When it comes to electronic signatures in the United States of America, one of the most important laws that companies should keep in mind is the Uniform Electronic Transactions Act (UETA). Alongside the Electronic Signatures in Global and National Commerce Act (ESIGN Act), it was enacted to help make electronic contracts and electronic signatures valid, legal, and defensible.
UETA was proposed by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and is one of several United States Uniform Acts. It has been adopted by 48 states, as well as the District of Columbia, the U.S. Virgin Islands, and Puerto Rico. The last state to adopt it was Washington in 2020, and the only states not to adopt the law currently are Illinois and New York.
What is the National Conference of Commissioners on Uniform State Laws?
Also known as the Uniform Law Commission, the National Conference of Commissioners on Uniform State Laws (NCCUSL) is a non-profit association established in 1892. It aims to provide U.S. states and territories with legislation that is both well-researched and drafted and which addresses critical areas of state law.
The commission exists to ensure that certain key laws are uniform across states. This prevents confusion when presented with cross-state issues. For example, in the case of the UETS, the uniform law ensures that the governance of electronic signatures is the same across states, which makes conducting cross-state business easier for corporations and companies.
What is a Uniform Act?
A Uniform Act is a state law that has been drafted and proposed by NCCUSL. When adopted by states, these laws ensure that certain key aspects of the legislation are uniform across the country and make cross-state matters easier to regulate.
What is UETA?
UETA serves as a framework that states can use in order to determine the legal status of electronic signatures. It was approved by NCCUSL in 1999, after which states started the process of adopting it into state law.
Unlike the ESIGN Act, it is not federal law. However, it has legal standing in the states that have adopted it into law. In these states, it provides businesses with a guarantee that electronic signatures have the same legal protections as handwritten signatures.
This act is applicable in cases of business transactions, as well as when it comes to e-commerce transactions. Like with the ESIGN Act, it does not apply to wills and trusts, as well as several other documents that are governed by courts. It does, however, apply to some governmental matters.
Under UETA, an electronic document must meet four major requirements in order to be considered valid. These are:
- Intent to Sign: As with handwritten signatures, all parties involved must have intended to sign the documentation. Signatures that do not also have an intention to sign behind them are considered invalid.
- Consent to Do Business Electronically: As an electronic document implies business being conducted electronically, all parties involved must consent to do business in this manner. This is an easy requirement to prove in the case of business transactions. However, it can be more complicated in the case of a provider collecting signatures from customers, as in the case of e-commerce.
However, it is possible to provide proof of customer consent to doing business electronically in one of the following ways:
- Making the customer sign a copy of the UETA Customer Consent Disclosure
- Showing proof that the customer agreed to conduct the transaction through the use of an electronic document
- Showing proof that the customer did not withdraw their consent to conducting business electronically.
- Association of Signature with the Record: In order to conduct business electronically, you will undoubtedly be making use of a system that allows you to capture eSignatures. This system should be one that creates some form of a record of the transaction. The form used in order to create this record should be one that shows the process of signing the document and should also prove that the other party has used an electronic signature in order to complete the transaction.
- Retention of the Record: UETA compliance requires more than simply creating a written record of the electronic transaction. Any record created should be accessible to all parties that have signed the electronic document.
If these requirements are not met, electronic documents and signatures can be challenged in court. This can be a costly process – even if you win the challenge, you will have to pay for legal fees, and the legal proceeding can take up months and years of your time. By making sure that your documents meet the requirements set out by UETA, you ensure that you do not have to worry about such a situation arising in the future if you are faced with a disgruntled customer or business partner.
What Definitions Are Set Out In UETA?
To better clarify what is meant by electronic record and electronic signature, UETA has clarified definitions of these two terms. These definitions ensure that there is no confusion when understanding what the law demands.
- Electronic Record: According to UETA, an electronic record is any record that is “created, generated, sent, communicated, received, or stored by electronic means.”
- Electronic Signature: UETA also clarifies a definition of what an electronic signature is. According to the text of the act, it is “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”
What Does UETA Cover?
According to the text of the act, UETA covers electronic contracts that relate to “business, commercial (including consumer) and governmental matters.” This means that this act does not cover any documents and electronic transactions between individuals that do not relate to business matters. Also, any electronic records and electronic signatures that are unrelated to business transactions are not covered by UETA.
Other Important Considerations for Ensuring UETA Compliance
One other important consideration to keep in mind is that for any electronic documents to be deemed valid under UETA, they must not have been tampered with.
If the documents have been tampered with, they are no longer considered valid. This means that organizations should ensure that the software they are using to conduct business electronically must have checks and measures to ensure that all parties involved are signing a document that is intact in its original state.
Furthermore, your company should also have a policy dictating how written records are retained. This should describe what types of electronic documents should be retained, how they should be retained, and for how long they should be retained. This is done to ensure that your employees have a clear guideline to follow. However, a retention policy also means that it is easy to quickly get rid of any unnecessary documents once the statutory requirements for retention have passed.
Also, by having a clear written record policy, you ensure that in case of any litigation or regulatory action, it will be easy to defend against any potential allegations of wrongdoing when it comes to destroying records.
Your record retention policy should set out how you are going to store electronic documents. This method should allow for the easy recovery of records if needed, and your policy should also set out the method by which documents will be destroyed at the time required.
If you are a business owner, your records should include all documents produced by your employees, whether paper or electronic. This includes all emails, proposals, agreement correspondences, contracts, quotes, texts, etc. Along with these, you should also include calendar and appointment books are part of your business records.
Does UETA Mean That Electronic Signatures Are Enforceable?
