Notarizations are required to make contracts legally binding. They’re often used in various transactions, such as applying for mortgages, bank accounts, deeds, and employment documents. The global market of electronic signatures (e-signature) is forecasted to increase at a compound annual growth rate (CAGR) by 26.6% from 2021 to 2030. Moreover, in 2030, it’s expected to gain USD$12.7 million in revenue.
Notaries are state-authorized individuals who certify documents, establish signatories’ identities and ensure all parties understand the agreement terms. Before, notaries needed the presence of both parties and sometimes a witness, depending on the record in question.
But with digitalization, signing electronic forms and documents has become more convenient, as parties can affix an e signature to cement an agreement.
And this brings an important question: Can an e-signature be notarized? Read on to find out.
What are electronic signatures?
Electronic signatures are computerized representations of an individual’s agreement to a document, such as a contract. In such cases, a party can use a PDF editor to attach an image of their signature to confirm agreement to the contract terms.
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Are e-signatures secure?
E-signatures are often used interchangeably with digital signatures, a subset of e-signatures with higher security levels, including public key infrastructure-based encryption and audit-trail features.
For instance, a company can use Class 1 electronic signatures, or those with the most relaxed security, internally for human resource-related processes, such as applying and approving paid leaves or memo issuances. Meanwhile, Classes 2 and 3 are required for legal, healthcare, banking and other transactions with moderate to high risks of compromising a signatory’s identity.
So, a quick answer to the question is yes. An electronic signature can be notarized in most countries based on the legal frameworks below.
What makes electronic signatures legally binding?
In the United States (US), federal and state rules have authorized electronic signatures in various transactions. The Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act (E-SIGN Act), signed in 1999 and 2000, are US laws that recognize digital signatures as valid as manual signatures. These regulations allow involved parties to sign agreements and contracts electronically, should they agree.
The E-SIGN Act focuses on commercial transactions covered by interstate and foreign sales. Meanwhile, the UETA aims to enhance trading and governmental transactions by recognizing the use of digital records and signatures, encouraging all states to adapt to cohesive laws concerning electronic transactions. US states have adopted the UETA except for New York, although local laws recognize e-signatures as legally binding.
The European Union (EU), through its 1999 Electronic Signatures Directive, also recognized that electronic signatures are legally enforceable in specific transactions. The law, which has since been replaced in 2016 by the electronic Identification Authentication And Trust Services, or eIDAS, has added some regulations on using digital signatures for more secure online business dealings.
However, the E-SIGN and UETA don’t apply when executing legal documents such as wills and trusts. Other electronic requirements must accompany an electronic signature before being notarized.
How to use e-signatures in online notarization?
According to the American Bar Association, notaries can perform online notarization in three primary ways. The first method is in-person electronic notarization, which isn’t any different from the traditional procedure except that the parties sign digitally instead of using pen and paper.
Another process is called remote ink-signed notarization, done remotely thru online platforms but with the signature being affixed to the physical copy of the document. The party will have to send the paper to the notary, who certifies it and sends the record to the other party. Finally, the remote online notarization method involves electronic signatures, identity validation and online audio-video devices.
This procedure is totally or partially permitted in most US jurisdictions except Washington, DC, California, South Carolina, and Louisiana.
Which types of documents with e-signatures can be notarized?
Before signing electronic documents and considering a transaction legally enforceable, one must confirm whether the state allows electronic signatures to be notarized.
Most personal and business documents with e-signatures are legally valid, such as employment and sales contracts, service agreements, banking transactions, insurance policy applications and claims, to name a few.
On the other hand, notaries won’t stamp e-signed documents that require additional verification or involve highly-regulated industries such as healthcare and law, as identified in the E-SIGN Act. These records include wills, trusts, divorce and adoption papers, official court documents and orders, housing notices or orders, insurance policy termination, product recalls, hazardous materials handling or transportation, and certain exemptions under the Uniform Commercial Code.
Concluding thoughts
Besides the US and EU, several progressive countries worldwide have recognized the use of electronic signatures in certain personal and business transactions. In such permittable instances, they’re as valid as physical signatures or those using ink and paper, making them legally binding.
However, not all transactions are accepted, and each territory has exemptions to their applicability. If unsure, check local laws or ask a legal expert for assurance.
