Electronic signatures, also called e-signatures, are becoming commonplace. According to P&S Market Research, the global digital signature market is expected to reach $2.9 billion by 2022.  E-signatures can help to close deals quickly and efficiently, but if you think that all e-signatures are alike and have the same enforceability in the event of a contract dispute, think again.  It is essential that businesses choosing to forgo paper signatures understand the ins and outs of collecting e-signatures.

The federal E-Sign Act (formally known as the Electronic Signatures in Global and National Commerce Act) and state statutes called the UETAs (Uniform Electronic Transaction Acts) give electronic signatures the same weight as their pen and ink counterparts. And like a more traditional signature, which can be given through initials or even a simple “X,” an electronic signature can be produced in a variety of ways. The law says that electronic signatures can consist of 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.”

Since the E-Sign Act and state laws require affirmative consent to transact business electronically, you should make sure your contracts state the parties’ intent to sign the document electronically.  A simple way to accomplish this is to include a clause in your agreements, such as: 

Electronic signatures will be as effective as a manually executed signature, and may be used for all purposes. Each party hereby consents to do business electronically.

Steps also should be taken to make sure that your e-signed contracts can survive challenges to their authenticity.  All electronically signed documents should be retained and protected from unauthorized access in order to preserve their integrity.  Best practices include:

• Implementing an “audit trail” to capture the history of the signing process (including the signature image, the time stamp and the IP address).
• Adopting strong identity validation practices like the use of a sign-on password, or a document password sent to a verified email address.
• Putting into place a mechanism that “freezes” the agreement as of the time that it was signed, so the document can’t be changed after-the-fact.

The above list might need to be modified for the particular transaction being conducted. You also should be aware that some agreements, by law, still require an ink signature.  For example, documents dealing with family law matters, wills and trusts, and certain agreements involving real property, require traditional ink signatures in most states. Additionally, some business owners might prefer to do agreements the “old-fashioned” way and forgo e-signatures.

While e-signatures can help to speed up transactions and simplify the execution process, business owners should consult with an attorney to consider whether their agreements are appropriate for electronic execution, and all businesses should take steps to protect against challenges to the validity of e-signatures.

Jamie Kent Hamelburg is a business and commercial real estate attorney at Press, Dozier & Hamelburg. She can be contacted at (301) 913-5200 or by email at jhamelburg@pressdozierlaw.com. Press, Dozier & Hamelburg partners with businesses to achieve their goals, and represents families and individuals, often when they are most vulnerable. Our attorneys deliver valuable insight and counsel in the areas of business law, employment law, litigation, commercial real estate, estate planning and administration, and business succession planning. We provide all of our clients with personal service, emphasizing responsiveness, sensitivity, and respect. We are located in Bethesda and serve Maryland, Virginia and Washington, DC.

Note: The content in this Blog is for informational purposes only and should not be acted upon without first consulting legal counsel. It is not intended to constitute legal advice.