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Electronic Signatures: Are They Valid?

by Vinay Jain

On Shake, you can sign agreements using electronic signature (“e-signature”) technology.  E-signatures are widely recognized and accepted as legally binding.

In 2000, Congress enacted the Electronic Signatures in Global and National Commerce Act (“ESIGN”).  The law provides that in any transaction in or affecting interstate commerce, “a contract relating to such transaction may not be denied legal effect … solely because an electronic signature … was used in its formation.”1

Similarly, forty-seven states have enacted the Uniform Electronic Transactions Act (“UETA”), which says that “a record or electronic signature may not be denied legal effect or enforceability solely because it is in electronic form.”2  New York, Illinois and Washington have not enacted the UETA, but all have similar state laws giving legal effect to electronic signatures.3  All of these laws broadly define “electronic signature” and treat e-signatures on par with traditional handwritten signings.

The term “electronic signature” is broadly applied in these laws and can include forms of electronic acknowledgement beyond a signature in electronic format.  ESIGN, for example, defines “electronic signature” as an “electronic sound, symbol or process.”4 An electronic form of a handwritten signature is closest to a traditional pen-and-ink signing, but the law also allows for less traditional forms such as box-checking on Internet sites and the entering of a digital symbol or other unique identifier (like a PIN).

While e-signatures are valid in most types of commercial contracts, there are exceptions, including wills, trusts, powers of attorney and some real estate transactions.5 Notarizations can be performed using electronic signature technology under the ESIGN Act and the UETA, but the traditional requirements of a signature and seal, and in-person inspection and notarization, still apply.6 Government agencies may apply specific e-signature rules to regulated industries or transactions.7

The authenticity of an electronic signature can be challenged in court just as the authenticity of a traditional signature can be.8 In either context, the court will look for evidence that the person purported to have signed was actually the signer.  The facts, circumstances and communications surrounding the signature can provide such evidence. Authentication safeguards, such as requiring an email address and email-transmission of notifications to the parties, can also provide evidence of authenticity.9  In this respect, electronic signatures can actually be more secure than traditional signatures, since they are almost always accompanied by an “electronic trail” including confirmation emails and additional communications.

 

  1. 15 U.S.C. §§ 7001-31 (2000), 15 U.S.C. § 7001(a)(2).
  2. Unif. Elec. Transactions Act, (2009), UETA, § 7(a).
  3. See e.g., New York Electronic Signatures and Records Act, N.Y. Technology Law, Art. 3 (1999) (“The use of an electronic signature shall have the same validity and effect as the use of a signature affixed by hand.”).  In states where the UETA is not enacted, the ESIGN Act is generally controlling.
  4. 15 U.S.C. § 7006.
  5. Specifics can vary by state.  See e.g., New York State Office of Information Technology Services, Electronic Signatures and Records Act, available at http://www.its.ny.gov/policy/esra/esra.htm
  6. See National Association of Secretaries of State, Issues and Trends in State Notary Regulation, May 2011, available at http://www.nass.org/index.php?option=com_content&view=article&id=226&Itemid=469.
  7. See Prudential Ins. Co. of Am. v. Dukoff, 647 F. Supp. 2d 401, 411 (E.D.N.Y. 2009) (deferring to the State of New York Insurance Department’s guidance regarding e-signature verification in insurance contracts and claims.).
  8. See Holmes v. Air Liquide USA LLC, 2012 WL 267194, at *3 (S.D. Tex. Jan. 30, 2012) (“the inability to be 100 percent certain {of a signature’s authenticity} is not unique to electronic signatures.”); Cunningham v. Zurich Am. Ins. Co, 2011 WL 4345214, at *7 (Tex. Ct. App. Sept. 15, 2011) (finding that an email signature block, without a clearer signature itself, was not enough to indicate intent to enter into a contract).
  9. See Zulkiewski v. Am. Gen. Life Ins. Co., No. 299025 (Mich. Ct. App. June 12, 2012) (enforcing an e-signature based on evidence the e-signature technology company had authenticating safeguards, including email addresses and e-mail transmission of notifications to all the parties); Martyn v. J.W. Korth & Co., 2011 WL 2144618 (W.D. Mich. June 1, 2011) (using email exchanges as evidence plaintiff actually e-signed the agreement and denying a defense that courts have not accepted in manual signature cases).
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Vinay Jain

As Chief Legal Officer, Vinay serves as Shake's general counsel, is responsible for the company's legal contracts and content, and leads efforts to educate consumers and small businesses about the law.

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