How to Use Legal Electronic Signatures in the U.S.?

Electronic Signing has held equal status to "Wet" Signing since 2000, when it was first legalized under the ESIGN Act and other international laws.

However, there are some but not too few exceptions where you need to sign using a pen and paper.

An electronic signature solution (or digital signature) is a type of electronic authentication method that allows one party to prove their identity by signing a document using a private key. It is typically used for legal purposes, but may be applied to any kind of transaction where authenticity needs to be proven.

Efficiently and securely, digital (or electronic) signature technologies are used by companies to receive legally binding consents from agents while they're on calls with them.

Moreover, the particularities of electronic signature laws vary from one jurisdiction to another. We will explore the legal status of electronic signatures in the United States.

The Encryption Technology Underlying Legal e-Signatures

A legally binding electronic signature requires the use of a technology known as Public Key Infrastructures (PKIs) which enable the secure management of electronic signatures.

A digital signature is created using a private key. Only the person signing the document knows the corresponding public key; anyone who verifies the signature must know the public key.

Once the signer has signed the document, a cryptographic hashing algorithm creates a unique digital signature for the document. A private key then encrypts the signature and securely saves it in a safe place. The encrypted signature is then attached to the document and sent to the recipients.

With the help of the public key certificate, recipients can verify the validity of an electronic document by comparing its digital fingerprint with the one embedded within the document itself.

Types of Electronic Signatures

There are three main types of electronic identification systems. These include digital certificates, public key infrastructure (PKI), and tokenization.

This law regulates the electronic identification, signature process, seals, and documentation throughout Europe. They're commonly used by companies and web services as defaults, and they've become ubiquitous in the online world.

Simple Electronic Signatures (SES)

Electronic Signatures are broadly defined as “electronic forms of identification” (eIDs) that include digital signatures. An eIDAS definition states that an electronic signature must be “associated with other electronic information” and that its use must be “to authenticate the identity of the person who signs the electronic information.”

In some cases, simple electronic signatures can be considered legally binding. However, for many documents, higher qualifications must be met.

Advanced Electronic Signatures (AES)

While electronic documents may not require any type of signature, they must contain an identifiable author who can vouch for the authenticity of the information contained within them. In addition to being signed, the author should also include his/her name, company affiliation, contact details, and date of creation.

Qualified Electronic Signatures (QES)

These are similar to qualified electronic signatures, but they also go further to meet additional regulatory mandates. Qualified electronic signatures (QEIS) must have a digital signature based on public key certificates that were issued using proper technological means. They also must have prior verification of the signatory by a certified entity, such as a certification agency. This verification can be done either in person or remotely via video chat.

History of US eSignature Laws

During the late 1990’s, online transaction became a norm in the United States. The need arose to make electronic signatures legally binding. It was not until 1999 that the National Conference of Commissioners introduced the Uniform Electronic Transactions Act (UETA), which gave legal force to electronic signatures. However, the UETA only acquired authority through the enactment of states legislators. Therefore, its validity depends upon the states.

After that, the U.S. Congress passed the Electronic Signatures in Global and National Commerce Act (ESIGN), which recognized the importance of electronic transactions and revised some commerce-related laws.

Thus, together with the UETA, they help to ensure the legitimate use of electronic records and eSignature documents for commercial activities.

The Electronic Signatures in Global and National Commerce Act (ESIGN) was signed into law by President Bill Clinton on October 21, 2000. It gives legal status to eSignatures and eRecords.

UETA (Uniform Electronic Transactions Act) became effective in 1999. It allows for electronic signatures and records to be used instead of paper documents.

Electronic Records and Signing Acts (UETA and ESIGN) confirmed that electronic records and digital signing carry the same legal status as their physical counterparts. They provide the following:

• A contract, signature, or document doesn't need to be written down for it to be legally binding.
• A contract relating to a transaction may not be denied legal effect merely because an electronic version of the document was used in its creation.

For each country, there is a specific type of document or document category for which an eSignature cannot be used. Legal counsel should identify these exclusions.

How to Ensure That Your Documents Are Legally Compliant in the US?

To be legally binding, an electronic document must meet certain requirements.

Intent to Sign & Opt-Out Clause

Like traditional wet-inked documents, electronic signs are valid only when a user clearly shows an intent to sign. For example, eSignly lets users decline electronic signing requests by choosing "Decline" from the dropdown menu.

Consent to Do Business Electronically

Both parties must either expressly or implicitly agree to conduct business electronically. Most leading electronic signature software prompts users to affirm their agreement before signing.

Clear Signature Attribution

When signing documents electronically, eSignly provides a detailed audit trail for proper attributes-on purposes. This trail starts at the sender’s email id, continues through the device IP address, and ends with the timestamp when the user signed the document.

Association of Signature with the Record

Electronic signatures must always be associated with the document they're attached to. For example, eSignly does not let you transmit an electronic signature to someone unless you've already sent them a copy of the document they're signing.

Record Retention

The Electronic Signatures in Global and National Commerce (ESIGN) Act requires that records containing an electronic signature must contain a fully executed version of the record. Most leading electronic signature software provide a fully executed version of any electronically signed document.

E-signature Legal Requirements

According to the US Electronic Signatures and Records Association Act, an electronic signature is only valid if all parties agree to its usage instead of using paper signatures.

The Uniform Electronic Transactions Act (UEA) also states that each country must have a law outlining how electronic signature documents should be handled.

In general, legally-binding e-signatures must:

• Show that person really is who he claims to be.
• Make sure the person signing understands they're signing electronically. You can prove this by giving them the choice of signing on paper instead.
• The user has confirmed their consent by clicking the “I Agree” button.
• A signature can be verified by independent parties. For example, an email trail, timestamp (date/time), mobile phone number, and Internet Protocol address can help verify the identity of the person signing the document. Sometimes two-factor authentication may be used to ensure that the person who signed the document actually has access to the account they claim to own.

When meeting the above criteria, electronic signatures are considered legally binding. However, there are some circumstances under which they cannot be used.

Many countries and jurisdictions don't use electronic signatures for important events such as births, deaths, divorces, and adoptions. Instead, wet signatures and a witness or notary are often needed. Electronic signatures are also unacceptable if the person signing isn't considered to be technologically literate.

The Key Takeaway

There are two main laws governing electronic signatures in the United States: UETA and ESIGN.

Both ESIGN and UETA were passed in 2000 and describe five main elements that make an e-signature legally binding:

• Validity: Electronic signatures have the same legal standing as physical documents. A document signed electronically cannot be considered invalid just because it was eSigned.

• Consent: You must obtain written permission from people who want to use an electronic signature. Before they sign, you must provide them with specific details about using electronic signatures.
• Intent: An e-signature requires that the person signing has the intent to sign the document. They must agree to what’s written in the document they are signing and fully understand the implications of their signature.
• Recording: An electronic signature must be accompanied by evidence that this is an electronic (digital) signing and not a traditional (wet) signing.
• Data Integrity: Data integrity refers to documents that have been signed by an authorized person. It ensures that these documents cannot be tampered with or unintentionally lost.

Electronic signatures are accepted in most business transactions in the United States. They include both B2B (business-to-business) and B2C (business-to-consumer) transactions, as well as government-to-business and government-to-individual transactions. Several courts have upheld their reliability, enshrined them in case laws.

There are some instances where electronic signature isn't accepted in the United States. These include situations where the documents require "wet" (physical) signature or where they must be signed by an official notary public.