The Use of Electronic Signatures for Digital Contract Signing

The Use of Electronic Signatures for Digital Contract Signing

Electronic signature transactions are becoming increasingly common and popular. The number of such transactions was 89 million in 2012 and it grew to 754 million in 2017. Digital contract signing is just one of the uses. Digital signatures also make it easier to control record-keeping practices, audits, and internal document management.

To understand the use of electronic signatures for digital contract signing, it’s first important to define what is an electronic signature and whether it can be used to create a legally-binding document.

What is an Electronic Signature?

An electronic signature is a digital indicator of a person’s identity and their agreement with the contents of a document or a transaction. It plays the role of a handwritten signature in the digital realm.

The premise is simple – a person goes through an online document like a PDF file and a special annotation is used to place the signature where a handwritten signature will typically appear.

In the early 2000s, there were multiple legal issues surrounding the acceptability of electronically signed documents. This is when the US government approved the Electronic Signatures in Global and National Commerce Act (ESIGN Act).

Through the act, electronic signatures have been given the same legal weight as a handwritten signature placed on a piece of paper.

Digital Contract Signing and Electronic Signatures

An electronic or digital contract is a document that is created and transmitted in an electronic form. It doesn’t have to be printed out, which is in line with the paperless policies that many companies across the US have adopted.

Digital contracts can be signed in several ways and all of these are legally binding.

One of the simplest options is having an I Agree button at the end of the document. By clicking on the button, the user will be agreeing to the terms and conditions. The use of an electronic signature is another viable option. Depending on the variety, the entire name of the signee will appear on the bottom of the document or the electronic signature will consist solely of initials.

Through the ESIGN Act, businesses have been enabled to conduct their business 100 percent online.  Cryptographic digital signatures are becoming a more common way of verifying the signee’s identity and such options are readily available for all entities.

How to Create an Electronic Signature?

If you’re interested in going paperless and doing most of your business online, chances are that you’re wondering about how to create an electronic signature.

In essence, the electronic signature is an image of your signature. It can be created with the mouse or a stylus. Alternatively, you can upload an image file that features your photographed signature. A signature created this way is legally binding – do not forget the fact when placing it at the bottom of a document.

You will also need to understand the difference between electronic and digital signatures. The electronic signature is what has been discussed in the previous paragraph. A digital signature is cryptographically-secure and verified. It is a private signing key that is more complicated and more difficult to use.

To use a digital signature, you will need to possess a security certificate that is a form of identification unique to you. Certification authorities are the only entities that can issue digital signatures and these will also have to be renewed periodically for security purposes.

 

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