Living in an era of unprecedented information growth, the great majority of information is produced and preserved electronically. Electronic documents and electronic signatures are ubiquitous in commercial operations across the globe.
However, since it seems to be so simple to sign documents, many people are often worried about the legitimacy of electronic signatures. Does the e-signature on a contract confer legal validity on the document?
This article will give ways to ensure that your digital records are legally compliant and valid.
1. Know The Governing Rules In Digitally Signed Documents
Legislation has been enacted in several nations worldwide, broadly allowing to sign documents online using electronic signatures, without defining the technology for transaction processing and document storage.
For instance, in the United States, this is accomplished via the Uniform Electronic Transactions Act (UETA) and federal Electronic Signatures in Global and National Commerce Act (ESIGN). Both of which were subsequently approved by the majority of states. Both statutes provide those records about transactions that can’t be denied legal effect, validity, or enforceability solely due to their electronic format. These statutes give no explicit requirement for using a particular technology or for the recognition of various kinds of electronic signatures.
On the other hand, Regulation No. 910/2014 of the European Union on electronic identification and trust services for electronic transactions in the internal market establishes the requirements for the use of electronic documents and signatures across the EU. In contrast to ESIGN and UETA, the law recognizes several levels and kinds of electronic signatures (seals, stamps) and establishes criteria governing their validity. It’s, however, technology-neutral and prevents the imposition of requirements over the stated responsibilities.
If you find yourself in an unusual or complex e-signature scenario, take precautions and double-check your state’s regulations to guarantee compliance.
2. Understand The Regulations For Business Record-Keeping
There are specific legal requirements for record-keeping, including prescribing the format in which records must be maintained. These requirements enable the retention of documents on an electronic medium, provided specific criteria are fulfilled.
Generally, systems used to preserve information are expected to correctly and fully reflect the recorded data and keep the information readable across jurisdictions.
For example, Regulation 20 of the Health and Social Care Act 2008 (Regulated Activities) 2010 specifies the legal requirements for record-keeping. The first section of the regulation emphasizes why records are necessary. Providers that lack pertinent information jeopardize their service users’ health, wellbeing, and safety, who’ll, therefore, be unable to benefit from supplied services.
Thus, conversion to a paper record must be feasible within a reasonable period or without excessive delay, according to the laws of the majority of nations. Numerous countries need authorities to access, download, and utilize information stored in an electronic system for tax compliance reasons.
Other express legislative obligations relating to electronic record-keeping are relatively uncommon. For instance, previous approval of an authority’s system, an electronic system with a life expectancy equivalent to the relevant record retention term, or the capacity to evaluate the viability of electronic programs and electronic data processing.
Records should be accessible to the service user or their legal representative engaged in the service user’s care. As a result, everyone should be aware of where records are stored and how to get access to them, and be able to add to them as needed.
3. Be Compliant With E-Signature Legal Requirements
Numerous e-signatures allow businesses to get legally binding permission. They outperform pen-and-paper signatures in terms of efficiency and user experience. Digital signatures are a subset of electronic signatures that are very secure due to their use of encryption technology.
Electronic signatures are regarded as equal to handwritten signatures in certain situations. This is particularly true when audit trails may track the signature procedure back to the destination. These audit paths, safety checkpoints, and the ability to lock a document after applying a signature solution provide non-repudiation. These guarantee that the document can’t be rejected around the agreement.
Some non-repudiation techniques include:
- Capture of asymmetric or public-key IP encryption
- Two-step signatories verification
- Certificates for digital products
- Creation and login requirements of the account
While the legal framework for electronic signatures differs by nation, the criteria for an e-signature to be deemed binding are mostly the same. These include the following:
- A signature on an electronic document is valid only if the document and its terms are evident, and the signature is produced intentionally.
- A copy of the document containing the signature must be provided to the customer upon signature.
- All signatures must be securely connected and not individually kept. Signed papers should be held in an encrypted environment and not sent to anyone other than the parties involved.
- All electronic documents or signing platforms should contain a provision that the customer agrees to sign the agreement electronically.
- You must also retain signed copies of each document, if necessary.
Bear in mind that a customer should always opt out of a digital signature in favor of signing a paper contract. You don’t want any possibility of your clients’ electronic signatures being rejected. Ensure that a clear audit trail exists to support the authenticity of electronic signature. This includes actions taken before to signing the document, such as checking a box to indicate agreement with the terms and conditions, or clicking ‘Next Page’ to sign.
You can also verify that you comply with disclosure requirements using third-party software. Include a straightforward tool for the signer to download and save their own copy of the document for the purpose of record-keeping.
4. Use The Right Type Of Electronic Signature To Use
Electronic signatures officially carry the same weight as ink signatures. When the ESIGN Act of 2000 was enacted, e-signatures were formally recognized as legally binding on international trade. However, each country’s electronic signatures and evidence are subject to specific laws.
For instance, the Regulation on eIDAS (Electronic Identification, Authentication and Trust Services) was adopted by the European Commission in 2014 and entered into force in July 2016. This legislation harmonized the laws of the EU Member States and created a single EU-wide framework.
The eIDAS specifies three distinct kinds of eSignatures. These are the following:
- Simple Electronic Signature
Simple electronic signatures in many nations, including the United States, are entirely acceptable and lawful. However, you may still choose to have signers verify themselves in other methods, even if it’s not required by law. No identification of the signer is needed for simple electronic signatures.
- Advanced Electronic Signature
An advanced electronic signature (AES) is a digital signature based on an advanced certificate that identifies the signatory individually. The signatory utilizes the signature keys with a high degree of trust.
- Qualified Electronic Signature
Finally, a qualified electronic signature (QES) is a specified digital electronic signature validated by a trusted third party or a government standard. This also involves using a secure signature creator and the certification as ‘qualified’ within the competence relevant. Qualified electronic signatures require face-to-face ID verification (either remotely via video chat or in-person).
Based on the increased criteria for ID verification, QES offers the most significant degree of signatory assurance. It’s with the highest level of technical and administrative overhead as each party is individually checked.
Nevertheless, different kinds of eSignatures may be chosen according to the type of transaction, the nation wherein one is situated, and the internal rules of a business. Developing an internal eSignature policy that specifies when workers should use each kind is often beneficial.
5. Manage Your Sensitive Electronic Records
The storage of some kinds of information, for example, certain personal information, is regulated by a higher level of protection in several countries. The organization responsible for maintaining the record must weigh the importance of security and accuracy against the expense and other constraints of purchasing and administering technology.
To demonstrate that the electronic system used to maintain the records is reliable, the organization may need to prove that the software is operational. This is where a certified system provider that processes data according to a defined procedure may be beneficial.
While tools such as the virtual private network, or VPN, encrypt your Internet traffic, you should look for encryption software if you need security for your local data. You may also use access controls to monitor and give access to just those working on a specific project. You can also share information with a client that you want them to view, while excluding any sensitive information.
A secure document management system that guarantees the appropriate security of your shared data is necessary to simplify your office life. There are many options available, including advanced capabilities, like virtual file shredding, self-decrypting data, and tokenization. For contracts that need to be stored securely but referred to in the future, contract lifecycle management software is also popular.
Everything is digital now—from online shopping to the automation of complicated corporate processes—and it’s also laying the groundwork for the future. Numerous records that remain in paper format are progressively being transferred to electronic format. As electronic transactions and storage increase to include information management, so do the rules governing those pieces information. Therefore, security measures must be in place to safeguard data from loss, damage, modification, and unauthorized additions, as well as restrict access to data.