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The ultimate guide to electronic signatures

The ultimate guide to electronic signatures

Without a doubt, electronic signatures are the best way to sign documents.

In fact, electronic signature tools help thousands of businesses create a better signing experience, automate their business processes, and eliminate weeks of work.

But, despite all of that, it can be difficult to understand how e-signatures work.

In this guide, you’ll learn everything you need to know about electronic signatures, digital signing, and the online signing process.

Table of contents

  1. What is an electronic signature?
  2. The state of eSignatures in 2021
  3. Should your business use electronic signatures?
  4. What makes signatures legal?
  5. Electronic signatures and encryption
  6. Further reading
  7. Wrapping up

01. What is an electronic signature?

Electronic signatures represent a large selection of methods by which digital documents can be signed and authenticated.

In the United States, the Federal ESIGN Act of 2000 classifies electronic signatures as:

“An electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”

In Europe, the eIDAS Regulation states that e-signatures are:

“Data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign.”

In other words: Electronic signatures are used by signers to mark a digital document and must be logically associated with both the document and the signer.

Types of electronic signatures

types of signatures

Because the legal interpretation of electronic signatures is very open-ended, there are a variety of ways to sign digital documents.

Here are some of the most common ways to get documents signed.

Standard electronic signatures

Sometimes called e-signatures or virtual signatures, these are among the most common type of e-signature for online signing.

This type of signature doesn’t use any kind of cryptographic encryption and relies on the user’s intent to sign as proof that the document was signed.

While this type of signature is very easy to use, it’s also the easiest to refute because there are limited security protocols in place to verify the authenticity of the signer.

Digital signatures

Sometimes called an advanced electronic signature, this type of signature is far more secure. These signatures often use public key infrastructure to ensure that signatures are authentic.

The benefit to using digital signatures is that the authenticity of the signer is much easier to verify, making this method ideal when signing important documents like business contracts and proposals.

Most online signing platforms, including PandaDoc, offer digital signature solutions by default both for added security to users and to ensure compliance with all governmental regulations.

Handwritten signatures (digital)

Have you ever signed a document using your mouse or using a tablet and a style? You’re essentially creating your handwritten signature in an electronic format.

But don’t be fooled! Handwritten signatures created in this way may be standard electronic signatures or digital signatures depending on the technology behind the signing platform.

Even though you may have added your personal signature to a document, how the signing tool being used captures that information may play a role in determining legality later on.

Wet signatures (non-electronic)

A wet signature is a signature created when signing a piece of physical paper using a pen. While not technically an electronic signature, we wanted to highlight this signature type for three reasons:

  1. In several legal scenarios, such as filing for bankruptcy, wet signatures are required and electronic signatures are not considered valid.
  2. Scanning your wet signature into a digital format can be counted as e-signature because the image of your signature is created in an electronic format. However, e-signatures created in this way are not given the same legal standing as a digital signature.
  3. In countries where physical signatures still supersede electronic signatures, a scanned version of your wet signature won’t carry the same legal weight.

In some specific scenarios, you will still need to physically sign and submit your documents. So don’t throw away your favorite pen! You may still need it one day. 

02. The state of eSignatures in 2021

The state of electronic signatures has evolved rapidly over the last several years.

Between the COVID-19 pandemic and widespread adoption of electronic signature tools, digital signing solutions are more common now than ever before.

Key industry developments

The e-signature market today is full of incredible signing platforms.  Right now, some of the biggest players are:

Right now, the e-signature market is also changing. In 2020, the global digital signature market size reached 2.8 billion and is expected to grow to $14.1 billion by 2026.

Many key players are also expanding their offering beyond digital signatures. HelloSign, now a Dropbox subsidiary, integrates with the storage platform for easy signing. PandaDoc offers document creation tools that work well for proposals and contracts. Adobe Sign combines e-signing with PDF editing tools.

As you might expect, the pricing for each of these services varies with their service offering, so be sure to take a close look at everything before you commit to a plan.

