What Is the E-Sign Act?

The Electronic Signatures in Global and National Commerce (E-Sign) Act promotes the use of electronic signatures and records in national and foreign business, giving them the same legal validity as traditional paper-based documents. This legislation was enacted in 2000 to make it easier for businesses to operate in the growing digital economy.

Background to the act

The E-Sign Act was created to address the growing need for a unified legal framework to support electronic commerce. Before its introduction, electronic signatures and records were often subject to varying state laws, creating confusion. It standardized the use of electronic documents and signatures across the US, ensuring protection for individuals doing business electronically.

Key provisions

Equal legal standing for e-signatures

Under the E-Sign Act, electronic signatures are legally equivalent to and enforced the same way as handwritten signatures. This ensures that electronic contracts and agreements hold the same weight as those signed with a wet signature.

Consent requirement

The act requires clear communication to obtain consent from all parties for using electronic signatures and records, including an explanation of the signing process.

Record retention

Electronic records must be retained to ensure integrity and easy access for future reference, auditing, and verification purposes.

Scope of the act

Documents covered: The act covers a variety of documents, including contracts, agreements, notices, and policies.
Exceptions: Documents exempt from the E-Sign Act include wills, family law papers, certain uniform commercial code (UCC) contracts, court orders, utility service cancellations, notices of default or eviction, health or life insurance terminations, product recalls, and hazardous materials transport documentation.

Requirements for electronic signatures under E-Sign

Intent to sign: There must be clear intent by the signatory to sign the document and adopt the signature as their own.
Consent to use electronic records: All parties must agree to conduct business digitally and consumers must demonstrate their ability to receive electronic documents before engaging in the transaction.
Attribution: The electronic signature should be distinctively linked to the person signing, ensuring clear identification.
Association with the record: The signature must also be logically linked to and embedded in the document being signed.
Record integrity: The electronic record must be maintained in a way that prevents alteration after the signature has been applied to ensure integrity.

Applications

E-commerce: Supporting the growth of online shopping by validating electronic signatures in transactions, allowing for paperless sales agreements.
Banking and finance: Enabling secure online banking and expediting financial services, such as loan approval and account opening.
Real estate: Reducing paperwork and speeding up closings with electronic records of contracts, leases, and other documents.
Healthcare: Streamlining data and administrative processes through electronically signed patient consent forms, health records, and insurance applications.

Difference between E-Sign and UETA

Both the E-Sign and Uniform Electronic Transactions (UETA) Acts provide a legal framework for the use of electronic signatures. They work complementary to each other.

UETA is a state-level law that provides a framework for interstate electronic transactions, whereas E-Sign applies to federal jurisdiction, covering both interstate and international business.

E-Sign Modernization Act of 2020

The E-Sign Modernization Act of 2020 sought to update the original E-Sign Act by allowing consumers to consent to receive digital documents without having to prove their ability to access them. This change aimed to streamline electronic transactions and make the process smoother for both businesses and customers.

The bill passed out of the Senate Commerce Committee but did not go any further. It was reintroduced in September 2024 and is currently undergoing discussions.

*Disclaimer: This content does not constitute legal advice. The suitability, enforceability or admissibility of electronic documents will likely depend on many factors such as the country or state where you operate, the country or state where the electronic document will be distributed as well as the type of electronic document involved. Appropriate legal counsel should be consulted to analyze any potential legal implications and questions related to the use of electronic documents.