Electronic Signature Laws & Regulations - United States

In today’s fast-paced digital landscape, businesses need reliable tools to streamline operations, ensure legal compliance, and enhance productivity. One such indispensable tool is the eSignature solution, a transformative technology that eliminates the need for physical signatures. Among the top-tier solutions available, emSigner stands out as a comprehensive platform designed to cater to businesses of all sizes.

This blog dives deeper into what makes emSigner a leading choice for eSignature solutions, exploring its features, benefits, and considerations to help you determine if it’s the right fit for your business.

Many of us have experienced signing a document electronically. It can be done by typing our name, drawing it on the device with our finger, or inserting an image of our signature. Electronic signature is the modern way of document signing. It is the most secure method of document signing. It offers flexibility to organizations to choose from various kinds of e-signatures based on the nature of business and signing requirements. 

If you are thinking, “Is electronic signature legal in the USA,” then this blog you have landed on the right page. The U.S. Electronic Signatures in Global and National Commerce Act, also known as the ESIGN Act proclaimed in the year 2000 that e-signatures hold legal value in every state and territory of the U.S.A. wherever federal rules are applicable. In states that do not uphold federal laws, the U.S. government has ordained the Uniform Electronic Transactions Act or UETA. This act was published in 1999 by the Uniform Law Commission.

However, the default federal law is ESIGN which applies to transactions associated with international or interstate businesses in states that do not accept UETA or any other policy that offers alternative methods for using e-signatures that are consistent with ESIGN. 

ESIGN was legislated as a measure to settle disputes between various state laws. It regulates the approach to digital signatures and records for interstate and international business. Most jurisdictions have adopted UETA. It has significantly similar policies and applies to different transactional scenarios that are not covered by ESIGN.

Kinds of electronic signature

There are two primary kinds of electronic signatures used in the USA. They are:

• E-signature- Also known as electronic signature, e-signature signifies any electronic procedure that implies the acceptance of any record or agreement. This is a broad category that includes the majority of the electronic signatures in the U.S.A. This kind of signature uses various authentication methods to verify the identity of the signer. The signer has to submit one or more of the several authentication factors such as username, email ID, password, PIN, OTP, etc. The signing proof is portrayed by a secure method that involves an audit trail of the actions done on the document and a digital certificate that is tamper-proof and fixed into the final signed document. 

• Digital signature - In the case of digital signature, a trust service provider such as a Certificate Authority issues a digital certificate which is used as a signing proof. The digital certificate is attached with each signature with the help of encryption on the document. 

Role of electronic signatures

Electronic signatures are highly potent in leveraging cross-border transactions. Here are some of how electronic signatures can uplift international transactions:

• Speed and efficiency - Electronic signatures eliminate the need for paperwork and physical documents need not be sent across borders for signing purposes. This helps streamline the signing process and reduce delays while maximizing the efficiency of operations. 

• Cost savings - Electronic signatures cut down heavily on printing, scanning, postage, courier services, and other expenses that come with physical document handling. This saves funds that may be used in other important international transactions.

• Accessibility - E-signature makes it possible for signing parties to sign from any location, thus offering accessibility and flexibility. This makes working cross-border and across different time zones easy.

• Security- Electronic signature solutions come with advanced security features including encryption, multi-factor authentication, and biometrics. These security features prevent unauthorized access and exploitation of the document. This enhances the overall security and integrity of financial transactions and documents.

• Global compliance - Trusted e-signature solutions like emSigner comply with international policies and regulations of e-signing. This ensures that agreements are legally valid in the court of law as they are enforceable in multiple jurisdictions.

• Record keeping- E-signature software comes with dynamic record-keeping features that help organizations maintain a digital trail of their signed documents and agreements. Such organized record-keeping is helpful in dispute resolution whenever required and in need of auditability.

• Cross-border transactions - E-signature enables simplicity and ease in cross-border collaborations and transactions. Parties can exchange and sign documents from different corners of the world. This makes it possible for businesses to explore global opportunities and expand. 

• Reduced environmental impact - E-signatures are an environmentally sustainable approach to doing international business. As it reduces paper consumption and the carbon footprint that is associated with physical transportation of the signing documents. Such an approach is highly needed in today’s international business landscape. 

ESIGN Act

The ESIGN Act recognizes electronic signatures with the same legal status as traditional wet-ink signatures across the USA. The Act has helped expedite how organizations collect, track, and manage approvals and signatures on all kinds of documents and agreements. The ESIGN Act defines e-signatures 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.” This means that electronic signatures have legal recognition as a legal process to demonstrate an agreement to a contract.

The ESIGN Act states that electronically executed agreements can be presented as a piece of evidence in a court of law. ESIGN is only applicable to those transactions that fall under the interstate and international commerce category. It excludes all records and contracts that are governed by the Uniform Civil Code, also called the UCC. It further ignores transactions that are associated with laws that govern wills, testamentary trusts, codicils, divorce, adoption, and family matters.

