An Overview of UETA and ESIGN Act

Electronic signatures have become a generic part of the international computing landscape. The e-signatures follow the notion that the internet could use as a credible method for business transactions. The internet is more than just a means of communication, and so, it was obvious to use it for making transactions a lot simpler. Therefore, electronic signature laws such as the UETA and ESIGN act were put in place to govern the application of electronic signatures.

Electronic signatures were introduced to help people sign contracts from wherever they are, without the need of traveling to the distances. Furthermore, e-signatures were considerably helpful initiatives for saving time as well as costs for printing, storage, and maintenance of documents. These factors implied positive influences of e-signatures on the online economy.

Must Read: Top 10 Electronic Signature Myths and Facts

Before getting into the details of the UETA and ESIGN Act, let’s first understand the need for e-signature laws.

The Need for E-Signature Laws

Despite the promising advantages derived from electronic signatures, the need for legal imperatives such as UETA and ESIGN act was observed prominently. The lack of any specific legal system in the initial stages of electronic signatures was a prominent setback in ensuring their legal validity. This was also a notable pitfall in ensuring standardization of legal proceedings related to electronic signatures.

Therefore, it can be noted that these two laws had a considerable role in ensuring the legality of adopting electronic signatures. In the following discussion, let us find out some more details about these two laws and the various implications alongside the key points of difference between the two of them.

US Electronic Signature laws are specifically tailored to support the competitiveness of modern businesses with regards to their document workflows. Nowadays, a business could have a user-friendly signing experience with electronic signatures just because e-signatures are legally binding in different courts all over the world.

Even if UETA and ESIGN act is the general legal precedents followed for electronic signatures in the US, many countries have their unique regulations for e-signatures. For example, European countries follow the eIDAS (Electronic Identification and Authentication and Trust Services) regulation and Canada follows the Personal Information Protection and Electronic Documents Act (PIPEDA).

The two US e-signature laws are known for their distinct histories and implications which shall form the crux of a major share of this discussion. So, let’s dive deep to have more details of the ESIGN Act and UETA Act.

Electronic Signatures in Global and National Commerce Act (ESIGN Act)

The ESIGN Act is the federal law for electronic signatures that validates that contracts and documents signed online are legitimate. It has specific indications towards ensuring that business operations are streamlined and consumers don’t have to deal with paper burdens. If you have applied for a loan physically, then you must be aware of the effort and trouble that goes in there!

On the other hand, signing online has eased many processes for people, and many of them don’t even realize that the Electronic Signature in Global and National Commerce Act has played a huge role in helping consumers make the most of the electronic signatures.

There are a number of reasons to adopt electronic signature. Here are the top 10 reasons why you should adopt Electronic Signature for Your business.

The History of ESIGN Act

The ESIGN Act had widespread support from the Congress right from the beginning. Michigan Senator, Spencer Abraham, was one of the notable supporters for the bill. Spencer thought that the bill would be a successful instrument in taking away the fears related to the security of electronic contracts.

Representative Anna Eshoo and Representative Tom Bliley were the two legislators who first showed their inclination towards strengthening e-commerce contracts. The year 1999 witnessed the introduction of various bills related to eCommerce, and over the next years, the bills were subject to revision and expansion before their combination. The common goal for promoting electronic commerce alongside maintaining technological neutrality was found in House Bill 1714 and Senate Bill 761.

It was also noted with the HR714 did not have a broader scope, thereby leading to the inclusion of additional provisions for customer protection at a later stage. Finally, the act was introduced as a law by President Bill Clinton in June 2000. Most important of all, many states had already crafted and passed legislation related to electronic recordkeeping by the time the act was passed.

