There are two statutes that establish the legality of electronic signatures in the US, namely the Electronic Signatures in Global and National Commerce Act 2000 (ESIGN) and the Uniform Electronic Transactions Act 1999 (UETA). This summary provides an overview of ESIGN and UETA’s requirements with respect to electronic signatures.
- Electronic Signatures May Not Be Denied Legal Effect
ESIGN states that the validity or enforceability of a contract, electronic record, or signature for a transaction affecting interstate commerce cannot be challenged solely because it is in electronic form or because an electronic signature or record was used in the formation of the contract. Likewise, the UETA, which has been adopted by forty-seven states and the District of Columbia provides that a signature may not be denied legal effect or enforceability solely because it is in electronic form. US law recognizes that an electronic signature may be as legally effective as a signature applied in wet ink on paper. ESIGN does not give electronic signatures a special status in the law. Rather the ESIGN states that a signature may not be denied legal effect solely because it is in electronic form. The foundational provisions of the ESIGN acknowledging electronic signatures provides:
- In General. Notwithstanding any statute, regulation, or other rule of law (other than this title and title II), with respect to any transaction in or affecting interstate or foreign commerce:
- (1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability because it is in electronic form; and
- (2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.
- “Electronic Signature” Defined
When a signature is created using a “symbol or process” that is “attached to or logically associated with” a contract or other record by a signer with intent, such signature will be legally effective. ESIGN defines an “electronic signature” as:
- Electronic signature. The term “electronic signature” means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.
ESIGN defines “electronic record” as:
- Electronic record. The term “electronic record” means a contract or other record created, generated, sent, communicated, received, or stored by electronic means.
ESIGN defines “record” as:
- The term “record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
Thus, an electronic signature may consist of an electronic symbol or process, such as an individual saying “I agree,” typing “I agree” or the person’s name or following some other process, such as clicking “I agree,” which is attached to or logically associated with information inscribed: (i) on a tangible medium, such as the tangible, hard copy of an authorization; or (ii) stored in an electronic medium retrievable in a perceivable form, such as the electronic record containing the identical information as contained in the tangible hard copy delivered to the consumer.
Evidence of the signer’s intent to sign the record (which is required if the signer signs in ink on paper) may be inferred (as it is from ink on paper) from words close to the place of the signature where such words indicate in clear and conspicuous terms the signer’s intent to sign and be bound thereby. Thus, an electronic signature created by a software program should be legally effective and should not be denied legal effect solely because it is in electronic form. Similarly, a contract relating to such transaction should not be denied legal effect, validity or enforceability solely because an electronic signature was used to sign such document and subsequently stored as an electronic record, rather than in hard copy.
ESIGN does not apply to specific contracts and records that are governed by:
- a statute, regulation, or other rule of law governing the creation and execution of wills, codicils, or testamentary trusts;
- a State statute, regulation, or other rule of law governing adoption, divorce, or other matters of family law; or
- the Uniform Commercial Code, as in effect in any State, other than sections 1–107 and 1–206 and Articles 2 and 2A.
- court orders or notices, or official court documents (including briefs, pleadings, and other writings) required to be executed in connection with court proceedings;
- any notice of—
- the cancellation or termination of utility services (including water, heat, and power);
- default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence of an individual;
- the cancellation or termination of health insurance or benefits or life insurance benefits (excluding annuities); or
- recall of a product, or material failure of a product, that risks endangering health or safety; or
- any document required to accompany any transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials
In summary, both the United States Electronic Signatures in Global and National Commerce (ESIGN) Act, and the Uniform Electronic Transactions Act (UETA), have four primary requirements for an electronic signature to be recognized as valid under U.S. law. Those requirements are:
- Intent to sign– Electronic signatures, like traditional wet ink signatures, are valid only if each party intended to sign.
- Consent to do business electronically– The parties to the transaction must consent to do business electronically. Businesses are required to obtain from consumers electronic consent or confirmation before sending information electronically that a law requires to be in writing.
- Association of signature with the record–The system used to capture the transaction must keep an associated record that reflects the process by which the signature was created, or generate a textual or graphic statement (which is added to the signed record) proving that it was executed with an electronic signature.
- Record retention–Electronic signature records must be capable of retention and accurate reproduction for reference by all parties or persons entitled to retain the contract or record.