E-Signatures: What Are the Legal Requirements?
By now, most of us have signed a document electronically, often by attempting to replicate our usual signature using a stylus or index finger on a tablet device. Documents can also be “signed” by typing in our name, accepting a script version of our name, or inserting an image of our usual signature.
This awkward process often leaves one wondering how e-signatures could possibly be valid. Even when we sign on a tablet, the result seldom looks like our usual signature.
Nevertheless, electronic signatures are legally binding and have been in the U.S. since 2000 with the passage of the Electronic Signatures in Global and National Commerce (ESIGN) Act. The objective of the law was to foster the use of electronic records and contracts in interstate and foreign commerce. Forty-nine states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands have also adopted the Uniform Electronic Transactions Act (UETA), which was developed in 1999. New York adopted its own e-signature law in addition to the ESIGN Act, and Arizona and Nevada have their own laws in addition to the ESIGN Act and the UETA.
The ESIGN Act is designed to ensure that an electronic signature or contract “may not be denied legal effect, validity, or enforceability” solely because it was executed electronically. E-signatures have the same validity as traditional “wet” signatures for many types of documents as long as the requirements of the ESIGN Act or the UETA are met.
E-Signatures in the U.S.
The ESIGN Act and the UETA have similar principles. First, the parties must agree to conduct the transaction electronically. This requirement can be met circumstantially by the parties’ conduct. However, many electronic documents include a check box or other mechanism for the signer to indicate a willingness and intent to proceed electronically. An email trail can serve as evidence of the signer’s authenticity unless additional authentication of identity is required by law.
The signer must be informed of the option to have the document made available in nonelectronic form, the right to withdraw consent, and the consequences of such withdrawal. In addition, the signer must be informed of any hardware or software requirements for accessing a copy of the document, and of the right to obtain a paper copy after signing.
The ESIGN Act and the UETA are subject to the requirements of other laws and regulations. For example, the UETA does not apply to wills, codicils, and testamentary trusts because they are unilateral rather than multiparty transactions. Those documents must be executed according to state law. However, the UETA provides that a signature can be “notarized, acknowledged, verified, or made under oath” and may be signed electronically if all required information “is attached to or logically associated with the signature or record.”
E-Signatures in the EU
In the EU, e-signatures became valid with a community framework directive in 1999, which was superseded by the Electronic Identification, Authentication and Trust Services (eIDAS) regulation in 2014. eIDAS was developed to promote uniformity and mutual recognition across EU member states. The U.K. passed its own law, the Electronic Communications Act of 2000, which was replaced by the eIDAS. Although the U.K. is no longer part of the EU, it recognizes eIDAS as the legal basis for e-signatures.
eIDAS establishes three categories of electronic signatures:
Simple electronic signatures do not require validation of the signer’s identity. Actions such as typing in your name and clicking an “accept” button qualify.
Advanced electronic signatures are uniquely linked to and capable of identifying the signer. The signer must retain control of the process, and any subsequent change to the associated document must be detectable. Typically, advanced electronic signatures are digital signatures that use cryptographic certificates and keys.
Qualified electronic signatures require the signer to use a qualified signature creation device, such as a mobile app, smart card, or USB token that creates a one-time passcode. A qualified electronic signature must be given the same legal validity as a handwritten signature.
Electronic Trust Services create and validate electronic time stamps, seals and digital certificates as well as e-signatures, and must work across borders. More than 20 EU member states have national electronic ID systems that are interoperable with one another and serve as personal digital certificates for use in qualified electronic signatures. The U.K. has no such system, so qualified electronic signatures are not commonly used.
Only a handful of documents require a “wet” signature. These include wills, codicils and testamentary trusts, and family law documents such as divorce agreements.
Putting It into Practice
E-signatures have become commonplace with many people working and doing business remotely. It has enabled businesses to become more efficient, streamline transactions, and enhance customer service.
Ensuring the legality of e-signatures starts with understanding the federal, state, and international laws and regulations applicable to the transaction. Organizations should use software that facilitates the signing process and verifies that disclosure requirements have been met. The software should also ensure that the document can’t be tampered with, and makes it easy for the signer to download a copy of the executed document. In addition, organizations should maintain an audit trail of emails or other communications supporting the validity of e-signature.
Stay Informed About New Developments in Law
E-signatures raise questions of law, as do other new technological developments. It’s important to understand the latest legal developments in California and the rest of the nation with Purdue Global Law School.
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