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 “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 a 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.
The relation between UETA and ESIGN act
In addition to the ESIGN Act, the Uniform Law Commission drafted UETA (Uniform Electronic Transactions Act) in 1999 to provide a legal framework for electronic signature use per state. It outlines the legalities ESIGNatures relating to everything from transferable records to automated transactions and retention of records. 48 US states have adopted UETA. While Illinois and New York have not adopted UETA, they have implemented similar statutes validating e-signatures. In the United States, the Uniform Electronic Transactions Act (UETA) 1999 and the Electronic Signatures in Global and National Commerce Act (ESIGN) 2000 admit the validity and enforceability of electronic signatures.
The UETA and the ESIGN Act cover commercial transactions and therefore do not pertain to records used unilaterally or which do not relate to business, commercial (including consumer), or governmental affairs. They also specify exemptions to the use of electronic signatures in certain documents, such as those relating to the creation and execution of wills, adoption, divorce, or other matters of family law. Please review the list of exemptions under section 103 of the ESIGN act, and consult with legal counsel to identify relevant exclusion categories.
- 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:
a. Both parties concur on the 'secure nature' of the signature
b. Applied by both parites in a verifiable manner
c. Created in a manner that can be deemed commercially reasonable
d. Can be relied upon by all parties in good-faith
How to ensure that an electronic signature is ESIGN compliant?
Intent
As with traditional wet ink signatures, electronic signatures are valid only if a user demonstrates a clear intent to sign. For example, Signeasy allows users to opt-out of electronically signing a document by providing the option to decline signature requests.
Consent
The respective parties must express or imply their consent to do business electronically. Most leading e-signature software prompts users to confirm their consent before they sign.
Proof of signing
The context and circumstances under which the document was signed can indicate the attribution of an electronic signature. Signeasy ensures proper attribution by providing users with a detailed audit trail. This trail goes from the signer’s email ID to the device IP address to the signature timestamp each time they sign a document electronically.
Attribution
An electronic signature must be connected or associated with the document being signed by indicating a process by which the signature was created or by creating a graphical or textual statement, which gets added to the signed record. It is critical for electronic signatures to be connected to the document being signed. For example, Signeasy does not allow electronic signatures to be transmitted to anyone except as part of a signed document sent by the signer.
Record Retention
An electronically signed document must be in the form of an electronic record capable of retention by the recipient at the time of receipt. The sender or the information processing system must not inhibit the ability of the recipient to print or store the electronic record for later reference.
Are electronic signatures legally binding and enforceable?
Both the UETA and ESIGN ACT laws explicitly provide that “a signature, contract, or other record relating to such [commercial] transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form."
An electronic signature is an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person intending to sign the record.
The acts establish the general rule that electronic signatures are valid and enforceable, provided certain requirements are established. The legal admissibility of electronic signatures is well-established in the United States. To ensure that the electronic document can be authenticated and admitted as evidence, it is important to maintain an audit trail that logs the actions taken by the parties electronically signing documents.
ESIGNature compliance across the world
ESIGNature laws in the UK 🇬🇧
ESIGNature laws in India 🇮🇳
- Information Technology Agreement (ITA)
- Indian Contract Act (ICA)
- Electronic Signature or Electronic Authentication Technique and Procedure Rules (ESEATPR)
ESIGNature laws in South Africa 🇿🇦
- Electronic Communications and Transactions Act (ECTA)
ESIGNature laws in Canada 🇨🇦
- Personal Information Protection and Electronic Documents Act (PIPEDA)
- The Uniform Electronic Commerce Act (UECA)
Benefits and Limitations of the ESIGN Act
The ESIGN Act offers numerous benefits for individuals and organizations seeking to embrace electronic signatures. Firstly, it enhances efficiency by streamlining document signing processes, eliminating the need for physical paperwork and reducing turnaround times. This efficiency leads to significant cost savings by reducing expenses associated with printing, paper, postage, and document storage. Additionally, electronic signatures provide convenience and accessibility, allowing individuals to sign documents from anywhere at any time using various devices. They also offer enhanced security measures, such as encryption and authentication, ensuring the integrity and non-repudiation of signed documents. However, it is important to be aware of the limitations and exceptions of the ESIGN Act. Certain types of documents may be excluded from its scope, and specific industries may have additional compliance obligations. Compliance with consent and disclosure requirements is also crucial for maintaining the enforceability of electronic signatures. Nevertheless, by understanding and adhering to the ESIGN Act's provisions, businesses can fully leverage the benefits of electronic signatures while ensuring legal validity and reliability.
