Types of signatures and when to use them
Signatures add legal authority to agreements of all kinds – but not all signatures are created equal.
There are four main categories of signature used in the business world: wet signatures, e-signatures, digital signatures, and clickwrap signatures. Depending on the circumstances, you may need to use one or more of these methods when you agree to a contract or sign other important documents.
The types of signatures may seem similar, but it’s a good idea to get a clear grasp on the small but significant differences between them. Here, you can find a few helpful physical and electronic signature examples, as well as details on when to use each type.
The term might not sound familiar, but we’ve been using wet signatures for centuries. One of the most famous wet signatures in American history is the large, prominent signature of John Hancock on the Declaration of Independence. Some people might ask for “your John Hancock” when you need to sign a document.
The term “wet” signature refers to wet ink used to create a handwritten signature on a physical piece of paper. It’s the traditional way we sign documents in person. In addition to signing your name in cursive or print, other valid wet-signature techniques include using a distinct mark, like an “X” or a wax seal.
When to use a wet signature
While more and more businesses have electronic signatures over the past few decades, there are still plenty of instances where you can expect to use the trusty ink pen to sign your name:
- When signing loan documents and other financial agreements
- On a printed credit card slip
- To quickly give your consent to urgent medical procedures
- On a physical check
In some cases, an organization might prefer a wet-signature because they want to retain a physical copy of an agreement.
Pros and cons of using a wet signature
While you don’t often get to choose between using a wet or electronic signature, it is a possibility from time to time. So, why choose a wet-signature over an electronic signature? There are a few pros and cons to keep in mind.
Wet signature pros
One of the main reasons a wet-signature may be preferable is that both parties must typically be present at the time of signing. This provides an opportunity to confirm details and touch base before formalizing the agreement. That’s a big part of why some companies and business people prefer wet signatures.
When you sign a document in person, you can add additional validity to the process by hiring a Notary Public. These state-authorized professionals witness signatures on documents like vehicle titles and house deeds. A notarized document offers an additional layer of validity and is sometimes required, especially when dealing with official government documents.
Wet signature cons
There are a few important limitations to bear in mind when it comes to using a wet signature as well. Obtaining wet signatures can be:
- Expensive (storing paper documents can be costly)
- Slower (processing may have to go through several departments and workflows)
- More challenging to verify later (an employee has to track down the file from physical storage)
When you are the one signing a document, you may prefer an electronic signature so you don’t have to keep a copy of the original document.
How to create a wet signature
In most cases, it’s as easy as whipping out a pen and signing on the dotted line. In some circumstances, however, you can use a wet signature to sign electronic agreements too.
To do this, sign your name on a piece of paper, scan or photograph it, and save it as an image on your computer. Then, you can use it as an e-signature for PandaDoc and other services. Your driver’s license is an example of a document that requires a scan of your wet signature.
An e-signature is essentially a digital version of a wet signature. Using an e-signature is the most common way to consent to an agreement or to agree to the terms laid out in an electronic contract.
When to use an e-signature
There’s a good chance you use e-signatures on a regular basis as they’re the preferred signature method for a wide range of purposes. A few common electronic signature examples include:
- Agreeing to the terms of an online subscription
- Signing your e-filed tax return
- Including your typed name at the bottom of an email
- Using your PIN at an ATM
- Signing for charges on a screen at a register
- Scanning and sending an image of your wet, handwritten signature
It’s usually unnecessary to print a copy of an agreement where you used an e-signature. You may, however, want to save the file on your computer or in the cloud for your personal records.
Pros and cons of using an e-signature
There are a few pros and cons to consider when it comes to using e-signatures.
The primary benefit of using an e-signature is convenience. You don’t have to meet in person to sign an agreement, which means it’s easy to conduct business across long distances or while working from home.
E-signatures make it possible for companies to offer the products and services we’re used to using online. Imagine if you had to wait for a contract in the mail each time you wanted to sign up for a streaming music or movie platform. You’d have to sign it, send it back, and then wait for it to be processed. The internet would have never become what it is today if it weren’t for e-signature capabilities.
There are times when you might prefer a wet-signature over an e-signature. As mentioned above, it can be beneficial to get the parties together when signing some agreements. If you still have details to hash out, or if you’d like to conduct your business in person to further your networking goals, in-person may be the better option.
You might also prefer to obtain a wet signature in situations where you need to be very careful about verifying the other party’s identity. Signing agreements in person reduces the likelihood of fraud.