Electronic signatures and COVID 19

As with many online business platforms, electronic signature companies saw a surge in subscriptions and usage during the COVID-19 pandemic. 

Check out the Google Trends data and the spike in interest as the pandemic was just beginning.

google trends

According to data from the PEW Research Center, nearly 71% of people report doing their job from home all or most of the time and more than half say they want to continue working from home in a post-pandemic world.

This dispersion of the workforce led to a surge in cloud-based tools and online platforms, with companies from Amazon to Google seeing aggressive growth throughout the pandemic. 

Other companies, like electronic signature platforms and online collaboration tools, also saw growth as companies searched for new tools to accommodate their remote employees.

Current use cases for electronic signatures

Today, electronic signatures are used by Fortune 500 corporations and big hospitals all the way down to freelancers and consultants.

And the number of businesses using electronic signatures is always growing. Currently, electronic signatures can be used in any of the following documentation:

  • Sales proposals
  • Purchasing contracts
  • Hiring and onboardings
  • Non-disclosure agreements (NDAs)
  • Non-compete agreements (NCCs)
  • Timesheets
  • Leases and rental agreements
  • Tax documents
  • Bank forms
  • Insurance paperwork
  • School forms
  • Permission slips
  • Model and product releases

Most electronic signature solutions are flexible enough with nearly any company, regardless of size or industry, can benefit from adopting electronic signatures.

03. Should your business use electronic signatures?

Electronic signatures are recognized in many places around the world as a legal substitute for handwritten signatures.

In fact, digital signatures have become so commonplace that their usage is enshrined in national law.

Because of this, many businesses have adopted e-signatures and document digitization for a number of reasons:

  • Signing contracts electronically using electronic signatures for PDF contracts is much faster than requiring a handwritten signature, which often requires that a physical contract be sent by mail.
  • Digital files reduce paper waste, are simple to store, and can be more easily tracked throughout the entire content management lifecycle.
  • When signed correctly, digital signatures are more secure than handwritten signatures, providing additional legal protection in the event of a breached contract or NDA.
  • Using digital tools, e-signatures can be integrated automatically into templates and document formats for an even faster signing experience.

The ease of use for most electronic signatures, combined with their existing legal status, makes electronic document signing a safe bet when signing contracts electronically.

Especially for businesses who are generating and processing paperwork with a limited staff, the ability to send and receive electronically signed documents can reduce errors and ease workloads.

If you’re looking for ways to drastically speed up your business processes, providing customers with a way to sign contracts electronically and in real time can help you expedite deals with no risk to your organization.

An overview of the e-signing process

When a business wants to implement an e-signature solution, they must first digitize their existing documentation and convert it into a recognizable document format (.docx, PDF, PNG, etc.). 

After this process is complete, the business can add an e-signature solution to their digital document. From there, the organization sends the documents to the signer and requests an electronic signature. 

The signer will follow the process required to create a digital signature. This process varies, depending on the software used during the signing process.

Many electronic signature solutions use handwritten signature illustrations to show signers where they should sign within a contract. 

Some even help you create a digital image of your signature, but that’s not strictly required by signature law.

Once the document is signed with the signer’s unique electronic identification, it can’t be changed. 

Any attempt to alter the document will invalidate the signature, requiring the signer to complete the process again after reviewing any changes to the document.

What type of electronic signature should you use?

Want to send documents to be signed electronically?

If you’re operating a business and want to make sure that your documents are legally enforceable, we recommend that you require digital signatures when you send documents for a signature.

As discussed at the top of the document, digital signatures are a subsection of electronic signatures that use public-key infrastructure (PKI) to make sure that signatures are valid and authentic.

Most of these security standards take place behind the scenes and are set up in a user-friendly format.  When using electronic signature services like PandaDoc, your contracts can also be signed from almost anywhere via mobile devices (iOS or Android), desktops, or laptops.

