Are eSignatures legal in the United States?

Quick facts

Legal recognition of eSignatures in the United States

eSignatures are recognized under the Electronic Signatures in Global and National Commerce Act (ESIGN Act) and the Uniform Electronic Transactions Act (UETA). These laws align with international standards like the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce (MLEC).

Electronic Signatures in Global and National Commerce Act (ESIGN Act)

Enacted: 2000

The ESIGN Act affirms that electronic signatures and records have the same legal effect as traditional paper documents and handwritten signatures. This federal law facilitates the use of electronic records and signatures in interstate and foreign commerce, promoting efficiency and reducing paperwork.

Uniform Electronic Transactions Act (UETA)

Adopted by States: Starting in 1999

The UETA is a model law adopted by 49 states of the United States, the District of Columbia, Puerto Rico, and the US Virgin Islands. It provides a legal framework for electronic transactions, ensuring that electronic records and signatures are treated equivalently to their paper-based counterparts.

These legal frameworks have been instrumental in the widespread adoption of eSignatures across various sectors in the United States, enabling businesses and individuals to conduct transactions efficiently and securely online.

Note: New York remains the only state that has not adopted the Uniform Electronic Transactions Act (UETA). Instead, it implemented its own statute, the Electronic Signatures and Records Act (ESRA), which makes electronic signatures legally binding in the state.

Types of electronic signatures accepted in the United States

The United States recognizes a wide range of eSignatures under the ESIGN Act and UETA, from simple eSignatures to more secure digital and biometric signatures. Each type of signature serves different purposes and levels of security, making it essential to choose the appropriate method based on the specific requirements of the transaction.

Unlike some jurisdictions, such as the European Union with its distinct classifications of eSignatures (simple, advanced, and qualified under eIDAS), the US legal framework does not formally classify eSignatures into these specific categories. Instead, it provides broad recognition and acceptance of eSignatures based on certain requirements.

Here is a detailed overview of the different types of eSignatures accepted in the US:

1. Simple electronic signatures

Simple electronic signatures are the most basic form of eSignature. They involve any electronic method used to signify agreement or consent without specific security measures.

Examples:

• Typed signatures: Typing your name at the end of an email or in an online form
• Click-to-sign: Clicking an "I Agree" or "Accept" button on a website to indicate agreement to terms and conditions
• Scanned signatures: Pasting a scanned image of a handwritten signature into a digital document
• Email signatures: Sending an email that indicates consent or approval of the attached document

Use cases:

• Low-risk agreements such as internal memos, simple contracts, or acknowledgments
• Routine business transactions where high-level security is not a primary concern

2. Digital signatures

Digital signatures use cryptographic techniques to secure the signature and verify the signer's identity. Digital signatures are created using a digital certificate issued by a trusted certificate authority (CA).

Examples:

• Public key infrastructure (PKI): Using a PKI to create a unique digital signature. The signer uses a private key to create the signature, and the recipient uses the corresponding public key to verify it.
• Digital signature platforms: Platforms like Signeasy, Docusign, Adobe Sign, and others that provide secure digital signing services. These platforms use digital certificates to authenticate signers and ensure the integrity of the signed document.

Use cases:

• High-value contracts, legal agreements, and financial transactions where security and authenticity are critical
  

• Regulatory filings and compliance documents that require verifiable signer identity and document integrity

3. Biometric signatures

Biometric signatures involve the use of unique biological characteristics of the signer for authentication. This method ensures that the signature is uniquely tied to the individual, providing a high level of security.

Examples:

• Fingerprint scans: Using a fingerprint scanner to capture and verify the signer's fingerprint as part of the signing process
• Facial recognition: Utilizing facial recognition technology to verify the signer's identity before allowing them to sign a document
• Iris scans: Using an iris scanner to authenticate the signer based on their unique iris patterns

Use cases:

• High-security transactions and agreements that require high-level authentication
• Situations where strong identity verification is necessary, such as in healthcare, banking, and government services

4. Clickwrap signatures

Clickwrap signatures involve users indicating their agreement to terms and conditions by clicking a checkbox or button. This type of signature is commonly used for online agreements.

Examples:

• Website terms of service: Users click "I Agree" to accept the terms of service when signing up for a website or online service.
• Software licenses: Clicking a button to accept the license agreement before installing software

Use cases:

• Online services and software where users need to accept terms and conditions
• eCommerce transactions where buyers agree to terms before completing a purchase

Requirements for legality of eSignatures in the United States

To ensure that an eSignature is legally valid and enforceable, the following basic criteria must be met:

1. Consent of all parties

Both the sender and the recipient must agree to use eSignatures for their transaction. This consent is typically documented during the signing process, either through an explicit opt-in mechanism or by using software that logs the agreement to sign electronically. Without clear consent, the validity of the eSignature could be challenged.

Example: An online form where users check a box agreeing to use eSignatures for the agreement.

2. Identity verification

The signer’s identity must be verifiable to establish that the eSignature is authentic and legally attributable to them. Common methods of identity verification include email authentication, multi-factor authentication (MFA), secure login credentials, or using a digital certificate issued by a trusted certificate authority (CA). For high-value or sensitive transactions, additional verification measures may be implemented.

Example: A digital signature platform that requires users to enter a one-time password (OTP) sent to their registered mobile phone.