How to create an e-signature
As a signer, creating an e-signature usually involves typing in your name or initials into a document, or signing a screen with a digital stylus.
If you’d like to offer an e-signature solution as part of your business dealings, there are a few more steps involved:
- Digitize the document and convert it into a standard file format like PDF or .docx.
- Add e-signature capabilities with a program like PandaDoc.
- Send the document to the signer for a signature.
This process can vary based on the service you select. Sometimes, the sender will send the signed document back to you by email. Other times, the e-signature service will notify you when the signer has finished.
The term “digital signature” is a little misleading. You might assume a digital signature and an e-signature are the same things, but they are different in a few important ways.
A digital signature is an authentication method that allows code to be attached as a signature. Third-party certification agencies issue digital signatures and their associated keys.
You can think of a digital signature as a digitized fingerprint embedded in a document file. It goes beyond an e-signature by actually confirming the authenticity of a document. It’s similar to the way a notary service adds validity to a wet signature.
When to use a digital signature
In many cases, digital signatures are part of behind-the-scenes processes that we don’t even notice. For example, if you use Microsoft Outlook to handle your email, you’re using a digital signature each time you send an email. Microsoft places a digital signature on every email sent from its server.
Often, we use a digital signature in addition to an e-signature. This is the case when an electronic document prompts you to add an optional digital signature for additional security. No one other than the authorized recipient can view the document.
Pros and cons of using a digital signature
There are several factors to consider when deciding whether to use a digital signature certification process.
Digital signature pros
A digital signature can make a contract even more legally binding. The digital signature certificate process adds security to the document and allows it to be kept private between the parties.
Digital signature cons
Going through the process of obtaining a digital signature can be time-consuming, and may not be ideal for time-sensitive agreements. It can also become expensive if you need to use digital signature services regularly.
How to create a digital signature
To use a digital signature, you’ll need to go through the process put in place by your chosen service provider. The general steps for creating a digital signature are:
- A user gets a digital certificate from a certification authority, including the public and private keys.
- The signer shares the public key with the sender and uses the private key to sign the document.
- The sender uses the public key to verify the signature.
PandaDoc makes it easy to work through the digital signature process, whether you need a single certificate or ongoing services. With PandaDoc, all you have to do is:
- Upload a document or open one from your account.
- Select Fields from the Content menu.
- Drag and drop the Signature box into the document.
- Click on the field and add your signature or send it to a client by hitting the Complete button.
Clickwrap signatures are not signatures in the typical sense, but the outcome is similar to other methods. Clickwrap, or a “click-through agreement,” refers to the process of ticking a box to accept terms and conditions. You’ve undoubtedly used clickwrap to agree to the terms of a website, allow an app to be installed on your phone, or sign up for a warranty when making a big purchase.
As a business owner, you might include clickwrap capabilities on your website in certain circumstances. If your site offers a chat room or forum, for example, you might want to have contributors agree to abide by specific rules when they contribute. It can also be a simple, secure way for users to verify that they agree to your terms and conditions before signing up for your service.
Are some signatures more legally binding than others?
Generally, wet signatures and various forms of electronic and digital signatures carry the same legal authority.
In the U.S., this authority was established in 2000, when Congress passed the E-Sign Act, also known as the Electronic Signatures in Global and National Commerce Act. The United Nations established the basis for international laws around e-signatures in 1996 with the UNCITRAL Model Law on Electronic Commerce.
Without getting into too many details, these legal guidelines have been tested extensively over the past few decades. By now, the legal precedent is well established: Wet signatures and electronic signatures are equally valid.
As we mentioned before, if you have any concerns about the security or legality of your document, you can add to its validity by going through a digital signature certification process. For sensitive, confidential, or otherwise essential documents, it’s a good idea to include this added layer of security in case of legal disputes or data integrity concerns.
Getting valid signatures for your business agreements
It would be great if we could rely on a handshake to back up an agreement’s validity, but in today’s world, it’s just not enough.
Even when you fully trust your business partner, you can’t predict the future. Businesses change hands, and people change jobs. Business needs change over time. Legally signed documents using any of these physical or electronic signature examples can give you the peace of mind to know you’re always on the up-and-up.
PandaDoc takes the pain out of the e-signature and digital signature processes. Learn more about our legally binding, simple-to-use, encrypted signature services, and sign up for a free, 14-day trial.