ESIGN Act: Legal Electronic Signatures in the U.S.

It’s no secret, legal electronic signatures are what keeps business documentation flows functional especially during the physically distanced COVID-19 has made us. No more printing, physically signing, scanning and hand-delivering contracts. It reduces document approval processes from weeks to just minutes and also makes it so much easier to track, manage and store. But, the real question is – are electronic signatures legally binding in all 50 US states?

The short answer is ‘yes, absolutely’. The ESIGN Act (Electronic Signatures in Global and National Commerce) is one of the esignature law (s) that assures it.

What is the ESIGN Act?

In 2000, the U.S government passed the ESIGN Act to ease the adoption of electronic signatures, ushering in a new era of document streamlining in all US locations where federal law applies.

According to the act, an electronic signature is defined as “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.”

This act ensures that:

• eSignatures can be used in the court of law as evidence
• eSignatures are as legally viable an option as wet signatures
• The effect, validity and enforceability of electronic documents are not denied

Digital Signatures and the UETA / ESIGN Act

ESIGN Act is not the only enforceable e-signature regulation in the US. UETA (Uniform Electronic Transactions Act) grants electronic signatures the same legal status as traditional wet ink signatures in the US likewise. Similarly, ESIGN and UETA oblige individuals to accept all requirements outlined therein.

ESIGN Act & UETA applies to 48 US states: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming.

UETA also applies in the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

Other e-signature laws

• Illinois –Law 5 ILCS 175/1-101
• New York – Electronic Signatures and Records Act (ESRA)
• Illinois’ Electronic Signature Law 5 ILCS 175/1-101, also enacted in 1999, considers some types of eSignatures to be more secure than others. Some of the factors that define such eSignatures are:
  • Both parties concur on the ‘secure nature’ of the signature
  • Applied by both parties in a verifiable manner
  • Created in a manner that can be deemed commercially reasonable
  • Can be relied upon by all parties in good-faith
• The Electronic Signatures and Records Act (ESRA), enacted in 2000, deems electronic Signatures as legally binding as wet signatures in New York. There is even a best practices guide for those who wish to use eSignatures under the ambit of ESRA.

Note: The UETA and the ESIGN Act cover business, governmental affairs and e-commerce transactions. But, they do not apply to the likes of wills and marriage, death, birth certificates, codicils and testamentary trusts (as specified under section 103 of the ESIGN act).

What do the ESIGN Act and UETA imply?

Both UETA and ESIGN grant electronic signatures the same legal status as traditional wet ink signatures in the U.S.

These acts:

• Establish that any law with a signature requirement can be satisfied by an electronic signature.
• Allow electronically executed agreements to be presented as evidence in court.
• Prevent denial of validity or enforceability of an electronically signed document solely because it is in an electronic form.

What Makes Electronic Signatures Legal in the USA?

For an electronic signature to be legally binding, it must meet the following requirements:

Intent to sign

First of all, e-signatures are only valid if each party intended to sign. Like traditional signatures, there should be an intent to sign in order for electronic signature to be legally binding.

Consent to do business electronically

Most leading e-signature software companies ask all parties involved in the transaction to confirm their consent to do business electronically before they sign.

Clear signature attribution

An electronic signature is “an electronic sound, symbol or process attached to or logically associated with a record and executed or adopted by a person.” The system used for capturing electronic signatures should be able to attribute the signature to the individual.

Record retention

Finally, records created for each transaction must be retained and available for reproductions as long as they accurately reflect the agreement for all parties.