Electronic signature laws and validity in the US

With cross-state and border transactions rising year on year, businesses are under increasing pressure to embrace digitized processes, including the use of eSignatures to get agreements over the line.

But what does the law in the United States say about electronic signatures, and are they valid? The short answer is yes. But you'll want to read this guide to better understand the ins, outs, and exceptions.

Are electronic signatures legal in the US?

Electronic signatures are viewed as legal throughout the United States, and are generally treated as having the same legal status and validity as a handwritten, wet ink signature. 

This is confirmed by the ESIGN Act and UETA, two US laws that govern the use of eSignatures across the various states. 

The ESIGN Act covers all of the US, while UETA operates at the state level. If a state has adopted UETA, it will generally be used for in-state transactions, but the ESIGN Act takes priority if there’s any conflict between the two laws.

Let’s explore what these two key laws say about eSigning for US-based businesses and individuals, and what this means for the validity of eSignatures in the United States today.

1. The Electronic Signatures in Global and National Commerce Act (ESIGN Act)

The ESIGN Act, passed in 2000, is a federal law that gives electronic signatures the same legal status as handwritten signatures. It applies across the US and covers most business, consumer, and commercial contracts.

Here’s an overview of the ESIGN Act’s provisions, and what they mean for eSigning in practice: 

• Electronic signatures are legally binding: If both parties agree to use electronic signatures, they are legally valid, just like signing with a pen.
• Consent is required: Parties to a transaction must agree to use electronic signatures. Consumers also need to be informed about the possibility to use paper records instead, and given the option to opt out if they prefer physical signatures.
• Intent to sign: The signature must show the person's intent to sign the document, and there needs to be a way to confirm who signed it (like a password or other form of identification).
• Record retention: Businesses must keep electronic records in a way that allows them to be accessed and reproduced, so they can serve as valid legal documents.
• Exceptions: Electronic signatures can’t be used for certain documents, like wills, some family law matters, or eviction notices. It’s worth consulting a legal professional if you’re not sure. 

This legislation works in conjunction with another US-based eSignature law: The Uniform Electronic Transactions Act (UETA). Let's cover that now.

2. Uniform Electronic Transactions Act (UETA)

The UETA was introduced in 1999 and is a state law, adopted by most states, that gives electronic signatures the same legal power as wet ink signatures in state-level transactions. 

• Agreement to use electronic signatures: Like the ESIGN Act, UETA requires both parties to agree to use electronic signatures before they are legally binding.
• Definition of electronic signatures: UETA defines an electronic signature as anything from typing your name in an email to using more advanced digital tools, as long as the intent to sign is clear.
• Attributing the signature: There needs to be a clear link between the person and their signature, ensuring that the signature can be traced back to them.
• Electronic records are valid: Electronic records are considered legal documents, as long as they are stored in a way that can be accessed and accurately reproduced.
• Exceptions: Like the ESIGN Act, UETA doesn’t cover certain documents, such as wills, some types of family law, and a few financial instruments.

How do these laws work together?

The UETA and ESIGN Acts establish the legality of electronic signatures in the US, but they differ very slightly in scope, application, and jurisdiction.

For example, UETA is a state-level law adopted by almost all states and it applies to electronic transactions that take place within those states. By comparison, the ESIGN Act is a federal law that applies across the US broadly, governing interstate and international electronic transactions, too. 

If a state hasn’t adopted UETA, or if its laws conflict with the ESIGN Act, the ESIGN Act takes precedence.

For a deeper understanding of how the two US-based laws interact, check out this guide to ESIGN and UETA. 

The adoption of eSignatures in the US 

This unified approach to embracing electronic signing processes means that the US has been fast and firm in their adoption of eSignatures:

• It’s estimated that 70 per cent of US businesses leverage eSignatures within their business processes
• Post-pandemic, the number of businesses leveraging electronic signatures has increased by 50 per cent
• The United States is estimated to hold the largest market for electronic signatures, with North America’s market valued at $440m alone - the largest in the world.
• The adoption of eSignatures is increasing rapidly, with global eSignature transactions multiplying from 89 million to 754 million over the course of five years, with many of these transactions involving a US-based party. 

This popularity isn't surprising given the time-savings and opportunities to optimize processes offered by electronic signing. According to Forbes, “businesses achieve 70 - 80% efficiency improvements after removing manual processes to adopt digital technologies like electronic signature solutions.”

“The growing popularity of the paperless system has created a demand for electronic authorization” - Fortune Business Insights

What is considered a valid eSignature under US law?

An eSignature under both the ESIGN Act and UETA can take many forms. It is broadly defined as an “electronic sound, symbol, or process” attached to or logically associated with a contract or other record and executed by a person with the intent to sign the record. 

This means a wide variety of methods can be legally valid, in certain cases, including:

• Typing a name at the end of an email or document
• Clicking an "I accept" button on a website
• Using a stylus to sign on a touchscreen device
• Uploading a scanned image of a handwritten signature
  

The key thing to remember is that the signatory must show intent to sign and agree to the terms of the contract or document.

How to create a legally binding electronic signature in the US

As we just described, there are a number of ways to sign a document or record electronically. You can add a signature in a Google Doc, for example. You can even use scanned signatures, or sign a PDF.

But the fastest and most secure way to sign a document today is to use an electronic signature solution like Docusign, or an end-to-end contracting platform like Juro that offers native eSignature functionality.