04. What makes signatures legal?

In many (but not all) cases, electronic signatures are considered the equivalent of a handwritten signature. This is especially true when audit trails can trace the signing process back to the intended recipient.

These audit trails and security checkpoints, as well as the ability to lock a document after a signature solution is applied, creates non-repudiation — the assurance that the validity of the document can’t be denied — around the contract.  

Some methods used to create non-repudiation include:

  • Digital certificates
  • Asymmetric or public-key encryption
  • IP Address capture
  • Account creation and login requirements
  • Two-step verification for signers and signatories

Combined, these methods increase the level of security surrounding the document signing process and boost the enforceability of digital contracts in courts.

Below, we’ll discuss the laws behind electronic signatures and how they are applied within their specific regions.

Electronic signatures in the United States

In the US, electronic signatures are governed by the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act (ESIGN Act).  

Combined, these two pieces of legislation maintain the groundwork for electronic signatures in the US. They’ve been adopted by nearly all states and are implemented at both a local and federal level.

The UETA

Created in 1999 by the National Conference of Commissioners on Uniform State Laws, the UETA seeks to define the terms and basic legal framework for electronic signatures.

The UETA defines an electronic signature as:

“An electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”

While the law also provides a list of rules and regulations for each state, it must be adopted on a state-by-state basis. This is different from the E-Sign Act (below), which has been implemented at a federal level.

The UETA provides guidelines that are similar to the E-Sign Act but adds a few provisions that make it unique. These include how records should be attributed, how to handle mistakes in contract documents, and how information processing systems are defined when sending and receiving information.

Perhaps most importantly, the UETA states in Section 13 that “evidence of a record or signature may not be excluded solely because it is in electronic form.”  

This provides legal standing to electronic signatures, which may be disproven but can’t be dismissed simply because of their digital format.

Non-Participating States

To date, 47 states have adopted the UETA as a legal framework for how electronic signatures are handled.  The outlying states are Illinois, New York, and Washington.  

47 states have adopted the UETA

You can find their UETA-alternative legal documentation below.

Illinois: Electronic Commerce Security Act

New York: Electronic Signatures and Records Act

Washington: Washington Electronic Authentication Act

The ESIGN Act

Implemented in 2000 as a federal solution to electronic signatures and digital signing solutions, the ESIGN Act is active in all 50 states.  

This law provides federal guidelines on various topics, including the intent to sign and the attribution and association of a signature with a graphic or textual record. 

Like the UETA, the E-Sign Act defines the legal definitions used to determine validity and regulation throughout the signing process.

In addition to safeguarding consumer consent surrounding electronic signature capture, the ESIGN Act provides leeway for consumers who prefer paper signatures to electronic signatures or digital alternatives. 

It also mandates that businesses actively retain contracts and records associated with electronic transactions.

These measures ensure that consumers have the right to sign via pen and paper or in an “alternative, non-electronic form” and how consumers may withdraw consent from utilizing electronic formats.

Limited Exclusions

In the US, the UETA and E-Sign Act cover the legal groundwork regarding electronic documents and the e-signing process. 

However, there are some notable exceptions.  Neither law accepts the validity of electronic signatures in the following circumstances:

  • The creating and execution of wills
  • Areas of family law, including adoption and divorce
  • Uniform Commercial Code
  • Court documents

In these circumstances, documentation must be physically signed.

Electronic Signatures in the European Union

In the EU, the validity and legality of electronic signatures are governed by eIDAS and the GDPR.  

Companies seeking to do business with individuals and businesses across the EU should seek compliance with these bodies of law in order to gain legal standing through any electronic signature requirements.

The eIDAS

The eIDAS (electronic IDentification, Authentication and trust Services), which became an established EU regulation in July 2014, extensively covers laws around electronic identification, digital certificates, electronic seals, timestamps, and the legality of electronic signatures.

The idea behind eIDAS was to create a uniform law that applies to every member state within the EU so that electronic identification information could be accepted from every EU member state.

