The onslaught of COVID-19 has required that most businesses now work remotely. This materially changes the dynamic of the office and leaves employees uncertain as to how they will complete tasks, such as executing contracts, which they had, up until then, taken for granted. Businesses should be aware that federal and state laws allow for certain contracts to be executed via electronic signatures and notarized electronically.
What are the electronic signature and notarization legal requirements?
Federal and State Electronic Signature Laws
On June 30, 2000, President Bill Clinton signed the Electronic Signatures in Global and National Commerce Act (“E-SIGN”) into law, giving electronic signatures the same legal effect as handwritten signatures under federal law. 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.” When federal law does not apply, individual states have the option to adopt the Uniform Electronic Transactions Act (“UETA”). Currently, UETA has been adopted by forty-seven (47) states of the Union and the District of Columbia, with Washington (pending adoption of UETA), Illinois (the Electronic Commerce Security Act) and New York (the Electronic Signatures and Records Act) having passed similar legislation governing electronic transactions.
Business owners that intend for their contracts to be signed electronically (because either they do not want to meet in person or cannot have agreements readily signed and sent) should include specific language in their contracts to that effect. Contracting parties should also be given the opportunity to opt-out of signing documents electronically. Please note that certain types of agreements, such as those involving trusts and estates, and securities law, still require handwritten signatures. Businesses must also be careful to adhere to applicable federal and state laws to ensure that all documents are enforceable after they have been signed. Advanced authentication options are recommended for enhanced security. In addition, there are many software platforms available in the marketplace that can assist with digital identification, auditing, record retention and phone authentication.
Electronic Notarization Requirements
On March 19, 2020, Congress introduced the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (“SECURE”). Senator Kevin Cramer explained that “Americans shouldn’t have to risk their health or safety to execute important financial or legal documents, especially when they could do so from the safety of their own home.” To date, twenty-three states have approved the use of Remote Online Notarizations (“RON”). SECURE would allow the nationwide use of RON so that consumers and notaries can use two-way audio-visual communication to execute documents that require notarization.
It may be a while before our professional lives return to a sense of normalcy. Fortunately, federal and state electronic signature and notarization laws exist and/or have been introduced that will help ease the burden of working remotely. When implementing these electronic signature measures, it is imperative for businesses to seek the advice of knowledgeable counsel to ensure proper navigation of applicable state and federal law.
If you are interested in learning more about this topic or require assistance in connection with contract construction and agreement execution for your business, please email us at email@example.com, or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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