Legality and enforceability of electronic signatures in the United States*

The United States has a formal two-tier model, with a federal law, the Electronic Signatures in Global and National Commerce Act (“ESIGN”) and 48 states and Washington, D.C. and Puerto Rico having its own variable version of the Uniform Electronic Transactions Act (“UETA”). Of note, California, while formally adopting UETA, has numerous non-uniform exclusions, many involving consumer transactions. Two states Illinois and New York have not adopted the UETA but have adopted similar laws or are subject to ESIGN.

ESIGN and UETA use the same definition for an electronic signature — an electronic signature includes “any electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record”.

Yes, such a signature would qualify as an “electronic signature” under both ESIGN and UETA.

Electronic signatures may generally be used in the following categories of transactions or documents:

• Human Resources
• Procurement
• NDAs
• Software licensing
• Education
• Life Sciences
• High Tech
• Consumer transactions (excluding certain post-default notices, and excluding non-uniform exemptions in California's UETA)

While the use of electronic signatures is not prohibited for the following transaction types — though depending on the state or government entity, individual transactions within the transaction category may not be authorized to be executed electronically — additional considerations may need to be met for certain types of transactions, and at times caution should be exercised, before using electronic signatures. Below are some examples of the types of transactions that may require further assessment before proceeding:

• Corporate organizational documents and resolutions
  • In some states, corporate documents are excluded or subject to special rules.
• Procurement
  • Electronic equivalents of bills of lading and warehouse receipts under Article 7 of the UCC.
• Healthcare
  • Records related to FDA clinical trials.
• Banking
  • Wire transfer agreements under Article 4A of the UCC.
• Lending
  • Under UETA, special rules apply to negotiable promissory notes (including negotiable promissory notes not secured by real property).
  • In some UETA states, as noted in Section 5, notices of default or foreclosure under mortgage or leases cannot be provided electronically.
  • Letters of credit under Article 5 of the UCC.
• Real Estate
  • Under ESIGN and UETA, electronic equivalents to negotiable promissory notes where debt is secured by real property must meet specific requirements.
• Chattel Paper
  • Article 9 of the UCC sets forth requirements that must be met to have control over electronic chattel paper.
• Insurance
  • State regulators have established special requirements and exceptions for certain insurance documents.
  • Further, ESIGN and some state UETAs exempt documentation related to termination of health or life insurance.
• Documents to be notarized
  • While ESIGN and UETA both expressly authorize electronic notarization, not all state notarial laws enable electronic notarization.
  • Note that as of April 2021, over 30 states have adopted legislation enacting remote online notarization.
• Documents to be recorded
  • Recordation is done in the US on a county level; therefore, the relevant county may not be capable of accepting electronically recorded documents.
• Government filings
  • Under ESIGN, electronic use is only permitted on records presented to, or filed with, government agencies with authorization from the agency.
  • Under UETA, electronic use is only permitted on records presented to, or filed with, government agencies with prior authorization from the agency and in accordance with standards established by the agency.
  • For example, the IRS has established rules for various forms and reports.

ESIGN does not apply to the following transactions and/or documents:

• Wills or testamentary trusts
• Documents related to adoption, divorce, and other matters of family law
• Court documents requiring execution in connection with court proceedings
• Notice of utility termination, default or foreclosure under mortgage or lease, termination of health or life insurance, and product recalls and safety notices
• Notices that accompany transportation or handling of hazardous materials, pesticides, and other toxic materials
• Certificated securities

The UETA does not apply to the following transactions and/or documents:

• Wills and testamentary trusts
  • We note that states are beginning to introduce and enact the Electronic Wills Act, meaning that despite the exemption from UETA, the ability to execute a will electronically is permissible in certain states.

• Certificated securities

• In some states:
  • Documents related to adoption, divorce, and other matters of family law;
  • Court documents requiring execution in connection with court proceedings are excluded;
  • Notice of utility termination, default or foreclosure under mortgage or lease, termination of health or life insurance, and product recalls and safety notices;
  • Notices that accompany transportation or handling of hazardous materials, pesticides, and other toxic materials.

Yes. First, under both ESIGN and UETA, parties cannot be required to use electronic records and signatures. The consent does not need to be expressed and can be manifested through the facts and circumstances of the transaction.

Second, under ESIGN and various state UETAs that have incorporated this requirement from ESIGN, whenever information is required by law to be provided to a consumer “in writing,” then the information can only be provided to the consumer if the consumer is provided with the specific electronic consent disclosures that ESIGN mandates, then affirmatively consents to be provided with such information electronically, and has not withdrawn such consent. Furthermore, the consumer must consent electronically, or confirm his or her consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent.

An electronic signature cannot be denied legal standing, validity, or enforceability solely because it is in electronic form. With that said, if the validity of the electronic signature is challenged, the party seeking to enforce the electronic signature must (i) demonstrate that the signer intended to sign the electronic record; (ii) attribute the electronic signature to the signer (which may be accomplished by any means); (iii) ensure that the electronic signature is attached to, or logically associated with, the record being signed; (iv) the signer must be permitted to retain a copy of the signed record; and (v) the signed record must be maintained in a secure manner that preserves its integrity.

Maintaining an audit log associated with each signing session will help establish, in the case of a dispute, that the signature can be attributed to the signer.

Last updated: May 2021