E-signatures for a small business: when they are binding and how to automate contracts.

The short answer

For the contracts a small business signs every week, such as service agreements, engagement letters, accepted quotes, terms of business and confidentiality agreements, an electronic signature works in both the US and the EU. The law in both places starts from the same rule: a signature is not invalid just because it is electronic.

What decides whether a signature holds up in a dispute is the evidence behind it. Can you show who signed, that they meant to sign, and that the document has not changed since? A proper e-signature tool records all three. A picture of a signature pasted into a document records none of them.

A few kinds of document are left out of these rules, or need a stronger kind of signature, and those are listed below. This guide describes the rules in general terms only. For your own contracts, and for anything unusual, ask a lawyer where you trade.

In the US: the ESIGN Act and UETA

The federal ESIGN Act covers transactions in or affecting interstate or foreign commerce. It says a signature, contract or other record cannot be denied legal effect, validity or enforceability solely because it is in electronic form, and a contract cannot be refused effect solely because an electronic signature or record was used to make it.

The Act defines an electronic signature broadly: an electronic sound, symbol or process attached to or logically associated with a record, and executed or adopted by a person with the intent to sign it. A typed name, a signature drawn on a phone screen or a click on "I agree and sign" can all qualify, as long as the person meant to sign. Intent is the word that matters.

Two more points from the Act. It does not force anyone to use or accept electronic signatures, so a customer can still ask for paper. And states may replace parts of it by adopting the Uniform Electronic Transactions Act, UETA, a model law written for the states to adopt one by one. New York has its own Electronic Signatures and Records Act, which gives electronic signatures the same force and effect as signatures made by hand, and also leaves their use voluntary.

Consumers and documents a law says must be in writing

There is an extra step when a law requires information to be given to a consumer in writing, such as certain notices and disclosures. Under ESIGN, an electronic copy only counts if the consumer has agreed to receive it electronically, and before agreeing they must be told:

• That they can have the record on paper.
• That they can withdraw their consent, and what happens if they do.
• Whether the consent covers one transaction or a category of records.
• How to update their contact details and how to get a paper copy, and whether that costs anything.
• What hardware and software they need to open and keep the records.

They must also consent in a way that shows they can open the format you are using. For most business-to-business contracts this never comes up. If you sell to consumers and a law requires written disclosures for your kind of sale, ask your adviser how your signing flow should handle it.

In the EU: eIDAS and its three levels

Across the EU, electronic signatures are governed by the eIDAS Regulation, No 910/2014. It names three levels:

• A simple electronic signature: data in electronic form attached to or associated with other data and used by the signatory to sign. A typed name, a scanned signature or a click can all be simple signatures.
• An advanced electronic signature: one that is uniquely linked to the signatory, capable of identifying them, created with signing data under their sole control, and linked to the document so that any later change can be detected.
• A qualified electronic signature: an advanced signature created with a qualified signature creation device and based on a qualified certificate, issued by a qualified trust service provider that must verify the signer's identity first.

The legal effect, from Article 25: no electronic signature may be denied legal effect or refused as evidence solely because it is electronic or is not qualified. A qualified signature has the equivalent legal effect of a handwritten signature, and one made with a qualified certificate from one member state is recognised as qualified in all the others.

Beyond that, the Regulation leaves the legal effect of electronic signatures to national law, and it does not touch national rules that require a contract to take a particular form. Each member state publishes a trusted list of its qualified trust service providers, so you can check that a provider claiming qualified status has it.

Which level a small business needs

For most everyday contracts with business customers, a simple signature through a proper e-signature tool is enough, because the tool's record of who signed and when does the heavy lifting.

Move up a level when the stakes rise:

• An advanced signature, when you want stronger proof of exactly who signed, such as a large or long contract, or a signer you have never met.
• A qualified signature, when national law requires a written form that only a qualified signature can replace, or the other side insists on one.
• Paper, a witness or a notary, when the law of the country or state requires it for that document.

If you trade across EU countries, the same contract can need different things in different places. That is a question for a lawyer in the country concerned, asked once and written into your process.

Documents that need more than an e-signature

ESIGN leaves out some documents entirely or in part. In plain words, the list covers:

• Wills, codicils and testamentary trusts.
• Adoption, divorce and other family law matters.
• Most of the Uniform Commercial Code, apart from some parts such as sales and leases of goods.
• Court orders and notices, and official court documents such as pleadings.
• Notices that water, heat or power will be cut off.
• Notices of default, repossession, foreclosure or eviction for a person's main home.
• Notices cancelling health or life insurance.
• Product recall notices about health or safety.
• Documents that must travel with hazardous materials.

New York's law has its own exceptions, such as documents that dispose of a person's property and negotiable instruments. In the EU, national law decides which documents need a particular form: in many countries, for example, a property sale goes through a notary whatever the signature. For a real estate agency, that means the listing agreement may be signed electronically while the transfer itself follows its own rules.

