In the 1989 movie Back to the Future: Part II, Marty McFly is asked to electronically sign on a tablet to make a $100 donation to save the town’s historic clock tower. Fast forward to 2024, and practically everyone uses cell phones, iPads, or tablets. On these devices, each of us engages in hundreds of verified transactions. Most of these transactions are simple contract agreements for a purchase-sale or a service subscription. An increasing number, however, involve workflows for the approval of complex transactional documents, to the point that most modern-day legal closings are now virtual.
With the rise of electronic commerce over the internet, growth was initially limited by the requirement for “wet ink” signatures. In 1999, to resolve this issue, the Uniform Electronic Transaction Act (UETA) was adopted by the National Conference of Commissioners on Uniform State Laws. To date, UETA has been adopted by every state except New York. UETA essentially said that a contract or signature that is an electronic record cannot be denied legal effect simply because it is an electronic record.
New York chose to implement its own statute, the Electronic Signatures and Records Act (ESRA). ESRA approves electronic records except in the area of estate planning and health care directives. Under the authority of ESRA, New York has established guidelines on the use of electronic records. See https://tinyurl.com/4yd2bsp6.
On June 30, 2000, the Electronic Signatures in Global and National Commerce Act (15 USC 7001) (E-SIGN) was signed into law. E-SIGN extended the validity of electronic signatures to transactions that are part of interstate or international commerce.
The COVID-19 health emergency and shutdown, which began on March 11, 2020, accelerated the trend to virtual closings. During this time period, in person meetings were either discouraged or illegal, and the vast majority of commercial transactions were completely electronic. By the time the COVID-19 health emergency ended on May 11, 2023, digital transactions had spread around the globe.
The United States was not alone. In Japan, where the use of seals, or “hanko” on official documents goes back hundreds of years, offices were forced to re-evaluate their practice of affixing personal or company seals to legal documents. These days, except for birth, wedding, or death certificates, and wills, codicils, and testamentary trusts where blue ink and a pressed notary seal are the standard, electronic signatures are the norm.
UETA, ESRA, and E-SIGN talk about the validity of electronic records not being unauthorized just because they are saved in electronic format. It does not mean that all electronic records have equivalent legal status as binding agreements. A document saved in .docx format in Microsoft word and a paper record that has been scanned and saved as a PDF (portable document format) are both “electronic records.” There needs to be something more to make that electronic record an enforceable contract between the parties. Just as a blue ink signature needs to be verified by witnesses and circumstances, an electronic record also needs to be verified. In fact, given the right process, electronic records can be more precisely verified than paper records.
If you type your name at the end of a contract or paste an image of your signature into a document, it is signed and binding if you intend for it to be binding on you. If, as a secretary or associate, you paste your boss’s signature into a document, that signature is binding on your boss if your boss authorized you to so bind him to that agreement. Such approaches, while binding under the circumstances, are not trustworthy or easily verifiable.
There is a common practice among transactional attorneys to create and circulate signature packages consisting of the execution pages of all documents required in a closing. The affected agreements may include a provision expressly authorizing the agreement to be executed in counterparts. These pages may be printed, signed with wet ink, and then returned or they may be electronically signed and returned to the closer. At the closing, the signature pages are assembled with the underlying final agreements and presented in a package to the parties and their lawyers. In such an approach, it is ultimately the credibility of the lawyers that really authenticates the agreement.
Digital signatures offer a different and better paradigm. Without getting into the technological weeds, a digital signature guards against inauthentic documents being presented as real because the document is tied to a specific signer. It also guards against unauthorized changes being made to the document between the initial presentation and the final execution. Depending on the technology or service you use to sign the document, a wealth of information about the signer travels with the document. At minimum, the information captured with the signature will include the date and time the document was signed, the device on which it was signed, the IP address of that device, and the location where that device was used.
If you are using a personal digital signature certificate, it will also include the certificate ID, which can be used by the issuing authority to get all the information it has on the person who got the certificate. If you are using third-party services like DocuSign (www.docusign.com) or PandaDoc (www.pandadoc.com), you will have access to the information such as the user’s login information, and any authentication or user verification offered or required by that service. If you recently filed your tax returns online, you likely used a website called ID.me and got a certificate verifying you to the government. When I last filed my returns, I had to correctly answer several very personal questions and had to go through a video interview. After that, I was issued an ID and a personal identification number (PIN). Armed with that information, I could then pay my taxes.
