Electronic Signature Clause (Explained: All You Need To Know)

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What Is An Electronic Signature Clause

An electronic signature clause is a contractual provision where the parties agree to execute the contract via electronic means.

In other words, with an electronic signature clause, the parties expressly state that they agree that the contract be signed electronically and that the electronic signatures will be legally binding.

This type of clause can be inserted anywhere in the contract but will generally appear towards the end of the contract with the general provisions.

The electronic signature clause can be very simple or can be more complex where it stipulates the specific electronic means of signing, the electronic signature platform, the individuals authorized to sign, and so on.

Today, as more and more business is conducted online, the need for electronic contracts and the ability to sign contracts electronically has increased tremendously.

Why Are Electronic Signature Clauses Important

In the past few decades, technological advancements have brought more and more businesses to transact with their stakeholders and customers online.

Also, with the COVID-19 global pandemic, many businesses have embraced technology and bolstered their online presence.

As a result, with more companies and individuals doing business online, it’s important to have the ability to enter into contracts and agreements electronically as well.

The electronic signature clause is a contractual provision allowing the parties to set the ground rules relating to electronic signatures (also known as e-signatures).

With an electronic signature clause, the parties are able to start and end their contracting cycle electronically without having to print any physical documents.

Since the contract is the “law of the parties”, the contracting parties can choose to set the rules as to e-signatures and the proper procedures to follow for an electronic signature to be considered legally binding upon them.

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Electronic Signature Clause Elements

The electronic signature clause can contain all the necessary details the parties consider important to sign contracts electronically.

A simple electronic signature clause states that the parties agree that their electronic signatures will be legally binding and leaves them the freedom to mutually determine the signature process.

On the other hand, the parties can choose to introduce more requirements and conditions for the validity of their electronic signatures.

Here are some elements that can be considered to add to the electronic signature clause:

• What type of electronic signature will be considered valid, such as typing a signature, copying the image of a handwritten signature, using an electronic signature platform, and so on
• The specific platform that can be used to sign electronically
• The specific individuals having the authority to sign electronically
• The type of contracts that can be signed electronically
• The jurisdictions where electronic signatures will be accepted 
• The timeline to fully sign the contract electronically 
• The procedure for providing copies to all signing parties

Depending on the specific needs of the parties, the electronic signature clause can include other conditions and requirements as well.

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Electronic Signature Requirements

When you’re considering electronic signatures, it’s important that you understand the legal requirements applicable in your jurisdiction to ensure that the electronic signatures will become legally binding.

For instance, if you include an electronic signature clause in a jurisdiction that does not recognize electronic signatures, your contract may be unenforceable.

Every jurisdiction may have laws and statutes governing electronic signatures.

In the United States, you have the ESIGN, in Canada you have PIPEDA, in the European Union you have eIDAS, Electronic Transaction Act in Australia, and Contract and Commercial Law Act in New Zealand.

For an electronic signature to be valid, you generally need to have:

• Electronic signatures are made with the intention to sign the contract electronically
• The parties’ agreed expressly or implicitly to electronic signatures
• Sign the document electronically
• Copies of the signed contract to be sent to all signing parties

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Electronic Signature Clause FAQ

What does an electronic signature clause mean?

An electronic signature clause is a contractual clause where the parties agree that electronic signatures will have the same legal effect as manual signatures.

In other words, the parties expressly agree that signing the contract electronically will lead to a legally binding contract.

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Is an electronic signature clause valid?

The validity of an electronic signature clause will depend on the laws applicable to the contract.

In the United States, Canada, Australia, and other jurisdictions, electronic signature clauses are valid as the law recognizes electronic signatures to be the equivalent of a wet signature.

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Do I have to accept an electronic signature clause?

Even though many consider electronic signatures to represent a new norm, you have the right to ask that a contract be signed originally.

However, keep in mind that many companies and institutions have adopted processes and procedures to promote electronic transactions as it’s quick, reliable, and traceable. 

It’s possible that by refusing to sign electronically, it may delay your transaction.

Takeaways 

So there you have it folks!

What is an electronic signature clause?

An electronic signature clause refers to a contractual provision where the parties outline their agreement on what constitutes a valid contract electronic signature.

Fundamentally, the electronic signature clause is used to allow the parties to sign contracts electronically.

However, the provision can be used to set rules, limits, and conditions governing the electronic signature process.

In business today, more transactions are handled electronically than on paper.

As a result, you are likely to deal with this type of contractual clause in some form or fashion.

Now that you know what an electronic signature clause is and how it works, good luck with your research!

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