An e-signature is legally binding as per the ESIGN Act if it involves the following five factors:

Intent to sign

Just like a handwritten signature, the signer of the document must demonstrate his intent to sign the document electronically. This intention can be shown by typing, drawing using a mouse, or clicking an “agree” or “accept” button. 

Consent to do business digitally

Various e-signature laws require consent to conduct business electronically. The consent must be shown to prove that the user has the required technology to sign electronically. This may be in the form of a click button or a clause stating his agreement.

Opt-out clause

If a signer wants to opt out of signing the document electronically, then clear instructions for manual signing must be readily available within the signing process.

Signed copies

All signers must receive a final, signed copy of the agreement. Most e-signature solutions automatically deliver the final signed copies as part of the approval process.

Record retention

The ESIGN Act addresses record retention.It favors the legitimacy of electronic records till they precisely reflect the nature of the agreement and can be reproduced whenever needed. This is usually fulfilled by allowing the signer to download a copy of the agreement or providing him a signed copy of the same.

Uniform Electronic Transactions Act (UETA)

The Uniform Law Commission created the UETA model in 1999 with the vision to make electronic signatures and records legally valid in the majority of the states in the USA. This means that an electronically signed document holds the same status and is as legally binding as a document signed in wet ink. 

Almost all American states have adopted UETA which makes e-signatures highly popular. However, New York has its own set of rules for electronic signatures and we have discussed that in detail in the next section.

The fundamental principles of UETA are:

• A signature or record in its electronic form cannot be denied legality or enforceability.

• A contract that was formed using an electronic record cannot be denied legal status or enforceability.

• If a law requires a record to be in writing, an electronic record is usually acceptable in that case.

• If a law requires a signature, an electronic signature is usually acceptable in that case.

The UETA Act does not apply to wedding, birth, or death certificates, and codicils, wills, and testamentary trusts.

New York

As mentioned before, New York has not implemented the UETA Act. Despite that, e-signatures have held legal importance in the state since 2000. This legal status is granted by the Electronic Signatures and Records Act (ESRA). According to this act, electronic signatures hold the same legal status as handwritten ones. ESRA also governs the electronic facilitator within the New York Office of Information Technology Services. This department manages the technologies that foster government effectiveness and efficiency, including e-signatures. It also publishes a detailed guide for those seeking knowledge about e-signatures under ESRA. 

New York gives e-signatures the same legal value as traditional wet ink signatures. They are recognized by the courts and can be admitted to the law court if they adhere to the evidence policies. Similar to other e-signature policies, government organizations, and citizens are not required to use e-signatures or records. Furthermore, ESRA does not include documents associated with incapacity planning or post-death, including living wills, trusts, wills, healthcare proxies, and power of attorney. 

Documents that cannot be electronically signed

As per general rules, here are the documents that do not recognize electronic signatures and must be traditionally signed with wet ink:

• Codicils, wills, and testamentary trusts

• Birth, marriage, and death certificates

Other documents that may require a handwritten signature, depending on the state, include, powers of attorney, “do not resuscitate” orders, adoption papers, health care proxies, divorce papers, and other documents related to family law documents.

Differences between ESIGN Act and UETA Act

The basic points of difference between the ESIGN Act and the UETA Act are mentioned below:

• ESIGN is a federal law that is applicable across the nation, while UETA is a state law that is operative in 47 states and territories. Here, in cases of disputes, ESIGN takes precedence over UETA.

• Unlike UETA, ESIGN Act does not include oral communications from the definition of e-records, restricts transferable records, limits regulatory authority, and omits default rules.

• UETA, on the other hand, includes provisions on record attribution, message timing, contract document errors, and admissibility of e-records. All of these are not present in the ESIGN Act.

Bottomline

There are various e-signature solutions available and each of these has distinct features. However, if you want the best e-signature solution to cater to all your e-signing requirements, then emSigner is the best solution tool. It is the best and easy-to-use resource that offers a comprehensive solution for document management or contract management. Also, if you want more information about electronic signatures and details regarding, “Are electronic signatures legal in the USA?” then our team at emSigner can help you with all the details.

emSigner is based on three main principles:

• Automation- You can get instant benefits with its completely automated signing process that gives you the benefits of going paperless including reduced costs and increased ROI.

• Data security and trust - It provides user identification features where users have to go through an authentication process before signing, thus leveraging security in the signing process.

• Compliance - The platform adheres to state rules and regulations concerning electronic signatures making the document legally binding on a global level. 

emSigner empowers your organization with effective e-signing features and contract management facilities. If you want to expedite the process of e-signing storing and managing documents, then emSigner is the best tool you can invest in.