Advantages of using electronic signatures under the ESIGN Act:
- Increased efficiency: Electronic signatures streamline document signing processes, eliminating the need for physical paperwork, mailing, or in-person meetings.
- Cost savings: Adopting electronic signatures reduces costs associated with printing, paper, ink, postage, and storage of physical documents.
- Time savings: Electronic signatures enable faster turnaround times for signing documents, accelerating business transactions and reducing delays.
- Convenience and accessibility: Electronic signatures allow individuals to sign documents from anywhere, at any time, using various devices such as computers, tablets, or smartphones.
- Enhanced security: Electronic signatures can offer advanced security measures, such as encryption and authentication, ensuring the integrity and non-repudiation of the signed documents.
Limitations and exceptions to the ESIGN Act:
- Certain types of documents may be excluded: The ESIGN Act does not apply to all types of documents, including wills, trusts, and other testamentary documents, certain family law matters, and court orders or notices.
- Inapplicability in specific industries: Some industries may have specific regulations or requirements that limit the use of electronic signatures. For example, healthcare-related documents may have additional compliance obligations under HIPAA.
- Consent and disclosure requirements: The ESIGN Act requires obtaining consent and providing necessary disclosures before conducting electronic transactions. Failing to comply with these requirements may affect the enforceability of electronic signatures.
Recognizing the legal weight and enforceability of electronic signatures:
- The ESIGN Act establishes the legal recognition of electronic signatures in interstate and foreign commerce in the United States.
- Under the ESIGN Act, electronic signatures carry the same legal weight and enforceability as traditional handwritten signatures.
- Courts and regulatory authorities recognize the validity and enforceability of electronic signatures, provided that they comply with the requirements outlined in the ESIGN Act.
- It's important to note that the legal weight and enforceability of electronic signatures may vary in different jurisdictions outside the United States, depending on local laws and regulations.
Industry-Specific Considerations for the eSIGN act
Application of the ESIGN Act in specific industries (e.g., finance, healthcare):
- Finance industry: The ESIGN Act applies to various financial transactions, including loan agreements, insurance policies, investment documents, and electronic fund transfers. Financial institutions can leverage electronic signatures to streamline customer onboarding processes, account opening, and other financial transactions.
- Healthcare industry: The ESIGN Act has significant implications for the healthcare sector, allowing for electronic signatures on consent forms, patient records, telemedicine agreements, and other healthcare-related documents. However, healthcare organizations must also consider compliance with additional regulations such as the Health Insurance Portability and Accountability Act (HIPAA) for maintaining patient privacy and data security.
Additional requirements or regulations applicable to specific industries:
- Real estate industry: While the ESIGN Act permits electronic signatures on real estate documents, there may be additional state-specific requirements or regulations to consider, such as the Uniform Electronic Transactions Act (UETA) or state-specific real estate laws.
- Government contracts: Government agencies and contractors must ensure compliance with specific regulations governing electronic signatures, such as the Federal Acquisition Regulation (FAR), which may have additional requirements beyond the ESIGN Act.
- Legal profession: Lawyers and law firms should be aware of any state-specific rules of professional conduct regarding the use of electronic signatures, as well as any court-specific requirements for electronic filing and signatures.
Complying with industry-specific standards and guidelines:
- Each industry may have its own set of standards and guidelines related to electronic signatures and record-keeping. It is important for organizations to familiarize themselves with these standards and ensure compliance.
- For example, the Payment Card Industry Data Security Standard (PCI DSS) provides guidelines for securely handling credit card information, including the use of electronic signatures in cardholder agreements and related documents.
- Similarly, organizations operating in highly regulated sectors, such as pharmaceuticals or aviation, should consider industry-specific regulations and standards when implementing electronic signatures to ensure compliance.
What are some exceptions to the ESIGN act?
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).
