Documents That Cannot Be eSigned in the USA

E-signatures have grown into such an important part of successful business and personal operations. The ability to e-sign online has transformed how documents are executed, making it much faster and more efficient. However, apart from the convenience that electronic signatures bring forth, there are instances and specific documents wherein U.S. law bans the act of e-signing. The present blog looks at the type of documents that cannot be signed online in the USA, the regulatory environment to that effect, and why it is critically important to understand such limitations for compliance and risk management.

Understanding E-Signatures in the USA

It is required, first of all, to consider the legal background that restricts or permits the use of e-sign online in USA. The key legislation regulating electronic signatures is the Electronic Signatures in Global and National Commerce (ESIGN) Act enacted in 2000. In concert with the Uniform Electronic Transactions Act (UETA), the ESIGN Act establishes legal validity for electronic signatures and records in interstate and international commerce.

Despite such general legal provisions, there are certain types of documents and circumstances whereby esign online are either restricted or else not legally recognized. Quite frequently, this limitation may be based either on the nature of the document in question, or on the state and/or federal laws that may so require.

Types of Documents and Transactions Where E-Signatures Are Not Allowed

1. Wills and Testamentary Documents

One of the most conspicuous exclusions to online esigning in the USA involves wills and testamentary documents. Most states require the physical signing of wills in the presence of witnesses. The need to ensure that the authenticity of the testator's intention is maintained, thereby avoiding possible fraud, motivates such a move. Although some states are researching ways to modify the rules to accommodate digital solutions, presently, esign online is not legally accepted to create or modify wills.

2. Certain Family Law Documents

Documents of family law, such as divorce decrees, child custody agreements, and adoption papers, require a degree of personal interaction and judicial oversight that cannot be fully executed by esign online. Circumstantially, courts will require physical signatures simply so the parties understand and acknowledge, in earnest, the agreement. Most family law applications include requirements for appearances and notarization in person, reducing instances where e-signatures can be used in the real world.

3. Real Estate Transactions

Although esign online in USA enjoys extensive use in most of the documents concerning real estate, there are still aspects of the transaction that require physical signatures. For instance, in some states, transferring the title of real property and some mortgage documents require not only physical but also in-person notarization to meet the recording requirements of the particular state. This is one limitation that could be expected since property transactions have to be verified and witnessed in form.

4. Court Filings

While esign online in USA has been in use, it is important to note that most court documents and the processes associated with them do require physical presence. Also, most of these documents may not allow for e-signatures. Several jurisdictions in the land do require physical signatures in court documents including but not limited to complaints, motions, and other filings. As much as several courts are accepting electronic filing systems, their systems also require documents in nature with physical signatures or under certain conditions.

5. Certain Financial and Banking Documents

E-signatures are integrated into the financial industry on a large scale, and there are specific categories of financial and banking documents that may not be allowed to use electronic signatures. For example, certain securities transaction agreements, certain types of loan documents, and other agreements related to different elements of regulatory compliance may require physical ink with additional steps of verification as a part of due process in the industry.

6. Documents to be Notarized

Many documents requiring notarization may allow for the use of e-signatures, but such notarization is accepted in not all states. Notarization is, after all, a process of verification of the identity of the signer and witnessing the signature of such document. This customarily requires physical presence; although a few states have adopted electronic notarization, the acceptances and procedures vary so greatly, and not all documents may be eligible for e-signing and electronic notarization.

7. Documents Requiring Witnesses

Certain documents involve witnesses, and thus cannot be wholly taken care of with the use of an e-signature. For instance, there are some agreements or contracts that need to be executed in front of one or more witnesses who will testify to the proper signing of such a document. These types of documents involve physical presence and, by default, the witnessing of the act makes them less ideal for e-signing.

Regulatory and Compliance Considerations

Understanding the limitations of esign online will enable businesses and individuals to follow the concerned laws and rules. While the ESIGN Act and UETA provide a broad legal framework for e-signatures, there are indeed variations in state regulations and requirements. Businesses and individuals using these must be well-versed with the restrictions to avoid legal issues and to keep their documents valid.

For companies in highly regulated industries, expert consultation from attorneys or compliance professionals may be required to properly understand nuances in the applicability of esign online and to remain compliant with all applicable laws.

Conclusion

While the ability to e-sign online has brought much efficiency and ease into the management of documents, there are certain papers and transactions for which esign online in USA is limited. Knowing which documents cannot be e-signed online avoids potential pitfalls and helps ensure legal requirements are met.