Using electronic signatures as part of any business process that requires the use of contracts can provide immense value in terms of speed and efficiency to any business. Even though electronic signatures are nothing new, I talk to people all the time who have questions about how and why electronic signatures are legalling binding. Below I've listed a vew of the reasons, some links, and some bext practices.
What exactly is an electronic signature?
The E-Sign Act defines "electronic signature" as "an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record."
The E-Sign Act, aiming to bring uniformity to patchwork state legislation governing electronic signatures and records, mandates that no signature be denied legal effect simply because it is in electronic form. Additionally, "a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation."
In the US, there are a number of laws that make electronic signatures legally binding:
The Electronic Signatures in Global and National Commerce (E-SIGN) Act (15 U.S.C. §§7001-7031)
The Uniform Electronic Transactions Act (UETA) (7A Pt. 1 U.LA. 211, 211-99 (2002))
- Additionally many states have adopted some form of the UETA. Here is the version of the UETA adopted in California.
Click-to-sign create a binding Electronic Signature also.
A federal court has actually intepreted the ESIGN act as applying not only to squiggly black lines that mimic ink signatures, but also to clicking / tapping buttons that say things like "I Agree" or "I accept."
Additionally, courts have held that agreements reached by electronic means are not invalid pursuant to analogous statutory requirements. For example, the Federal Arbitration Act (the "FAA") specifies that its protections for arbitration agreements pertain only to a "written provision" in any contract. 9 U.S.C. § 2. Courts have uniformly applied the E-Sign Act to subsequent interpretations of the FAA's written provision requirement. See, e.g., Campbell v. Gen. Dynamics Gov't Sys. Corp., 407 F.3d 546, 556 (1st Cir.2005) ("[The E-Sign Act] definitively resolves the issue ... as to whether an e-mail agreement to arbitrate is unenforceable under the FAA because it does not satisfy the FAA's `written provision' requirement, 9 U.S.C. § 2. By its plain terms, the E-Sign Act prohibits any interpretation of the FAA's `written provision' requirement that would preclude giving legal effect to an agreement solely on the basis that it was in electronic form."); Specht v. Netscape Comm'cns Corp., 306 F.3d 17, 26 n. 11 (2d Cir.2002) (assessing whether clicking to download software created enforceable agreement to arbitrate, and noting that the matter of whether "the agreement is a `written provision' despite being provided to users in a downloadable electronic form ... has been settled by [the E-Sign Act]," although ultimately finding that consumers' clicking "yes" in the context presented in that case did not manifest assent to license terms).
We find this analysis helpful in reaching the same conclusion in the context of the Copyright Act. To invalidate copyright transfer agreements solely because they were made electronically would thwart the clear congressional intent embodied in the E-Sign Act. We therefore hold that an electronic agreement may effect a valid transfer of copyright interests under Section 204 of the Copyright Act. 603*603 Accordingly, we agree with the district court that MRIS is likely to succeed against AHRN in establishing its ownership of copyright interests in the copied photographs."
A few best practices to make sure your electronic signatures are legally binding:
- Make sure all signers knows that they are signing a document electronically.
- Authenticate the identify of your signers. Email or SMS works well for this.
- Make sure you have good, durable electronic records of all contracts that are signed electronically.