What is the ESIGN Act?

Apr 04, 2024

The federal ESIGN Act is a US federal law that made eSignatures legal and valid both domestically and internationally in commerce between US companies and foreign companies. Another law that regulates eSignatures in the US is UETA, which came first and has been adopted by 47 states and D.C. The ESIGN Act resolves discrepancies between the laws of different states, providing a federal basis for the validity of eSignatures. Together, UETA and the ESIGN Act are the two laws that contain all the federal laws on eSignatures to this date.

The ESIGN Act’s main purpose is to ensure that documents and contracts “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.”

In plain language, the ESIGN ACT gives eSignatures the same validity as physical signatures. You can read the text of the law here, but we’ll boil down the main insights below.

An eSignature can be typed, drawn, written, scanned, and more.

The ESIGN Act defines an “electronic signature” as an “electronic sound, symbol, or process” (summarized here by the FDIC). eSignatures must demonstrate that the signer intends to sign, so even if there is no electronic representation of a signature, a text message with a thumbs up or any other signaling of the equivalent of “Yes, I accept” is legally enforceable (and could cost thousands of dollars if misinterpreted!).

The ESIGN Act is designed for interstate and foreign commerce.

Every state has its own law regulating eSignatures, so the ESIGN Act is mainly designed to apply to commerce between states or between a foreign and domestic company. 

The ESIGN Act has limitations.

The ESIGN Act explicitly states that it preserves the right of people to not use eSignatures, allowing them to choose paper signatures instead. The main exceptions in the law are in matters relating to family law—like adoption and divorces—and in wills and trusts. There are also exceptions for:

  • court orders, court notices, and other court-related documents;
  • rental issues like canceling utility services and evictions;
  • health and life insurance; and
  • hazardous materials, among other things.

Certain things cannot be replaced with an eSignature.

These include:

  • Additional layer(s) of notarization
  • More identification
  • One or more witnesses
  • Thumbprints

What makes an eSignature valid?

A valid eSignature must have:

  • Proof of intent
  • Dependable identification of parties to the transaction/contract/document
  • Document integrity
  • Electronic capture
  • Disclosure and consent

As mentioned above, certain legal documents like wills, powers of attorney, and sworn declarations fall outside the scope of the ESIGN Act, and it is advisable to execute important legal and financial documents in person and on paper, even if they could be executed electronically.

The ESIGN Act is the basis of legal validity of eSignatures.

The act covers a wide range of scenarios and sets up a legal basis for the validity of eSignatures, as well as an outline of the conditions under which an eSignature can be determined valid. With the ESIGN Act, both US and foreign businesses can execute interstate and international transactions with confidence that eSignatures are valid, binding, and enforceable.


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