Are eSignatures Legally Valid for Business Contracts?

Yes. Electronic signatures are legally binding in the U.S., EU, and most jurisdictions, provided intent, consent, and auditability requirements are met. 

With a major shift in global commerce, digitization has completely transformed paperwork - how contracts and agreements are structured, executed and enforced.

Electronic Signatures replacing the traditional wet-ink signatures has become a core component of modern management in businesses.  

Legality is distinct from enforceability and hence this shift from pen to pixel is an amalgamation of reshaping legal standards, technical support and operational workflows. Every digital transaction should not just be beneficial but also capable of withstanding rigorous judicial scrutiny. 

The adoption of e-signatures with a balance of convenience, legal standards, security frameworks and business workflows can provide practical value to organizations. 

Legal Validity of eSignatures 

The legal foundations of electronic signatures are based on a combination of national and international frameworks, and not a single global law, that follow the Technology Principle, a shared principle stating that the way a signature is created is less important than the signer’s intent and the reliability of the record. 

Although electronic signatures stand the same legal validity of handwritten signatures, the participating parties must generally agree on the use of these electronic records, whether they are capable of being stored, accessed and altered.  

There is a broad definition of e-signatures in the legal systems. It can include typed names, a click on the “I Agree” button or a cryptographic signature, if they all fall under the compliances respective to the parties involved. 

Let us take a look at some of the major regulations used across the world. 

• ESIGN Act, 2000 & UETA (United States) 

• Prohibits denial of validity solely because a contract is in electric form 

• Emphasizes mutual consent to transact electronically 

• Requires electronic records to be retainable and accurately reproducible. 

• eIDAS Regulation (European Union) 

• Provides a unified legal framework for electronic signatures across EU member states. 

• Introduces a tiered system for signatures with varying levels of identity verification and security. 

• Higher-tier signatures carry strong legal presumption and evidentiary value.  

• UNICITRAL Model Law (Global and Other Jurisdictions) 

• Promotes functional equivalence between electronic and paper-based signatures. 

• Adopted or mirrored by countries such as the UK, Canada, and several Asia-Pacific economies 

• Allows flexible implementation, leading to varied local compliance requirements. 

  
  

As the global commerce witness legal parity across all frameworks, the core legal theme remains consistent with execution and compliance details.  

Enforceability and Admissibility in Court 

Technically, we are clear that e-signatures hold the same value as the traditional signatures. The ultimate test of this shift lies in its power of holding up in a legal dispute. To ensure a signature is defensible, businesses must fulfill five core requirements derived from the regulations and best practices. 

Five Pillars of Enforceability 

• Intent 

An affirmative action demonstrating the user’s intent to be bound. This could be achieved via a “Click to Sign” button, drawing a signature, or typing a name. The interface must make the action clear of initiating a binding legal obligation.  

• Consent 

Typically, a checkbox or a clause, at the start or end of the workflow, that the user must explicitly agree to use electronic records.  

• Opt-Out Clause 

Mandatory option for signers to decline the e-signing and request for a paper copy. 

• Association and Document Integrity 

The signature must be bound to the specific record, ensuring that the signature applied to that specific version of the content.  

• Record Retention and Accessibility 

All parties involved must be able to access, download and store the signed document. 

The Second Order Shift: Text-to-Sign 

From the shift to digitization in global commerce, now to the shift towards mobile commerce, the “Text-to-Sign” workflow, is growing and becoming critical to certain industries like real estate, insurance and field services.  

The mechanism involves a secure link received via SMS, authentication and signature on mobile browser.  Increasingly acknowledged by the courts, text messages and SMS-based acceptances can form binding contracts.  

Legal Standing of SMS eSignatures 

At this point in time, having a mobile device acts as a simplified multifactor authentication factor. Jurisdictions around the world have found that texts, if they contain the essential terms and a signature, can satisfy specific requirements to be considered as a binding contract. 

SMS signing does also require strict adherence to the TCPA (Telephone Consumer Protection Act) in the US. Organizations need to obtain written consent prior to sending marketing or contract-related texts to avoid heavy fines. Platforms, like Falkon SMS, mitigate such practices by integrating compliant features like opt-out management and 10DLC registration directly into the workflow. 

Where Digital Signatures Still Fall Short 

Despite the wide spread and acceptance of e-signatures, there are some specific high-stake documents that are still excluded from the regulatory coverage and require traditional wet-ink signatures. 

These last holdouts for wet-ink signatures may vary by state and country but some common exclusions include: 

• Wills and Testamentary Trusts 

Majority states require physical signing with witnesses to prevent any frauds and influence in the estate matters. A digital will is generally invalid unless specific state statures allow for electronic wills under strict conditions. 

• Family Law 

Divorce, adoption and other family court related documents usually require wet ink or specific court-approved electronic filing procedures. ESIGN explicitly excludes these documents from its scope.  

• Official Court Orders 

Even though e-filing is common for lawyers, actual court orders issued by judges have specific signature requirements and some pleadings must be wet-signed before scanning.  

• Notice of Default/Eviction 

Notices regarding housing foreclosure, eviction and utility termination often cannot be purely digital to ensure the receiving of the warning by the recipient and avoid prejudice by a lack of digital access. 

• Specific Real Estate Documents 

On one hand the Remote Online Notarization (RON) is growing, while on the other, some countries still require wet ink for deeds and mortgages for recording purposes. Even though the electronic practice is increasing, it is yet to be universal. 

Some organizations often need a hybrid workflow especially those operating in mixed industries. They use e-signatures for 90% of client forms but retain manual processes for beneficiary designations or trust setups to avoid validity risks. 

Layered Legality in Regulated Industries 

Regulated industries, on the other end, have layered legality with strict data protection and process requirements. Contract law might validate an e-signature but the industry regulations might consider it non-compliant if the data security is insufficient. 

• Healthcare (HIPAA) 

The electronic signatures to comply with the Health Insurance Portability and Accountability Act (HIPAA) in healthcare industry businesses. This compliance concerns the security of the Protected Health Information (PHI) in the document.  

• Finance (SEC and FINRA) 

Strict record-keeping and supervision is mandated by the SEC Rule and FINRA regulations governing the financial institutions.  

• Life Sciences (FDA) 

FDA regulations are rigorous for pharmaceutical and biotech companies requiring the e-signatures to include specific data points such as printed name, date/time, meaning of signature, and be linked to the record.  

Checklist for Legally Valid Workflows 

Businesses should be able to configure their e-signature platforms with best practices to maximise enforceability. 

• Ensuring approvals happen in the correct order through sequential signing, to maintain the logic of workflow. 

• Using cryptographic seals (tamper-evident seals) to lock the document to secure the content and ensure it cannot be altered post-signing.  

• The final signed PDF and audit trail should be emailed directly to all parties immediately upon completion. 

• Use explicit language and checkboxes, like "I agree to do business electronically,” at the start or end of the session. 

The Big Picture 

The overall trend is evident, electronic signatures are legally valid, widely recognized and increasingly essential for cross-border commerce. Legal validity of e-Signatures is backed by frameworks like the ESIGN Act and eIDAS, offering a level of security and efficiency that wet ink cannot simply match. 

Tools like Falkon Sign, are designed for seamless transition of organizational workflows, providing the secure and legally binding features needed to drive the businesses forward. E-signatures are more than mere convenience, it will prove to be a mark of distinct competitive advantage in speed, compliance and customer satisfaction.