ESIGN & UETA Compliance

ESIGN Act and UETA Compliance

E-signatures have revolutionized how businesses, consumers, and organizations handle transactions, making processes faster and more convenient. But many customers still do not understand how electronic signatures are legally binding.

Here’s a comprehensive overview of e-signature legality in the United States, covering the key laws and requirements you need to know.

The Legal Framework for E-Signatures

The legal framework for e-signatures in the U.S. is built on two key components:

1. Federal Law: The Electronic Signatures in Global and National Commerce Act (ESIGN) sets nationwide standards.
2. State Laws: Most states follow the Uniform Electronic Transactions Act (UETA) or similar statutes. New York, for instance, has its own comparable law.

Together, these laws ensure that electronic signatures and records are treated with the same legal validity as their paper counterparts in most transactions. The term "person" in these contexts is broadly defined, covering individuals, companies, trusts, partnerships, government entities, and other legal organizations.

Under ESIGN: Transactions encompass a wide range of actions related to business, consumer, or commercial activities between two or more entities. Examples include:

• Selling, leasing, or licensing goods, services, or intangible assets.
• Conducting real estate transactions, such as property sales or leases.

Under UETA: Similar to ESIGN, the focus is on interactions involving business, commercial, or governmental matters.

Explain it like I’m five!

For an electronic signature to be enforceable under U.S. law, it must meet these essential criteria:

1. Intent to Sign
   An e-signature is only valid if the signer demonstrates a clear intention to agree to the document’s terms, just as with traditional ink signatures.
   
   
2. Consent to Use Electronic Records
   The parties must agree to conduct the transaction electronically. For consumers, additional steps are required:some text
   • They must receive clear disclosures about their rights under electronic transactions.
   • They must affirmatively agree to use electronic records.
   • They must retain the option to withdraw consent without penalty.
     
     
3. Attribution and Association of Signature with the Document
   The electronic system used must connect the signature to the signed document. This can include timestamps, audit trails, or visual indicators that the signature was electronically applied.
   
   
4. Record Retention
   E-signature records must be stored securely and remain accessible for all parties, ensuring they can be accurately reproduced when needed.

Areas Where E-Signatures Are Industry Standards

E-signatures are widely accepted in many industries and transactions, such as:

• Human Resources: Employee contracts, non-disclosure agreements (NDAs), and onboarding documents
• Technology: Software licenses and service agreements
• Education and Healthcare: Agreements and permissions, IEPs, special needs, behavioral assessments, enrollment, patient registration, EMT forms
• Business Transactions: From simple consumer purchases to complex agreements
• Real Estate: Amendments, inspections, contracts
• Sports & Media: NIL agreements, contracts, waivers
• Nonprofits: Membership, rental agreements, board signatures
• Energy & ESG: Environmental assessments, safety checkins, railroad commission forms

Proceed with Caution

While e-signatures are widely accepted, certain transactions may require additional scrutiny or specialized procedures:

• Documents containing credit card information, such as CCAs
• Corporate resolutions and procurement contracts
• Real estate deals, including deeds and titles
• Banking agreements, such as wire transfers and loan documents
• Healthcare records tied to FDA clinical trials
• Documents requiring notarization or government filings

Consulting legal or industry-specific guidance is recommended before proceeding electronically.

Summaries of Key E-Signature Case Laws

1. Barwick v. Geico (2011)
   This case involved the electronic acceptance of an auto insurance policy. The court ruled that the e-signature was valid under state law, highlighting the importance of clear consent and secure processes for capturing electronic signatures.
2. Zulkiewski v. General American (2012)
   In this case, the validity of an e-signature was central to a dispute over life insurance documents. The court confirmed the enforceability of the e-signature, stating that the process used ensured its association with the signed document and the signer’s intent.
3. Harpham v. Big Moose Inspection (2015)
   This case dealt with a contractual dispute in which an electronic signature was challenged. The court found that the e-signature met legal requirements, including proof of intent and association with the document, reinforcing that e-signatures are enforceable when properly executed.
4. Yearwood v. Dolgencorp (2015)
   The court addressed the use of electronic signatures in arbitration agreements between employers and employees. It ruled in favor of the employer, emphasizing that clear consent and intent to sign electronically made the agreement valid.
5. Moton v. Maplebear, Inc. (2016)
   This case involved the enforceability of an arbitration agreement signed electronically by an employee. The court upheld the validity of the e-signature, ruling that the evidence showed the signer intended to accept the agreement, demonstrating the legal strength of e-signatures in employment contracts.
6. IO Moonwalkers, Inc. v. Banc of America Merchant Services (2018)
   This case examined the enforceability of electronically signed service agreements. The court upheld the e-signature as legally binding, focusing on the robust evidence linking the signature to the document and the signer’s intent.

Be Careful About Click Through Agreements

Clickwrap, Clickthrough, click-to-accept or click-to-sign agreements are also legally binding signatures even if you do not type your name. Clicking a box can be just as legally binding as signing your name. However, there is some case law that challenges how far they can go:

• Nguyen v. Barnes & Noble Inc. (2014)
  In this case, the court examined whether Barnes & Noble’s click-through agreement, presented as a hyperlink to the website’s terms of use, created a binding contract. Nguyen had purchased a discounted item on the company’s website, only to have the transaction canceled. He filed a lawsuit, and Barnes & Noble sought to enforce the arbitration clause in its terms of use, which Nguyen allegedly agreed to by using the site.
  
  The court ruled against Barnes & Noble, finding that:
  
  

1. The terms of use were not sufficiently conspicuous or clearly displayed.
2. There was no affirmative action (like checking a box or clicking "I agree") required by the user to demonstrate consent to the terms.
   
   

• Dillon v. BMO Harris Bank, N.A. (2016)
  In this case, the plaintiff, Dillon, challenged the enforceability of an arbitration agreement contained within a payday loan’s terms and conditions. The terms were presented in a click-through agreement, and the defendant argued that Dillon had accepted them by proceeding with the transaction.
  
  The court ruled against enforcing the arbitration clause, finding that:
  
  1. Insufficient Notice: The terms and conditions were not prominently displayed, and Dillon was not adequately notified of the arbitration clause’s implications.
  2. No Clear Affirmative Consent: There was no explicit action (e.g., checking a box or clicking "I agree") demonstrating that Dillon had affirmatively agreed to the terms.
  
  

• Schnabel v. Trilegiant Corp. (2012)
  A subscription service's arbitration clause in a click-through agreement was deemed unenforceable because the terms were not adequately communicated to the users, and they did not explicitly consent.
  
  
• Long v. Provide Commerce, Inc. (2016)
  The court found that a “browsewrap” agreement, where terms were available via a link at the bottom of the page, did not create a binding contract because users were not required to explicitly agree.

The Future of E-Signatures

Electronic signatures are transforming the way we do business, providing convenience without sacrificing legal validity. By understanding the rules and following best practices, businesses and individuals can confidently embrace this powerful tool for modern transactions.

Ready to take the leap? Join the automation revolution with UnicornForms

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Disclaimer: The content on this site is provided for general informational purposes only and is not intended as legal advice. Laws and regulations can change rapidly, and UnicornForms does not guarantee the accuracy or timeliness of the information presented. For any legal inquiries or concerns regarding the content, we recommend consulting a licensed attorney in your jurisdiction.

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