Aren’t fax signatures the weirdest thing? It’s trivial to cut and paste — with real scissors and glue — anyone’s signature onto a document so that it’ll look real when faxed. There is so little security in fax signatures that it’s mind-boggling that anyone accepts them.
Yet people do, all the time. I’ve signed book contracts, credit card authorizations, nondisclosure agreements and all sorts of financial documents — all by fax. I even have a scanned file of my signature on my computer, so I can virtually cut and paste it into documents and fax them directly from my computer without ever having to print them out. What in the world is going on here?
Part of it is laziness where the stakes aren’t high:
In a 2003 paper, "Economics, Psychology, and Sociology of Security," Professor Andrew Odlyzko looks at fax signatures and concludes:
Although fax signatures have become widespread, their usage is restricted. They are not used for final contracts of substantial value, such as home purchases. That means that the insecurity of fax communications is not easy to exploit for large gain. Additional protection against abuse of fax insecurity is provided by the context in which faxes are used. There are records of phone calls that carry the faxes, paper trails inside enterprises and so on. Furthermore, unexpected large financial transfers trigger scrutiny. As a result, successful frauds are not easy to carry out by purely technical means.
He’s right. Thinking back, there really aren’t ways in which a criminal could use a forged document sent by fax to defraud me. I suppose an unscrupulous consulting client could forge my signature on an non-disclosure agreement and then sue me, but that hardly seems worth the effort. And if my broker received a fax document from me authorizing a money transfer to a Nigerian bank account, he would certainly call me before completing it.
Part of it is the law — despite the social importance we put on handwritten signatures, there’s no legal need for them. The Restatement (a distillation of rules from centuries of case law, published by the American Law Institute) of Contracts § 50 specifically recognizes "acceptance by performance:"
In, the bulk of "contracts" and the United States are probably accepted by performance. When you buy a cup of coffee, do you sign an agreement to buy it, or do you perform by handing over cash and they perform by handing you a coffee?
Truth is, most of the time a fax signature is used no signature at all would work just fine. If you negotiate a contract and then just start doing it, a court will usually enforce it, despite the absence of any signatures.
The bulk of contract disputes don’t arise from a failure to formalize the contract, but rather from the happening of an unexpected event and what each side believes should happen after that event. In that case, it doesn’t matter if you faxed your signature or not — it matters if the contract was drafted well enough to cover the unexpected event.
The secret to that is to make the contact as clear as possible and to focus it on what you actually what to have happen, not on what you think the law does or should require.