Are Electronic Signatures Legally Binding?

Published Date: 31 August 2019 | 6 min read

Electronic signatures

Signing methods have come a long way over the past few years. With the rise of digital documents, changes to the way we sign them were inevitable. As a result, more and more companies started using electronic signatures.

However, while most businesses see electronic contract signing as an opportunity to improve efficiency and security, others are hesitant and need more information. Thus, this blog post aims to answer the most frequently asked questions about electronic signatures and their validity.

 

What is an electronic signature?

An electronic signature represents an electronic process or technique that indicates the acceptance of an agreement. In other words, an e-signature is a legal and valid way to sign documents online.

 

Is an electronic signature just typing your name on a document?

Contrary to popular belief, an electronic signature is not just typing your name on a digital document.

Identification methods such as digital IDs, fingerprint, iris scanners, and voice recognition are also commonly used to sign documents electronically.

 

What are the types of electronic signatures?

According to eIDAS, e-signatures represent data in electronic form attached to other data in electronic form and used by the signatory to sign. Based on their security level, the eIDAS Regulation defines three types of electronic signatures.

 

1. Standard electronic signatures

Standard or simple electronic signatures refer to all e-signatures that are not advanced or qualified.

In its most basic form, a standard electronic signature can be typing your name on an electronic document. However, this type of signature is not always valid and legally binding.

Imagine a person types their name on a contract and then denies having signed it. In this case, businesses need a way to prove that the person is the actual signer of the document.

One way to do this is by asking the person to create a user account before signing. Similarly, one can link the signature to its creator by employing two-step authentication methods.

Are standard electronic signatures valid and legally binding?

In short, standard electronic signatures are valid and legally binding, but only if you can prove the identity of the signer.

 

2. Advanced electronic signatures

Advanced electronic signatures, aka digital signatures, are a more secure way to e-sign documents. As defined by eIDAS, a digital signature must be:

uniquely linked to the signer;

capable of identifying the signer;

created by the signer using electronic signature creation data that they have sole control over, such as a private key;

linked to the data signed so that any subsequent change to the document is detectable (in case of alteration, the digital signature is invalid).

To create a digital signature, one can use digital signing solutions that provide eID authentication, data encryption, and audit trails.

Are advanced electronic signatures valid?

Yes, advanced electronic signatures are valid and admissible as evidence in court.

 

3. Qualified electronic signatures

Qualified electronic signatures are digital signatures created by an approved signature creation devices (QSCD). Additionally, qualified e-signatures are based on qualified certificates for electronic signatures.

You can find the list of qualified certificate providers via the EU Trusted List Browser.

Are qualified electronic signatures valid and legally binding?

Yes, qualified electronic signatures are always valid and have the same legal standing as handwritten signatures.

 

What are the benefits of electronic signatures?

E-signing aims to make life easier for people. The three main benefits of electronic signatures are:

 

Efficiency gains

When it comes to document signing, employees spend a lot of valuable time on manual administrative tasks such as printing, scanning, and mailing agreements. Even more so, when several people need to sign a document in a specific order. Not to mention the time spent on filing, archiving, and retrieving documents when necessary.

Electronic signature systems help automate manual processes and save time. With Penneo, you can:

automatically send documents out for signing to the right people in the correct order based on predefined rules;

e-sign PDFs from any device;

store documents and data securely in the cloud;

access the documents and retrieve them when needed;

By reducing time spent on paperwork you can improve productivity and reduce the costs associated with paper, printers, scanners, and postage.

 

Higher level of security and compliance

Manual processes are prone to human error. According to research, employee mistakes were the cause of approximately 88% of all data breaches.

Of course, to err is human. For this reason, companies should consider automating signing processes.

An electronic signature system helps you:

ensure the security of confidential data via encryption;

grant different levels of access to documents via role-based access control;

automatically delete data as per GDPR;

detect any changes to the document with the help of audit trails;

securely collect information via encrypted forms;

In addition, Penneo safely stores data and backups in data centers within the EU, and encrypts data backups for extra security.

Moreover, no one can forge or deny advanced electronic signatures created with Penneo. Our digital signing solution uses national eIDs to create digital signatures that are able to identify the signer and verify the integrity of the signed document.

 

Enhanced customer and employee experience

E-signatures eliminate the hassle of printing, scanning, and mailing documents which makes both the customer and employee journey smoother. All relevant stakeholders can sign documents electronically no matter where they are or what device they use.

As a result, organizations gain a competitive edge by halfening the document turnaround time and ultimately doing business faster.

 

Who can use electronic signatures?

Everyone can use electronic signatures to sign documents online. However, regulated industries should opt for digital signatures rather than simple e-signatures to ensure compliance with laws and regulations.

Here are some of the documents that one can sign with an e-signature based on different industries and departments:

Audit & accounting: engagement letters, annual reports, and NDAs;

Finance: loan and mortgage agreements, pension scheme agreements, and insurance policy agreements;

Law: general meeting documentation and wills;

HR: employment contracts and company policies;

Real estate: lease agreements and purchase contracts.

 

Creating an electronic signature with Penneo

For security reasons, we strongly recommend using digital signatures. However, Penneo also provides standard electronic signatures in the form of Touch signatures.

To e-sign PDFs via Penneo, follow the steps below:

1. Open the email from Penneo and click on Click here to read your documents.

2. Read all the documents and attachments and click on Go to signature.

3. Choose Touch signature.

4. Select one of the three options: draw your signature, type your signature, or upload an image of the signature.

5. Click on Sign documents.

 

What document formats can I sign electronically with Penneo?

You can only e-sign PDF documents via Penneo. If you want to sign a Word, Google Docs, or any other type of text file with Penneo, you need to convert them to PDF first.

 

How do I choose the best electronic signature system?

To ensure a high level of data protection and compliance with laws and regulations, you should choose an e-signature system that provides either advanced or qualified electronic signatures. This way, you can ensure that the signatures you collect are always valid and legally binding.

For standard electronic signatures, never use electronic signature solutions where you can only copy-paste the signature. E-signatures that you create using such tools are not legally binding since they can't identify the signer.

If you're in the market for a highly secure and compliant electronic signature solution, why not explore Penneo with a 21-day free trial?