Law firms can save time and money by incorporating electronic signatures into their paperless workflow, but issues of legality, security and implementation must be considered.
Many “paperless” offices encounter an obstacle in signatures, often resorting to printing out an electronic document in order to have it physically signed, only to scan it back into electronic form. E-signatures can make things easier in many contexts, provided they are legal, secure and practical.
Electronic signatures, in some forms, have been used – and enforced by courts – for decades. However, their legality was strengthened by the 2000 passage of the Electronic Signatures in Global and National Commerce (E-Sign) Act at the federal level. The E-Sign Act defines an electronic signature broadly 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,” and provides that “a signature, contract or other record” relating to interstate or foreign commerce “may not be denied legal effect, validity or enforceability solely because it is in electronic form.”
The E-Sign Act preempted state laws existing at the time which required paper signatures. In addition, most states have now adopted the Uniform Electronic Transactions Act (UETA), which also provides that electronic signatures have the same validity as traditional signatures.
Both the E-Sign Act and the UETA apply to commercial contracts, but there are many other types of documents that still require paper signatures. The E-Sign Act does not preempt any state law requirements regarding wills and testamentary trusts, family law matters, court orders, briefs, pleadings and notices regarding eviction, foreclosure, product recalls and other vital interests. Needless to say, in these matters, law firms must adhere to the applicable legal requirements. E-signatures will not work when notarization is required. And just because electronic signatures are possible in a certain context, that does not mean they will be the first choice. Even in commercial contracts, there may be situations where obtaining paper signatures is actually easier, or when a party insists on traditional signatures. These exceptions aside, there are a vast number of transactions for which e-signatures should be considered.
Advantages and Disadvantages
Perhaps the greatest advantage of electronic signatures is the time they save. When things need to happen quickly, there should be no need to wait for physical papers to be delivered to a party for their signature. Not only is a mouse click quicker than the stroke of a pen, but electronic delivery of documents takes seconds, rather than hours or days, and consumes a tiny fraction of the resources required to print documents out and deliver them.
Reducing the amount of time that law firm staff members spend dealing with paper saves the firm money, and electronic documents promote an environmentally sound policy in the office. Technological development has made nearly every aspect of commerce more efficient, and obtaining paper signatures should not be a bottleneck. Moreover, a properly implemented e-signature can actually provide greater proof of authenticity than a paper signature would.
However, as with other aspects of electronic communication, there are costs and potential risks associated with e-signatures. Most e-signature services require personal information to be transferred through the internet, so appropriate security measures must be taken. In addition, law firms must consider the cost, compatibility and potential future obsolescence of e-signature software and services.
Levels of Security
Certain simple types of electronic signatures are used every day in situations where enforceability is unlikely to be called into question. For instance, letters are often electronically signed; a person can place an image of his or her signature into an electronic document very easily. While such a signature would constitute a valid e-signature, it would provide limited proof of authenticity in the case of a challenge to the enforceability of a contract.
Another level of security is provided by a conformed signature – the person's typed name, often preceded by “/s/” – submitted while the person is logged in to an electronic service with a password. Federal courts permit this type of signature in electronic filings, and contracts are formed every day through email alone.
The highest level of security is provided by third-party electronic signature services that authenticate the user, the document and the signing process. This type of e-signature, when properly implemented, is more difficult to forge than a paper signature, and thus can provide greater proof of authenticity. Authentication of the user is most commonly accomplished through the use of a username and password, but fingerprint scans are also in use, and other types of biometric authentication, including retinal verification and facial scans, are in development. Document authentication prevents the modification of the document after it has been signed or the copying of signatures from one document to another. Process authentication records the signing process, including the order of multiple signatures, and it provides proof that individual legal disclosures were made and that specific actions were taken by the user.
A variety of services are available that provide the convenience of electronically signing documents while ensuring the security of the process and the authenticity of the signatures and the documents themselves. Here are three leading services:
DocuSign is widely used in the real estate industry. Backed by a venture capital investment from Google, the company says its service is used by 20 million people and that 60,000 new users sign up each day. Users can upload documents to the service and have them emailed to specified recipients. The documents can be set with reminders to e-sign and expiration dates if they are not signed within a certain time frame.
EchoSign, purchased by Adobe three years ago, is comparable to DocuSign in many ways. It is compatible with Adobe products, so PDF files are easy to create. Faxed signatures can also be incorporated into an EchoSign document. The service claims 6 million current active clients.
RightSignature competes with DocuSign and EchoSign primarily in pricing, with similar features for a lower monthly cost. RightSignature also permits the creation of online signable forms, and its application programming interface is incorporated into a large number of online platforms, such as Google Docs and Dropbox.