Not Required to Ink the Deal- Electronic Signatures

We are now used to shopping online and accepting software licensing click through agreements. The adoption of the Uniform Electronic Transactions Act (UETA) in most states and the passage of Electronic Signatures in Global and National Commerce Act (ESIGN) at the federal level in 2000 solidified the legal landscape for use of electronic records and electronic signatures. As a result you are no longer required to ink the deal and have original signatures and can use electronic signatures in transactions. Both ESIGN and UETA establish that electronic records and signatures carry the same weight and legal effect as traditional paper documents and handwritten signatures, stating: A document or signature cannot be denied legal effect or enforceability solely because it is in electronic form. As a result, your real estate transactions and corporate merger may be done electronically too and this is becoming more and more common too.

Intent to Sign

The electronic signature laws requires that a signature is only valid if the signer intends to sign.

Signature Associated with the Record

In order to qualify as an electronic signature under ESIGN and UETA, the system that is used to capture the electronic transaction must either keep an associated record reflecting the process by which the signature was created or make a textual or graphic statement that is added to the signed record, reflecting the fact that it was executed with an electronic signature.

Consent to Do Business Electronically

Between businesses, the nature of the parties’ consent to do business electronically can be established explicitly or by implication based on the parties’ interactions. However, consumers receive special protection under ESIGN and some state UETA enactments. Electronic records may be used to deliver Required Information to consumers only if the consumer:

-receives certain disclosures (UETA Consumer Consent Disclosures);
-has affirmatively consented to use electronic records for the transaction; and
-has not withdrawn such consent.

Record Retention

UETA provides that legal effect, enforceability or validity requires that electronic signature records be:

-capable of being retained; and
-capable of being accurately reproduced for later reference by all parties or persons who are entitled to retain the contract or other record.

Best Practices

Like their ink and paper counterparts, electronically signed documents can become the subject of a dispute. If there is a dispute regarding an electronically executed contract, merely complying with ESIGN may not be enough. The signature process must provide enough proof to uphold the transaction. There are several electronic document signing services that can help establish the contract with additional features. For example:

-Audit trail tracks all signer actions
-Secure encryption so documents can be read and signed only by designated users
-Unique Signatures created by each user, accessible only to that user, and stored securely online
-Sign Document Blocks so users can ‘initial’ and ‘sign’ specific areas of a document
-User Authentication leveraging email, access code, and/ or third party ID check
-Time-Stamping of every step in the document process
-Transaction Summary provides complete document history

Similar to other situations, how many bells and whistles you require in your electronic signing system may depend on the value of the transactions at hand. The higher dollar value or volume, the more precaution you should take to guard from risk.

Admissibility into Evidence

The Federal Rules of Evidence and the Uniform Rules of Evidence generally allow for electronic records and their reproductions to be admissible into evidence. This applies to electronic signatures stored in a computer or server, so that any printout or output readable by sight, shown to reflect the data accurately, is considered an original.

For more information you may contact the Goosmann Law Firm at info@goosmannlaw.com or by calling 712.226.4000.