TEN THINGS: ELECTRONIC SIGNATURES (WHAT IN-HOUSE COUNSEL NEED TO KNOW)

1.   A brief history of signatures.  Humans have been officially “signing” documents for a long time.  At least as far back as the ancient Egyptian and Persian empires.  Though manually signing one’s name really didn’t start until around the second century AD.  Prior to that (and even for centuries thereafter), the most common expression of officially “signing” a document was in the form of a seal or stamp.  More often than not it was a ring worn by someone pretty important who would stamp that ring into a wax seal to ensure the authenticity of a document (you may recall some pretty intense ring-signing in the movie “Ben Hur”).  This relatively simple method of signing documents persisted well into the Middle Ages, where kings – and other members of the aristocracy – used signets (rings) to stamp documents to prove authenticity.  The king also had an official seal of the office.  This seal, in England for example, was lugged around by the Lord Keeper of the Privy Seal and when the king needed to sign a royal document the holder of the Privy Seal would walk up, hand the king the seal, and, presto, document signed and authenticated.  Starting in the 1600’s or so signing one’s name by hand became acceptable throughout Europe (and its colonies).  For example, think about the requirements of the 1677 Statute of Frauds whereby a written signature became necessary in order for certain contracts to be formed.  Over time, what constitutes a signature got looser, anything from signing an “X” for your mark (which evolved from the practice of signing documents with the sign of the cross) to using a rubber stamp to the elaborate use of notaries (especially in civil law countries) to authenticate signatures on documents.  For most of us, we simply sign with a blue-ink pen (a “wet signature”) and move on.

• Typed, printed name.
• Email exchange.
• Text message exchange.
• Faxed signatures.
• Scanned signatures.
• Copy of signature pasted into a document.
• Clicking “I accept” on a website.
• Use of signing tool software, like DocuSign (more on this below).
• A thumbprint affixed via an authentication device.

“It makes no difference whether [the telegraph] operator writes a steel pen an inch long attached to an ordinary penholder, or whether his pen be a copper wire a thousand miles long.  Nor does it make any difference that in one case common record ink is used, while in the other case a more subtle fluid, known as electricity, performs the same office.”

3.  What is a digital signature?  There is a second type of electronic signature that I will mention but will not really be part of the discussion in the rest of this post.  Digital signatures are a subset of electronic signatures.  They are a signature based on cryptographic technology called a PKI (Public Key Infrastructure).  They are authenticated signatures that rely on encryption keys issued by a governing body (either as a digital certificate or a physical token) and a pin number to prove the identity of the signer.[1]  They are highly secure but probably more work and expense than most businesses want to take on, or would only take on for certain types of transactions vs. day-to-day commercial contracts.[2]

• Clear and conspicuous notice that the consumer may receive a written copy of the information on paper (which is why you sometimes get asked if you would like a copy of the terms of service emailed to you)
• The consumer must affirmatively consent to receive the information electronically.
• Consumers are provided with information about the software and hardware needed to access the information electronically.[7]

6.  What are the benefits?  There are many benefits to your company adopting electronic signatures, including a) no need to track down people for physical signatures (and the delay this can cause); b) contracts can be signed literally anywhere on a smartphone, laptop, tablet, with no need to scan, fax, overnight, etc. – this means getting contracts done faster, a goal of every legal department; c) eliminating or reducing the need for physical storage of contracts, as well as saving the cost of mailing; d) the ability to set up the routing process so the signatures are obtained in the right order and a fully executed copy comes back to the legal department; e) the ability to monitor of the status of the execution of the contract in realtime; f) most of the solutions are simple and intuitive to use; and g) it’s the perfect solution to getting contracts done during the current COVID-19 pandemic.

7.  What are the downsides?  Of course, it’s not all birthday cake and ice cream.  There are some downsides to using electronic signatures.  First, not every country/jurisdiction accepts them (only 50 or so countries so far).  Second, they cannot be used for every type of agreement.[8]  Third, not everyone will agree to use/accept electronic signatures regardless of the legality (i.e., plenty of Fred Flintstones in our George Jetson world).  Fourth, it is more difficult/more time consuming to notarize an electronic signature (but it can be and is done in many places).[9]  Fifth, it’s not foolproof.

9.  Vendors.  There are dozens of electronic signature vendors out there.  Who you choose probably depends on what you need.  For some, faxed and scanned signatures are good enough and there is little reason to change.  For others, they want a provable signature audit trail and/or password features that only allow a signature with the use of a password.  Some want the full scope of protections offered by digital signature experience.  Here is just a partial list of vendors to check out (in no particular order):[11]

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  10.  Electronic signature “to-do” list.  If you think your company is ready to adopt electronic signatures (or enhance an already existing program), here are some things for your to-do list:

  • “This Agreement and other documents to be delivered pursuant to this Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy and all of which, when taken together, will be deemed to constitute one and the same agreement or document, and will be effective when counterparts have been signed by each of the parties and delivered to the other parties.  Each party agrees that the electronic signatures, whether digital or encrypted, of the parties included in this Agreement are intended to authenticate this writing and to have the same force and effect as manual signatures. Delivery of a copy of this Agreement or any other document contemplated hereby, bearing an original manual or electronic signature by facsimile transmission (including a facsimile delivered via the Internet), by electronic mail in “portable document format” (“.pdf”) or similar format intended to preserve the original graphic and pictorial appearance of a document, or through the use of electronic signature software will have the same effect as physical delivery of the paper document bearing an original signature.”

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    Sterling Miller

    April 10, 2020

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