E-signatures: Are They Legally Binding?

Paperwork is the bane of many small business owners’ existence. Not only does all of the printing, scanning, shredding, and storing of signed documents take up valuable time that could be used growing the business, but the hidden costs of managing all of that paper can have a negative impact on the company’s bottom line. Electronic signatures, or e-signatures, offer an obvious solution to the paper problem, but are electronically-signed documents legally binding?

What is an Electronic Signature?

An e-signature is a token that is attached to a document to indicate a party’s intent to approve of or “sign” the document. You probably use some form of electronic signature on a daily basis without even realising it. Clicking an “Accept” button when agreeing to a website’s terms and conditions, for example, is considered providing a legal electronic signature. Other forms of electronic signatures are:

• Scanned signatures – Scanned signatures are handwritten signatures that have been scanned and converted into digital format.
• Digital signatures – A digital signature is involves using a pair of cryptographic “keys”: a private key to be used by the signatory, ad a public key for verification by the document’s recipient.
• Biodynamic signatures – This type of signature requires a special pen and pad that measures and records details of a handwritten signature’s creation, including writing pressure, writing speed, and the appearance of the writing.

Okay, So Are They Legal?

Under English law, contracts are legally binding if the parties have made an agreement — whether that agreement is a verbal one, an electronic one, or a tangible one (such as a signed document). Handwritten signatures aren’t necessary for a contract to be considered valid. To prove that the contract is valid, one simply needs to provide evidence of such an agreement in court. Parties can use any form of e-signature to create valid agreements of all kind that do not require a specific statutory form. Possible uses for e-signatures include:

• Commercial agreements (sales agreements, NDAs)
• Human resources documents (onboarding paperwork, employment contacts, benefits documents)
• Real estate contracts (purchase and sales agreements, residential and commercial lease agreements)

While e-signatures are completely legal and generally admissible in court, it’s still up to the individual court to decide whether or not the agreement is valid. As every business is different and has different needs, it’s a good idea to speak with an authority in your niche about whether electronic signatures are the right solution for you.