The Legality of Electronic Signatures: What You Should Know

Introduction

Since their introduction, electronic signatures have brought much needed efficiency and accuracy to procurement professionals burdened by slow, manual processes and fragmented team communication. In this post, we’ll dive into the adoption of electronic signatures, their legal enforceability, and how they outperform traditional wet signatures in contract review and execution.

What is an electronic signature?

An electronic signature (e-signature) is simply the digital equivalent of a handwritten (wet) signature. It enables you to approve and execute contracts completely digitally. Unlike physical signatures, e-signatures can help streamline the signing process by dramatically reducing signature time while offering secure authentication.

Since the 2020 pandemic lockdown, e-signatures have been widely adopted worldwide. Companies implementing electronic signature solutions can achieve average cost savings of between 55% and 78%. 

However, a wet signature is required in a few specific instances — such as for wills, certain court documents, or real estate transfers in some jurisdictions. Even so, the enhanced efficiency, security, and accuracy of electronic signatures make them the preferred choice for most business agreements. Studies show that 73% of top-performing companies have adopted electronic signatures in their supply chain and procurement processes.

Legal enforceability of electronic signatures

Electronic signatures carry the same legal weight as physical signatures. They are widely recognized and accepted across many countries, streamlining the signing process without compromising legal validity.

Global and local regulations

In the US, laws like the ESIGN Act and UETA establish that e-signatures are legally binding for most transactions. Similarly, in the EU, the eIDAS regulation guarantees that electronic signatures are enforceable across member states, enabling businesses to operate smoothly in a global marketplace without compliance issues.

Security and authentication

Industry-leading e-signature platforms offer robust security features, such as encryption, audit trails, and digital certificates. These capabilities help you authenticate signers, track the signing process, and protect sensitive contract data. For procurement, these protections are important to secure high-value supplier agreements by mitigating the risk of fraud and ensuring contract validity.

Benefits of electronic signatures

Procurement teams struggling with the slow, expensive process of collecting manual signatures on vendor and supplier contracts can benefit from the advantages of using electronic signatures, including:

• Speed: E-signatures cut down on processing times, enabling contracts to be completed faster compared to manual signatures. By integrating e-signatures, procurement teams can track contract statuses and approvals in a single platform, reducing miscommunication and delays caused by fragmented processes.
• Security: Advanced digital security protocols, including encryption and digital certificates, enhance the integrity of e-signatures. They safeguard contracts from unauthorized access, tampering, or forgery. This is critical for maintaining compliance and protecting sensitive data.
• Efficiency: E-signatures eliminate manual touch points and minimize signing errors, resulting in cost savings and improved operational efficiency. 

Case law example of electronic signature legality

Many procurement teams have already adopted electronic signatures with solid results. But if you’re still unsure, here’s a recent case that highlights how e-signatures hold up well in legal disputes:

In Solcius, LLC v. Meraz (2023), the Texas Court of Appeals confirmed that electronic signatures have the same legal standing as physical signatures. The court ruled that as long as the intent to sign and consent to using electronic signatures is clear, e-signatures are indeed legally binding. 

This ruling is important for procurement teams managing high-volume vendor contracts, as it strengthens the validity of e-signatures and minimizes the risk of legal challenges that could impact supplier agreements.

Best practices for using electronic signatures

To get the most out of e-signatures, procurement teams should follow these best practices:

Create reusable templates

Standardize vendor contracts and purchase orders by creating templates that can be reused, saving time and minimizing errors.

Centralize documentation

Use a contract management platform, like Concord, that stores all signed contracts in one accessible location.

Integrate e-signature tools with existing systems

Make e-signatures more efficient by integrating them with your procurement system to avoid duplication of effort and streamline workflows.

Track signature statuses in real-time

Use a CLM platform that enables you to monitor the status of signatures in real time, helping you follow up with signers and stay on top of deadlines.

Conclusion

Electronic signatures have revolutionized vendor and supplier contracts by cutting costs and simplifying approvals. The adoption of e-signatures is essential for companies looking to stay competitive, secure, and efficient. 

By reducing manual errors and streamlining approvals, legally binding e-signatures free up your procurement team to focus on high-impact priorities like negotiating better pricing and optimizing delivery timelines.