Digitization has taken businesses worldwide by storm. On average, companies that rely on digital solutions are 26% more profitable, and have 12% higher market evaluations than their industry peers, according to a Capgemini study.
Electronic signatures represent one of the biggest opportunities to accelerate a shift towards employing digital business solutions. In 2000, the U.S government passed the ESIGN Act (Electronic Signatures in Global and National Commerce) to ease the adoption of electronic signatures, ushering in a new era of document streamlining.
However, 17 years down the line, most businesses lack a clear understanding of the legality of electronic signatures. One of the most frequently asked questions during our client consultations is: how can I ensure that my electronically signed documents hold up in a court of law?
This blog will help you better understand what it takes for an electronic signature to be legally binding in the U.S.
Is ESIGN Act the only enforceable electronic signature regulation in the U.S?
No. In addition to the ESIGN Act, the Uniform Law Commission drafted UETA (Uniform Electronic Transactions Act) in 1999 to provide a legal framework for the use of electronic signatures in each state.
UETA has been adopted by 47 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. While Illinois, New York, and Washington have not adopted UETA, they have implemented similar statutes validating electronic signatures.
What do the ESIGN Act and UETA imply?
Both UETA and the ESIGN Act grant electronic signatures the same legal status as traditional wet ink signatures in the U.S. These acts:
What are the factors that make electronic signatures legal in the U.S?
For an electronic signature to be legally binding it must meet the following requirements stipulated by these two acts:
(i) Intent to sign
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.
(ii) Consent to do business electronically
The respective parties must either express or imply their consent to do business electronically. Most leading electronic signature softwares prompt users to confirm their consent before they sign a document electronically.
(iii) Clear attribution of signature
Attribution of an electronic signature can be determined based on the context and circumstances under which the document was signed. SignEasy ensures proper attribution by providing users a detailed audit trail: straight from the signer’s email ID to the device IP address to the signature timestamp, every time they sign a document electronically.
(iv) Association of signature with the record
It is critical for electronic signatures to be connected to the document that is 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.
(v) Record retention
The ESIGN Act legitimizes the validity of electronic signature records as long as they accurately reflect the agreement and can be reproduced as required. Most leading electronic signature softwares address this by providing users a fully-executed signed copy or by allowing them to download a copy of the signed document.
Running through the above-mentioned factors will help you choose a legally binding electronic signature software that suits your needs to a T, with ease.
Adopt electronic signatures and boost your business by signing up for our free trial today!