Electronic Signatures in a Nutshell
"ESIGN, the federal law, does not preempt a state’s laws dealing with electronic signatures... Most companies may design a national electronic signature process, without having to contend with significant state variations in the electronic signature process...
"ESIGN states that a signature may not be denied legal effect solely because it is in electronic form. ESIGN does not give preferential treatment to electronic signatures. Consequently, an electronic signature can be challenged for all the other reasons that a wet signature can be challenged, such as the incapacity of the person signing, mistake, fraud, duress, and forgery. ESIGN does not require anyone to use or accept an electronic signature or record...
Under ESIGN (or the applicable state law) an electronic signature can be as simple or complex as:
• Clicking “I Agree;”
• Saying into a recording device, “I Agree;”
• Digital signature using PKI technology;
• Using a peripheral device that records an image of one’s signature; or
• Other ways using an electronic sound, symbol, or process attached to or logically associated with the document or record, which is executed or adopted by a person with the intent to sign.
"Verifications and acknowledgments required by law to be in writing, such as certain notices in financial transactions, may be provided and obtained in electronic form under ESIGN in certain circumstances. ESIGN essentially provides that if a law requires a disclosure to be provided by a certain method that includes acknowledgment of receipt, that disclosure may be given electronically if, and only if, the electronic method for providing that disclosure also includes a process or method for capturing electronically an acknowledgment...
"Failure to comply with the ESIGN disclosure requirements does not render void or voidable the underlying transaction (for example, the application for insurance or the insurance policy ultimately issued), but could subject the company to regulatory sanctions for failing to provide the required disclosures (such as the replacement notice) in accordance with applicable law. There may also be civil remedies available to consumers if the disclosures are deemed to have not been given effectively...
"[With certain exceptions,] ESIGN allows an archived electronic record to satisfy applicable statutory requirements that a contract or other document be retained “in writing,” if the electronic record is maintained in a form capable of being retrieved by all parties for later reference. In addition, ESIGN recognizes that records of a transaction (whether completed electronically or not) may be archived exclusively through electronic means, but failure to archive the records in a way that allows the record to be accurately reproduced could result in the unenforceability of the agreement represented by the electronic record and regulatory sanctions for failing to maintain the proper records...
"The 5-point approach examines a proposed electronic signature and electronic delivery process from the following perspectives:
1. Authentication Risk
This is the risk that the electronic signature obtained is from a forger, not from the actual person whose name is associated with the electronic signature...
2. Repudiation Risk
This is the risk that a document bearing a person’s signature is altered after the document is signed electronically and the person repudiates the contents of the document bearing his or her signature...
3. Compliance Risk
This is the risk that the rules and regulations governing such a transaction, such as regulation requiring certain consumer disclosures to be provided by a certain stage in the transaction, are not satisfied...
4. Adoption Risk
This is the risk that the e-process takes longer than the traditional process or is not as convenient as the traditional process and consequently, adoption of the process is slow...
5. Relative Risk
...For most electronic signature and e-delivery processes, the goal will be to have the transaction, on the whole, be no riskier than the current processes..."
Read more in this article by Patrick J. Hatfield (Lord, Bissell & Brook LLP), from which the foregoing is quoted.
