E-Signing in a Virtual World
COVID has elevated electronic signatures within the landscape of commercial transactions from a commonplace convenience to a necessity. Accordingly, it seems ripe to discuss whether and to what extent electronic signatures on commercial transaction documents would be enforceable and how to ensure that the commercial documents you are signing electronically will be valid.
Effective June 11, 2020, Washington adopted the Uniform Electronic Transactions Act (“UETA”) (RCW1.80.010, et seq). UETA provides a framework for states to enact state law concerning the enforceability of electronic signatures and electronic records. Almost all states have enacted a form of the UETA.
The Federal counterpart to UETA is the Electronic Signatures in Global and National Commerce Act of 2000 (“ESIGN”) (15 U.S.C. 96). It applies to any transaction in or affecting interstate or foreign commerce.
Both UETA and ESIGN provide that an electronic signature or electronic contract will not be denied legal effect solely because it is in electronic form. However, there are some requirements that must be met in order for an electronic signature to be considered valid:
- The parties to the transaction must have agreed to conduct the transaction by electronic means, which is determined from the context and surrounding circumstances, including the parties’ conduct.
- An electronic signature must be attributed to the purported signer, which can be shown by the context and surrounding circumstances at the time of the signature’s execution, including the security procedure applied to make sure the electronic signature came from the purported signer.
- The electronic signature must be attached to or logically associated with the contract.
- The person signing the contract must have intended to sign.
- The electronic contract must be capable of retention and accurate reproduction by all parties entitled to retain the contract.
UETA and ESIGN are designed to give parties flexibility in agreeing how they want to conduct their transactions electronically and is a rule of general application, but where there is a specific law requiring certain formalities, the other law governs, so it is important to examine laws surrounding the specific type of legal document you are wanting to execute electronically to make sure there are no other requirements that would limit the ability to conduct business electronically.
Signatures that must be notarized, acknowledged, verified, or made under oath can still be made electronically as long as the notarization or acknowledgement conforms with the law governing it. Washington currently allows for electronic notarization as well.
Promissory notes under RCW 62A may also be electronically signed and transferred as long as the specific requirements of RCW 1.80.150 are met, which provide for an authoritative copy of the note that can be transferred.
Some types of documents are excluded from UETA and/or ESIGN. For example, wills, codicils, testamentary trusts and certain transactions governed by the Washington UCC may not be enforceable under UETA and ESIGN if signed electronically.
In addition to the validity of an electronic signature, UETA and ESIGN also contain provisions about maintaining records and providing information to consumers.
Generally, if a law or regulation requires a contract or document be retained, even as an original, UETA and EISGN provide that an electronic record of the contract or document satisfies this requirement as long as it accurately reflects the information in the contract or document and remains accessible to all persons entitled by law or regulation to have access in a form that is capable of being accurately reproduced for later reference.
Where a law or regulation requires that information be made available to a consumer in writing, UETA and ESIGN allow that information to be provided in electronic format as long as the consumer has affirmatively consented to receive such information in electronic format and such consent meets the specific consent requirements provided in the statute.
If you want to know whether you can electronically sign something, consider:
- What law applies to the specific document you want to sign and is there a requirement that would remove the document from UETA/ESIGN’s general rule that documents can be signed electronically?
- If you can sign electronically, do the circumstances allow for a valid electronic signature?
- Once you have signed electronically, can you properly maintain a record of the electronically signed document?
Software services such as DocuSign are useful for making sure that your electronic signature meets all requirements to be valid. The document itself should also include a statement whereby each party consents to conducting the transaction electronically. Usually included in the “Counterparts” section, below is a sample of such language:
This Agreement may be executed in one or more counterparts, which may be transmitted electronically (including a PDF transmission of a wet ink signature), each of which shall be deemed to constitute an original, but all of which, when taken together, shall constitute one and the same instrument. The parties expressly intend to be bound by authenticated electronic signatures (e.g. by DocuSign).
If you have questions about documents requiring electronic signatures, contact a member of the Stokes Lawrence Business practice.