What Constitutes a Signature?
What constitutes a signature? The definition has changed drastically in an increasingly digital world. Getting acceptance remains an essential part of the contract management process, and an effective signature is crucial to acceptance.
In the modern era, a signature is defined by the user’s affirmative assent to be bound to an agreement. When properly executed, electronic signatures are readily accepted and enforced by courts.
You can simplify the contract process by utilizing the correct signature method for your business’s needs. This is determined by the type of transaction or transaction flow, the number of signers, and the type of end users. All users are granted an easier contract-signing experience when you choose the right signature for the job.
In this article, we will cover:
- How the definition of a signature has changed over time
- Definition of signatures under the ESIGN Act and the UETA
- Types of signatures
- Signature best practices to ensure enforceability
What is a wet signature?
The traditional “signature” most people think of is the wet signature: when an individual person or non-business entity physically signs with a pen on a piece of paper. This requires negotiations over telephone, mail, or in person, which is incredibly slow because wet signature contracts take a lot of time to review and redline.
Many companies still require wet signatures, often because they think it is safer. In reality, modern electronic signature methods are safe and reliable ways of ensuring an enforceable agreement. Many others use this method because “it’s how we’ve always done it.” With advancements in digital contracting technology, more effective methods like clickwrap exist that do not require a wet signature.
Federal and state laws like the ESIGN Act and the UETA hold that digital signatures are just as effective as wet signatures. These laws increase the viability of digital signatures as a replacement for pen-to-paper signatures required in the past.
How signatures have changed over time
As technology changes, so does the contract management process. Contracts are increasingly digital, and acceptance methods have adapted accordingly, including what constitutes a signature. Instead of a traditional wet signature, various electronic signatures have largely replaced traditional pen-to-paper acceptance.
Earlier methods of contract acceptance include:
- Pen to paper: The wet signature. This was the original method to obtain a signature. Both parties would physically sign the agreement. Pen to paper methods could also include faxed copies and those sent via email. This method is slow and ineffective for a fast-paced business.
- Digital signature devices: Signature pads were the original digital signatures. They track the movement of a digital pen over the surface to create what looks like a traditional signature.
- Signature images: Some contracts permit the use of a signature image that is uploaded and added to a document.
- Electronic signatures: True electronic signature methods like embedded signatures and clickwrap increase the efficiency of the acceptance stage. They provide efficient methods to prove that a contract was signed.
The increase in available signature methods provides flexibility by allowing your company to choose the right acceptance method for the job. While previous contracts required wet signatures or clunky digital signing, modern technology permits digital acceptance methods like clickwrap, browsewrap, and sign-in-wrap. When properly utilized, these various signature methods effectively prove that the user agreed to the contract and is bound by its terms.
How signatures and contract acceptance are defined by the ESIGN Act and the UETA
The ESIGN Act and the UETA have significantly impacted how a signature is defined. A digital signature and other acceptance methods are considered valid signatures. Both laws protect the enforceability of digital signatures and make them just as effective as a wet signature.
The Electronic Signatures in Global and National Commerce Act (ESIGN)
The ESIGN Act was made effective on June 30, 2000. Its rules govern the validity of electronic signatures and records of those transactions. It is one of two primary laws that make electronic signatures effective. It allows companies to create signatures through “any electronic sound, symbol, or process” that would be “logically associated” with a contract. The electronic signature method must meet the ESIGN Act’s requirements to constitute a valid signature.
These requirements include, but are not limited to:
- The consumer must be made aware of their rights to a paper or electronic copy of the agreement and the right to withdraw any consent.
- The consent or signature applies only to that particular transaction or record.
- There are procedures necessary to withdraw consent.
- The consumer can reasonably access the information.
- Records of the signature and agreement are kept per the Act’s requirements.
Following the requirements of the ESIGN Act does not have to be complicated. With a digital repository for your contracts, you can store your electronic signatures to comply with federal law. It makes it easy to handle voluminous agreements and prove enforceability when needed.
