e-signing real estate contracts

Three Mistakes That Will Threaten Your E-Signature’s Legal Validity

Contributed by Pem Guerry

With compliance requirements differing from industry to industry, it can be difficult (and tiring) to keep up with an influx of regulations, especially regarding digital documents. But don’t be discouraged—documents using e-signatures are every bit as legal as those using traditional wet ink signatures.

As with any paper document, however, e-signatures come with rules to abide by. But sometimes, documents and signatures – even those with wet ink signatures – may be contested in court. If that happens, it’s critical to make sure your e-signatures provide undeniable proof of their validity.

In order to avoid a negative court ruling, keep in mind (and at bay) these three mistakes that could undermine your e-signature’s legal validity:

Mistake 1: Your signer isn’t authenticated. In today’s technology-driven landscape, receiving information not intended for you is a common—yet avoidable—occurrence. High-level authentication methods, such as two-factor authentication, require signers to prove their identity by confirming their log-in information, answers to pre-selected questions or by entering a code sent to their email address or cell phone.

Authentication, in addition to comprehensive audit trails, legally validates that the intended signers view and sign only their document under only their privileges.

In the 2010 Adams vs. Quiksilver, Inc. case, the e-signatures were dismissed due to multiple parties accessing one online agreement without proof of which party actually signed the agreement. Don’t replicate this mistake.

Mistake 2: Your signer doesn’t know they are signing a legal document. To uphold legally compliant electronic signatures, you must prove that the signer knows he or she is signing a legal document. Basic legal disclosure and consent language, which the signer must read and approve before signing a document, secures this.

However, depending on your business’s policies or the compliance requirements in your industry, you may need to alter the consent language to cover all bases.

In the 2002 Labajo v. Best Buy Stores, L.P. case, the plaintiff, Christina Labajo, after signing up for a free magazine subscription, was unknowingly renewed and charged for it. Best Buy was able to prove that Christina signed the signature pad, but they couldn’t prove that she read the disclosure.

Mistake 3:
Your document isn’t protected from unauthorized alterations. Documents must include tamper-evident technology, using cryptography such as digital hashing and encryption, in order to retain legal validity. Ensuring that this technology is included in your e-signature software and makes each and every signature tamper-evident will negate any prospect of alteration. Many solutions are reliant, or dependent, upon a link to the e-signature vendor for proof, and it is critical that the evidence be embedded in the signed document and completely independent of the vendor.

Keeping these mistakes in mind, evaluate whether or not your electronic signature solutions provider meets your legal needs. If your documents are ever challenged in court, make sure you can show a clear, comprehensive authentication method, audit trail and proof of tamper-evident technology. It never hurts to cover all your bases.

Want to learn what makes a digital signature legal and compliant with federal regulations? Download our free white paper to learn the five laws all legally compliant digital signatures should follow.

Pem Guerry is the Executive Vice President at SIGNiX, an Independent E-Signature™ solutions provider that makes signing documents online safe, secure and legal for any business. SIGNiX offers an independently verifiable cloud-based digital signature solution, which combines workflow convenience with superior security. Learn more about what makes SIGNiX different at www.signix.com.


This post was originally published on RISMedia’s blog, Housecall. Check the blog daily for winning real estate tips and trends for you and your clients.

Reprinted with permission from RISMedia. ©2015. All rights reserved.

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