Highlights:
- In US courts, a document cannot be denied effect solely because it is electronic.
- The United States’ Electronic Signatures in Global and National Commerce Act (E-Sign Act) and the Uniform Electronic Transactions Act (UETA) control the use of electronic documents and signatures at the federal and state level.
- The COVID-19 pandemic has propelled the wider acceptance of electronic documents and signatures through software programs such as DocuSign, which creates an audit trail to authenticate the validity of an e-signature.
When the COVID-19 pandemic began, many companies quickly required their employees to start using electronic signatures on documents, because many people did not have scanners and printers to use while working from home. The use of electronic signatures raises issues about appropriate use. The tips below relate to the use of e-signatures in the United States.
These tips are mainly based on the ACC webcast “A Primer on Electronic Transactions and Electronic Signatures” by Jackie Camp, Partner, Alyse Young, Associate, Joseph Speight, Associate at Womble Bond Dickinson; and Stefanie Holland, Vice President, Deputy General Counsel, Corporate and Assistant Secretary, Albemarle Corp.
Key US laws governing electronic signatures and documents
In 2000, the US Congress enacted the Electronic Signatures in Global and National Commerce Act (E-Sign Act) which created national standards for e-signatures. Under the E-Sign Act, an electronic document or electronic signature cannot be denied legal effect solely because it is electronic. Exceptions include wills and certain contracts under the Uniform Commercial Code.
Forty-nine US states, Puerto Rico, the Virgin Islands, and the District of Columbia have adopted the Uniform Electronic Transactions Act (UETA). New York has a similar law but has not adopted the UETA.
The E-Sign Act applies to most contracts stemming from interstate or foreign commerce, and when both the E-sign Act and the UETA apply, the E-Sign Act preempts the UETA.
Tips for using electronic signatures:
- Companies should establish guidelines and policies, and train employees on the proper use of e-signatures. Employees many feel uncomfortable using software such as DocuSign.
- Language should be added to documents, noting the parties have agreed to accept e-signatures.
- A party to a contract cannot decide to sign using DocuSign then force the other to accept it.
- Whether an e-signature is acceptable for a certain type of document depends on a state’s version of the UETA.
- A company’s bylaws can provide for the acceptance of e-signatures.
- If there is a question about the use of an e-signature, a client can e-sign a document, then when the client is in the office, they can sign a copy that can be kept on file.
- The US Securities and Exchange Commission usually requires ink signatures, but there has been some flexibility due to Covid.
- Documents with e-signatures are usually admissible in US courts, and most courts will not exclude an electronic record solely because it is electronic.
- The US Federal Rules of Evidence establish how to admit an electronic record into evidence.
- Executed electronic documents need to be retained for the same amount of time as “ink signed” documents.
- DocuSign’s software creates its own audit trail, allowing the user to authenticate an e-signature.
- Having a technology security procedure in place is the best evidence to present to a court that an e-signature is authentic.
- Verify that the person e-signing has the authority to do so.
- Electronic signatures may not apply in cross-border agreements.
- Electronic signatures are valid when the agreement is silent about e-signatures and no party objects.
Learn More:
Learn more in the webcast “A Primer on Electronic Transactions and Electronic Signatures”
Read “eSign Rising” by Dan Puterbaugh, ACC Docket, September 2017, pp. 51-55.
Read “Embracing E-Signatures: Maximize Your Document Processes” by Olga V. Mack and Katia Bloom, ACC Docket, August 25, 2017.
Check out the ACC Resource Library: www.acc.com/resource-library
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