TLF Business Lawyer, Christine E. Taylor on Electronic Signatures

NEWS | The Towne Law Firm, P.C. | November 2020

‘Exploring The Validity of Utilizing E-Signatures’

Phone with sticky note, 'sign here'

ALBANY, N.Y. (November 24, 2020) Although they had been adopted in business transactions for many years, this spring, due in part to the pandemic, electronic signatures became the most dominant form of signing a document. In [the hospitality] industry, it lent itself most prevalently in the execution of waivers and general releases, seasonal long-term agreements and even for overnight guest reservations. But is an electronic signature as legally valid as the traditional “wet-ink” signature?

Generally, most electronic signatures, in most states, are just as valid and enforceable as a traditional signature. In the United States, there are primarily two types of “virtual” signatures: (1) an electronic signature or e-signature and (2) a digital signature. An electronic signature refers to any electronic process that indicates an acceptance of an agreement, most virtual signatures fall into this category. Electronic signatures can use a wide variety of ways of authenticating the signer’s identity including, email, password protections or pins sent to another device such as a cell phone. Proof of the validity of this signature is usually demonstrated by a secure process such as a digital certificate embedded in the executed document.

A digital signature by contrast, utilizes a trust service provider (TSP), to authenticate a signer’s identity. These digital certificates are associated with the specific signatures and ultimately bound to the document using encryption.

The United States passed the Electronic Signatures in Global and National Commerce (ESIGN) Act in 2000. ESIGN stated that electronic signatures are legal in every state and U.S. territory where federal law applies. Where federal law does not apply, however, most states have adopted the precursor 1999 Uniform Electronic Transactions Act (UETA) or some local version thereof.

ESIGN legally recognized electronic signatures and records if all parties to the contract choose to use electronic documents and to sign them electronically. UETA provided that when a law requires either a writing or a legal signature, an electronic record or signature can satisfy that requirement when the parties to the transaction have agreed to proceed electronically.

More specifically the ESIGN ACT, identifies an 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 ESIGN Act further provides that any law with a requirement for a signature may be satisfied by an electronic signature, that electronically executed agreements may be presented as evidence in court, and it prevents the denial of legal effect, validity or enforceability of an electronically signed document solely because it is in electronic form. But how do you prove intent and consent? What are the best practices under ESIGN?

To prove clear intent you must be able to show that the signer intended to sign and be bound by this agreement electronically. For example, the signer can show intention by doing an active affirmation, such as using a mouse to draw their signature, typing their name or clicking an accept button that is clearly labeled. To prove consent, make sure that the document outlines what they are clicking to accept, or some clause that clearly states that the parties agree that the document may be electronically signed and that the signatures are intended to have the same validity as a handwritten signature. Next, a person utilizing e-signatures should provide a signed copy to the signer and as required by ESIGN, the document must be retained. Electronic records are legitimized as long as they can be reproduced.

UETA’s fundamental principles are similar to that of ESIGN. Under UETA, a signature cannot be denied legal effect simply because it is in electronic form, a contract cannot be denied legal effect because electronic means were used in its formation, if a law requires a record to be in writing then electronic means suffice, and if a law requires a signature than an electronic signature generally satisfies the law. There are still some caveats to electronic signatures, generally they do not apply to birth, wedding, or death certificates and wills, codicils, and testamentary trusts are often exempt.

UETA has been adopted by 48 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Island, however, New York and Illinois have instead implemented their own statutes. Illinois statute identifies some electronic signatures as more secure than others. Secure signatures are those that are created in a manner that is commercially reasonable under the circumstances, applied by all parties in a trustworthy and verifiable manner, relied upon in good faith by all parties and all parties agree that the signature is “secure.”

New York enacted the Electronic Signatures and Records Act (ESRA). Under ESRA, electronic signatures have the same validity as handwritten signatures and are admissible in a court of law.  No government organization or citizen is required to use electronic records or signatures. ESRA expressly does not apply to any document that provides for the disposition of an individual’s person or property upon death or incompetence, or any document that appoints a fiduciary such as wills, trusts, “do not resuscitate” orders, powers of attorney and health care proxies.

Additionally, as a caution, UETA has been amended by some of those states to include new technologies, so it is important that you review the current adaptation in your locality.  For example, in some states, if other requirements are met, the UETA holds that you can have a binding contract even if it was only negotiated over email  Any defense that one’s signature was not written down on “paper” or non-enforceable because it is in electronic form is specifically rejected by the UETA, which provides legal recognition of electronic records to the same extent as a traditional “ink” contract or signature. However, one should understand that there is no special credibility or weight given to electronic signatures. An electronically signed contract will face the same scrutiny in a court of law as would its paper counterpart.

When generally considering the validity of an electronic signature look to the following:

  • Did the parties consent to the electronic signature – did they intend to sign the document electronically? When it is a sophisticated business-to-business transaction consent can be circumstantial, but for consumers, and in most cases, it must be affirmative. Note: the law generally requires that consumers opt into the process, this can generally be satisfied by requiring the signer to check a box or click a button during the process.
  • What was the process by which the signature was created? The process must be recorded by the software used to create the signature.
  • Were records kept? Records of the electronic signatures must be retained and available for accurate reproduction. Generally, those who use services such as DocuSign and Adobe Sign are in the clear as they generate audit reports to satisfy the recording requirement.

Thus, after checking your local state law, look into using electronic signatures. They can save you time, energy and in the time of the pandemic, limit in-person interaction, allowing you the legal protection you need via the signature and allowing your guests to move on to the more fun part of their trip sooner – the camping!

Written by: Christine E. Taylor, TLF Associate

Published in: Woodall’s Campground Management, November 24, 2020