Tuesday, February 16, 2021

Validity and Enforceability of Electronic Signatures
Electronic Signatures, or "E-Signatures" have quickly become a way of life, like signing for packages or a credit card purchase. But how enforceable are these "E-Signatures" when it comes to legal documents? 

I wrote this back in November of 2016 to share what I learned about the topic

Several practices should be implemented to ensure that your business’s electronically-signed agreements are binding.

Federal law governs when the use of an electronic signature is valid and enforceable. The Electronic Signatures in Global and National Commerce Act (also called ESIGN Act) defines an electronic signature as “an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with intent to sign the record.”

This definition covers a lot of ground, as businesses use different means, methods and technologies that create electronic signatures, including:
Check boxes or buttons that state you agree to certain terms and conditions;
PIN numbers or passwords;
Signing an electronic keypad; or
A graphical representation, image or a scan of a handwritten signature.

The ESIGN Act protects the validity and enforceability of signatures made electronically, including:
A signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and
A contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.


The ESIGN Act does not apply to:
Wills, trusts, and codicils;
Termination of utility services;
Termination of health or life insurance;
Family matters, such as adoption and divorce;
UCC transactions, unless allowed by other statutes;
Notices of default, foreclosure or eviction;
Product recalls; and
Documents related to the transportation of hazardous materials

The laws of electronic signatures also apply to email. Parties can create enforceable agreements through email if the email sets forth the material terms of the agreement and clearly shows that both parties intended to agree to those terms. In order to have a valid electronic signature in an email, the signature should show a manual input entered by a person who intended to agree.

Examples of electronic signatures in emails are:
The use of the symbols "/s/" in addition to a person's name; 
Using a unique method to enter the signer’s name, such as an uncommon cursive font or script; or
A graphic representation or image of the signer’s name or signature.

Under the ESIGN Act, parties are not compelled to accept electronic signatures if the parties prefer traditional methods of signatures. Thus, the ESIGN Act requires that the parties consent to enter into the transaction through electronic means.

The ESIGN Act requires the signer show an intent to sign the record. That means whoever signs electronically should be able to confirm his identity and the “intent to sign.” Since the ESIGN Act requires intent to sign the record, any evidence that shows lack of intent helps the signer avoid liability in the event of unauthorized use of the electronic signature.

New York businesses must carefully control and monitor the use of electronic signatures. They should only be available to a limited number of persons that are authorized to bind the business to an agreement. Those persons should clearly state in any electronic communication that they do indeed have such authority. There should be a business record that confirms who has such authority created so that there is no confusion down the road should there be an unauthorized use of an electronic signature.
So, how do you ensure that an "E-Signature" is enforceable? 

Include language within the document which expressly consents to - or declines - the use of "E-signatures" in executing the document. That way, the signer has been agreed to the use of an "E-Signature". 

Create a whole separate agreement expressing the signing party's intent to be bound by an "E-Signature" prior to conducting the desired business agreement. Proof of intent is the strongest evidence in determining whether a party chose to be bound by an "E-Signature". This methods, like our first option, gives the signer the choice to move forward or to decline. Either way, there can be no dispute on the parties' intent. 

Verifying the identity of the signing party. This can be hard if the parties have not met face-to-face, or are working remotely during an emergency like the COVID-19 pandemic. Methods of verification include password-protected logins, PIN numbers, or through use of a third-party service that has its own verification process.

Keep all records required by law. Your proof is only as good as your ability to archive your past executed agreements. Chain of custody and integrity of evidence is key to enforcing agreements. Leave a paper trail of all records, including the complete agreement and any transactions executed in furtherance of the agreement.  

Just like with paper documents, give the signing party a copy of the final completed agreement via download or email that is in a commonly-readable format. Retain proof of transmittal for your own records.

But most importantly, consult an attorney! We are trained to know the best practices for you and your business and can recommend what you should or should not do. 

Gene Berardelli is a street-smart attorney with with over fifteen years of experience in civil and commercial litigation. Gene has achieved several career achievements, including successfully settling a seven-figure personal injury claim, successfully arguing before the New York State Appellate Division and successfully representing clients in trial litigation, mediations and arbitrations against such recognizable entities as the City of New York, New York City Transit Authority, JPMorgan Chase, TD Wealth Management Services, Inc., The Long Island Railroad, and Macy*s. Gene is also a noted New York Election Law expert who has had his opinions cited in scholarly works and published in news and feature articles.

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