At the most advanced level of e-signatures, authentication can use blockchain technology with advanced encryption. The contract becomes a one-of-a-kind certificate. With the signature timestamp on the blockchain, a full history of the participants travels with the document and cannot be manipulated as the document flows through the approval process. This is the approach used by DoxyChain (doxychain.com). Some pundits have predicted that all commercial transactions will become blockchains at some point in the future.
eSignature solutions establish trust between the participants that they are signing the document that they agreed to, even if the participants are on opposite sides of the world. The solution ultimately saves time—the time that participants would have spent traveling to a centralized location to sign in person at a formal closing and money—the cost of managing and monitoring the execution process. eSignature platforms allow asynchronous execution. The signer can sign the document at the time and place of their choosing. The actual execution date and time is recorded with the document in a way that can be independently verified. There is a full audit trail. Though the possibility of fraud can never be entirely eliminated, the risk can be mitigated. The identity of the signer can be verified, including the signer’s authority to sign on behalf of the contracting party. Digitally signed documents cannot be changed. The possibility of signing one document but then being presented with a different document is removed because the signature is part of the document and not just an attachment.
Not all eSignature solutions are created equal. The solution you choose needs to be evaluated based on specific use cases. Here are some factors to consider in choosing a solution.
Per Envelope Price: Price is always a factor. Most eSignature solutions look at the number of envelopes that you send. An envelope can contain a single document or multiple documents and can be routed to a single signer or a chain of signers. If you do only a few envelopes a month, you will want a service with a low base price subscription. If you expect to send hundreds of envelopes a month, you will want a service that has unlimited envelopes or a very low per envelope price.
If you are sending only a few documents out for execution a month, you may find a signature solution in a service you already use. If you have the subscription service for Adobe Acrobat, you can now sign documents, request signatures, and track responses in real time at no additional charge. If you are not using the Adobe Sign service, be sure to understand the difference between digital stamping and a full signature workflow.
If you use online document storage, you may already have eSignatures included. DropBox recently bought HelloSign and rebranded it as DropboxSign (sign.dropbox.com). If you have a personal version of Dropbox, you can send three envelopes a month at no extra charge, but with the Essentials or Business offerings you get unlimited signature requests. Similarly, Citrix Sharefile, which purchased RightSignature, is now bundling unlimited eSignatures into their premium cloud storage and file sharing offering (www.sharefile.com/rightsignature). And Box.net includes free eSignatures with all its pricing plans (www.box.com/esignature).
Ease of Use: When it comes to signatures, the process must be user-friendly and intuitive. Can the sender understand where to place the signature tags and how to route the envelope to all the parties who need to sign? Will the recipient understand how to sign the document if they don’t already have a login to your eSignature platform? It is always worth getting a free trial login to evaluate the eSignature platform. Just be sure to timely cancel the service if you don’t like it.
Functionality: Here, you need to understand all your use cases. If all you want to do is send an engagement letter out to client, a click through web-form may be enough. But if, in addition to a signed engagement contract, you want to query your client for information required before your initial meeting, you may want to look to a platform that also includes digital forms for gathering information. If your contracts need to go through several persons before final approval is granted, you will want workflow capability that can route the documents to each user and include audit trails so you can identify agreements that are stuck. If you are uploading a package with multiple documents, you may want an envelope template with anchor tags in the document that will automatically flag all the places in the package that require signatures or initials.
Flexibility: Flexibility may be important to your signature workflow. If you want to require the signer to initial each page of the agreement, your eSignature platform should allow you to add anchor tags in the footer on each page that it will recognize. DocuSign and PandaDoc support custom anchor tags. If you want to route an agreement to your financial comptroller for approval before it is sent out to the counter party, make sure you can require non-signers to approve the document as part of the workflow.
Integration: Documents don’t exist in isolation. They may be drafted with a document assembly tool, or they may exist in a document management system. You will want to reduce the time from drafting to final execution. Some solutions allow you to send directly from your word processor or Outlook. Others require you to upload a document to their eSignature platform. NetDocuments offers a DocuSign integration wherein you can right-click on a document and send it to DocuSign. See https://tinyurl.com/4zdyt8yw. Once the DocuSign process is completed, the fully executed document returns automatically to NetDocuments.
