E-Sign: An Explainer

Long Story Short: E-Sign and UETA allows agreements signed electronically (such as through checking a box) to be fully enforceable. In addition, E-Sign permits account disclosures to be delivered electronically, so long as the consumer is given a series of E-Sign disclosures and affirmatively consents to such electronic delivery.

Long Story: Over the last 20+ years, we’ve seen a bunch of society-seismic legislation. Anti-terrorism laws. Banking overhauls. Health care reform. Tax code changes. Massive stimulus packages.

Those were all huge, important and systemic changes, but I’d also add one more legislative change that’s been at least “kinda sort” as momentous to the everyday life of Americans – electronic signatures! [hey, you’re reading a legal blog. If you want something with more zing, gotta head over to Instagram, Tik Tok or whatever the kids are using these days….]

Hear me out. The fact that we can sign up for bank accounts and credit cards online, suppress those annoying paper statements, and ditch the paper check is all thanks to some very-forward thinking Federal and state legislation passed in the early 2000’s, which put electronic signatures on equal legal footing as “wet-ink” signatures.

This landmark legislation was the Electronic Signatures in Global and National Commerce Act (“E-Sign”) passed by Congress in 2000, and the model Uniform Electronic Transactions Act (“UETA”), which has been adopted by 47 states (and the District of Columbia…which really should be a state, but that’s another blog posting….).

In a nutshell, both E-Sign and UETA basically gives the same legal effect to agreements signed electronically, as agreements signed the old fashioned-way. In other words, an electronically signed contract is just as legally enforceable as an ink-stained contract.

And an “electronic signature” isn’t limited to an actual “John Hancock” autograph in digital form. It can be “an electronic sound, symbol or process” attached to a contract and executed by a person with intent to sign the contract. So, clicking that box constitutes your signature just fine.

E-Sign and UETA don’t stop at electronic signatures. Both laws also allow the electronic delivery of any information (such as account disclosures) required to be provided in writing. However, E-Sign (but not UETA) imposes the following requirements on delivering required information electronically to consumers:

  • The consumer has affirmatively consented to such electronic delivery, and has not withdrawn their consent. [Note that this consent must also reasonably demonstrate that the consumer can access the required information in the electronic form that such information will be provided].
  • Prior to collecting the consumer’s consent, you’ve provided the following in a clear and conspicuous statement informing the consumer of the following:
  • any right to have the materials provided in paper form.
  • the right of the consumer to withdraw consent to receive required information electronically, and any consequences/fees related to withdrawing their consent (such as closing the consumer’s account)
  •  whether the consent applies to a particular transaction (such as initial disclosures) or identified categories of information that may be provided during the relationship (such as account statements, privacy notices, changes in terms, etc.)
  • how a consumer may withdraw consent to receive required information electronically.
  • how a consumer may obtain a paper copy of the required information, and any fee related associated with that paper copy.
  • a description of the hardware and software required to access and retain the information provided electronically.

[Note that a U.S. Senate committee approved a bill in the closing days of the last Congressional session that would have dropped the requirement for the consent to demonstrate that the consumer could access the required information electronically. However, the bill died without a Senate floor vote. No word yet on whether the measure will be re-introduced during this Congress.]

The E-Sign and UETA requirements track each other closely, however UETA lacks E-Sign’s requirement to obtain the consumer’s consent to receive required information electronically (as noted above).

In an interesting twist (if only to me), E-Sign doesn’t preempt (or in non-legalese, doesn’t override) a state’s adoption of the UETA, so long as the state enacts the model UETA without change.  

E-Sign and UETA don’t cover every contract – documents related to wills/trusts, adoptions and divorces are not covered, and still must be physically signed. Also, notices of utility service terminations, foreclosures/evictions, cancellation of health insurance/life insurance and product recalls must still be delivered in paper under E-Sign.

The amazing fact (again, if only to me…lawyer-dork) is that both E-Sign and UETA have been left untouched since their passage in the early 2000’s (I mean…I’m not even sure flip phones were a thing yet then), yet continue to function amazingly well even with today’s technologies that probably would have been seen as Jetson-like in 2000.

Next time you set up that automatic electronic payment, or apply for that loan online….remember that’s all made possible by something passed around Y2K. Questions? Let’s talk.