Even legislation designed to smooth the transition to electronic signatures, or e-sign, can't erase all the legal concerns surrounding it. While such legislation could reduce business and consumer risk, those involved in e-commerce continue to watch for any legal challenges to e- sign, as well as the resulting precedents the future holds.
Frank Prince, an analyst with Forrester Research, Cambridge, MA, notes there are current ambiguities in what it now means to "affirmatively consent." He expects those ambiguities and their piecemeal resolution will engender a significant amount of case law in both business-to-business and business-to-consumer e-sign cases.
"This will have to be worked out in great detail," he says. "Here's the reason: Let's say you sign electronically and you're not in the physical presence of the other party. What does it mean to affirm consent when the only mechanism you have is the very same electronic mechanism you are supposed to affirmatively consent to?"
For hundreds of years, Prince says, society has placed great importance on the ceremonial aspects of document signing. The growing number of e-sign technology companies, Prince says, must "bridge the distancing nature of electronics with something a human being can relate to as a significant act."
In our litigious society people's perceptions of what is legal, their "comfort level," will also affect the signature process as it mutates into something different from the age-old process to which they are accustomed. Banks and other businesses accepting electronic signatures, digital signatures or any combination thereof, want to raise a signer's level of comfort, thereby minimizing the risk of litigation.
While the use of technology cannot eliminate fraud, Rae Cogar, senior staff attorney at eOriginal in Baltimore, says it can make it more difficult. For example, a digital signature is more difficult to forge than a signature made in ink with a pen.
But in court, the burden of proof has and will continue to rest on the recipient of the signature. While the law now says that an electronic or digital signature is valid, a company must nonetheless be reassured the right person signed under legally acceptable conditions, an assurance even biometrics cannot prove. Such continuing uncertainty is why Cogar says she does not "believe the electronic or digital signature will replace the notary."
The witness or notary function has a twofold purpose beyond identification of the signer. One purpose is judging the signer's mental competence and comprehension, while the other is to assure the signature was not given under duress.
The following example of the first on-line mortgage closing speaks volumes about both the technical and acceptance issues of conducting remote transactions electronically, as well as the efficiencies gained.
Last summer, a group of companies, including eOriginal, worked together to conduct the first online mortgage closings by simulating, to the highest degree possible, the traditional paper-based process, including the homebuyer presence at the office of Enterprise Title during the settlement. Prior to the closing, the mortgage company, Mortgage.com, prepared electronic originals of the loan package. Enterprise Titled used a version of The Attorney's Title Insurance Fund's DoubleTime real estate closing software embedded with eOriginal system components to prepare the closing documents.
During the electronic settlement, the title agent, sitting with the buyer, witnessed and notarized each signature. The difference is instead of paper being signed; each document's image was viewed by the buyer on a 10- by-12 inch electronic graphics pad and signed with a stylus pen. On the monitor, the homebuyer watched the document package as it was sealed in an electronic vault using eOriginal's Trusted Custodial Utility (TCU), a digital encryption technology. At each opening or closing, the document set was unlocked or sealed with TCU, resulting in the closing documents remaining complete and secure on one file server with an audit trail of all activity.
During the next step, Mortgage.com accessed the TCU via the Internet to perform a quality check of the documents. The Broward County (FL) Records Division, using the NewVision Official Records System, verified and recorded the documents, again by accessing the TCU, and collected all fees.
At this point, the documents became public record and were instantly available for public search, both at the records division and through the county's Web site. The electronic title insurance policy was issued immediately. Mortgage.com could then electronically transfer the ownership of the loan to Fannie Mae, which secures and sells mortgages on Wall Street, so the mortgage could be included in a block being sold the same day.
Technically, under the new laws, someone could purchase a house from a home PC using a digital certificate or smart card. However, Joe Bryant, eOriginal senior vice president and general manager of the real estate division, says Fannie Mae remains reticent about buying and selling loans from closings where there is no witness.
Once the electronic ink is dry, so to speak, businesses have numerous options in the ways they use electronically received documents. Ease of storage and access are great, but the real added value comes from efficient management and processing of the document's contents. How quickly does someone act on them? How are changes, new versions and related documents, tracked and managed? How does a company make information accessible without risking its security or disseminating duplicate, soon-to-be obsolete sets of documents?
Visionary companies will match the opportunities created by e-sign technology to their existing processes and desired business objectives. They will seek out efficiencies that were impractical when paper documents required signatures.
While some remain cautious about the legal issues, many see e-sign removing a major obstacle to e-commerce. "It's a watershed event," says Guido DiGregorio, president and CEO of Communications Intelligence Corp., Redwood Shores, CA, "and it's going to be certainly an evolution over two years. But to my mind, it's more like a revolution. If (businesses) can't do transactions at the speed of the Internet, with all the savings associated (with that) and at a higher level of security than your own handwritten signature, then they're simply not going to be around. They won't be able to compete."
Debra Haverson is a business writer based in Baltimore.