With Juro, you can sign contracts securely, in a matter of seconds, on any device. Juro's advanced electronic signature (AdES) standard complies with ESIGN and UETA, making it the perfect choice for US-based businesses that want a convenient and secure way to get contracts over the line.

But that's not all. Juro users can mass-sign documents, set up signing orders, and even track the activity of counterparties within a document with a live audit trail. This makes it quick and easy to spot bottlenecks and move past friction points within a contract, whether it's to push an MSA over the line, or to get that salary increase letter signed.

However, the biggest advantage of signing contracts with Juro is that you can also create, negotiate, review, approve, store, track, and renew your agreements within the platform. That means contracting can happen end-to-end, all in one place. Sound like something your team would benefit from? Hit the button below to see the platform in action.

Electronic signature validity: a few exceptions

The exceptions to the enforceability of electronic signatures under the ESIGN Act and UETA typically revolve around sensitive documents that traditionally involve heightened formalities or require additional legal protections. 

While electronic signatures are generally accepted, there are specific circumstances where they may not be valid:

• Wills and trusts: Some states may not allow electronic signatures for creating or amending wills and trusts.
• Court orders, notices and official court documents: Certain court documents and legal notices may require traditional handwritten signatures.
• Family law-related documents: Documents related to marriage, divorce, adoption, and other family law matters may require handwritten signatures in some instances.

In these cases, traditional handwritten signatures or specific legal procedures may be required.

Industry-specific standards for electronic signatures in the US

Certain industries will also have specific requirements for electronic signatures to ensure security and compliance. Let's run through a few examples:

• Healthcare: The Health Insurance Portability and Accountability Act (HIPAA) requires secure methods for electronic signatures to protect patient information.
• Finance: The Electronic Fund Transfer Act (EFTA) and the Gramm-Leach-Bliley Act (GLBA) mandate stringent security measures for electronic signatures in financial transactions. Additionally, the Financial Industry Regulatory Authority (FINRA) has guidelines for electronic signatures in financial transactions and record-keeping for member firms.
• Real estate: Some states have additional requirements for electronic signatures in real estate transactions, such as notarization or witness signatures.
• Government contracts: The Federal Acquisition Regulation (FAR) provides specific guidelines for electronic signatures in government contracting.

Understanding these standards is vital for industry compliance and the legal enforceability of electronic signatures. It is important to always check industry-specific regulations when implementing electronic signatures in these sectors.

Frequently asked questions

Which states have not adopted the UETA?

All US states except New York have adopted the UETA. However, this doesn’t mean that New York doesn’t accept electronic signatures. It just means that they have their own legislation: Electronics Signatures and Records Act (ESRA).

Illinois and Washington also adopted the UETA later than most states, with Washington enacting the legislation in 2020 and Illinois following their lead a year later. 

Which US state takes the strictest approach to eSignature validity?

According to DLA Piper, California is one fo the strictest states when it comes to eSignature validity in the US. This is largely due to the fact the state has a larger list of transactions that eSignatures and electronic records will not apply to. 

How do eSignatures work in the context of contract law?

Under contract law, an electronic signature functions like a handwritten signature. It shows the intent of the signatory to be bound by the terms of the contract, as long as both parties agree to use electronic signatures and meet the legal requirements under ESIGN or UETA.

What security measures should be in place for eSignatures?

While not mandated by law, it’s recommended that electronic signatures be secured using authentication methods like passwords, PINs, or multi-factor authentication (MFA). Audit trails and encryption help verify the authenticity of the signature and ensure the document hasn’t been tampered with.

Can electronic signatures be used in court as evidence?

Yes, electronic signatures are admissible as evidence in court. However, the party relying on the eSignature must prove that the signature is authentic and the contract signing process met legal requirements.

Can an employer require employees to sign documents electronically?

An employer can request that employees sign documents electronically, but under the ESIGN Act, the employee must consent to the electronic process. Employees must also have the option to withdraw their consent or request paper versions of the documents.

What happens if one party refuses to sign electronically?

If one party refuses to sign electronically, the transaction cannot proceed electronically. Under the ESIGN Act, both parties must consent to use electronic signatures. If one party prefers a traditional handwritten signature, the agreement will need to be completed in paper form.

Do electronic signatures require notarization?

Some documents that are signed electronically may still require notarization, such as real estate deeds or affidavits. States that allow eNotarization (electronic notarization) have specific guidelines for how notaries verify identities and apply their notarial seal digitally.

Are eSignatures allowed in real estate transactions?

Yes, electronic signatures are allowed in real estate transactions under both the ESIGN Act and UETA. However, certain types of real estate documents, like deeds or documents requiring notarization, may have additional legal requirements that vary by state.

How does the ESIGN Act apply to businesses operating in multiple states?

Businesses operating in multiple states benefit from the ESIGN Act because it ensures a unified federal standard for electronic signatures in interstate commerce. However, businesses should also be aware of state-level laws like the UETA, which may impose additional requirements or exceptions.

How do electronic signatures differ from digital signatures?

An electronic signature is a broad term that refers to any electronic process that indicates acceptance of an agreement, such as typing your name or clicking “I agree.” 

A digital signature, on the other hand, is a type of electronic signature that uses encryption technology to verify the identity of the signatory and ensure the integrity of the document.

You can read more in this comparative guide to electronic signatures vs digital signatures.