What makes a signature hold up

If a signature is ever challenged, the question is whether you can prove the person signed this document and meant to. A good signing process leaves that proof:

• The signer is identified, at least by a link sent to their own email address, and for bigger contracts by a code sent to their phone or an identity check.
• They see a clear step that says signing is binding, such as "By clicking Sign, I agree this is my signature". New York's state guidance calls this the ceremony of signing.
• The final document is locked after signing, so any change shows.
• An audit trail records who signed, when, and from which email address and device.
• Every signer gets the signed copy, and you store it where you can find it in five years.

A Word document with a pasted signature image, sent back by email, has almost none of this. It may still count as a signature, but proving it is much harder.

E-signature tools, by how they charge and connect

Prices change, so compare how each tool charges rather than the figures on the day. Three common ones, from their own pricing pages:

• DocuSign charges per user. Its plans include a set number of envelopes, meaning documents sent for signature, per user, and sending more costs extra. Bulk sending, payment collection and web forms sit on its higher business plan.
• Dropbox Sign charges per user and says signature requests are unlimited on its plans. The number of templates rises with the plan, it connects to tools such as Google Drive, Microsoft Word and HubSpot, and its API is priced separately.
• PandaDoc charges per seat and has a free plan with a small monthly allowance of documents, while its paid plans include unlimited e-signatures. CRM connections and payment collection come with its Business plan, and API use is bought as credits.

Before you buy one, check whether a tool you already pay for, such as proposal, invoicing or practice management software, lets a client accept or sign inside it. Then ask three questions: how many contracts you send a month, how many people send them, and which tool the signed contract has to reach, such as your CRM or a folder. If you need advanced or qualified signatures in the EU, check the tool offers that level and which qualified provider stands behind it.

Automate a contract from accepted quote to filed copy

The contract is the step where many jobs stall: the customer said yes, but nobody sent the paperwork, or it sat unsigned for two weeks. A workflow fixes that, with a person at the points that need judgement:

• Starts when the quote is accepted, either in your quoting tool or when a person marks it accepted after a call.
• The contract is created from your template, with the customer's name, the scope, the dates and the price taken from the quote. A person checks it before it goes.
• It goes out for signature from the e-signature tool, in the name of the person the customer dealt with.
• One reminder goes out a few days later if it is still unsigned. After that, a person phones.
• When it is signed, the deposit invoice goes out where you take one, the signed copy is filed in the customer's folder, the job or record is updated and the team is told.
• If any step fails, such as an email bouncing or the filing connection dropping, a named person gets an alert and the contract waits on a review list.

The steps after that, from the intake form to the first meeting, are covered in client onboarding automation. Chasing the deposit if it is not paid is covered in automated invoice reminders.

A kitchen fitter's contract, end to end

A two-person kitchen fitting firm sends its quotes from its job software. On Tuesday at 7pm a customer accepts a quote for a full kitchen.

• Tuesday evening: the contract is drafted from the firm's template, with the scope, the fitting dates and the payment stages from the quote. It waits for the owner.
• Wednesday 8am: the owner checks the dates against the diary, corrects the worktop description and approves it. It goes out for signature in his name.
• Wednesday 12.40pm: the customer signs on her phone. The deposit invoice goes out at once, the signed contract and audit trail are filed in the job's folder, and the fitting dates are marked as confirmed once the deposit is paid.
• If she had not signed by Saturday, one reminder would have gone out, and on Monday the owner would have rung her.

The firm's contract template was checked once by a solicitor. The workflow only fills it in and sends it. If consumer cancellation rights apply to contracts like this one where you trade, the contract and the workflow both have to respect them, which is another question for your adviser.

Mistakes to avoid

• Using e-signatures for documents the law excludes, such as a will.
• A signature image pasted into a document, with no record of who sent it back.
• Contracts sent from one person's personal account, so the signed copies leave with them.
• Signed copies kept only in an inbox.
• An automation that sends a contract before a person has checked the price and scope.
• Endless reminders to a customer who has gone quiet, instead of a phone call.
• A template nobody has had checked, copied from the internet.
• Assuming a contract that works in one country or state works in all of them.

We build contract workflows as part of automation, around the e-signature tool and templates you choose, where their APIs allow. Your contract wording stays with you and your lawyer.

When to ask a lawyer

Ask once, early, and write the answer into your process:

• Before you rely on your contract template, signed electronically or not.
• When you sell to consumers and a law requires written notices or disclosures.
• When you sign contracts in more than one country or state.
• When a document may need a witness, a notary or a qualified signature.
• When a signed contract is disputed.

For an accountancy practice or a law firm sending engagement letters, the same applies to the letter itself: the professional body's rules on engagement terms matter more than the signing method.