Regarding electronic signatures, eIDAS segments digital signatures into three separate categories, each more secure than the last. 

These are listed below, and you can find additional information about them in Section 4 of the eIDAS Regulation.

01. Standard Electronic Signature (SES)

As mentioned at the top of the guide, eIDAS defines an electronic signature this way:

“Electronic signature means data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign.”

This is the most basic form of an electronic signature as defined by eIDAS.  It has no basic security requirements and relies on logical assumptions to assume intent.  

The United Kingdom’s Guide on Electronic Signatures and Trust Services cites a “scanned signature” or “tickbox plus declarations” as examples of this type of signature.

While a standard electronic signature might hold up in court (assuming the sender can prove that the signer was the one who actually signed the contract), the legal framework here is loose.

This type of electronic signature does not have the equivalent legal effect of a handwritten signature.

02. Advanced Electronic Signature (AES)

A step above standard electronic signatures, eIDAS qualifies advanced electronic signatures based on a higher standard of legal requirements (found in Article 26).

An advanced electronic signature shall meet the following requirements:

  • it is uniquely linked to the signatory
  • it is capable of identifying the signatory
  • it is created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control
  • it is linked to the data signed therewith in such a way that any subsequent change in the data is detectable

With AES, the escalation of requirements lends itself to enforceability and non-repudiation. 

By eliminating the potential for fraud and creating a system where only the intended signer can access and/or sign a legal contract, the legal standing of the contract increases.

However, like standard electronic signatures, this type of electronic signature does not have the equivalent legal effect of a handwritten signature.

03. Qualified Electronic Signature (QES)

The most stringent protocols for electronic signatures include both the requirements for advanced electronic signatures (listed above) and additional requirements for the device upon which the signature is provided.

This means that devices must be acquired from an authorized certificate authority by the EU and used during the signing process. While this is covered extensively from Article 29 through Article 34 of eIDAS, the United Kingdom’s Guide on Electronic Signatures and Trust Services provides a simplified definition:

“An advanced electronic signature that is created by a qualified electronic signature creation device, and which is based on a qualified certificate for electronic signatures.”

With QES, both the digital security protocols and the devices on which a signature is created add to the authenticity and integrity of the electronic signature and the signed documents.  

The addition of the digital certificate further reduces the potential for fraud or tampering and creates stronger non-repudiation around the digital contract.

Only qualified electronic signatures carry the equivalent legal effect of a handwritten signature.

The GDPR

The EU’s General Data Protection Regulation (GDPR) aims to harmonize data privacy laws across Europe.  

While the regulation doesn’t take aim at electronic signatures specifically, it adds additional rules and requirements that companies who implement electronic signature solutions should consider. This includes:

  • Data security
  • Encryption
  • Consent
  • Processing

Organizations seeking to utilize an electronic signature solution should understand the EU’s stance on these topics since they will be responsible for capturing and maintaining private information over an extended period in the form of contracts and digital agreements.

How PandaDoc eSignature software handles legality and compliance

PandaDoc provides an eSignature solution that complies with federal regulations around the world.

We do this by providing secure and traceable digital signatures for every document that you create. Our platform offers:

With PandaDoc, you’ll never have to worry about running into legalities surrounding eSignature laws.

While you’ll still need to generate language that complies with legal regulations, PandaDoc provides the tools you need to ensure that your documents are encrypted, secure, and legally compliant where electronic signature functionality is concerned.

05. Electronic signatures and encryption

Aside from the simple electronic signatures defined by eIDAS (above), most electronic signatures are protected by some level of security and encryption.  

This goes back to the idea of non-repudiation — the need for the organization issuing the contract to ensure that the authenticity of that contract is impossible to deny. 

Once the integrity of a contract and its attached electronic signature are no longer in doubt, the enforceability of the contract as a record of a transaction is much harder to deny.

These encrypted signatures go by a variety of names. 

In eDIAS and the EU, they are known as advanced electronic signatures.  In the US, they’re often called digital signatures and come with a specialized set of standards that differentiate them from simple electronic signatures. 