The language of UETA does not automatically make electronic signatures enforceable. What it does do is establish that legally, electronic signatures are the equivalent of manual signatures. It ensures that records and signatures cannot be excluded from evidence solely because it is available in an electronic form and not a manual form.
Business owners should keep in mind that not all manual signatures are enforceable. Manual signatures can be forged, or the people signing a document may not be qualified to do so. In such cases, despite the presence of a manual signature, the final document cannot be enforced.
Similarly, electronic signatures can encounter such issues. UETA simply ensures that you will have no more issues with electronic signatures than you would have had with manual signatures in such a case.
In order to make sure that your electronic documents are enforceable under UETA, they should meet the previously mentioned requirements. Of the four that we have discussed, the most important of them is that all parties involved should have consented to do business electronically.
Many businesses do so by displaying that the other party involved has not withdrawn their consent to doing business electronically. One of the most common ways this can be seen is through the use of ‘checkboxes’ on e-commerce websites that refer to the buyer’s agreement to the contract terms.
However, in such a case, as soon as the buyer claims that they did not want to enter the agreement or did not agree to the terms set out, the contract will no longer be enforceable under UETA. In order to prevent such a situation from happening, it is recommended that you use a more involved system for electronic signatures where possible. These will not only make it clear who has signed the document, it will also clearly show intent and agreement to the contract terms, making the resulting document easier to enforce under the terms set out by UETA.
Furthermore, it is recommended that the procedure requires the customer to clearly identify themselves. Instead of simply checking a box, it should ask them to fill in their name and identifying and contact information so that they can be easily identified. Similarly, requiring the customer to use passwords and security codes that they pick themselves can also satisfy the requirement of having an identifier for your customer.
Other good options can include a unique signature that the customer can create with the use of a computer mouse. Any transmissions sent to you for electronic documents should be maintained, as they can similarly be used to help identify the source. If the electronic contract or document is long and spans several pages, it is also recommended that you make the customer fill in their signature on each page. This displays that they understand and agree to all of the terms in the contract or document.
UETA Adoption
As UETA is not a federal law, each state can make its own discussion regarding whether or not to adopt it into state law. At the moment, only two states have not adopted UETA. However, they have similar laws that help ensure the legality of electronic signatures.
- Illinois: Illinois has currently enacted the Electronic Commerce Security Act over UETA. This law was enacted in 1999 and was modeled on the ESIGN Act. This law mandates that no information, records, and signatures can be deemed to lack legality, validity, or enforceability solely on the basis of the fact that they are in electronic form rather than physical form.
- New York: New York has enacted the Electronic Signatures and Records Act. It was signed into law in 2000. This act explicitly states that electronic signatures have the same legal standing and weight as handwritten signatures.
Notarization Under UETA
If you have any documents that must be notarized before submission, they can still be submitted electronically. However, the notary must be able to have their signature included in the electronic form as well, to provide proof of notarization.
The notarization or verification should not be a separate document. Instead, it should be attached to the electronic document being notarized, and it should also be retained along with the document for future proof or reference.
UETA vs. ESIGN Act
UETA and the ESIGN Act have certain similarities and are the two pieces of legislation that are most often referred to when it comes to discussing the legality of electronic signatures. As they exist to address similar issues, they are often confused and conflated with each other.
There are some areas in which the acts are similar to each other:
- Like UETA, the ESIGN Act also excludes several types of documents that are usually under the eye of the courts. These documents include wills, trusts, eviction notices, divorce papers, and more.
- Both legislations are focused on the use of electronic signatures for business, governmental, and commercial use.
- Similar to UETA, the ESIGN Act also allows notaries to attach electronic signatures to electronic signatures, effectively acting as witnesses. Essentially, both acts allow documents that require notarization to be transmitted online.
However, there are some key differences between the two acts:
- Unlike UETA, the ESIGN Act is a federal law. This means that every state in the country must be compliant with it, while when it comes to UETA, only states that have adopted it into law fall under its purview. This is why not all 50 states fall under the purview of UETA – it has not been uniformly adopted across the country. Furthermore, some states have added their own amendments and additions, so the specific details of the Uniform Electronic Transactions Act may differ from state to state.
- If there is a conflict between UETA and the ESIGN Act, the state law (UETA) will govern the issue in most cases. However, the ESIGN Act mandates that while state laws do not have to match up completely with federal legislation, each state must provide an equivalent level of protection for electronic signatures and contracts.
- Unlike the ESIGN Act, UETA emphasizes the context and circumstances around which parties entered an electronic transaction in order to define the validity and enforceability of the document.
Final Thoughts
Like the ESIGN Act, UETA is a key piece of legislation that ensures that electronic signatures and documents are treated as equivalent to physical documents and signatures. These laws are essential in allowing for business agreements and contracts to conducted easily, as there is no need to spend time waiting for the transmission of physical documents.
UETA, in particular, is important when it comes to inter-state business transactions. In the USA, state law takes precedence over federal law in the case of electronic signatures. Providing states with uniform legislation ensures that businesses can easily be compliant with state and federal law when conduction commerce across state lines.
It reduces the need for familiarity with several pieces of legislation, and it makes the search for an effective electronic signature provide and document management system easier. This is because both corporations and individuals simply have to search for providers compliant with UETA and the ESIGN Act, as opposed to searching for those compliant with 50 different pieces of state legislation.
As the earlier piece of legislation – UETA was first proposed in 1999, while the ESIGN Act was proposed in 2000 – UETA also served as a model for the creation of a federal law governing electronic signatures.
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