Exclusions from ESIGN law

While we are continuing ahead with our discussion on UETA and ESIGN Act, it is essential to outline the documents which are not included in the scope of ESIGN law. Here are documents which are not included in the ESIGN law:

  • Divorce notices.
  • Adoption paperwork.
  • Documentation for transporting hazardous materials.
  • Will, trusts, and codicils.
  • Utility service termination notices.
  • Court notices and orders.
  • Notices for eviction, default, repossession or foreclosure.
  • Notices for cancellation of insurance benefits.
  • Notices for material failure in products or product recall notices.

Now that we have obtained a detailed insight into one half of the UETA and ESIGN Act combination, it would be just right to move towards the other essential half.

UETA Came Before ESIGN

Many people might not have known about the fact that the UETA Act was the predecessor of the ESIGN legislation. It was passed by the National Conference of Commissioners on Uniform State Laws in 1999 before the ESIGN law was passed in 2000. The UETA (Uniform Electronic Transactions Act) is a state law that was specifically tailored for providing a framework that established the legality of an electronic signature for commercial as well as government transactions.

One of the most commonly accepted facts related to e-signature laws in the US is that the UETA and ESIGN Act are similar to each other. Even if this statement can be true to a certain extent, there are certain differences that make both the regulations distinct from each other. Before we take a look at the differences, it would be reasonable to dig deeper into the implications of the UETA regulation.

Adoption of Uniform Electronic Transactions (UETA Act)

The first interesting piece of information about the UETA regulation is that only 47 states in the US alongside the US Virgin Islands, the District of Columbia and Puerto Rico have adopted the regulation. The three states of New York, Washington, and Illinois have not adopted the UETA law.

However, these states have adopted legislation similar to the UETA and ESIGN Act to provide governance for the management of electronic transactions. Washington passed the Electronic Authentication Act in 1997 while the state of Illinois instituted the Electronic Commerce Security Act in 1999.

New York follows the Electronic Signatures and Records Act for ensuring the legality of electronic signatures just the same as pen and paper signatures. On the other hand, the remaining 47 states as well as the District of Columbia, the US Virgin Islands and Puerto Rico follow the guidelines mentioned in UETA for reaching consumer agreements on different online platforms.

Precise and Wider Legal Definitions of ESIGN and UETA Act

Another interesting highlight that can be noted with UETA as a supporting element in the UETA and ESIGN act combination is the broader legal definitions. UETA demarcates an electronic signature from an electronic record with broader definitions. For instance, UETA clearly states that an electronic signature and an electronic record should be combined to ensure their legal validity.

An electronic signature has to be linked or attached to an electronic record or document to make sure that the document or record is considered legally valid. Furthermore, an individual could find broader legal definitions of terms such as ‘computer program’ and ‘automatic transaction’ to help companies find better opportunities in terms of options to do business without compromising consumer protection.

Also Read: Digital Signature vs Electronic Signature

Some Important Points about ESIGN and UETA Act

As of now, you have understood the definitions and roles of these US electronic signature laws. But there are some important facts that we should also cover in this article. So, moving ahead, check out some of the important points about ESIGN and UETA act.

  • A widely accepted instrument for validating e-signatures

Before this act gained recognition as one of the prominent US electronic signature laws, businesses faced considerable issues related to the management of online transactions. This legislation made sure that electronic signatures stood up in any court by confirming that electronic signatures also had the same legal validity as pen and paper signatures.

The act stated that electronic signatures could not be denied legal validity or rendered unenforceable just because of their electronic form. Over the years, many court cases have shown support for the legal validity of electronic signatures.

  • Obtaining “Consent”

As a vital part of the UETA and ESIGN act combination, this legislation encourages the notion that customers have provided consent and have obtained the necessary disclosures about the electronic contract. The legislation implies the need to provide the customer with a clear and explicit statement about their right to withdraw consent at any time and the option for receiving the contract in a non-electronic form.

Even if the present consumer consent provisions in the act do not prioritize the facility of a paper contract to validate an electronically signed document or contract. However, the legislation also focuses on providing information to the consumer about accessing and retaining the electronic document, record or contract.

