Digital signatures are a modern and practical option. But are they legally binding? Should decision-makers sign contracts by hand just to be on the safe side? Not at all. The “advanced electronic signature,” pursuant to the European Union’s eIDAS Regulation (electronic IDentification, Authentication and trust Services), is legally valid – and vastly more secure than its handwritten counterpart.
Digital signatures – the standard in contract management
Contract management is becoming progressively more digital. By the same token, electronic signatures are steadily gaining relevance. Nonetheless, some executives still prefer to sign sensitive contracts by hand rather than signing digitally. The underlying reasons stem from uncertainty about the legal validity of electronic signatures and their probative value in legal disputes. But these doubts are completely unnecessary.
Electronically signed contracts are deemed to be legally binding if they comply with the EU’s eIDAS Regulation 1.
These are the criteria that electronic signatures, as defined by the eIDAS Regulation, need to meet
The eIDAS Regulation – Regulation (EU) No. 910/2014 – contains European-wide standardized rules that govern digital transactions. It regulates the conditions under which electronically transmitted and signed documents assume the same legal status as those on paper.
To that end, the regulation defines three types of electronic signatures – “simple,” “advanced,” and “qualified electronic signatures”. Andreas Dangl explores the differences between each of these signature types in greater detail in a separate blog post. Put simply, the more security criteria the electronic signature fulfills, the greater the legal validity and probative force of the signed document.
More than a scanned signature: the “advanced electronic signature”
When scanned, a handwritten signature is considered to be a “simple electronic signature” under the eIDAS Regulation, but it offers only a limited chance of success in the event of legal disputes. When encrypted – and thus substantially more secure – it is the equivalent of an “advanced electronic signature”, which is ideally suited for signing contracts digitally.
Digital signatures are now considered to be one of the basic functionalities of modern contract management systems. The requirements are high: Digital signatures must be unambiguous, tamper-proof, and verifiable. And the “advanced electronic signature” as defined in the eIDAS Regulation satisfies those criteria. Encrypted transmission ensures unique identification of the signer and protects the document from unauthorized access or modification.
Protection through encryption
Fabasoft Contracts’ contract management software features legally compliant “advanced electronic signature” functionality in accordance with the eIDAS Regulation. In doing so, it uses the Fabasoft Secomo security architecture.
True end-to-end encryption ensures that sensitive data is protected consistently and continuously, beginning at the workstation or mobile device. The secret key blocks any unwanted access. The signing process takes place seamlessly without changing systems and is device-independent, with no need to integrate third-party providers. This further enhances the security of the Fabasoft Secomo encryption standard.
Moving to the digital signature
When it comes to contract management, using the “advanced electronic signature” offers a host of advantages. Besides enjoying a simple and speedy signing process, companies benefit in particular from state-of-the-art encryption technologies. These render digitally signed contracts traceable and tamper-proof – and elevate the level of security well above that of paper. For sure.
1 Certain types of contracts are subject to restrictions regarding the extent to which advanced electronic signatures can be used – including, for instance, contracts that need to be certified by a notary or that require a qualified electronic signature. We'll take a closer look at these issues in a subsequent article.