First, what is a signature?

A signature is any symbol executed or adopted by a party with the intention to authenticate a writing. The key is that there's no requirement this be ink on paper, but instead shows that it can be any symbol provided the symbol is used with the intent of signing. This is why copies of signatures (such as on a fax), stamps or seals, and fingerprints can be used for signing on paper.

What is an electronic signature?

Like the signature above, an electronic signature is an electronic mark that's related to the electronic record or data that is being signed, such that the user has applied that symbol to indicate his intent to sign. It is important that the electronic symbol be related specifically to the party who is signing, that there's proof the symbol was applied with intent to sign, that the data being signed can be proven to be the original data (hasn't been tampered with), and be such that all parties to a signature are allowed to have independent copies.

How is electronic signature defined in the U.S. E-SIGN Act?

From Section 106 (Definitions), "The term 'electronic signature' means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record."

However, for such an electronic "symbol" to be legally binding, it is important that the symbol provide authentication of the party who created it, ensure that what was signed cannot be altered, ensure that the party understood that by creating the symbol the party was willingly signing, and that the party is able to keep an original of the data and his electronic signature for his own records. This is why an "I Agree" button isn't sufficient (it typically lacks authentication, does not ensure that the data agreed to cannot be changed later, and does not provide the user with an electronic copy of the data and the signature for his own records).

What do the courts say about electronic signatures?

There isn't any case law regarding electronic signatures. This is most likely due to the fact that lawsuits are rarely filed that contest whether something was signed, but instead focus on whether the parties lived up to the obligations outlined in a document, and what the reasonable meaning was behind terms in the document. Electronic signatures, provided they are compliant with the law, are much more secure than handwritten signatures, which are far easier to spoof or forge.

Is it legal?

Yes, electronic signatures are legally recognized, even when a statute uses terms like "in writing" or "signed."

Who can use them?

While anybody can operate electronic signature software legally, there are times when it makes sense to rely on a trusted third party, such as Yozons. The advantage of using a third party to handle your electronic signatures is that they have no vested interest in any given transaction. A third party doesn't look into your transaction or concern itself with the parties involved. They simply ensure timestamps are accurate, that all parties have equal and fair access to the documents, ensure the security of the technology and provide an unbiased witness to the fact that a given transaction took place in a legal manner. If you operate your own technology, using a third-party's system can help you prove that you were being fair and unbiased in handling your own transactions, whereas homegrown software may suffer security issues that others would point to in court to imply that the transaction was not fairly executed. Many homegrown solutions fail the E-SIGN Act's requirements of user authentication, ensuring the data cannot be changed after the fact, and no providing all parties with an original electronic record and electronic signature.

Can anything be signed electronically?

Not everything, but most common documents can be. The ESIGN Act specifically forbids a narrow range of documents that may not be signed electronically. The exceptions primarily relate to wills, testmantary trusts, adoption, divorce, court orders, termination of utilities, repossession, foreclosure, eviction, cancellation of life insurance, product recalls and documents related to the transportation of hazardous materials.