Understanding the Law – E-SIGN Compliant Electronic Signatures

On June 30, 2000, Congress enacted the Electronic Signatures in Global and National Commerce Act (“ESIGN” or “the Act”), to facilitate the use of electronic records and signatures in interstate and foreign commerce by ensuring the validity and legal effect of contracts entered into electronically. Yet many do not understand how their business can be compliant with the E-SIGN Act.

First we need to understand that E-SIGN (additional E-SIGN analysis here) [], in section 101(b) does not require people to use electronic signatures. When electronic signatures are used then Sub-section (c), in direct support of (b), requires a “Consumer Disclosure” that the consumer also “consent electronically, in a manner that reasonably demonstrates that the consumer can access information in the electronic form that will be used to provide the information that is the subject of the consent”.

As we can clearly see, the law outlines a two step process to signing files electronically. First, disclosure of the consumer’s right to use paper, which is followed by their consent to the electronic process. The second phase is the actual capture of the electronic signature.

Once the signature is captured the law directs its attention to the electronic record that has now been created. This aspect of the law, while often overlooked, provides the true power and cost savings of electronic signatures – the ability to STORE electronic files. Printing and storing a paper copy of the electronic record defeats the achievements of this law. It is the accessibility and cheap storage costs of electronic files that really amount to long term cost savings. Sub-section (d) details the retention of contracts and records. If a “statute, regulation, or other rule of law requires” the file to be retained then “that requirement is met by retaining an electronic record”.

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