As millions of people are under mandatory or voluntary restrictions limiting their in-person interactions with others in order to reduce the spread of COVID-19 and are dependent more than ever on remote technology and virtual meetings, questions about the validity of electronic signatures are coming to the forefront. Signing documents entirely in electronic format or having them witnessed or notarized remotely is not only convenient but may become more and more necessary as health-related lockdowns occur.
Whether an electronically signed document is valid and enforceable will depend on a number of factors, including the type of document and transaction involved, the state law that governs, the location of the parties, and the manner in which the document will be executed. The risk of electronic signatures being unenforceable or invalid is real; careful compliance with applicable laws remains important.
Electronic Transactions Act
Nearly every state in the United States has adopted the 1999 Uniform Electronic Transactions Act (UETA), a model act generally providing that a record or signature or contract may not be denied legal effect or enforceability solely because it is in electronic form or solely because an electronic record was used in its formation. Washington, Illinois, and New York have not adopted the UETA, but have enacted their own similar electronic signature laws. However, UETA only applies to “transactions” as defined in the act “relating to the conduct of business, commercial, or governmental affairs.” Further, UETA has some specific exceptions. For example, UETA specifically states it does not apply to the creation and signing of wills and to certain parts of the Uniform Commercial Code.
In 2000, the U.S. Congress enacted the Electronic Signature in Global and National Commerce Act (ESIGN), providing a general rule of validity for electronic records and signatures for transactions in or affecting interstate or foreign commerce. While UETA, as adopted by states, and ESIGN have many similarities and complement one another, there are some key distinctions between these state and federal laws.
Electronic Wills and Estate Planning Documents
As pandemic concerns continue to escalate, the creation or updating of estate planning documents such as wills, powers of attorney, trusts and related documents is on the minds of many individuals. Another model act, the 2019 Uniform Electronic Wills Act (UEWA), is being considered by various states. A summary of the UEWA and related issues is available here. Currently, only Nevada, Indiana, Arizona and Florida have enacted statutes (with various effective dates) permitting electronic wills, but these states’ laws are very different from one another and also are different from the UEWA.
Electronic and Remote Notarization
In the past several years, a growing number of states have passed laws that permit or soon will permit remote notarization of certain legal documents if specific procedures are followed. Some states have modeled their laws based on the 2018 Revised Uniform Law on Notarial Acts, though many states have enacted their own unique provisions.
These laws are complicated and nuanced and are rapidly evolving to catch up with societal and professional expectations. Businesses and individuals should prudently exercise caution and seek legal advice to navigate the risks and complexity before electronically signing legal documents.