Federal law governs when the use of an electronic signature is valid and enforceable.
The Electronic Signatures in Global and National Commerce Act (also called ESIGN Act) defines an electronic signature as “an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with intent to sign the record.”
This definition covers a lot of ground, as businesses use different means, methods and technologies that create electronic signatures, including:
- Check boxes or buttons that state you agree to certain terms and conditions;
- PIN numbers or passwords;
- Signing an electronic keypad; or
- A graphical representation, image or a scan of a handwritten signature.
The ESIGN Act protects the validity and enforceability of signatures made electronically, including:
- A signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and
- A contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.
The ESIGN Act does not apply to:
- Wills, trusts, and codicils;
- Termination of utility services;
- Termination of health or life insurance;
- Family matters, such as adoption and divorce;
- UCC transactions, unless allowed by other statutes;
- Notices of default, foreclosure or eviction;
- Product recalls; and
- Documents related to the transportation of hazardous materials.
The laws of electronic signatures also apply to email. Parties can create enforceable agreements through email if the email sets forth the material terms of the agreement and clearly shows that both parties intended to agree to those terms. In order to have a valid electronic signature in an email, the signature should show a manual input entered by a person who intended to agree.
Examples of electronic signatures in emails are:
- The use of the symbols “/s/” in addition to a person’s name;
- Using a unique method to enter the signer’s name, such as an uncommon cursive font or script; or
- A graphic representation or image of the signer’s name or signature.
Under the ESIGN Act, parties are not compelled to accept electronic signatures if the parties prefer traditional methods of signatures. Thus, the ESIGN Act requires that the parties consent to enter into the transaction through electronic means.
The ESIGN Act requires the signer show an intent to sign the record. That means whoever signs electronically should be able to confirm his identity and the “intent to sign.” Since the ESIGN Act requires intent to sign the record, any evidence that shows lack of intent helps the signer avoid liability in the event of unauthorized use of the electronic signature.
New York businesses must carefully control and monitor the use of electronic signatures. They should only be available to a limited number of persons that are authorized to bind the business to an agreement. Those persons should clearly state in any electronic communication that they do indeed have such authority. There should be a business record that confirms who has such authority created so that there is no confusion down the road should there be an unauthorized use of an electronic signature.
*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.
Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.
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