If your organization plans to collect electronic signatures on contracts – or if you already do – then you may be wondering about the legality of electronic signing. E-signature clauses explicitly acknowledge the legal validity of electronic signatures in general, and specify which types of e-signatures are acceptable for this particular contract.
With an electronic signature clause, all signers agree that the signatures applied to the contract are valid and acceptable. In other words, those signatures become just as legally binding as traditional “wet” handwritten signatures (in most cases).
Let’s take a closer look at what e-signature clauses are, and how they work.
What is an electronic signature clause?
An electronic signature clause is a part of a contract that specifically acknowledges the validity of e-signatures. This clause typically specifies that the contract will be legally binding despite being signed electronically. All parties that sign an agreement containing an e-signature clause are explicitly agreeing that their electronic signatures carry the same legal weight as their traditional handwritten counterparts.
Electronic signatures are already recognized as legally valid in many jurisdictions. In the US, the Uniform Electronic Transactions Act (UETA) and the ESIGN Act grant e-signatures the same legal status as “wet” pen-and-ink signatures.
In the EU, the eIDAS regulation recognizes three types of e-signatures as legally binding: simple e-signatures (SESs), advanced e-signatures (AESs), and maximum-security qualified e-signatures (QESs). At the same time, different jurisdictions have made e-signatures eligible on different types of documents.
When is it necessary to use e-signature clauses?
Electronic signatures are useful on a wide range of document types, and are actually necessary in certain business models.
For example, if your organization forms legal agreements with customers and vendors who don’t visit your physical location, an electronic signature clause may be required in order to validate the signatures of the people who’ve signed your contracts. A company that operates largely or entirely online may also find e-signatures necessary, since the legal team may not be able to sign agreements in person.
On the other hand, an e-signature clause may not be necessary if you’re using qualified e-signatures (QESs), which require every signer to verify their identity with a third-party trust service provider. However, very few businesses find it practical to use QESs on a large scale, due to their cost and complexity.
If your contracts use the more common and affordable advanced e-signatures (AESs), e-signature clauses can help uphold those signatures’ legal validity, enforceability, and admissibility.
Electronic signature clause examples
To see this in action, let’s take a closer look at three specific examples of e-signature clauses used in real-world contracts.
Seller acknowledges and agrees that Buyer may require or permit certain transactions with Buyer be conducted electronically using Electronic Records and/or Electronic Signatures. Seller consents to the use of Electronic Records and/or Electronic Signatures whenever expressly required or permitted by Buyer and acknowledges and agrees that Seller shall be bound by its Electronic Signature and by the terms, conditions, requirements, information and/or instructions contained in any such Electronic Records.
I agree and understand that by signing the Electronic Signature Acknowledgment and Consent Form, that all electronic signatures are the legal equivalent of my manual/handwritten signature and I consent to be legally bound to this agreement.
(From the State of Nevada)
The parties hereby agree that this Agreement may be executed with electronic signatures and shall be valid and binding on the parties.
(From Ferris State University)
As you can see in the examples above, an e-signature clause can be as simple, or as in-depth, as your company’s legal requirements demand. The common factor in all such clauses is that the signer acknowledges their own e-signature, as well as the e-signatures of any counter-signer(s), as legally binding on the agreement they sign.