What is the ESIGN act?

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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. UETA has been adopted by 48 US states. 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.

The history of ESIGN act in the U.S.

United 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. 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:
    a. Both parties concur on the ‘secure nature’  of the signature
    b. Applied by both parties 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 is the case 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 either express or imply their consent to do business electronically. Most leading e-signature softwares prompt 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 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.

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 🇬🇧

  • Electronic Communications Act 2000
  • Electronic Signatures Regulations 2002
  • Electronic Identification, Authentication and trust Services (eIDAS)

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)

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).

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May 17, 2022 11:00 a.m  CT

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