Are E-signatures Valid and Legally Binding for Business Communication?

Most people remember the time when business documents had to be printed off then manually signed in order to be considered legal. This took quite a lot of time as the signed document then either had to be sent by ordinary mail or courier or scanned and sent by email. Even the latter was questionable as a scanned signature was somehow regarded as less “official” than “real” signatures. That has now all changed and for most cases where a signature is required, a digital signature or e-signature is perfectly satisfactory and legal. E-signatures, like a lot of electronic communication, make business dealings a lot more efficient and many businesses are now used to them, but there have been lingering doubts over their legitimacy.

All that changed with federal legislation, as well as matching state legislation, which made signatures, except in certain limited circumstances, legal.

The two federal laws were passed in 1999 and 2000. These were the ESIGN Act and the UETA Act. Nevada’s Electronic Transactions (Uniform Act) revised statute NRS 719.240 was passed in 2013. Details of these are given below.

Definition of an electronic signature

There are several different types of electronic signature or e-signature. It could be an electronic symbol, a sound, an authentication of a PIN number or a signature on a PDF on a phone. As long as the signature has been made by someone with the sole purpose of authenticating the particular document or record it may be considered legally binding.

Exceptions to the validity of an e-signature

According to both the ESIGN (2000) Act and the UETA (1999) Act, which has been ratified by 47 of the states, including Nevada, an e-signature is valid except where it is used for a non-commercial transaction. The 3 additional states have alternative statutes other than the UETA which basically do the same thing.

Section 103 of the ESIGN Act specifies the exemptions to the Act. These include various documents that might be used in Family Law, such as divorce certificates, marriage certificates, wills and adoption papers.

E-signatures cannot also be used for the following. Paper notification must be used instead.

  • termination of life insurance;
  • notice of default;
  • notice of acceleration;
  • repossession, foreclosure or eviction of a person whose primary residence is a rental property.

ESIGN compliance

E-signatures must be agreed by all parties using them to be legally binding. They are not compulsory and paper signatures can be used instead. However, as has already been mentioned, there are a lot of benefits to using e-signatures. The UETA Act expressly requires the electronic signature provider to ensure that parties that use the e-signature consent to it before using it.

Parties that use e-signatures must also be asked if they “intend” to use this form of signature before using it. This allows the parties to use another method if they so wish to do so.

The document that is being signed must be clearly associated with the e-signature. This can be done by adding a statement either in text or graphical form that is attached to the signature.

There must be a way of attributing the e-signature to the person who actually signs it. This can be done in a number of ways including preserving an audit trail that confirms the link between signature and signer.

The signed document that contains the e-signature must be able to be retained by the person in receipt of it. That means that the sender cannot be allowed to prevent the recipient from saving or printed it off.

If you run a business and are confused about whether your use of e-signatures is valid or the way you are using them is legitimate or want to know about any other aspect of business law, don’t hesitate to contact one of our experienced business law attorneys at the Law Office of Pintar Albiston in Las Vegas, Nevada, You can contact us at 702-685-5255.