Are Digital Signatures Secure and Legal?

How Do Digital Signatures Work?

Today, most businesses create legally binding contracts by printing them on paper and passing the paper around for handwritten signatures. This process is time-consuming, wasteful, and expensive. Large organizations in which many signatures are required to execute a single contract, purchase order, or other legally binding agreement have invested in digital signature technology, which enables “signing” of documents that exist only in digital form. The benefits of faster signings, reduced costs, and security are dramatic. Now, these benefits are becoming available to individuals and small businesses too.

Digital signatures have long been an optional feature of Microsoft Word and Excel, and of Adobe Acrobat. The creator of a document can add a special signature field and email the document to the people who need to sign it. A signer needs to obtain a digital certificate from a trusted Certificate Authority such as Entrust.com. Then the signer can create a digital signature and use it to sign documents.

The digital certificate confirms that the signer is who he claims to be. When applied to a document, the certificate becomes part of the encryption that ensures the document cannot be altered after signing. The recipient of a signed document can verify its integrity and the signer’s identity with a single click.

Visually, a digital signature does not have to look anything like your handwritten signature. In fact, a digital signature can be invisible on a printed document; the real mojo is in the digital encryption. But as a practical matter, some visual indication that a document has been digitally signed is almost always provided. It may be as rudimentary as a typed phrase on a signature line, such as, “digitally signed by John Doe on MM/DD/YY.” The visible portion of a digital signature may be almost anything, including a scanned image of the signer’s handwritten signature or a scrawl made by the signer’s fingertip on a tablet or smartphone screen. Yes, you can even clumsily draw your “signature” with a mouse.

Digital Signatures on the Web

Web-based services have sprung up to serve users of digital signatures. DocuSign.com and RightSignature.com are two examples that work almost identically. The originator of a document can upload it to the Web site, specify a number of signers by name and email address, add fillable text fields to be completed, and then click “send for signatures.”

Each signer receives an email containing a link to the document that is to be signed. He logs in to the Web site (creating an account if it’s his first time using the service), reviews the document and completes any fields necessary, and then clicks “sign.”

The website may offer the signer a choice of several signature “styles” for the visible portion of his signature, or he may draw his signature freehand on the screen. The latter option obviously would require a device with touch input. DocuSign and RightSignature both offer mobile apps for the iPad, iPhone and Android-based tablets and smartphones as well.

The service then adds his digital signature to the document and notifies the sender that another signature has been obtained. The digital document never leaves the service’s server, so it is not subject to interception or tampering. When all parties have signed the document, it is stored securely for future reference. Each party can download an encrypted PDF copy to print and file.

The old method of getting documents signed is cumbersome. Typically, someone will print a document, mail it off, and wait for the recipient to sign and return it by mail. Things can be sped up quite a bit if the document is emailed to the recipient, but it still must be printed, signed and returned. Not everyone has a scanner, so it's not always possible to return the signed document electronically. The modern web-based solutions make it possible for the document to be delivered, signed and accepted in minutes.

What About Security and Legal Aspects?

Twice this year, I was asked to use digital signing services in business transactions. The first time, I was a bit leary if everything would be legal and secure. But a bit of research assured me that this technology was safe, and I loved the simplicity and transparency of the process.

Digital signature service providers must use strong end-to-end encryption, achieve industry standard certifications for information security management systems, and pass rigorous third-party audits. Compliance with the U.S. Federal ESIGN Act and the Gramm-Leach-Bliley Act (GLBA) ensures that the digital signatures are legally recognized.

Free trials are available from both DocuSign and RightSignature. For ongoing use, prices range from $14 a month for a single originator of documents to $49 a month or more for high-volume corporate users with many originators. I've used both services, and in each case, I paid nothing because the other party was the originator of the document.

Digital signatures can speed up the process of signing contracts, eliminate paperwork, and protect sensitive documents against loss or theft. They are as legally binding as handwritten signatures. As the price of digital signature services comes down and the process becomes even simpler, more and more freelancers and small businesses will enjoy the benefits of truly paper-free business processes.

Have you used a digital signature? Post your comment or question below...