The Uniform Electronic Transactions Act (UETA)
The UETA is a state law adopted by the National Conference on Uniform State Laws in 1999. Every state has adopted it except New York and the District of Columbia. However, both have laws similar to the requirement of the UETA that govern electronic signatures.
The Act clarifies that electronic signatures are as effective as wet signatures and has changed the landscape of digital contracting by creating increased flexibility in signature methods. The UETA provides protection for electronic signatures, including provisions that hold:
- A contract cannot be denied simply because the signature is electronic.
- The contract may not be denied simply because the contract is digital.
- If a law requires a signature, a digital signature constitutes a signature for purposes of that law.
- An electronic record satisfies any “in writing” requirements under the law.
Electronic signatures come in many forms, and each is considered valid thanks to the ESIGN Act and the UETA. Electronic signature methods carry many benefits. These include:
- Convenience: There is no need to pass physical documents back and forth or email them. You can simply sign when the contract is fully negotiated.
- Simplicity: Digital signatures are easy to use. A company can collect signatures quickly and without significant employee hours.
- Cost: Digital signatures significantly reduce costs. There are no physical inventory requirements like paper, pens, and increased work hours during the acceptance stage.
- Speed: eSignatures do not create the same delays as other signature methods. Contract acceptance can happen instantly instead of taking days.
- Increased security: Digital signatures have built-in security measures to ensure they are encrypted and are actually signed by the right party.
Ways to sign electronically
Checkboxes and Buttons
Many agreements are “signed” by simply checking a box. These clickwrap agreements are among the most common acceptance methods for high-volume contracting. A clickwrap agreement is also known as:
A user agrees to an online contract by simply checking a box or clicking a button that says “I agree.” Instead of a digital signature, this click represents the signature and indicates acceptance. Clickwrap agreements are an effective way to limit risk without impacting the customer experience. A customer can quickly agree to the terms without the inconvenience of less-sophisticated signature methods.
A squiggly line
Another form of eSignature requires the user to sign with their mouse. This usually results in an illegible signature but counts just the same. This digital format still indicates that the user agrees to the terms by requiring affirmative action.
Signing in or registering
Another common electronic signature method is known as a sign-in-wrap. It requires the user to complete another action, like signing in or registering on the site, to agree to the terms presented. This is performed by clicking a button.
Signature best practices to ensure enforceability
The key is authenticating the signer using multiple types of identifying data. Proving these data points is what makes an electronic signature binding. To accomplish this goal, a company should follow certain best practices concerning its electronic signatures and clickwrap agreements.
- Require affirmative assent: The signature method should require that the user take a specific action to agree to the terms. Passive acceptance methods like browsewrap agreements have been struck down as unenforceable by courts in the past because they do not require affirmative action to agree. Instead, a simple action like clicking “I agree” records that the user chose to take action confirming they will be bound by the contract terms.
- Conspicuous notice of terms: The agreement’s language should be obvious and readily available to the user. The user must have the opportunity to review the agreement before they sign. This can be by a link, a scroll-through box, or the opportunity to download the agreement. The key is to make it available and obvious what the user agrees to.
- Obtain consent when terms are modified: Agreements have to change over time. When they do, your company should get consent to these changes from the user. This is easily handled when you use effective contract management software, which automatically tracks when updates require a new signature.
Maintain excellent records: Your digital contracting software should automatically record important data on who signed, the version of the contract signed, the relevant dates, and much more. This data is crucial to enforcing the agreement when necessary.
Create enforceable signatures with Ironclad
When you utilize the right signature method for your contract, you can create enforceable agreements. What constitutes a signature has expanded over time, but you want a method that binds the user to the agreement. When you follow signature best practices, you can effectively manage your contract lifecycle and increase your company’s productivity.
Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.
- What is a wet signature?
- How signatures have changed over time
- How signatures and contract acceptance are defined by the ESIGN Act and the UETA
- Ways to sign electronically
- Signature best practices to ensure enforceability
- Create enforceable signatures with Ironclad
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