These names carry special significance because they imply that some measure of digital security has been applied to the signing process.

Here are the two types of data security most often applied to electronic signature solutions.

Asymmetric encryption

When signing and sending electronic documents, both parties involved need some assurance that the content of the contract is not altered after the signing process is complete. 

Modern software uses public-key encryption to perform this task. 

Asymmetric key cryptography allows parties to independently verify the authenticity of a contract by using the encrypted keys to validate a digitally signed contract across multiple versions (or digests) of the document.

In most software solutions, the document only opens correctly (and with no warnings or alerts), if all versions of the contract match. 

If there are errors in the signing process, or if something has changed from the time that the document was signed, the process fails and all involved parties must sign the document again.

These extra checks and safeguards create electronic identification and audit trails that make documents more authentic. 

And, because this is a widely accepted practice, many modern business solutions (such as Microsoft Word) come equipped with pre-built digital signing solutions. 

Evidence-based authentication

This type of authentication is focused on ensuring that the electronic signature on a contract is authentic. 

This is often done by sending the document to a device or account that the intended signatory is known to control while requiring a secondary passcode in order to access the document itself.

Here are two common examples of evidence-based authentication:

  • A company sends a document to the signer’s email, but they send a text to a number controlled by the signer which she must use in order to access the document.
  • A signer is notified of a contract requiring his signature via an online document service. However, in order to access it, he must create an account and verify that account through proof of identity before he can sign.

With evidence-based authentication, companies are trying to ensure the identity of the signer. When combined with public-key encryption, it’s possible to ensure the authenticity and enforceability of a paperless signature.

06. Further reading

Here, you’ll find a list of sources for legal documentation for electronic signatures in both the United States and the European Union.

You can also check out our e-signature legalities page for additional information on electronic signatures in other countries.

United States

European Union

07. Wrapping up

Do you have additional questions about electronic signatures or the electronic signing process?

Have an idea for how we can make this ultimate guide even better?

Contact us and let us know!

Frequently asked questions

  • In the United States, the Federal ESIGN Act of 2000 classifies electronic signatures as:

    an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.

    In Europe, the eIDAS Regulation states that e-signatures are:

    data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign

    In other words: Electronic signatures are used by signers to mark a digital document and must be logically associated with both the document and the signer.

  • Digital signatures are an advanced form of electronic signatures. These signatures use public key infrastructure to ensure that signatures are authentic.

    The benefit to using digital signatures is that the authenticity of the signer is much easier to verify. The additional security makes this method ideal when signing important documents like business contracts and proposals.

    Most online signing platforms, including PandaDoc, offer digital signature solutions by default both for added security to users and to ensure compliance with all governmental regulations.

  • The e-signature market today is full of incredible signing platforms. Right now, some of the biggest players are:

    • DocuSign
    • Adobe Sign
    • SignNow
    • PandaDoc
    • HelloSign

    Right now, the e-signature market is also changing. Many key players are expanding their offering beyond digital signatures.

    HelloSign, now a Dropbox subsidiary, integrates with the storage platform for easy signing. PandaDoc offers document creation tools that work well for proposals and contracts. Adobe Sign combines e-signing with PDF editing tools.

    As you might expect, the pricing for each of these services varies with their service offering, so be sure to take a close look at everything before you commit to a plan.

  • A standard electronic signature is easy to create. You can take a picture of your handwritten signature or use an online signature capture tool to save an image of your signature.

    Keep in mind that any mark, symbols, or sound that can be logically associated with a document can be considered an electronic signature. In these cases, even doing something as simple as typing “I agree” when replying to an emailed contract could be considered an electronic signature in the eyes of the legal system.

Eugene Zaremba

Eugene Zaremba Director of Demand Generation at PandaDoc

Eugene works at PandaDoc as the Director of Demand Generation. He is an avid fisherman, taking nearly 20 fishing trips every year.

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