Security and Compliance: Depending on your practice, there may be corporate governance requirements you need to comply with. It may not be enough that the documents are signed. You may want certifications that the platform is compliant with relevant eSignature laws such as E-SIGN Act, UETA, or eIDAS. Don’t assume full compliance. Check out the website and their security documents. If your documents include personal information and are stored on the platform’s website, you are obligated to ensure that the platform complies with law. Platforms like RPost (rpost.com) focus on secure delivery of information as well as certification of signatures.
Identity Verification and Authentication: There is a difference between drawing your signature on a tablet to approve a document and requiring the signer to verify its identity. The former may meet the minimum requirements. Although identity verification may slow down the execution process, it may also result in a more easily enforceable agreement. Some eSignature platforms include an option to require use of an independent verification service like ID.me, AuthenticAte.com, or vouched.id. Others, like OneSpan (OneSpan.com), include digital identity verification as part of their offering.
Audit Trails: It can be assumed that an audit trail will identify who signed the documents and when it was signed. But there are several steps between the initial submission of the document and when it is finally executed. The audit trail may include the identity of every person who accessed the document, even if they are not actual signatories. It could include all downloads and online reviews. This information can provide insight into why a document may not yet be executed. In the event of litigation, it could be used to prove awareness of the terms of the agreement by non-signatories.
Workflow and Templates: If your volume is more than occasional, you will want to find an eSignature platform that has templates for transactions that are used on a repeat basis. You will find support for templates in platforms like DigiSigner (www.digisigner.com) or XodoSign (eversign.com).
Support: Check the service to understand the level of support it provides. It may be email only or chat-based. There may be a charge for a live support person. Most eSignature platforms are easy to use, so online help, tutorials, and videos may be all you need. Review the offerings. If you have a complex workflow, you may want to find an eSignature consultant to help you design and implement your process.
Mobile Friendliness: All platforms will work with a PC, whether desktop or laptop. But will your eSignature platform allow you to execute the agreement on a cell phone or a tablet? If you want to reduce the friction of signature, having a mobile-friendly platform can be quite helpful. Some platforms like SignNow (signnow.com), JetSign (www.jetsign.com), and SignEasy (signeasy.com) got their start as mobile applications.
Scalability and Management Consoles: If your organization is small with only a few authorized signers, almost any system will do. But as your organization grows, you will want to centralize the tracking of executed agreements. You may need a tool that includes Contract Lifecycle Management (CLM) features. CLM will allow you to access executed agreements as well as gather meta-data from those agreements. Some of the eSignature platforms have added an artificial intelligence feature set that will read and summarize the terms of the agreements, both before execution and after execution.
Form Building: If your practice involves long, heavily negotiated agreements, your needs for eSignature will focus on ease of execution and identity verification. If, however, your company originates most of the paper, you may be interested in some of the more advanced drafting features available in platforms like PandaDoc (www.pandadoc.com), SpotDraft (www.spotdraft.com), and HoneyBook (www.honeybook.com). If you want serious, rule-based document assembly with eSignatures, you might consider XpressDox (www.xpressdox.com) which has hooks to connect you to many eSignature platforms.
Data Gathering: Several eSignature platforms also offer secure data gathering. You can use a verified form to get information from your clients that meets the privacy act requirements for data gathering and secure storage. Platforms like Jotform (wwwjotform.com), formstack (www.formstack.com), and zoho (zoho.com/forms) start with data gathering but also include authentication options, whereas programs like Adobe and DocuSign let you add custom anchor tags on a document and let you require users to fill these out as part of the execution process.
The COVID-19 pandemic-induced shutdown demonstrated that in-person closings are not actually necessary in the modern world. In many ways, virtual closings and eSignatures are a preferable way of doing business, offering significant savings in terms of time and money. Resistance to the adoption of eSignatures often stems from concern about potential fraud or the possibility that a party to a contract will claim that they were unaware that their signature had been used. It is the responsibility of an attorney to meticulously choose the best eSignature software, both for their firm’s use and to recommend it to their client. The era of relying solely on ink signatures is behind us: Back to the Future is already here.
Technology—Probate provides information on current technology and microcomputer software of interest in the trusts and estates area. The editors of Probate & Property welcome information and suggestions from readers.
