Digital and Electronic Signature Laws in America

With all of the concern about identity theft in the digital age, the idea of using digital signatures (digital signatures are a type of e-signature) for important financial agreements and contracts can be feel intimidating. While this concern would have been valid in the past, the United States Government has shown interest in the use of e-signatures as a valid means of entering into an agreement.  This has spurred an increased interest in creating ever safer methods for using electronic and digital signatures.  As such, we would like to examine the two main federal laws which have helped to spur this interest.

Uniform Electronic Transactions Act

The Uniform Electronic Transactions Act (UETA) was a part of the United States Uniform Acts, which were established in an attempt to unify state laws concerning contracts.  While the broader Uniform Acts focus extensively on paper contracts, UETA represents the Uniform Acts addressing the question of an electronic signature’s validity.

The 19 sections of this act begin by defining key terms and also the scope of the act, it then moves to set parameters for when electronic signatures are valid.  Section 5 explains that e-signatures will only be valid when both parties consent to transactions via electronic means.  Section 7 is where legal recognition is officially granted to e-signatures.  Section 7 even goes so far as to overrule older laws by stating that an electronic record satisfies any law which requires a document to be in writing.

Other requirements for electronic contracts include: The idea that the information must be available to all parties, which makes the use of online contract management all the more effective.  Permits public officials and notaries to act electronically which essentially removes outdated stamp and seal requirements.What is essential to remember about UETA, however, is the fact that this legislation only applies to business, commercial, and governmental matters.  This does not grant legal recognition to non-commercial contracts or agreements.

Electronic Signatures in Global and National Commerce Act

The second major federal legislation concerning digital and electronic signatures is Electronic Signatures in Global and National Commerce Act (ESIGN).  This act allows the use of e-signatures in many situations and is specifically concerned with interstate agreements.  This legislation essentially covers all of the agreements that are not recognized by UETA.  ESIGN was heavily influenced by the problems which were created due to each individual state having differing law(s) regarding the use of e-signatures in contracts and agreements.

The verbiage of ESIGN opens up the use of electronic signatures.  It states that electronic records can be considered legal documents when they “accurately reflect” the substance of the documents involved.

While ESIGN opens up many opportunities to utilize e-signatures, section 101 of the ESIGN act preserves the right for any individual to refuse the use of electronic signatures.  Which would then require the two parties to consent by a physical signature put down on paper.

It may be of interest to note that industry leaders pushed congress to create National ESIGN Day.  This anniversary of sorts was signed into existence in 2010 and is recognized as being on June 30 of every year.