3. Document integrity (tamper proof)

Once an eSignature is applied, the document should be locked or encrypted to prevent unauthorized modifications. Reliable eSignature platforms use hashing algorithms and encryption techniques to maintain the document’s integrity, creating a secure and immutable record of the transaction.

Example: A contract signed using a digital signature that shows an alert if any changes are made after the signature is applied.

4. Record retention/audit trails

A complete and accessible record of the eSignature process must be maintained. This includes a log of all actions taken during the signing process, such as timestamps, IP addresses, and user authentication data. These audit trails serve as evidence in case of disputes and help organizations comply with regulatory requirements for recordkeeping.

Example: An eSignature platform that keeps a secure, time-stamped audit trail of each step in the signing process, from document creation to final signature.

Limitations and exceptions

While eSignatures offer convenience and efficiency, they are not universally accepted for all types of documents and transactions in the United States. Certain documents and situations require traditional handwritten signatures or other forms of authentication. 

Key exceptions include:

1. Wills, codicils, and testamentary trusts

Documents related to the distribution of an individual’s estate after death require many formalities and witnesses to prevent fraud and ensure authenticity.

2. Adoption, divorce, and other family law matters

Legal documents and agreements related to family law, such as adoption papers and divorce decrees are matters that often involve complex legal and emotional considerations, requiring additional safeguards and in-person verification.

3. Court orders and notices

eSignatures are not valid for official court documents, including orders, notices, and other judicial paperwork. Courts typically require original signatures to maintain the integrity and authority of legal proceedings.

4. Notices of cancellation or termination of utility services

Notices regarding the discontinuation of essential services such as water, electricity, and gas can significantly impact individuals' lives, requiring a higher standard of communication and verification.

5. Notices of default, repossession, foreclosure, or eviction

eSignatures are not valid for documents related to the default on loans, repossession of property, foreclosure proceedings, and eviction notices. These notices involve significant legal and financial consequences, necessitating additional precautions.

6. Notices of cancellation or termination of health or life insurance benefits

Communications about the termination or cancellation of insurance policies affect critical aspects of an individual’s well-being and financial security, requiring heightened security and clarity.

7. Product recall notices and documents involving hazardous materials

Notifications about product recalls and documents related to the handling and disposal of hazardous materials often involve safety and regulatory compliance, demanding stringent verification methods.

8. Certain transactions governed by the Uniform Commercial Code (UCC)

eSignatures are not valid for specific transactions under the UCC, such as those involving negotiable instruments (for example, checks), and certain investment securities. The UCC has specific requirements and formalities that must be followed to ensure the legality and enforceability of these transactions.

Industries and use cases of eSignatures in the United States

eSignatures have become an integral part of business processes across various industries in the United States, driven by the need for efficiency, security, and convenience. Several key sectors have embraced eSignatures for streamlining operations and enhancing customer experiences.

Regulatory authority and compliance tips

In the United States, the regulatory framework for eSignatures is governed primarily by the Electronic Signatures in Global and National Commerce Act (ESIGN Act) and the Uniform Electronic Transactions Act (UETA). 

While these laws provide the legal foundation, there isn’t a single centralized regulatory authority that oversees eSignatures. Instead, their implementation and enforcement involve various stakeholders:

1. Federal level: The Federal Trade Commission (FTC) ensures compliance with the ESIGN Act for commercial transactions, focusing on consumer protection in electronic agreements.
2. State level: Individual states may have specific guidelines under UETA, often handled by state courts or regulatory bodies.
3. Industry-specific regulators: In sectors like healthcare, banking, and insurance, specific agencies such as the Department of Health and Human Services (HHS) for HIPAA compliance, the Consumer Financial Protection Bureau (CFPB), and state insurance commissions may provide additional oversight for eSignature use.

Ensuring compliance with the legal and regulatory standards for eSignatures involves a combination of using the right tools and following best practices. Here are practical tips to stay compliant:

1. Use certified eSignature providers: Choose eSignature platforms that comply with the ESIGN Act, UETA, and other industry-specific regulations. Providers like Signeasy often offer built-in compliance features, including identity verification, document encryption, and audit trails.
2. Maintain detailed audit trails: An audit trail is essential for verifying the validity of an eSignature. Ensure your eSignature solution logs critical details, such as the signer's identity, timestamps, IP addresses, and any actions taken during the signing process. These records help demonstrate compliance and can serve as evidence in disputes.
3. Ensure consent and transparency: Obtain clear consent from all parties to use eSignatures. Provide transparent disclosures about the eSigning process, including how the signature will be used and stored, to avoid legal challenges.
4. Implement strong identity verification measures: Verify the signer's identity using methods such as email confirmation, phone-based authentication, or multi-factor authentication. For high-value or sensitive transactions, consider digital signatures that use cryptographic techniques and digital certificates.
5. Secure documents against tampering: Ensure that your eSignature solution includes document encryption and tamper-proofing. Signed documents should be locked to prevent unauthorized modifications and maintain their integrity.
6. Retain documents and records: Store signed documents securely and in compliance with applicable record retention requirements. These records should be accessible for audits or legal reviews while maintaining confidentiality.
7. Stay updated on legal changes: Laws governing eSignatures can evolve, especially in highly regulated industries like healthcare, finance, and insurance. Regularly review updates to federal, state, and industry-specific regulations to ensure ongoing compliance.
8. Train your staff: Provide training for employees on the legal requirements and best practices for using eSignatures. This ensures that your organization follows a consistent, compliant approach.