A new law signed June 30 by President Clinton gives an electronic signature the same legal validity as one written with pen and ink. Experts say the law paves the way for schools eventually to use electronic signatures for everything from grant applications and land acquisitions to purchase orders and permission slips.
“School districts will be able to complete transactions online with more confidence, knowing the electronic signatures they provide [and accept] will be legally binding,” said Lauren Hall, executive vice president of the Software and Information Industry Association, which lobbied for the legislation.
The new law, which takes effect Oct. 1, provides that no contract, signature, or record shall be denied legally binding status just because it is in electronic form. But it also provides that most electronic contracts and documents will be legally enforceable only if they are in a form capable of being retained and accurately reproduced for later reference.
All existing consumer protection lawsincluding those prohibiting fraud and deceptionwill continue to apply.
Lawmakers have left it up to others to spell out exactly how such online transactions will take place. The parties involved could reach agreement on a contract format, for example, or they could go through a growing number of third parties offering software that verifies the authenticity of electronic signatures.
Similarly, the law applies to a broad range of technologies that make online agreements possible. “The language in the law was left deliberately broad,” Hall said. “We wanted to make sure the legislation was not specific to a given technology.”
For this reason, the law refers to “electronic signatures,” which could include certification from a touch-tone telephone or by using biometric technologies, instead of merely “digital signatures,” which use a specific type of encryption technology to stamp one’s approval on an electronic document.
The law’s immediate impact on schools may be slight, because it doesn’t change a school’s ability to purchase goods or complete other transactions online. Until now, though, schools and businesses have had to carry out such transactions “in good faith,” Hall said, meaning if one party disputed a contract that was agreed to electronically, it was unclear whether the contract would hold up in court.
“We didn’t need [the law] to succeed, but it helps,” said Lisa Carnochan, senior director of products for Epylon.com, which launched a national roll-out of its online procurement service to schools July 10.
Like other online procurement companies, such as Simplexis and eschoolmall.com, Epylon doesn’t require digital signatures from school purchasing agents to complete online purchase orders or solicit bids for services. But now, if there are any questions about the validity of a contract, the law means “the electronic forms you fill out count,” Carnochan said.
Over time, the law has the potential to change the way schools do business completely, Hall said.
“We’re going to see a greater public acceptance of electronic signatures” as a result of the law, she said. As more people become comfortable with performing transactions online instead of face to face, the law “will give schools the opportunity to simplify many of their administrative processes.”
In the wake of the law’s passage, a host of companies are stepping up to take advantage of what they think will be a growing demand for electronic-signature technologies.
Two categories of companies stand to profit from this trend. The first is established eCommerce security companies, such as VeriSign Inc. and Entrust Technologies, that provide universally recognized digital certificatesa sort of ID card that can be stored in the owner’s computer. The certificate, a unique, encrypted code, lets consumers prove their digital signatures are valid.
The second group includes dozens of companies, such as Irvine, Calif.-based signOnline, that will sell technologies and services that let users affix a digital signature to a document and store the original in a secure setting.
“Eventually, we’re all going to have digital signatures,” said Brad Harvey, co-founder of signOnline. “You’re going to see the whole world transformed.”
One application that online procurement companies such as Simplexis and Epylon.com hope to provide soon is the ability for school districts to handle sealed bids electronically. The authentification and encryption afforded by digital signature technology could be keys to protecting the integrity of such closed bids.
Signing applications for grants or loans online is another possible application of the technology for schools. For example, schools applying for eRate discounts can apply online, but they must sign a printed version of the certification form and mail it to the Schools and Libraries Division to complete their application.
Mel Blackwell, a spokesman for the agency, said it’s possible that schools will be able to use some form of electronic signature instead of a hard copy beginning with next year’s applications. “We are always studying ways to make the process easier for school districts,” he said. “Our eyes light up when we see something like this.”
Don Tharpe, executive director of the Association of School Business Officials International, speculated that schools might use electronic signatures for transferring money, acquiring land, accepting parent consent forms, and even negotiating contracts with teachers over the internet in the near future.
But he cautions that the law is only a catalyst and doesn’t mandate change. “The law doesn’t say you have to recognize [electronic signatures], so schools can still say, ‘We have to have a hard copy,'” he said.
Software and Information Industry Association