Are electronic signatures legally binding in the US?
The Uniform Electronic Transactions Act (the “UETA”) governs electronic transactions and records, including the use and validity of electronic signatures. Most states have adopted the UETA.
The UETA defines an electronic signature as “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” The UETA does not stipulate that a specific technology must be used to create a valid signature. What matters is that there was an intention to adopt the sound, symbol or process for the purpose of signing the related record and creating a legally binding obligation. Important to this definition of electronic signature is the requirement that the electronic signature be linked or associated with the record itself. When dealing with paper, it’s logical to assume that the symbol or group of letters adopted by a party as their signature will be found on the same physical document that is being used to create a legally binding obligation. If that symbol is missing, the document hasn’t been signed and the intention to create a legally binding obligation isn’t yet present (although unwritten agreements can still be legally binding if the requisite intention is present - signed written agreements generally are evidence of this intention). However, this physical association is not always present in the digital world and therefore any electronic signature solution must ensure some link or connection between the electronic signature and the digital record. Ideally, the electronic signature should appear directly on the digital record, mimicking a paper document with a handwritten signature.
As the UETA is not adopted by every state, the federal government enacted the Electronic Signatures in Global and National Commerce Act (the "ESIGN Act") in 2000. The ESIGN Act governs the use of electronic signatures and records used for interstate and foreign commerce. The ESIGN Act states that a contract or signature may not be denied legal effect, validity, or enforceability solely because it is in electronic form. As a result, per the ESIGN Act, electronic signatures and records are equivalent to paper documents signed in wet ink. However, consumers have a right to refuse the use of electronic signatures and may reserve the right to require and use a handwritten signature. Finally, the ESIGN Act states that if a business must retain a record of a transaction by law, that requirement is satisfied by retaining an electronic record so long as the record: 1) accurately reflects the substance of the original record in an unalterable format; 2) is accessible to people who are entitled to access it; 3) is in a form that is capable of being accurately reproduced for later reference, whether by transmission, printing or otherwise; and 4) is retained for the legally required period of time. Therefore, it is important when storing electronic documents to ensure that a document management system is used that meets these requirements.
New York State enacted the Electronic Signatures and Records Act (the “ESRA”), which provides that electronic signatures are as legally binding as handwritten signatures. The ESRA adopts a definition of electronic signature that is similar to the UETA, defining an electronic signature as an electronic sound, symbol or process attached to or logically associated with an electronic record and adopted by a person as their signature. The ESRA defines an electronic record as information created, stored, generated, received, or communicated by electronic means in a form that a person can perceive and which can be accurately reproduced. Ultimately, the ESRA gives electronic signatures and electronic records the same legal effect as handwritten signatures on paper documents.