What are Electronic Signatures and How are they Used? 5 Questions to Ask

Louis Lehot, L2 Counsel, P.C.

Electronic signatures provide an easy and efficient way for businesses to sign documents, particularly in the age of globalization where signing parties may be scattered around the globe. Here are five questions to better understand electronic signatures.

1. What is an electronic signature?

Electronic signatures are defined in the federal E-Sign Act. This act defines electronic signatures as 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.” The E-Sign Act ensures that a document remains enforceable and legally binding, even though it is in electronic form.

2. When can electronic signatures be used?

Electronic signatures can be used on the majority of documents a business will require signatures for. Any documents related to commercial, stock option, or purchase agreements, as well as investment documents or leases can be signed with an electronic signature. There are several exceptions of note, however, where an electronic signature will not be sufficient. These exceptions include documents that need to be filed, recorded, or notarized, such as those relating to intellectual property, or documents relating to estate planning like wills, trusts, or codicils.

3. Are there any parameters that add enforceability to documents containing electronic signatures?

Common electronic signature services, such as DocuSign, will employ both a specific ID number relating to the document and a timestamp for when signing occurs. These two features can help to maintain enforceability of the document.

4. Are there any common mistakes associated with the use of electronic signatures?

The most common mistakes arise from the enforceability parameters, like the ID number and timestamp, not being consistent across the entire document. This can occur if additional pages are added to the document after electronic signatures have already taken place, therefore causing some pages to be missing the specific ID number. Issues with the timestamp can arise if changes to the body of the document are made after the electronic signature is provided; there will be a discrepancy between the time the document was signed and when it was finalized.

5. How can these common mistakes be avoided to ensure enforceability of the document?

The easiest way to avoid these mistakes is to ensure the document is finalized before being sent to the signing parties, and to ensure that all parties use the same electronic signature service. Additionally, if certain parties prefer to provide a wet signature, ensure that the electronic signature service you use will allow you to incorporate these signed pages into the document and give it the same ID number associated with the document.

With the ever-growing globalization of the business world, utilizing electronic signatures is the most convenient way to sign and ensure enforceability of documents.

Louis Lehot is founder and managing partner of L2 Counsel, P.C.

Article source: https://article-realm.com/article/Finance/5523-What-are-Electronic-Signatures-and-How-are-they-Used-5-Questions-to-Ask.html