In the current business world, parties may be separated by great distances and may never meet face-to-face. During the course or interactions, their communications may only be online, leading to a constant trade of contracts over e-mail. So, when it comes time to sign the contracts, a meeting may not be feasible, and instead, an electronic signature may be needed to finalize the transaction. Electronic signatures or “e-signatures” are those substitutes for a traditional “wet signature.” We have mentioned in passing some ways these signatures can be formed, but it leaves the question of what exactly can be an e-signature? To what extent can it be used? What are the benefits of using an electronic signature, and how might it be detrimental to your business arrangements?
What can be used as an electronic signature?
An electronic signature can be any sufficient substitution for a wet signature. This ranges from typing the individual’s name in a signature box, to signatures placed onto the electronic document through some sort of tablet device, or a checkbox in a click-wrap agreement stating: “I Agree.” There are even some cases where biometric data is being used as an electronic signature, such as fingerprint or facial image. Furthermore, while these could be used as electronic signatures, digital signatures differ, as they rely on a form of encryption to validate the authenticity of a document. These are then affixed to electronic documents, again, like a click-wrap agreement, or a contract that has been transmitted electronically. There are business services that facilitate and authenticate these signatures, e.g., DocuSign, that allows the tagging of the signature pages in the document. However, there are some limitations on what can be an electronic signature. As part of ESIGN (United States Electronic Signatures in Global and National Commerce Act), voice recordings for an oral agreement do not work as electronic signatures.
What can electronic signatures be used for?
Electronic signatures are primarily used in business agreements. ESIGN imposes the following requirements on the use of electronic signatures: (i) intent to sign; (ii) consent to do business electronically; (iii) association of the signature and; (iv) retention of records. It would be best served for business agreements where there has been correspondence online, with much of it being similar to contract law (i.e., with the intent to sign by indicating the “meeting of minds” that is requisite for contract formation) but with the added burden of recording the electronic signature. Furthermore, the Uniform Electronic Transactions Act (UETA) has been adopted in various states, which gives effect to electronic signatures in those cases where the business participants wish to use them.
However, there are exceptions for the electronic signature. These would include wills, trusts, divorce papers, cancellation of utilities, evictions or cancellation of insurance policies. Yet, even these vary state by state, with states like New York disallowing real estate transactions, California disallowing wills and trusts specifically, and Ohio allowing electronically signed wills as part of a court decision.
If you have questions about your electronic contracts, electronic signatures, or online business transactions you may contact us to set up an initial consultation. At our law firm, we assist clients with legal issues related to business, technology, and e-commerce transactions.