image must be informed of the changes and what they need to do in order to access the necessary information.
You should make sure everyone who signs electronic documents is aware of the software and hardware requirements needed to access transaction information, and that they are notified if those requirements change at any point in the future; this helps ensure that all parties involved can access the information they need to understand and comply with the agreement they’ve signed.
3. Rights, Responsibilities and Accessibility-Related Communications Must Be in Writing
To make sure an eSignature is legally binding, you must communicate in writing. Specifically, verbal communication about rights, responsibilities and accessibility is not enough to make an eSignature legally binding under the Esign Act.
Instead, this information must be provided in writing. This means that when sharing information about these topics with individuals who will be signing an electronic document, it’s important to do so through written means such as email, a written web page or within the actual contract or document itself.
By providing this information in writing, you ensure that all parties involved have a clear understanding of their rights and responsibilities, as well as any requirements for accessing records related to their transaction; this also helps ensure that the eSignature will be considered legally binding under the Esign Act.
4. Parties Must Follow Other State, Local and Industry Laws
It’s important to remember that, for an eSignature to be legally binding under the Esign Act, all parties involved must follow the laws and regulations of their state, locality and industry.
Simply using an eSignature doesn’t automatically make a contract or document legally binding. Instead, parties must ensure that they’re following any relevant laws or regulations that govern the use of eSignatures in their area or industry.
For example, some states may have specific requirements for transportation industry eSignatures, while healthcare providers need to follow specific federal regulations related to the privacy and security of patient information. Failing to comply with these laws and regulations can render an e-signature invalid, potentially leading to legal disputes or other issues.
To ensure that eSignatures are legally binding and enforceable, it’s crucial to stay up-to-date with any relevant laws and regulations in your area or industry; this can include working with legal professionals or other experts who can provide guidance on how to properly use electronic signatures in accordance with local and industry-specific requirements.
By following these guidelines and staying compliant with state, local and industry laws, you can ensure that your electronic signatures are legally valid and provide a secure and efficient way to conduct business transactions.
Use jSign to Streamline the Legally Binding eSignature Process
eSignatures provide a fast, convenient and safe way to sign documents and conduct business transactions. As discussed, in order for eSignatures to be legally binding, it’s important to follow the guidelines set forth by the Esign Act.
You’ll need to do the following:
- Provide all parties involved with information about their rights and responsibilities
- Ensure that any necessary software or hardware requirements are disclosed
- Follow any relevant state, local or industry laws and regulations.
By following these guidelines, you can enjoy the benefits of electronic signatures while you make sure that your agreements and transactions are legally valid and enforceable.
If you’re ready to start using eSignatures for your own business or personal needs, consider signing up with jSign today. With jSign, you can easily create, sign and manage electronic documents, (while you enjoy the peace of mind that comes when you know your signatures are legally binding and protected).Sign up with jSign today for a free 14-day trial and start signing!