Save $: Sign on the virtual line

    E-signatures save time, money and paper -- but they're not for every kind of contract.

    By Cindy Waxer

    (Fortune Small Business) -- Looking for a business challenge? Try getting seven people in as many locations to sign a 45-page contract.

    Merrie Turner Lightner faced that problem recently when her San Francisco-based real estate management company finally resolved a long-running dispute between tenants and their landlord.

    Getting everyone to sign on the dotted line wasn't easy. Pages kept going missing, and every party left out at least one signature. After a week of faxing, the Lightner Property Group's nine-person staff found itself overwhelmed.

    "We were all tearing our hair out," Lightner recalls. "No matter what we did, we just couldn't get it right."

    That's when Lightner, 53, turned to e-signature software. Since 2000, when Congress passed the Electronic Signatures in Global and National Commerce Act (ESIGN) to bolster public trust in online commerce, digital signatures have been granted the same legal weight as the old-school ink variety.

    At first e-signatures were used mostly by large organizations -- usually financial or insurance companies -- that could afford in-house software or expensive electronic pen-and-tablet solutions. But recently vendors such as AlphaTrust, EchoSign and Silanis Technology have started offering online signing technology at mass-market rates.

    How it works: Clients log on to a secure site, enter a password and find their names in SIGN HERE boxes. They indicate consent by clicking a box. The document can then be downloaded as a PDF.

    Lightner looked into services from AlphaTrust and AssureSign but found that both charged hefty startup fees -- as much as $600 -- plus $325 per contract. Then she found DocuSign, a Seattle company that charged no up-front fees and a flat $40 a month for unlimited signatures. Lightner estimates that the solution saves the company $1,000 on each large contract.

    The move paid off in productivity too. Today the firm's leasing agents choose from a selection of custom templates; enter a recipient's name, e-mail address and contract details; drag and drop yellow "sticky notes" to indicate where to sign; and click SEND. By using e-signatures, Lightner has been able to reduce the average time needed to execute a contract by 80%, she says. A week of faxing has shrunk to five minutes of e-mailing.

    Lightner's agents can request that e-mail alerts be sent to them whenever a contract gets signed or forwarded. That allows them to focus on showing apartments to prospective clients. And the firm has been able to save an average of 100 pages of paper per contract -- a boon for the environment and Lightner's bottom line.

    Concerns: There are drawbacks to digitizing your John Hancock.

    "You lose the ability to sit down face-to-face," Lightner says. "There's a time saving but also a loss of relationship building."

    And some legal experts question the validity of e-signature technology -- mostly because digital contracts require signatories to close each page before reviewing the next. That could give them grounds to claim that they weren't able to understand the contract in its entirety -- a loophole through which any good lawyer could drive a Mack truck.

    "With a written signature, it may be a long contract, but it's all right there in front of you," says Ieuan Mahony, a partner with the law firm Holland & Knight in Boston. "With a digital signature, that connection between the signature and the terms of the contract may be tenuous."

    Users should also be wary of exceptions written into ESIGN. Cancellation or termination of health insurance, utility shutoffs, product recalls and eviction notices are all specifically excluded in the law; such documents must still be signed on paper. Fail to do your homework and you could wind up with a contract that isn't legally binding.

    Bottom Line: But Lightner, who trained as both an attorney and a real estate broker, says that e-signature software can also reduce a company's liability. Last year she failed to catch a blank signature line on an expert-witness agreement. When it came time to settle the bill, the client refused to pay the full amount, arguing -- correctly -- that he hadn't signed off on all the work. Lightner lost $2,500 on a $7,500 contract.

    It was, she points out, an expensive mistake that couldn't happen using DocuSign, which allows contracts to be filed only if every party has ticked off every box.