7 Rules for E-Signature Legality and Compliance: Part 2

Posted by John Harris

Today we're bringing you Part 2 of our three-part series on e-signature legality and compliance (click here to read Part 1). 

We've decided to write this series because many businesses we talk to don't realize that different e-signature vendors offer very different levels of legal evidence. To choose a vendor that your legal and compliance teams are sure to support, follow the seven rules. 

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E-Signature Rule 2

All signatures on a single document must use the same electronic signature technology, or at the very least successive signatures should not flatten or otherwise destroy evidence of previous signatures. Alternatively, if a document requires multiple signatures from multiple signers, the same signature technology should be used so that each signature on the document retains intent, integrity and information relating to the transaction.

When you're looking at accepting electronically signed documents, you should know that that different e-signature technologies have different processes to prepare documents to be signed and lock in integrity (if the technology even offers that capability—some e-signatures don’t).

If a document is passed in and out of different types of e-signature technologies, you could lose the supporting legal evidence that's embedded in the document as the system prepares the document for the second signature. 

We recommend that you require that all individual documents with more than one signer be signed using the same e-signature technology. If that isn't realistic for logistic reasons, we recommend that you put policies in place to require that signature technologies not "overwrite" other signatures.

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E-Signature Rule 3 

The electronic form of signature must be executed or adopted by a person with the intent to sign the electronic record, (e.g., to indicate a person’s approval of the information contained in the electronic record). Not only must this intent be captured at the time of each signature, but it must also be captured for each individual signature and be provided as granular evidence within the electronic signature system’s audit trail.

It’s absolutely critical from both a legal perspective as well as an evidentiary one that intent to sign be carefully captured and recorded. However, there are two aspects regarding intent in an electronic signature. First, the e-signature solution must be equipped to capture the signer’s intent at the time of document review and signature. Secondly, the solution mus also store that intent as a granular event in an audit trail.

Capturing intent should go beyond simply clicking a signature field to sign it. Every action on the Internet these days is a single click away. Signing up for a complex financial product or purchasing a $450,000 property shouldn’t be reduced to the same action it takes to like a funny cat picture on Facebook.

Intent should be represented through clear language and clear actions that both delineate the act and ceremony of signing to the signer as well as communicate the desire to sign to the signing process itself.

Capturing intent is only half of the equation, though. It’s not useful to ‘capture’ intent but then be unable to show evidence after the fact for the intent to sign each signature. This is why organizations must demand that intent for each signature is stored as a granular element in the solution’s audit trail.

For example, let’s consider a single document with multiple signatures for the same signer, and a group of documents that are ‘merged’ together into a single presentation for the signer. Many electronic signature solutions, instead of storing intent for each individual signature on each document in an audit trail, will choose to capture intent once or sum up all of the signatures into a single event on an audit trail. That is, you might have a document(s) with five individual signatures for the same signer, but the audit trail will only show one signer event.

This will only make post-signature proof of each signature more difficult. Typically, we see signature repudiation (a signer alleging that they did not sign something) happen at an individual signature level as opposed to a document or whole transaction level. In this case, a signer might allege that he or she did sign three out of four signatures but never intended to sign the fourth. If the intent evidence is not granular, a capable attorney might find ample room to argue that the signer did not intend to sign the document and render the terms governed by that individual signature unenforceable.

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E-Signature Rule 4

Each signed document must be backed by an audit trail that captures intent to sign for each individual signature and provides granular, consistent, timestamped evidence as to every step in the entire signature process.

Whether you're getting documents signed on paper or electronically, it’s critical that signatures communicate intent. If electronic systems need to stand up to the scrutiny faced by electronic evidence in today’s courtrooms, they must also track and store all of the steps of the signature process, from set-up to signature to final document delivery.

Not only does this allow users to clearly track where any document is at a given time in a transaction, but having this detailed information on hand also gives you a better defense against claims like, “I didn’t sign that.”

Most electronic signature services capture some sort of event history while a signature process is in motion, but the level of detail captured and stored can vary quite dramatically, sometimes barely providing enough detail to reconstruct the process at all. Some services fail to include key data points, giving an opening for an attorney to create doubt in the transaction.

Lack of information in an audit trail will detract from a your ability to defend your signed documents in court. Legal precedent over the past ten years has shown that insufficient evidence can prompt the court to overturn signed agreements. And as time passes, the bar that electronic evidence has to meet will only rise.

With this in mind, it’s critical that you include very specific requirements regarding a highly granular audit trail to make sure your documents will hold up in court. This will also assist in risk mitigation for the organization, especially for highly regulated industries where documents must be maintained for many years.

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Next Thursday, we'll talk about three more rules for legality and compliance (here are links to part 3). To get SIGNiX's blog updates sent to your email, subscribe by clicking here.

John B. Harris joined the SIGNiX team as Director of Product Management in 2012. He focuses on rigorously tying customer needs, industry trends, and technology innovations to specific product requirements, while also contributing to SIGNiX’s marketing efforts and driving a product strategy that enhances SIGNiX’s leadership position.

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Filed Under:

evidence, credit unions

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