Is electronic signature legally binding in the US?

Is electronic signature legally binding in the US?

Technology has revolutionized the way businesses conduct their daily operations. By utilizing digital solutions, such as electronic signatures, companies are able to focus on their core activities better and streamline their processes, from menial to all-important ones; expedite transactions without compromising quality to shorten the turnaround time of processes, resulting in more output; implement new customer service strategies, ensuring meaningful and results-oriented transactions; and reduce operational costs by going paperless and automating processes.

 

E-SIGN Act of 2000

The birth of digital solutions for businesses across all industries has led to the rise of electronic signature platforms. Electronic signatures, or e-signatures, are symbols or digital data attached to an electronically transmitted document. This type of signature, approved by the U.S. Electronic Signatures in Global and National Commerce Act (E-SIGN Act) of 2000, holds the same legal status as a handwritten signature, provided that it adheres to the bill’s regulations. Moreover, the enactment set the legal landscape for the use of electronic signatures, establishing its enforceability in the United States.

The E-SIGN Act states a general rule of validity pertaining to the use of electronic records and signatures for transactions in or affecting interstate or foreign commerce. In its official document, it clearly defines 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.”

 

UETA of 1999

Aside from the E-SIGN Act, the Uniform Electronic Transactions Act (UETA) is another bill that secures the legality of electronic contracts and the validity of electronic signatures. Passed into law in 1999, earlier than the passage of the E-SIGN Act, it determines the legality of electronic signatures in both commercial and government transactions.

The UETA and E-SIGN Act both contain guidelines on electronic records and signatures; however, their main distinction has to do with governance. While the E-SIGN Act is a federal act, affecting people in all 50 states, the UETA has been adopted on a state-by-state basis.

 

UETA adoption

Forty-seven states, along with the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, recognize and implement UETA; however, Illinois, New York, and Washington have their own bill on electronic signature in place.

    • Illinois — Adheres to Electronic Commerce Security Act. While the bill does not give stringent definitions as to which technologies or platforms to use, it removes the uncertainty over the legal requirements for secure electronic signatures.
    • New York — Adheres to Electronic Signatures and Records Act. The bill confirms the legal equivalence of electronic signatures with manual signatures.
    • Washington — Adheres to Electronic Authentication Act. The bill serves as a guideline to learn how to facilitate commerce by means of electronic messages.

 

Legality of e-signature

The E-SIGN Act and UETA grant electronic signatures the same legal standing as traditional wet signatures.

Nevertheless, to avoid any legal problem, full compliance with the acts must be observed. For an electronic signature to be legally binding, it must meet the following terms:

    • Intent to sign

All procedures associated with signing documents electronically must be clear to all parties. Thus, intention to transact electronically must be explicit and straightforward and not implied. In addition, they must be aware of their rights, including the right to withdraw consent without the imposition of any condition or consequence and to access the signed document even when the transaction is already complete. All in all, the transaction should only proceed after all signatories affirmatively consented to sign electronically.

    • Consent to sign electronically

All parties must declare consent to sign electronically despite the option to sign on paper. The signatories must give affirmative and unambiguous consent before proceeding with the process. The assumption that a signatory agrees to sign electronically due to him or her not denying consent or being unresponsive to an option to grant consent, is legally unacceptable.

    • Association of signature with the record

The program used for the transaction must keep a record reflecting all involved processes, particularly the creation and collection of signatures. Moreover, an electronic signature must solely be connected to the document that required it. Forwarding it to anyone or using it apart from its original purpose declares non-adherence to certain laws and may have appropriate consequences.

    • Record retention

If the signatory consents to sign documents electronically, the E-SIGN Act requires the preservation of the record for a period of time, accurately reflecting the information, giving access to people who are legally involved for later reference and reproduction, and keeping the original file in an unalterable format.

Benefits of electronic signature

The use of electronic signatures supports companies, from startups to multinational corporations, in winning their business objectives. Moreover, even non-profit organizations utilize electronic signature solutions to improve their documentation and signature workflows, enabling them to concentrate more on promoting and achieving their causes. Real estate professionals sell more properties. Insurance agents receive signed documents from clients easier. Human resource staff onboard new hires quicker. By using an online platform that provides electronic signature solutions, businesses across all industries perform better.

The following are the most noteworthy advantages of using electronic signatures:

    • Lower operational costs

Electronic signatures are cost-effective. Aside from reducing the time it takes to sign and collect signatures from clients, it reduces operational costs by eliminating the use of pens and papers, travels to and from the workplace, or the cost of postal mail.

    • Faster document turnaround time

Companies that use electronic signatures do not only save money but also time. A reliable electronic signature platform enables signatories to sign documents in a few clicks, despite their location. Professionals no longer have to wait for several days or weeks for their clients to sign and mail the documents back. The signatories can sign the needed documents, using only an appropriate device and a stable internet connection. This is most advantageous for businesses with time-sensitive processes, particularly those that involve selling.

    • Increase in productivity

The improvement in the documentation and signature workflows of a company results in an increase in productivity and output; thus, this allows professionals to focus on more critical responsibilities, serve more clients, and close more transactions.

    • Convenience

A reliable electronic signature solutions provider enables professionals to sign and send documents for signing in just a few minutes. It eliminates manual processes that eat up time and cause evitable delays, and speeds up transactions by removing inefficient processes, such as printing documents, signing pages by hand, and driving to the nearest post office to send them.

    • Enhanced security

Paper documents are easily lost and damaged, unlike digital documents. Electronic signature platforms mitigate these risks. Moreover, they have strong and secure encryption algorithms, blocking the access of third-party websites, avoiding data theft. Moreover, any changes made in the document will show on the document log.

Now that almost every sector of business is embracing digital solutions, competition is getting tougher; therefore, for a company to not fall behind its competitors, it is only appropriate to use digital solutions to enhance workflows. For businesses that spend most of their workdays accomplishing and signing documents, utilizing an electronic signature platform leads to greater productivity and profitability.

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