  • Giving longstanding evidence

Another implication found in one of the popular US e-signature laws is the necessity for businesses to retain evidence of the contractual agreements signed using electronic signatures. The evidence is specifically needed to address legislative requirements alongside preparing to resolve any concerns that may arise in the future regarding the legitimacy of the contract or details regarding specific terms in the contract.

The guidelines indicate the need to maintain the accuracy and accessibility of the records of agreements for all parties involved in the contract for a specific period. The specific period is determined by governing authority or stage agency that has jurisdiction for a particular transaction, contract or document.

  • Preventing federal and state law conflicts

As one of the popular e-signature laws, you can also find the ESIGN law as vital support for federal and state regulations. One of the notable motivations for Congress to pass the act in 2000 was to resolve the concerns of conflicts between e-signature laws in different states. This was primarily intended to prevent any negative impacts on interstate commerce.

The ESIGN law indicates that states which have adopted the UETA act can be able to introduced modifications or restrictions in the application of the ESIGN law. At a later stage, almost all states adopted the UETA regulation and thus any concerns of conflicts in e-signature regulations across states were resolved.

  • An instrument to promote global business participation

In addition to the legal implications related to e-signature with the UETA and ESIGN Act, the latter was also accounted as a foundation for helping US companies gain the leading edge in global business. Therefore, the ESIGN legislation also focuses on promoting the use of electronic signatures for international business transactions. However, all the parties are required to have their specific authentication technologies in place alongside the required legal path for proving that a particular transaction is valid in court.

Similarities Between the Two US E-signature Acts

The UETA and ESIGN Act are similar in a number of terms:

  • The first similarity arises from the types of documents that are not included in the scope of each regulation. UETA also excludes will, trusts, and the transactions that are managed by courts such as divorce or eviction notice just like the ESIGN law.
  • The primary focus of the UETA regulation is vested in electronic contracts that are implemented for business, governmental and commercial applications just like ESIGN law.
  • Like ESIGN act, the UETA regulation also implies the precedents for notarization of documents by suggesting the need for the notary or authorized professional for acting as a witness to specific contracts to have their signature in the electronic form. The regulation also reflected on the need for attaching the verification by the notary or professional witness authority for the contract with the electronic document to avail references in the future.

Differences Between the Two US E-signature Laws

While the UETA and ESIGN Act have been crucial components in the legal landscape for monitoring electronic signatures and transactions conducted by using them, they are also known for certain differences. The first point of difference between these legislations are the following:

  • The first difference is in the notices that should be agreed upon by each party before entering an electronic transaction. The UETA regulation implies that context and the circumstances define the legal validity of an agreement and can be helpful for companies to get a stronghold when conducting online commercial transactions.
  • Another point of difference that can be noted in the two renowned US electronic signature laws is observed in governance. ESIGN law is a federal act, thereby implying its influence on online businesses in all the 50 states of the US. On the other hand, UETA is adopted on a state-by-state basis, thereby suggesting that individual states have the privilege of accepting or rejecting the guidelines in the regulation.
  • In the majority of cases of conflict between the UETA and the ESIGN regulations, the state law would hold the top hand. The ESIGN law comes into play in these cases by suggesting that state laws don’t have to follow the precedents of federal law exactly. However, the states are required to provide equivalent legislation for protecting electronic signatures and electronic contracts.

Closing Words

On a closing note, it can be clearly stated that the UETA and the ESIGN law have been introduced for promoting eCommerce and online contract signing. These legal precedents are found to be promising instruments in resolving the concerns associated with the security of electronically signed contracts and documents. The background for the development of these regulations has been noted as a promising highlight in the discussion mentioned above, which showed us the exact intentions of lawmakers behind promoting these laws.

Most important of all, the legal implications of each of these regulations showed insights for the larger picture for implementing them to achieve security and legal assurance for electronic documents, records and contracts as well as electronic signatures. Finally, the reflection on the differences between both the regulations provided a better understanding of the applications of these laws.

Posted by Brian Felix

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