Some of us remember when, to sign a document, it was necessary to print out the form, physically sign it, scan the signed document, and then send it as an email attachment.
Electronic signatures have made this process all but obsolete. Nowadays, for most transactions that require us to sign our name, we can apply a digital signature that satisfies the same legal requirements as a written signature. In many instances, an actual signature is not even required—simply clicking “I Agree,” signing your initial with your finger, or typing your name will suffice.
When applying an e-signature, you may have wondered if it is legally valid. The short answer is yes. E-signatures carry the same legal weight as handwritten signatures for almost every type of business and personal transaction in every US state and much of the industrialized world. However, to be valid, an electronic signature must meet certain requirements. There are also a few types of documents that cannot be e-signed.
E-Signature Laws
Two US laws make electronic signatures legally binding:
- the Uniform Electronic Transactions Act (UETA)
- the Electronic Signatures in Global and National Commerce Act (E-SIGN)
The UETA is a model act, i.e., proposed legislation, published by the Uniform Law Commission in 1999. It proposed making e-signatures the legal equivalent of manual signatures to remove barriers to electronic commerce. Every state has adopted the UETA except New York, which has passed similar laws making e-signatures legally enforceable.
Congress passed the federal E-SIGN Act in 2000. The E-SIGN Act legally recognizes electronic signatures and records used in interstate or foreign commerce, provided that the parties to the contract consent to the use of electronic documents and signatures.
Both the UETA and the E-SIGN Act contain four main requirements for an e-signature to be legally valid under US law:
- Each individual or business that is a party to a transaction must intend to sign the document.
- The parties must give affirmative consent to conduct business electronically. Different consent standards apply to businesses and individuals. Consumer consent is only valid when a consumer is provided with disclosures before giving their consent.
- An electronic record of the e-signature must be created by the software that generates the signature, and that record must accompany the transaction.
- Records of the e-signature must be retained and capable of accurate reproduction for future reference by all parties to the transaction.
Note that these requirements also apply to contracts signed with traditional signatures. When you provide a signature, whether handwritten or digital, it generally means that you have read and understood the contract, agreed to the terms, and intend to be bound by it. E-signature laws merely give the same credibility to electronic documents signed digitally as they do to paper contracts signed manually.
And just as you do not have to use your actual signature on a contract to make it enforceable—a squiggle, doodle, or “X” is just as valid as your written name—your e-signature only needs to indicate your intent to sign a contractual agreement. Often, this means a graphic symbol of your signature generated by the electronic document software. But a mark made with your finger on a digital screen is just as valid, and in fact, you may not have to make a mark at all. Clicking “I Agree” or entering a password or a personal identification number (PIN) that authenticates you also counts as an e-signature.
Exceptions to E-Signature Laws
As we conduct more of our business online, electronic signatures are a convenient way to apply our John Hancock to everything from employee paperwork and rent agreements to sales contracts and patient intake forms.
But e-signatures are not acceptable for every type of document. Exceptions to e-signature laws exist for the following documents and matters:
- Wills and testamentary trusts
- Family law issues, such as adoption and divorce
- Court documents (e.g., court orders, briefs, and pleadings)
- Utility cancellation notices (electric, gas, telephone, water, and sewer)
- Notices of housing eviction and foreclosure
- Health and life insurance cancellation notices
- Product recall notices (typically issued by government agencies, manufacturers, retailers, and distributors of foods and products)
- Documents required to transport or handle hazardous materials
An additional e-signature exception applies to US life sciences regulations and the Food and Drug Administration (FDA). Electronic signatures are still accepted by the FDA, but they must meet more rigorous criteria meant to protect the electronic records and limit access to them.
Similarly, when used in the healthcare industry, digital signatures must comply with Health Insurance Portability and Accountability Act (HIPAA) rules that protect sensitive patient health information.
States may have their own e-signature requirements for specific transaction types. For example, California law states that digital signatures used by a public entity are only valid if they meet requirements outlined in the California Code of Regulations. For example, digital signatures must be created with “acceptable technologies.” This is a California-specific variation of the UETA.
More recently, Arizona amended its version of the UETA—the Arizona Electronic Transactions Act (AETA)—to incorporate blockchain technology. Nevada and Tennessee have made comparable amendments to their respective versions of the UETA.
Finally, in addition to wills and testamentary trusts, most states do not recognize e-signatures for birth, wedding, or death certificates.
Electronic Contract or E-Signature Legal Questions? We Have Answers
Since the E-SIGN Act and the UETA were adopted, our reliance on electronic signatures and documents has increased dramatically. We can now enter into all sorts of agreements without ever leaving the house or putting pen to paper, with just a couple of clicks.
If your business uses digital contracts and e-signatures, it is crucial to adopt workflows that meet state, federal, and international legal requirements.. And whether the contract is digital or physical, an attorney should carefully draft it to protect your interests. To speak with a local small business lawyer from our office, please schedule an appointment.
