10 REASONS NOT TO USE ELECTRONIC SIGNATURES
Signing documents using electronic signatures has taken the contract execution industry by storm. The passage of the Electronic Signatures in Global and National Commerce Act (E-Sign Act) in 2000, allows the use of electronic records and signatures for domestic and international transactions. From real estate transactions to confidentiality agreements to sales contracts, electronic signatures applications (e-sign) have made executing many contract convenient and easy. Applications like PandDoc, DocuSign, Adobe Sign, HelloSign, and Yozon have dominated the e-sign marketplace. Will e-sign applications eventually dominate all signature transactions? Is the blue pen doomed? Not so fast; maybe not. Here are a ten situations that may change how you execute your contracts.
1. Some Clients Don’t Allow E-Sign
There is no need using E-Sign if your client does not or will not use it. I have worked with many large companies that have not adopted an E-Sign policy. As a result, these signers can only executed contracts by signing them in paper with blue ink. So, you must print duplicate copies, signed these copies in blue ink, and send the documents via overnight courier. The Recipients then countersign the two documents, keep one for themselves, and return a version to the originating party. As a work-around, I found a few companies willing to allow me as the first signer to use an E-signature. They would then receive from me the partially E-signed PDF document via e-mail, print the PDF, sign the hard-copy in blue ink, upload the fully-executed document, and send it back to me. This latter process speeds up the signature process by a few days and saves me overnight courier fees.
2. Corporate IT Firewalls Prevent E-Sign Transactions
When I first started using E-sign apps, I had difficulty getting clients to adopt the technology. I discovered many of my clients were not getting the E-sign signature requests because the E-sign message was banned by the client’s firewall. In other words, clients’ IT departments were unilaterally denying these E-sign request because their systems interpreted the requests as spam or malware. To overcome this obstacle, you must get your clients’ IT departments to update their spam policies. It can take a lot of work and some clients will still refuse to allow these transactions.
3. Recipients Don’t Receive E-Sign Notices Due To E-mail Spam Filters
Similar to item #2 above, recipients also use spam filters. Even if you succeed in getting a client’s IT department to allow these E-sign transactions, recipients must also releases these transactions from their individual spam filters. If most people are like me, I didn’t know that I had to periodically check my spam filter to “release” messages that I wanted. I have enough emails already to check.
4. E-Sign Envelope Fees Are Too Expensive
E-sign subscriptions are not cheap. They are cheaper than sending documents via overnight mail. But they are quite expenses compared to “print-sign-scan-email” processing of documents. Several major E-sign vendors charge as must as $5 an envelope. (An envelope is a single document with all its intended signers.) If you incorporate E-sign into your workflow, you would be surprised how many envelopes you can generate. I had a client who was tech-savvy. They use the E-sign app in most of their workflows (budget approvals, employee performance plans, offer letters, confidentiality agreements, vendor contracts, proposal approvals). When they realized they generated several thousand envelopes a year, they had to rethink their signature process. You will know when you are doing too many envelopes. You will probably get a call from your E-sign vendor sales rep informing you that at your current consumption rate, you are going to exceed the envelope and subscription package quota you originally purchased. Surprise.
5. E-Sign Apps Do Not Easily Allow A Middleman To Explain A Document Before The Signer Gets It
For some professionals, explaining a document before the signer signs it is important. Attorneys have an ethical duty to explain what a contract means to their clients before clients sign them. What are the nuances or red flags in the document? Is the client signing the same document version that the attorney reviewed and approved? Accountants and financial advisors prefer to discuss with their client the budget impacts before a contract is executed. Is the total dollar amount the same as budgeted for? Did the payment terms change? Many of the major E-sign apps only allow middle men to initial the document or assign signature authority to someone else. A few allow the person assigning a signature to someone else to make comments about the document. The app features, however, do not adequately replace the in-person review and counsel many signer want and deserve.
6. E-Sign Requests Get Lost In The In-box
Emails inundate us every day. Most of us cannot catch up to or stay ahead of the massive quantity of emails we get. E-sign apps just add more emails to the pile. No wonder they get lost in the in-box. I use an in-box filter that sometimes works and this helps a bit.
7. Notarizing E-Sign Documents is Awkward
The notary process in most states requires that the notary witness the recipient sign an original of the document. To do this electronically, the notary and recipient signer must be physically in the same place. The E-sign app must also allow the notary to sign and add his notary seal to the document. After the notarized signature is done, the document must be digitally sealed. For transactions that cross states lines, this process can get awkward. Recipient signers must prearrange to have the eNotary professionals available to them once the E-sign document is received. There is growing interest in allowing remote eNotary services (i.e., eNotary and recipient signer not in the same physical place), but changing current notary laws require legislative actions.
8. Distorted, Scanned Documents Do Not Render Well with E-Sign Apps
Some recipients work in the field and in small offices. Sometimes they print, sign, and scan (or take a picture of the) documents and email them (send via message). Sometimes what is received is a distorted or yellowed-out, browned-down image of a contract. But it is signed and legible. Do you ask them to redo it (and get the same thing again) or do you require that they use your E-sign platform? Good luck with the latter. Assuming you accept the former, when you import it into your E-sign app and overlay the signature block, the resulting executed document looks more like a patchwork of words and images than a uniform contract.
9. If A Recipient Does Not Have An E-Sign License, That Recipient Cannot Determine The Status Of The E-Sign Documents
Most E-sign apps do not allow non-subscribers to view the status of a document. I guess there’s good reason for this (e.g., privacy, security, additional fees). Unfortunately, I have to spend a lot of time accounting for the where-about of a contract with recipients that do not have licenses. They typically want to know who is holding up the signature process. I have to interrupt my workflow, research where in the signature queue the document is, let the requestor know who needs to sign it next, and then the requestor contacts the person who has not yet signed the document to nudge them along. Note: If the person who needs nudging is high up in the organization (e.g., an executive), the requestor usually drops the issue and waits.
10. Difficult To Verify The Actual E-Signer
When a person physically signs a document, another person usually witnesses it or personally knows the signer. In an E-sign transaction, the person signing the document is the person who receives the email. It is the person who has access to the email address which may not be the intended recipient. How do you know the person actually signing the document is that specific person? Perhaps you could use two-factor authentication. Two-factor authentication is preferred but it slows down the signing process.
The best combination for signing documents is a signing system that allows for convenience and verification. That combination should include an E-sign solution as well as a physical signature solution.
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About the Author.
Nat James is a practicing North Carolina attorney in the Research Triangle Park area. Mr. James has drafted, negotiated, and closed business contracts for clients since 1992. This material represent his observations from past experiences. It is not intended to provide you legal advice nor does it create an attorney-client relationship between you and Mr. James. If you need legal assistance, seek independent legal counsel by contacting your State Bar or State Bar Association.
10 REASONS NOT TO USE ELECTRONIC SIGNATURES