The latest on emerging legal requirements for global e-signatures.
This blog originally appeared here.
You send a work order and wait patiently for a signature. Twenty-four hours pass and still nothing. On average, it takes eight days to get a signature, be it on a contract, work order, or other essential document. It’s a common challenge for many businesses.
However, with e-signature technology, it takes only three hours on average to get a signature — that’s 21 times faster than the traditional models. What’s more, companies cite a savings of 1.3 hours and $11 per transaction. Despite the clear-cut benefits, though, many businesses are concerned about the legality of e-signatures and, specifically, what it means to declare an agreement electronically.
If a customer types “I agree” in an emailed contract, would it hold up in court? And what about embedding an audio clip in a contract of you verbally agreeing — does that “count?”
Assessing the three legal signature types
In short, yes, e-signatures are legal in these and countless other scenarios. By following a set of simple, prescribed best practices, businesses can create and execute an agreement electronically.
Depending on the particular agreement, businesses can use one of three types of legal signatures:
- Electronic signature
This is also called a “simple” electronic signature. This encompasses any electronic process that can be attached to a document to indicate agreement. They can range in their assurance level from simply checking a box to indicate consent to signatures authenticated through mobile passcodes.
- Digital signatures
Known as “advanced electronic signatures” outside of the U.S., these signatures have a certificate that authenticates the identity of the signer. It’s a similar process to a TSA Precheck, confirming a person is who they say they are. This additional certification can be a hardware or software component, and gives one additional assurance about the identity of the signer.
- Qualified electronic signatures (QES)
This newly created signature type is used in Europe where they have the same legal status as a handwritten signature. They’re also the only type of signature that enjoys mutual recognition among all the member states of the EU.
While all deliver the same end result — a legally binding agreement — each has its own unique considerations, with digital and qualified electronic signatures requiring a much steeper technical burden. For example, if your organization wanted to use QES, all parties signing the agreement would have to make a special trip to obtain an authenticating certificate. And once those authentications are in hand, your business is responsible for the IT burden of keeping an entire server of digital certificates valid and updated.
Granted, this level of engagement isn’t always necessary. Most business contracts including employee agreements, new account enrollment, purchase orders, and mortgages only need a simple electronic signature.
Developing your e-signature policy
The next step? Develop e-signature policies for your own organization. Think about the kinds of documents your business needs signed and how complex they are. It’s ideal to start as small and simple as possible, scaling as you add new contracts and document types.
You’ll also want to consider where you’re doing business and where you anticipate doing business in the near future. It’s a good idea to consult your legal counsel to determine the e-signature regulations in countries you’re currently working with (or anticipate working with) to ensure your workflows and e-signature processes are in line, and that the U.S. is your chosen jurisdiction for any disputes that may arise in the future.
Once you have an established system and workflows, treat e-documents the same way you’d treat any other documents — save and archive them, and be sure they’re always on hand, which means archiving them as you would normally. Also, be sure to include an opt-out option so reviewers can opt to give a handwritten signature if they choose.
As your needs progress, you may ultimately opt to create a custom mix of signature options. Some companies, for example, use simple signatures for most agreements and handwritten signatures for a remaining few. As you assess your needs and risk tolerance, you’ll determine the right balance.
Given the efficiency, ROI benefits, and tangible impact of e-signatures, there’s no doubt more and more businesses will make the leap — and realize significant savings in the process. By focusing on your business and its unique needs and goals, you’ll be able to structure an e-signature system that syncs and ensures that legally binding agreements are delivered quickly, easily, and without the headaches and hassles of traditional signature processes.
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