Is An Electronic Signature Legally Binding in the US?

August 17, 2023 • Electronic Signatures • 5 minutes

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Are electronic signatures legal in the United States? Two key laws confirm that the answer is “yes.” The 2000 Electronic Signatures in Global and National Commerce Act (ESIGN) and the Uniform Electronic Transactions Act (UETA) specifically state that e-signatures can be considered legally equivalent to handwritten signatures, and are legally binding.

But what makes an electronic signature legally binding? In order for a signature to be legally valid in the US, it needs to comply with certain laws that are specifically applicable to electronic signatures. By complying with the requirements outlined below, you’ll ensure that every e-signature on a digital document is legally enforceable.

First, though, let’s take a closer look at the validity of e-signatures in general.

Are electronic signatures valid in all states?

Yes, certain types of electronic signatures are legally valid in all 50 US states. The ESIGN Act and the UETA both confirm that e-signatures are legally binding – but only under specific conditions.

For example, every party has to demonstrate intent to sign and to do business electronically. Each e-signature must also include a record of who created it, and how. Let’s take a closer look at each of these conditions, and what exactly they mean in terms of legality.

What makes an electronic signature legally binding?

The ESIGN Act and the UETA both specify that e-signatures are only legally binding when the following criteria are met:

1. Intent to sign

It’s essential to be able to show that every party intended to sign the contract in question. This requirement is the same as for traditional pen-and-paper signatures. Sometimes, simply clicking “I Agree” on a website, or signing into an app, is enough to demonstrate that a person intended to sign a document, and was aware of what they were signing.

2. Consent to do business electronically

You need to provide proof that every party consented to engage in electronic transactions. Sometimes, a court might consider the situation’s context as proof. However, for extra security, especially with clients, many agreements add an electronic signature clause specifying that the parties agree to the legal validity of e-signatures.

In order for an electronic record to be used in a customer transaction, you’re required to provide a UETA Consumer Consent Disclosure. You also have to be able to prove that the customer agreed to use electronic records for the transaction (usually specified in the e-signature clause), and that the customer hasn’t withdrawn their consent.

3. Association between signature and record

An e-signature is only legally binding if it includes an audit trail, noting details like when the signing event took place, and who initiated it. This trail might be auto-created by your digital signing tool.  The trail needs to note what process was used to create the signature, and should include a textual or graphic statement proving that the signature was authenticated.

4. Record retention

All digital signatures should be storable, and able to be shown on demand. This means a random scribble isn’t legally binding in a digital agreement, since there’s no method to determine its origin or how it was added. If you ever need to prove the legal validity of an e-signature in court (as discussed in the section below), an audit trail will prove invaluable as evidence.

What documents can and cannot be signed electronically?

The following kinds of documents can all be signed electronically:

  • Offer letters, new hire paperwork and employee policy updates
  • Non-disclosure agreements, statements of work and sales contracts
  • Purchase orders and master service agreements
  • Real estate transactions
  • Account opening paperwork
  • Insurance policy applications and claims
  • Student services
  • Patient intake forms

However, the National Telecommunications Information Administration (NTIA) specifies that electronic signatures are not legally valid when signing the following types of documents:

  • Wills and testamentary trusts
  • State statutes governing divorce, adoption or other family law
  • Court orders or official court documents
  • Notice of cancellation of utility services
  • Notice of default, foreclosure or eviction for a primary residence of an individual
  • Termination notice for health or life insurance policies
  • Recall notices for products that demonstrate a considerable risk to health or safety
  • Any document legally required to transport hazardous materials, pesticides or other toxic substance

Does an electronic signature hold up in court?

An e-signature may or may not hold up in court, depending on whether it complies with the requirements above. If you ever end up in court over a contract, you may need to present a record of each e-signature’s creation, including the audit trail – so when signing electronically, make sure you’re able to access the audit trails for all signatures.

While this process might seem overly technical, it’s a lot simpler and more objective than the traditional approach to “eyeballing” wet pen-and-ink signatures. An audit trail eliminates those time-consuming steps, by providing a clear objective record of a signature’s authenticity.

As long as you can demonstrate the other party’s intent to sign, and the contract contains an e-signature clause, an audit trail should close the case. It’s very difficult for a person to dispute the legitimacy of a signature if their identity was authenticated when they signed.

It’s crucial for individuals and businesses to understand these requirements, to ensure their digital transactions remain legally sound. But as long as you implement e-signatures correctly, they offer a convenient alternative to traditional pen-and-ink signatures. And what’s more, they include a robust and objective method of authentication, which can ensure your documents hold up in court.

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