What Is An E-signature?
By definition, 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.” Electronic signatures are a way to virtually verify someone’s identity through a visual representation of their name. These signatures are used when someone is signing official, legally binding documents to provide proof of consent.
Documents such as leases, contractual agreements, and others typically require electronic signatures since more and more of the world becomes digitized. The electronic signature can consist of someone typing their name or initials or providing a scanned document of their handwritten signature. Not all electronic signatures are considered legal, however. There are rules governing the use of electronic signatures that we will cover later in this post.
The Legality of Typed Signatures
Understanding the legality of electronic signatures ensures that you are aware of the qualifications of a legal signature. The legality law of electronic signatures differs between countries; however, it is safe to say typed signatures are legally binding as long as you pay attention to the laws.
E-signatures in America
In America, a federal law was put into place in 2000 called the ESIGN Act, which granted legal recognition to electronic signatures in the USA. The law states that if all parties signing a contract equally choose to use electronic documents and sign them electronically, then it is legal. The law also states that a contract or electronic signature “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.”
In TaxDome you can use the request signature feature for all of your prepared documents and forms that need e-signing.
E-signatures in the UK
The UK Electronic Communications Act was published in 2000, confirming that an electronic signature cannot be deemed invalid only because it is electronic. In 2002, the Electronic Signatures Regulations Act passed, making typed signatures an accepted form of signing in the UK. As long as both parties agree to sign an electronic document with an electronic signature, the document is legally binding.
There are two different kinds of signatures in the UK, including Qualified Electronic Signatures (QES) and Advanced Electronic Signatures (AES). QES signatures are a specific kind of digitized signature that is government approved. It is used to secure a signature creation device, and can be accepted as the equivalent to a handwritten signature. AES signatures are uniquely connected to the person signing; they identify who is signing and can only be used by the signer, and are linked to data that can detect if the signature was altered. However, in the UK sometimes a handwritten signature is still required for signing. That happens with documents such as prenups or divorce papers, as well as real estate deeds, most leases, HM Customs, and Revenue documents.
E-signatures in the EU
In the year 2000, the EU passed a directive that acknowledges the validity of electronic signatures and states that they cannot be rejected just because of their digital form. The EU uses QES and AES signatures as well as SES signatures, which is the standard digitized signature. SES signatures can be used for B2B, B2C, and C2C situations, while AES and QES only apply to court briefs, credit loan agreements, and leases. A handwritten signature can be specifically required in real estate buying, marriage contracts, HR termination notices, and incorporation of a limited liability company.
Factors Required to Make Electronic Signatures Legally Binding
The ESIGN Act outlines the factors required to ensure an electronic signature is legally binding:
- Intent to Sign & Opt-Out Clause: electronic signatures are only considered valid if there is intent to sign from each party. This is why most digital contracts have options for the signator to opt-out of signing an electronic document. If a person is allowed to deny their signature but still signs, then it demonstrates clear intent for signing.
- Consent to Do Business Electronically: each party must show that they consent to operate electronically. E-signature software usually asks each party for consent.
- Clear Signature Attribution: the attribution of the signature needs to ensure proper use. E-signing software provides audit trails that track the email ID to the device’s IP address to the signature timestamp each time the person signs an electronic document.
- Association of Signature with Record: signatures need to be connected to the document being signed. Electronic signatures cannot be transmitted to anyone, only the signator can sign the document.
- Record Retention: as long as the electronically signed document can be reproduced as required or downloaded then it is considered valid.
When Are Typed Signatures Perceived Inappropriate?
When it comes to typed signatures, there are times when they are not legally valid. That happens when documents have a greater risk of fraud because of possibly false or forged signatures. To avoid this, a handwritten signature may be required to serve as proof of consent. Examples of documents that may require handwritten signatures include wills, sworn declarations, and power of attorney.
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