Overview: Electronic Signature or E Signature Laws

An electronic signature performs a significant legal function in connection with electronic records and transactions. Signed records are intended to make many kinds of contracts enforceable and electronic signatures are critical to electronic commerce applications.

The E-Signature Laws

With 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, the legal landscape for use of electronic records and electronic signatures in commerce has been firmly settled.

Rule of General Validity

Both ESIGN and UETA establish a legal framework based on the principle that electronic records and signatures carry the same weight and legal effect as traditional paper documents and handwrittten signatures.

Both laws accomplish this legal equivalency by establishing a procedural approach to meeting “writing” and “signature” requirements, stating:

1. A document or signature cannot be denied legal effect or enforceability solely because it is in electronic form;
2. A contract cannot be denied legal effect or enforceability solely because an electronic record was used in its formation;
3. If a law requires that a record be in writing, then an electronic record satisfies the law; and
4. If a law requires a signature, then an electronic signature satisfies the law.

ESIGN and UETA define an electronic signature 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.” Forms of electronic signatures range from a simple “I Agree” button on a web page to biometric scans using sophisticated infrared equipment.

The laws do not specify the form an electronic signature should take. Parties can determine the format based upon the specifics of the transaction and any surrounding circumstances. The method of choice depends on the purpose that the electronic signature is intended to perform and whether circumstances or other laws indicate a higher or lower threshold for risk of repudiation, mistake or fraud.

Intent to Sign

The electronic signature laws retain the logical common law rule that a signature is only valid if the signer intends to sign something. The e-signature laws do not define the manner in which intent is demonstrated. In case of a dispute, intent to sign is left to the finder of fact and is a key evidentiary consideration in developing an e-signature process.

Signature Associated with the Record

To qualify as an electronic signature under ESIGN and UETA, the signature must be attached to or logically associated with the record being signed. The system that is used to capture the electronic transaction must either:

(a) keep an associated record reflecting the process by which the signature was created, or

(b) make a textual or graphic statement that is added to the signed record, reflecting the fact that it was executed with an electronic signature.

Electronic signatures should also provide some method of verifying that the purported signer did in fact create the electronic signature. This process is called “attribution” and although it is not specifically required by the e-signature statutes, it has been recognized as a best practice for the establishment of an electronic transaction system. In the electronic context, attribution is closely related to the process of confirming the identity of a party (“authentication”).

Consent to Do Business Electronically

Under ESIGN and UETA, parties must agree to use electronic signatures and records. The consent process differs based upon whether one or more of the parties is a “consumer”, and if so, whether the consumer will be provided with information that a law or regulation requires to be provided in writing (“Required Information”).

Between businesses, the nature of the parties’ consent to do business electronically can be established either 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 (a) receives certain disclosures (“UETA Consumer Consent Disclosures”), (b) has affirmatively consented to use electronic records for the transaction, and (c) has not withdrawn such consent.

Record Retention

UETA provides that legal effect, enforceability or validity of Required Information (or any record that is required to be “in writing”) may be denied if the electronic record is not in a format that is (a) capable of being retained, and (b) capable of being accurately reproduced for later reference by all parties or persons who are entitled to retain the contract or other record.

Additionally, if there is a rule of law that would otherwise require electronic records generated through on online system to be retained for a specified period of time, the retention requirements in Section 101(d) must be met by keeping an electronic record that (a) accurately reflects the information set forth in the contract of other records; and (b) remains accessible to all persons who are entitled to access by statute, regulation or rule of law, for the period required, in a form that is capable of being reproduced for later reference. Retention and storage methods are particularly vital to the preservation of electronic chattel paper or other forms of transferable records.

Understanding the validity of electronic signature and electronic contract execution, intent to sign, association of the electronic signature and electronic record, consent to do business and record retention considerations are helpful when choosing an electronic signature and contract execution provider.

DocuSign’s electronic signature and electronic contract execution solution establishes intent to sign, associates the electronic signature with the electronic record, establishes consent to do business electronically and retains records in a secure manner.