The Electronic Signatures in Global and National Commerce Act, commonly known as "ESIGN", was enacted June 30, 2000, and is found at 15 U.S.C. 96. This federal law allows the use of electronic signatures in interstate and foreign commerce. The law ensures the validity and legal effect of contracts entered into electronically. Each state has enacted its own version of ESIGN. Section 101(a) states that a contract or signature "may not be denied legal effect, validity, or enforceability solely because it is in electronic form." Therefore, in most cases, electronic signatures and records have the same legal effect as paper documents.
An electronic signature can be any electronic indication of assent, including a symbol, or a 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. Examples of an electronic signature can include an actual signature on a document, delivered electronically, (think scanned, signed document), emails indicating consent to certain terms or the checking of a box agreeing to the "Terms and Conditions" of the sale.
Section 101(d) provides that if a law requires that a business retain a record of a transaction, the business satisfies the requirement by retaining an electronic record, as long as the record "accurately reflects" the substance of the contract and is "accessible" to people who are entitled to access it "in a form that is capable of being accurately reproduced for later reference, whether by transmission, printing or otherwise." When seeking to introduce the electronic record as evidence that your client or customer agreed to the terms of the transaction, you must have someone appear who is familiar with the method in which that specific customer indicated its consent, how your business retained the record, and how that record was retrieved. Much like having a witness testify to the physical business records of the company, they must be familiar enough with your procedures that the record can be introduced as a business record.
Section 101 of the ESIGN Act, sub-section (b), preserves the rights of individuals to opt out of electronic signatures and require only paper signatures. ESIGN requires a "Consumer Disclosure" that the signatory has consented to use an electronic format. Section 101(c)(1)(C) requires that the consumer also "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."
Additionally, certain transactions cannot be electronically signed. While Uniform Commercial Code transactions are covered, it does not apply to commercial paper, such as a promissory note, bank deposits and collections, letters of credit, warehouse receipts, investment securities or transactions involving security interests. Wills and trusts, family law matters such as marriages, adoptions and divorces are not covered by ESIGN. While ESIGN technically permits electronic notarization, almost all notarization is performed on a physical document. Most states do not have electronic notarization laws, and almost all require the notarization to happen in the physical presence of the person signing the document.
A "digital signature" is a type of electronic signature which carries additional safeguards. Software and programs are available to companies who wish to use digital signatures to ensure the security of their documents and ensure the customer's consent. Typically, a digital signature is a mathematical scheme for demonstrating the authenticity of a digital message or document. A valid digital signature gives a recipient reassurance that the message was created by a known sender, that the sender cannot deny having sent the message and that the message was not altered in transit.
Your company can use electronic signatures to conduct business provided you are not working with promissory notes, notarized documents or another type of excluded transaction. To enforce such an electronic signature in court, your company representative must be sufficiently familiar with your company's policies on electronic signatures to testify to the trustworthiness of the signature.
