The Electronic Signatures in Global and National Commerce Act — also called the E-Sign Act — was signed into law in 2000, providing for legal recognition of electronic signatures in commerce. Under the statute, e-signatures are given the same legal force and effect as handwritten signatures on traditional paper documents. While these provisions simplify many transactions, businesses must understand that the statute imposes specific requirements with which those contracts must comply.
Key Provisions of the E-Sign Act
As the business and regulatory landscapes continue to evolve, the ability to electronically sign documents under the E-Sign Act has improved efficiency and lowered transaction costs throughout industries across the country and in the global marketplace. Under the E-Sign Act, an electronic signature is defined 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.” Not only can e-signing streamline business processes, but an e-signature can also eliminate the need for paperwork, offer convenience, and provide accessibility.
Business owners should note several key provisions of the E-Sign Act including:
- Legal recognition — Under the Act, electronic signatures are recognized as valid and enforceable under the law if they meet the requirements. A signature cannot be denied enforceability simply because that signature is in electronic form.
- Consumer disclosure — The Act requires that consumers be provided with a clear and conspicuous statement that they have consented to receive information in an electronic format. The statement must also include information about their right to receive the document in paper form and the procedures to withdraw consent.
- Affirmative consent — The consumer must provide affirmative consent to receive information electronically. This means a business cannot assume consent was given because they did not respond to an option either to deny or grant consent.
- Retention of contracts and records — The Act specifies that if a contract or other record must be in writing under the law, an electronic record can satisfy the legal requirement. However, the electronic record must accurately reflect the information in the contract, be accessible to all parties entitled to access, and be in a form that can be accurately reproduced.
Generally, the E-Sign Act preempts inconsistent state laws but allows states to modify the law in the event it is consistent with the E-Sign Act and does not favor a specific technology. While 49 states have adopted the Uniform Electronic Transactions Act, which is consistent with the Act, New York is the only jurisdiction that has not done so. Rather, New York has a similar law in place — the Electronic Signatures and Records Act — which gives e-signatures the same treatment.
Retention and Security of Electronic Transactions and Signatures
Businesses must ensure compliance with the E-Sign Act. A platform or vendor should be carefully selected that follows federal law and any applicable state or international laws. In addition, as businesses must maintain accurate records of electronic transactions and signatures, procedures must be started for record retention — but it isn’t adequate to simply collect the signatures. Metadata such as timestamps, IP addresses, and the process associated with capturing the signature must also be stored in a format that can be reproduced at a later time.
Security protocol is also crucial when collecting and storing e-signatures. Businesses should ensure proper measures are in place that protect the integrity and confidentiality of both e-signatures and records. Security measures may include encryption, two-factor authentication, digital certificates, secure servers, and various other technologies that can mitigate risk.
Contact an Experienced New York Business Law Attorney
If you’re a business owner who uses digital contracts, it’s vital to ensure you are in compliance with the necessary state, federal, and international laws regarding e-signatures. Brinen & Associates provides knowledgeable representation to business owners for a wide variety of legal matters, including those involving digital documents and regulatory compliance. Call (212) 330-8151 or send us a message to learn how our New York Business Law attorneys can assist you.