Does a contract need a wet signature?

Richard Mabey, 17 December 2020

This explainer tells you what a wet signature is, when it's used, and the alternatives. If you're struggling to secure wet signatures on contracts, then contract automation might be the solution.

What’s a wet signature? | When do you need a wet signature?

What’s wrong with wet signatures? | Alternatives to wet signature | Digital contract process | Find out more

What’s a wet signature?

Wet signature is the use of a physical signature, made by hand with a pen ("wet ink"), to bind the party signing to the terms of the document upon which they leave their signature.

Contracts usually require, or at least encourage, both parties (or all parties, if there are more than two) to sign the document before it becomes enforceable. Note that a signature is not necessarily required in order for a contract to be concluded (read more about the position under English law). However it’s still seen as a crucial part of the process of concluding a contract.

Until pretty recently, securing that signature always meant physically dragging a pen across the page to leave a signature, then giving the same pieces of paper to the counterparty and having them do the same.

Juro wet signature

eSignature has changed that picture, with a workflow that involves the electronic signing of a PDF becoming common. Instead of a wet signature being required, parties can use software to electronically ‘sign’ a document and fulfil the requirements needed to make it enforceable. 

However, a handwritten signature of some kind is still needed in various jurisdictions and situations. What are they?

 

When is a wet signature still required on a contract?

This question relates to the validity of the contract, and its answer depends on the jurisdiction in which parties are based, as well as the purpose and content of the contract. For the most part, eSignatures have been recognized as valid and enforceable across the world, but certain situations still ask for wet-ink signatures. Some examples include:

In English law:

  • documents required to be filed with the UK tax authorities or Land Registry (source)

In US law:

  • Promissory notes and notarized documents, mortgages, deeds of trust, and other collateral documents (source)

In Canadian law:

  • promissory notes, personal guarantees, notarized mortgage documents, and security registered with the Bank of Canada (source)

In Germany law:

  • a transfer or pledge of shares in a GmbH; a transfer of real estate; or a mortgage/land charge over real estate would require to be notarised (source)

Various other jurisdictions have formal and informal requirements relating to wet ink signatures and notarized signatures, as well as related processes like initialling each page. For a brief rundown, visit this resource or check with your counterparty/counsel.

What’s wrong with wet signatures?

There are good reasons why eSignature has become so prevalent in contract process, both for individuals and businesses. There’s obvious friction and delay involved in the requirement to physically transfer one bundle of paper to another party - the time savings of sending documents electronically are transformative. 

There’s also less risk involved - a physical document is more vulnerable to being lost, stolen or damaged than a contract electronically and securely stored in the cloud. If the document was created in an electronic format, there’s no need to scan and save its physical impression in order to be able to store it digitally.

The friction and delay involved in a wet signature-based process also gets significantly worse with scale. Some of the companies we work with at Juro process hundreds or even thousands of contracts a month. For one customer, before automating routine contract workflow with Juro, this meant the CEO spending half a day a week sitting and physically signing hard-copy contracts by hand.

This is a poor use of anyone’s time, but particularly the kind of person likely to be a business’ authorized signatory - typically a CEO, CFO or similar senior figure. Through contract automation with Juro, they were able to ditch the wet signature and sign dozens or hundreds of contracts electronically, simultaneously, with one click.

What are the alternatives to wet signature?

Moving your contract workflow out of filing cabinets and envelopes, and into the cloud, is the overwhelming trend when it comes to how businesses manage contracts moving forward. eSignature underpins all of this, but it’s only one element of the contract lifecycle. The image below is an example of a contract process that has adopted eSignature to replace wet signature, but as part of a process that is still fragmented, inefficient and plagued by data loss:

Manual contract lifecycle

Although some elements of this contract process avoid a reliance on wet signature, the process as a whole is painful and likely to get worse with scale, due to its reliance on files (word documents and PDFs), rather than data. This creates three key issues:

  1. The workflow itself is slow and labour-intensive;
  2. Data is lost at each stage of the contract lifecycle; and 
  3. Files don't play well with your other systems (like CRM, ATS and so on). 

The problems that flow from these issues are familiar to anyone trying to work with large volumes of contracts: version control, lost contracts, unsigned contracts, inconsistent contracts, and the constant search for the latest version of a particular template. This is a headache not just for lawyers, but for anyone in a business trying to deal with contracts quickly and efficiently.

Moving to a digital contract process

To really leave behind the inefficiencies and bottlenecks caused by wet signature, you can use a contract automation platform  like Juro to create, agree and manage legal documents entirely in-browser. The process instead looks like this:

Digital contract lifecycle

Instead of upgrading wet signature to eSignature and keeping everything else largely the same, using Juro to establish this process creates the contracts themselves as structured data, rather than static files. This ends the problem of version control, and data can move easily between parties and platforms and is preserved throughout. This brings three key benefits:

  1. No-code workflow automation: contracts can go through an automated process, with negotiation, approval and signature all happening in-browser, but without the need for a difficult and code-heavy tech implementation.
  2. Contract data pipelines: this means that everyone who needs access to contract data can find it, without needing to use AI review tools to read documents. If contracts are made of data then they're searchable from day one.
  3. API-first contracting: while contracts might be just moving online, other key businesses processes have been there for years. A browser-native process for contracts means it can integrate seamlessly with key systems like CRM, or systems of record for HR, finance and procurement.

How can I get started moving past wet signature?

Lots of people and businesses are daunted by the idea of digitizing their contracts and making wet signature a thing of the past. It might seem like too big a project to take on - but if this is the case, remember that you can start small with a free trial and see if it works for you. Here's more information on how you can start small with contract automation.

Another common fear is that your company, or the stakeholders who you usually deal with on contracts, are too old-fashioned or traditional to adopt a modern software tool. This is a real obsession for the team at Juro - for example, check out this Farmdrop case study where fishermen and farmers adopted contract automation at scale. 

If you'd like to find out more about why wet signature might be slowing you down, and what you can do about it, hit the button below and we'll be happy to share what we've learned about automating routine contracts at scale.

Topics: Contract magic

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