To foster the growth and credibility of the electronic marketplace, Congress has passed the Electronic Signatures In Global and National Commerce Act ("E-Sign Act"). The E-Sign Act provides that electronic documents and signatures have the same legal validity, force and effect as traditional paper documents and handwritten signatures.

What Is an Electronic Signature?

The E-Sign Act defines an electronic signature as "an electronic sound, symbol or process attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record." An electronic signature can be as simple as digitally entering "/john doe" or as complex as a digital signature. A digital signature is a form of electronic signature that provides authentication through the use of encryption technology.

Consumer Consent Requirement

Your company may provide information required by law to be in writing electronically to a consumer only if your company first receives the consumer's affirmative consent to receive the information electronically and your company clearly and conspicuously discloses the following information to the consumer before obtaining its consent: (i) that the consumer has the right to have the document made available on paper, (ii) the particular transactions the consumer's consent is applicable, (iii) how the consumer may withdraw his consent, (iv) how the consumer may update his electronic contact information and (v) how a paper copy of the electronic document may be obtained. The legal validity of an electronic document will not be denied, however, solely because of your company's failure to obtain the consumer's electronic consent.

Exceptions

Electronic documents and signatures do not have the same legal validity as their traditional counterparts when such documents or signatures involve wills; codicils; testamentary trusts; adoptions; divorce or other family law matters; commercial transactions governed by the Uniform Commercial Code; court orders; notices; official court documents and pleadings; cancellation or termination of utility services; a default; acceleration; repossession; foreclosure or eviction under an agreement; the cancellation of health and life insurance benefits; recall of a product for health or safety purposes; and documents associated with the transportation of toxic and hazardous materials.

How This Affects Business

The E-Sign Act enables your company to save a lot of money by sending and retaining documents in electronic form and by expediting business transactions. Your company, however, must be careful not to enter into electronic business transactions that meet one of the exceptions to the E-Sign Act. In addition, there is the problem of those documents, such as mortgages, that need to be notarized. To minimize your risk, your company should implement and enforce security procedures, retention policies and guidelines concerning the use, access, storage as well as verification of electronic documents and signatures.

Helpful Guidelines

In deciding whether to use electronic documents and signatures in your business, you should ask yourself the following questions: