As technology develops, so does the need (or lack thereof) for physical signatures on paper. COVID-19 helped expedite the already rapidly developing electronic signature sphere, leading to massive increases in large-scale contracts signed electronically. While these forms of signatures are prevalent in the retail and small business community, banks have been slower to adopt this firm. The hesitance may have initially come from a lack of regulation on electronic signatures. However, those concerns should be qualmed a bit from development in laws regarding electronic signatures.

To form a valid contract, there must be an offer, acceptance, consideration, mutual assent, and intent to be bound by the terms of the agreement. An enforceable contract must always be signed by all parties. This is what memorializes the parties’ “meeting of the minds” and intent to be bound by the terms of the agreement. Courts typically use context to determine whether a signature is legally binding and creating an enforceable contract. A signature may be made either manually or by means of a device or machine, and using any name, including a trade or assumed name, or by a word, mark, or symbol executed or adopted by a person with present intention to authenticate a writing.¹ To most clearly show intent to form a binding contract (and enjoy the right to sue for breach of the contract), parties should take time to consider the form that best suits their needs in memorializing their agreement.

This issue is particularly important for interstate and international transactions. With geographic distance between parties comes potential for disconnect in the agreement and questions regarding memorializing the final version of the contract. Issues include time and costs associated with obtaining each parties’ handwritten signature on an agreement, or “wet signature.” an increasingly mobile economy and rapid communication has led to greater reliance on electronic signatures for contracts where parties are in different states or countries.

The United States, acknowledging the increasing reliance on electronic signatures, has addressed the barriers to electronic commerce. The Global and National Commerce Act (“E-SIGN”) and the Uniform Electronic Transactions Act (“UETA”) govern business transactions in the United States using electronic signatures and records in business transactions.

E-SIGN, enacted in 2000, ensures the validity and legal effect of electronic signatures in interstate and international commerce. Under E-SIGN, any signature, contract, or other form that is electronic cannot be denied legal effect simply because it is electronic in nature.² The signature must simply be attached to or logically associated with the contract or record and be executed with the intent to sign the record. Intent is the key element when determining the validity of an electronic signature. E-SIGN is designed to catch all electronic agreements, and those that somehow fall between the cracks are governed by the UETA (or the given state’s codification of the UETA.

The UETA was developed in 1999 in response to an increasingly digitized global economy. The motivation behind the UETA was to create a uniform system that would be adopted by most state governments. That hope has been realized. Today, 49 states and Puerto Rico have developed some iteration of UETA.³ Again, the UETA gives legal effect to signatures and records signed electronically, preventing denial of legal effect simply because an agreement may be electronic. Like E-SIGN, the UETA’s key inquiry when determining the legal effect of an electronic signature is the intent of the signor.⁴ When there is intent to sign the record, courts give electronic signatures the same effect as wet signatures.

The simplest way companies can integrate electronic signatures into their business is through large platforms like DocuSign. DocuSign is ideal for electronic business because it is an efficient one-stop-shop for businesses. They have risk mitigation tools including email validation, SMS verification, geolocation capturing systems, access code authentication, and more embedded into the documents themselves. These baked-in security mechanisms and verification methods efficiently support the intent required to form binding electronic signatures under E-SIGN and UETA.

As time has gone on, courts have ruled on less formal methods of communication (text message and emails) binding parties to an agreement. Some courts have ruled text messages containing agreement terms satisfied the signature agreement.⁵ However, it would behoove companies conducting large-scale business across borders to opt for a more formal memorialization of contracts. The best practice to ensure electronic signatures bind the parties is to use clear language showing intent to be bound by the terms of the agreement. Platforms like DocuSign come with verification processes that provide additional support for the parties’ intent, which is the key inquiry under American law.

Best Practices for International Transactions Using Electronic Signatures to Ensure ESIGN and UETA Compliance

Parties can enjoy the myriad benefits of electronic signatures by purposefully drafting to make the electronic signatures legally binding. To maximize the chances that an electronic signature is legally binding under E-SIGN, agreements should:

Figure out what the transaction is for. Some documents do not fall under UETA and E-SIGN. These include probate documents, divorce documents, real estate foreclosure proceedings, and transactions governed by Articles 3-9 of the Uniform Commercial Code (UCC). While there are limited exceptions to some of those subject matters, it is ideal to get a wet signature for those matters.

Display intent to electronically transact. The regulatory landscape adamantly deems the parties’ intent as the primary inquiry into the validity and effect of an electronic signature. So long as all parties show they willingly opted to sign electronically, courts will presume that electronic signature is binding under E-SIGN or UETA. This is commonly done through an express provision in the electronically signed agreement. Parties may also wish to add an ‘agree to terms and conditions’ button which parties are required to click ‘yes’ to before the document is finalized.

Establish attribution and association. Once intent is established, the next step is to ensure the signatures uniquely represent the individual signing the document and show a mark from the signer that can be associated with the record. Some form of identity verification through email or another dual-authentication would go a long way in ensuring identity.

Send all parties signed copies. All signers should receive a fully signed and filled out document. This is common among electronic signature providers.

Diligently document records. Once the agreement is completed in compliance with the above steps, corporations need to have mechanisms to ensure they remain able to prove all the above elements on the off chance someone contests the validity of the signature. These should be viewable and printable by all parties.

Notes

1. Uniform Commercial Code § 3-401.
2. 15 U.S.C. § 7001.
3. New York has adopted the Electronic Signature and Records Act (ERSA) to govern electronic signatures. It is considered very similar to the UETA.
4. 7. Legal Recognition of Electronic Records, Electronic Signatures, and Electronic Contracts., Unif.Electronic Transactions Act § 7.
5. BrewFab, LLC v. 3 Delta, Inc., No. 22-11003, 2022 WL 7214223, at *5 (11th Cir. Oct. 13, 2022).