Quick Reference Guide: Electronic Signatures & the ESIGN Act

electronic signatures and the ESIGN Act

We’ve previously covered a general description of what electronic signatures are, let’s look at it from the perspective of the ESIGN act.
For the sake of this post, we’ll first look at what the ESign act is. Wikipedia defines the Electronic Signatures in Global and National Commerce Act or ESIGN act as, “a United States federal law passed by the U.S. Congress to facilitate the use of electronic records and electronic signatures in interstate and foreign commerce by ensuring the validity and legal effect of contracts entered into electronically.”   
Breaking down the ESign Act
As defined by the ESIGN Act here (more on this foundational piece of legislation shortly), an eSignature is “any 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.” If that definition sounds vague or unclear, don’t worry. That’s sort of the idea; it is, after all, “legal-ese”. In plain English, however, the above definition simply “states” an eSignature as a legal concept. That is, its legal definition simply means that it is possible for an electronic signature to carry the same sort of legal “weight” as its pen-and-paper equivalent. That probably doesn’t make too much sense at this very moment. So, let’s take a closer look.
First, there is one critically important point you should understand: In a strictly legal sense, the term “electronic signature” does not refer to an actual signature. Instead, the term refers more broadly to the process requirements (we’ll call them components) that must be met in order for an electronically signed document to be considered legally binding in a court of law.
As far as the law is concerned, a signature is simply one component of an electronically signed document. By itself, it carries no legal authority. In order for an electronic document to stand up in a court of law, all of the components must be present. The ESIGN Act (again, more on this shortly) explicitly outlines these components in an attempt to standardize, well, the process by which an electronic document must be handled so that it carries full, legal authority. Let’s take a quick look at the basic components of an electronic signature.
As we just reviewed, the signature itself is only one component of a legally-binding electronic contract. However, there are four, primary components that you should care about most:

  1. Consent:
    Basically, any individual who signs an electronic document must explicitly consent to do so in the first place. Should an individual choose not to consent to an electronically signed agreement, a non-electronic option must be made available.
  1. Intent:
    In the simplest terms, this means that the signer clearly understands his or her intent to sign the document, and the process by which the individual signed the document was clear and understood from beginning to end.
  1. Verification:
    For an electronic document to be considered legally binding it must be signed by the same person whose signature appears on the dotted line. In turn, most electronic signature solutions have built-in verification methods.
  1. Auditability:
    This is the electronic equivalent of a “paper trail,” (popularly know in the electronic signature industry as an ‘Audit Trail’) whereby each party involved in an electronic agreement (or a legal entity, for instance) can, if necessary, easily access each step of the electronic signature process. You can read more about the anatomy and importance of an audit trail in our post titled “The Anatomy of an Audit Trail: Electronic Signature Simplified”.

We realize that navigating through the world of electronic signatures can be tricky, so we created “A Brief Introduction to eSignatures”. You can download if for free here.