What is the UETA and ESIGN Act?
You may see the terms ‘UETA’ and ‘ESign Act’ referred to on this site and elsewhere in connection with getting legally binding documents signed online.
These are both regulatory acts drawn up by the US government to provide legal guidelines for ensuring the validity of electronic records and documents signed online.
- The Uniform Electronic Transactions Act (‘UETA’) is an Act adopted prior to the ESIGN Act by 47 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands (source: NCCUSL) by the National Conference of Commissioners on Uniform State Laws.
- The Electronic Signatures in Global and National Commerce Act (‘ESIGN’) was passed at the federal level in 2000 (source) and became federal law in the United States.
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What Do These Acts Mean?
Together these Acts establish guidelines by which electronic records and signatures achieve the same legal standing as traditional paper documents and handwritten signatures.
It states that: A document or signature cannot be denied legal effect or enforceability solely because it is in electronic form.
However, in order to achieve this equal standing, almost all documents signed between parties in the United States must meet the requirements set down by these two Acts before they can be deemed ‘legal and binding’.
Basic Legal Requirements for Online Document Signing
Contained within these Acts are several key requirements that parties signing documents online need to be aware of, including:
- INTENT TO SIGN MUST BE CLEAR
A digital signature is only valid if the signer intends to sign the document and there is no possibility of forgery.
- THE SIGNATURE MUST BE ASSOCIATED WITH THE RECORD
To meet the requirements of ESIGN and UETA, the system used to capture the electronic transaction must either:
- Keep an associated record that details how the signature was captured, or
- Make a textual or graphic statement that can be added to the signed record.
- THERE MUST BE CLEAR CONSENT TO DO BUSINESS ELECTRONICALLY
This stipulation is mainly for Business-to-Consumer transactions, where the customer may not always be clear what they are signing and why. Between businesses, consent to do business in this way is usually established easily during standard interactions. However, ESIGN and UETA protect consumers by stipulating that electronic records can be used to deliver information to consumers only if they complete a set of actions:
- Receive certain disclosures (UETA Consumer Consent Disclosures);
- Have affirmatively consented to use electronic records for the transaction; and
- Have not withdrawn their consent.
- THERE MUST BE ACCESS TO RECORDS
These Acts also state that electronically-signed documents (or electronic contracts) are only valid if they are capable of being retained and are available for later reference by all parties involved in the contract.
- NO TAMPERING OF DOCUMENTS
If a document has been tampered with in any way before it is signed it may be rendered invalid. Therefore checks and measures must be introduced to ensure that both parties are signing an original, in-tact document.
Other Important Considerations for UETA and ESIGN
Documents requiring notarization can still be submitted electronically as long as the notary or individual who is an authorized witness of the parties’ agreement can also apply their digital signature to the documents.
What Happens if These Requirements are NOT Met?
Documents that are signed without meeting the requirements set down by ESIGN and UETA may be challenged in court. Please see one such example here ‘When is an Electronic Signature a Costly Mistake?‘.
Making Your Documents Legally Binding
Please refer to this post for tips on how to prepare legally-binding documents in accordance with ESIGN and UETA.
Contracts that are signed using WPESignature will hold up to legal scrutiny, providing an encrypted signing process and a comprehensive audit trail of exactly who signed, what, and when. This goes above and beyond what is expected to meet ESIGN and UETA guidelines.
General compliance with signature laws such as ESIGN and UETA is not difficult, but when preparing documents to be signed electronically, please consider the following points carefully:
• The process by which the signer is asked to sign must be clear and unambiguous
• The terms and agreements must be viewed and agreed to
• The language you use in your document must be readily understandable
• Checking boxes should be carefully used on contracts for op-ins and opt-outs
Following these eSignature guidelines, combined with the robust security and compliance provided by WP E-Signature, ensures you will avoid legal problems on account of your online document signing processes.