Will E-Signatures on Contracts Hold Up In the Court of Law?

Not long ago, a signature on paper was the only way to bind two or more people to a contract legally. However, e-signatures have become an essential part of business transactions in the digital age. As the process evolves and matures, e-signatures are widely used to execute contracts

Despite the popularity of e-signatures, there are still some doubts about their legality. This article discusses how electronic signatures work and sheds light on the authentication process, security measures, and audits to ensure that e-signatures can hold up in a court of law.

What makes an electronic signature legally binding?

An e-signature is the electronic representation of a handwritten signature. It can be a scanned image of your handwritten signature, a digital signature using a mouse or a tablet, or biometrics. The signature must be embedded in the document or included as an attachment.

Legally, an e-signature is as binding as a handwritten signature as long as specific requirements are met. When two parties want to execute a digital contract, they often use an e-signature to seal the deal. 

To be enforceable in court, an e-signature must meet the same criteria as a handwritten signature. First, the signature must be unique to the person who signed it. Second, the signature must be linked to the document. Third, the signature must be created under circumstances that demonstrate consent by the signer and with the intent to execute. Lastly, the signature must be capable of authentication.

Most importantly, the countries must have passed laws explicitly regulating e-signatures and their use in online contract signing. It’s important to remember that an e-signature is only valid if it meets all of your country’s electronic signature law requirements.

In Malaysia, e-signatures are legal under the Digital Signature Act 1997 and Electronic Commerce Act 2006. This means that an e-signature is recognised as legal, valid, and enforceable.

The legal framework for using e-signatures in Malaysia specifies the types of e-signatures that are valid, the parties who can use them, and the circumstances in which they can be used. It also establishes an electronic signature authority to certify electronic signatures. 

What information is available as an audit trail to establish authenticity?

An audit trail is a record of every step in the signing process, from when the document was created to when it was signed. This allows you to track any changes made to the document and who made them. 

Audit trails must be able to track some or all of the following information whenever possible:

  • Date and time of access to the signing platform
  • Date and time when alterations are made to the digital document or electronic record and the person’s identity.
  • Date and time when the document or record is signed, the identity of the signer, and platform identifier
  • Confirmation that the signer is verified (through authenticated ID)
  • The IP address of the signer

An audit trail is essential for proving the validity of an e-signature. By recording every step in the signing process, you can show that the signature was valid and that all requirements were met. This can be especially important in cases where the signature is being used for legal purposes. 

If you’re looking for a reliable e-signature solution, choose one that offers an audit trail, like SigningCloud. This will ensure that your documents are always safe and protected.

Criteria that make e-signatures valid

The criteria that make an e-signature valid depend on the jurisdiction in which the signature is being used. However, some factors that are commonly considered include the following: 

  • The signer’s identity must be verified. This can be done via verification through a third party or by checking the signer’s credentials against a list of authorised users. 
  • The signer must have the authority to sign for the organisation or entity they represent. 
  • The signature must be linked to a specific document or action. 
  • The signature must be tamper-evident, meaning that it can be verified that it has not been altered after signing. 
  • The process by which the signature is created must be reliable and secure, and it must have an audit trail which can be used to track changes made to a document and who made them.

For an e-signature to hold up in court, it can’t have any weaknesses regarding:

Security

When it comes to e-signatures, security is of the utmost importance. If an e-signature can be easily hacked or breached, it could be rendered invalid when presented in court as evidence. Companies need to take great care in ensuring that their e-signature system is as secure as possible.

One way to do this is by using strong authentication measures, including user IDs and passwords, as well as authentication tokens or one-time passwords. Additionally, companies should ensure that their servers are well protected against hackers and other forms of attack.

Another critical element of security is data encryption. This means that all information transmitted via the e-signature system will be encrypted, making it difficult for hackers to access. Additionally, companies should have a disaster recovery plan in place in case of a server crash or other emergency.

Audit logs

Audit logs are the key to ensuring their validity in court. Without proper logging, it would be easy for someone to forge a signature and alter the document. By keeping track of every time, a signature is created and by who, you can build a much more complex case to argue against.

However, not all audit logs are created equal. If your system doesn’t keep track of all the required information, or if it’s easy to alter the records themselves, your e-signature could be rendered invalid in court. Make sure you do your research before selecting an e-signature provider and ask them about their logging policies.

Authentication

One way to ensure that an e-signature is authenticated is to use a trusted third party to verify the signer’s identity. This can be done with a digital certificate or using a secure authentication protocol. 

A digital certificate is a file that contains information about the signer and the signature. It’s issued by a Certificate Authority, which verifies the signer’s identity by checking their name and other identifying information against public records. They also contain to make sure that the person has the authority to sign the document.

By having an authentication process, the signer’s identity is validated, and the document’s integrity remains intact.

Acts have four primary requirements for an electronic signature to be recognised as valid (and authenticated):

Intent to sign

An e-signature is a legally binding agreement created when an electronic document is signed. The signature can be placed anywhere on the document and can be in any form, as long as it is clear that the signer intended to sign it. 

There must be evidence of the signer’s intent to sign the document. This can be done by including text such as “I agree” or “Sign here” near the signature field or by using a digital signature pad that records the signer’s fingerprint or other biometric information. 

Consent to do business digitally.

When parties sign using e-signatures on the digital document, all signatories signify their consent to do business electronically and understand the implications of doing so. This means they agree to enter into an agreement and transaction.

Association of signatures with record

An e-signature is only considered valid if associated with a particular record. This means that the signature must be linked to the document or transaction intended to authenticate. Businesses often use a verification system that connects the signature to the record to ensure this association. This can be done in various ways, such as by embedding a unique identifier in the signature or by using a digital certificate.

Record retention

Record retention is keeping track of and maintaining essential records and documents. This usually means maintaining files related to transactions, customer information, employee records, and other vital data for businesses. 

Companies and organisations that do transactions online must establish a record retention policy. This will ensure that everyone in the company knows what needs to be kept and for how long. Along with policy is creating an efficient system for tracking documents with e-signatures.

Key Takeaways/Conclusion

In the digital age, an e-signature is legally binding and functionally equivalent to a handwritten signature as long as it meets specific requirements that will guarantee the document’s security, authenticity, and integrity.

When signatories affix their e-signatures on the digital document, they indicate their intent, consent, and agreement to enforce the contract terms. This makes e-signatures legally binding and can be held up in a court of law.

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