By David. A. Wolfe, Attorney
E-Sign Act and Electronic Signatures
In 2000, in order to address the concern whether electronic contracts could be enforceable and to provide procedures for keeping and retaining electronic records, disclosures and signatures, Congress enacted the Federal Electronic Signatures in Global and National Commerce Act (E-Sign).
Under E-Sign, documents can be authenticated and attributed to the person against whom enforcement is sought with an electronic signature. A traditional ink signature is impossible to affix to an electronic contract, but electronic signatures are available and examples include:
- A name typed at the end of an email message
- Clicking “I agree” in a click-wrap agreement
- A digitized image of a handwritten signature
- A PIN
- A digital signature
E-Sign generally supersedes pre-existing requirements that a record be kept on paper if that record is generated in a business, consumer or commercial transaction. Under E-Sign, if a statute, regulation or other rule of law requires that a contract or other record relating to a transaction be retained, the requirement is met by keeping an electronic copy of the contract. It must remain accessible to all persons who are entitled to access, in a form that is capable of being accurately reproduced for later reference.
To protect consumers from potential abuse, E-Sign excludes retention of electronic versions of the following documents:
- Wills and trusts
- UCC negotiable instruments
- Domestic relations
- Court orders
- Notices of utility turnoff
- Foreclosures, evictions
- Cancellation of health insurance
- Serious product recalls or failures
Electronic Signatures Under the Uniform Electronic Transactions Act
The Uniform Electronic Transactions Act, (UETA), is a state law enacted by 47 states and represents a national effort at providing some uniform rules to govern transactions in electronic commerce and bring differing state laws into line. UETA applies only to transactions in which each party has agreed by some means to conduct them electronically.
Both laws define an “electronic signature” as “an electronic sound, symbol, or process attached to or logically associated with a [contract or other] record and executed or adopted by a person with the intent to sign the record.” The fundamental rule of both E-Sign and UETA provides that a “record or signature may not be denied legal effect or enforceability solely because it is in electronic form.” Both E-Sign and UETA expressly acknowledge they are procedural, not substantive, and while these laws override writing and signature requirements, they do not limit, alter, or otherwise affect any substantive requirements imposed under other laws. Additionally, neither law requires a party to use and accept electronic records. Use and acceptance is strictly voluntary.
While electronic signatures are enforceable, it remains important for credit unions to institute procedures to ensure the identity of the person signing. This will establish the document’s authenticity that the document came from the actual person that sent it, and prevent later repudiation of the signature.