In companies of all sizes, whether manufacturing, retail or tech, you see the same thing -- employees holding manila folders containing legal documents with sticky tabs awaiting signatures. In some cases, it takes a few moments to get the necessary signature. In others, the file ends up unknowingly buried on the desk of someone on vacation. It's an archaic and inefficient process for which there is an easy solution -- electronic signatures.
Electronic signatures have been legal and enforceable in the United States since the passage of the ESIGN Act in 2000. They provide an enormous opportunity to facilitate speed, efficiency, and reliability in the contracting process. Yet, adoption has lagged because many still feel wary of electronic signatures.
On July 14th, 2014, three of the original proponents of the ESIGN Act, Senators Ron Wyden, John McCain and Representative Anna Eshoo wrote to Commerce Secretary Penny Pritzker "concerned about the extent of the adoption of electronic signatures within the federal government." They also wrote to "request a report on the state of this Act's implementation by federal agencies." (Lawmakers want more e-signatures") These lawmakers were asking why the federal government has been so slow to adopt electronic signatures -- legislation that was designed to help them streamline their processes.
The challenge of e-signatures seems to be that while everyone understands intellectually they are legal and enforceable in the United States and they represent a tremendous opportunity to gain speed and efficiency, some unease appears to prevent robust adoption. Let's take a look at why that might be.
Our reliance on written signatures is inflated. The resistance seems to hinge on the belief that written signatures are trustworthy and reliable and the fear that electronic signatures are new and untested. Neither of these beliefs is accurate.
Let's examine a typical written signature process. An agreement is finalized by phone or email. The agreement is sent via email, fax or mail to a provided address. Hours pass. Days. Weeks. Upon opening the envelope one sees a document that appears to be the version sent, possibly from the same address, email address or fax number that it was sent to with a scrawl that might be from the person whom you believe has signing authority in what may or may not be his or her actual signature. This is the process on which we rely.
If this weren't reason enough to leave written signatures in the dustbin of history, they are also wasteful, slow and costly. They delay business while the parties wait for signed documents to be returned. It is difficult to know the status of a document and challenging to track down people who are remote or traveling. Once the agreement arrives, it has to be scanned so that it can be archived. Assuming, of course, that it has not been lost along that way.
We find ourselves in an era where document generation, editing, exchange, routing and archiving are all done electronically. Yet, the single act of signing we are suddenly transported to the pre-digital age, print out a hard copy, uncap our ink wells, flourish our quills, and sign. This process is slow, clunky and prone to failure.
Taken together, it isn't difficult to conclude that written signatures are unreliable, subject to delays and breakdown in the process. In other words, they are very risky. Despite all this, many still insist on this process. Why?
Partly, it's because many still see electronic signatures as new and untested. When I talk to groups about this topic I often ask if anyone can guess when the United States courts first held that an electronic acceptance was binding. Some guess 2000. Some guess 1985. An occasional daring soul will offer 1972. No one guesses 1869.
In Howley v. Whipple (48 N.H. 487 (1869)) the New Hampshire Supreme Court did just that. It determined that "It makes no difference whether [the telegraph] operator writes with a steel pen an inch long attached to an ordinary penholder, or whether his pen be a copper wire a thousand miles long. Nor does it make any difference that in one case common record ink is used, while in the other case a more subtle fluid, known as electricity, performs the same office."
Compared to written signatures, electronic signatures are much safer and easier to use. Contracts can be signed from tablets and smart phones, allowing anyone to sign documents while traveling or on vacation. This eliminates the common problem of business grinding to halt while key signatories are tracked down. Further, e-signatures allow all involved to maintain visibility into the real-time status of where each document is in the signing process. Digital rights management can be enabled in documents giving all involved peace of mind that no alterations were made in the final versions. Electronic signatures are good for the environment and the bottom line.
Consider the endless licensing agreements, partnership agreements, travel approvals, supplier contracts, business compliance agreements, non-disclosure agreements, offer letters, corporate policy acknowledgements, benefits enrollment forms, insertion orders, creative approvals, and other documents that even a moderately sized organization must execute, these incremental environmental and financial savings quickly add up.
Electronic signatures have become one of the primary mechanisms for executing agreements. Those who use them not only find them a safe, effective way of doing business but they often remark that they could not imagine returned to paper-based processes. For those who have not moved to electronic signatures, all that is required is that one swallow hard and make the leap.