Are Electronic Signatures Legally Binding?

Everywhere you look, electronic signatures are being used to conduct business and complete critical processes for individuals and organizations.

This digital document signing method is much faster and easier than pen-and-ink; it’s no wonder everyone wants to use electronic signature software!

But what about the legality of electronic signatures? After all, you and your document recipients are probably using them to sign important paperwork. This may leave you wondering if your digitally signed electronic documents are even legally-binding.

In this article, we’ll take a look at the (sometimes nuanced) legalities surrounding electronic signatures and outline some important factors you should pay attention to.

With the increasing use of electronic signatures by businesses, organizations, and individuals, it became increasingly important that their legality was defined so that confidence could be established in their use. This is where the ESIGN and UETA acts come in.

First came the Uniform Electronic Transactions Act (UETA) in 1999. The National Conference of Commissioners on Uniform State Laws (NCCUSL), an organization that has worked diligently since 1892 to make state laws more uniform, worked to get the UETA passed in an effort to enforce the validity of electronic signatures in the U.S.

As stated by the UETA, its purpose is “to facilitate and promote commerce and governmental transactions by validating and authorizing the use of electronic records and electronic signatures.” Furthermore, the act “applies to any electronic record or electronic signature created, generated, sent, communicated, received, or stored.”

While the UETA proved extremely helpful and allowed businesses and government institutions to continue conducting business efficiently with e-signatures, it was missing one significant thing – independent users. Here’s where the ESIGN act comes in.

The ESIGN Act, effective in 2000, “applies to any electronic record or electronic signature created, generated, sent, communicated, received, or stored.” According to the FDIC, “The E-Sign Act allows the use of electronic records to satisfy any statute, regulation, or the rule of law requiring that such information be provided in writing if the consumer has affirmatively consented to such use and has not withdrawn such consent.

Through the efforts of both acts, organizations, and individuals have been able to confidently and legally use e-signatures on important documents for over twenty years.

While both the UETA and ESIGN acts were adopted and considered valid in most U.S states, two states chose not to adopt – New York and Illinois. These three states opted to enact their own laws that regulated the use of electronic signatures.

While the aforementioned acts established the validity of electronic signatures, specific components need to be met for them to be considered legally binding. To comply with e-signature laws, the following requirements must be met:

It’s important to keep in mind that while abiding by the outlined requirements above can help keep you in-check with ESIGN and UETA; it may not be enough for your local, state, international markets or industry requirements. Always check corresponding guidelines.

Unfortunately, not everything can be signed electronically and be simultaneously considered legally-binding. The ESIGN and UETA acts have clearly outlined documents that still require pen-and-ink signatures for them to be considered legal. Here’s what you can’t use electronic signatures for:

The industry you or your organization are in can significantly impact the use of electronic signatures. Here are some examples of common industry-related requirements that may apply to you:

Other common industries like real estate, legal, and financial generally abide by the preset rules established with the ESIGN and UETA Acts. That being said, it’s always recommended that you familiarize yourself with the general rules and expectations of the industry you’re in.