When Shakespeare wrote “A rose by any other name would smell as sweet,” he was not writing about electronic signatures. But, thankfully, the law has mostly evolved to no longer care whether your contracts are signed physically or electronically, with some exceptions. Though most business-to-consumer transactions do not involve the signing of contracts, a lot of business-to-business transactions do, which is why it is important to remain current on the law to ensure that your electronically signed contracts are enforceable.
Enforceability in U.S.
In the United States, the federal government has adopted the E-Sign Act, which states that a signature cannot be denied legal effect simply because it is made in an electronic form. The E-Sign Act preempts state law concerning electronic signatures to the extent that states haven’t adopted their own electronic signature laws.
If your business operates in a regulated industry that requires you to provide information to consumers in writing, such as the consumer credit industry, the E-Sign Act makes sure that consumers can’t hold the fact that you want to deal electronically against you, and it allows you to solely use electronic documents and signatures as long as you allow the consumer to receive a paper copy of the electronic record upon request. This Act applies at the federal level.
At the state level, 47 states have adopted the Uniform Electronic Transactions Act (UETA), which is a model law that was created when a bunch of smart lawyers got into a room and decided that it probably wasn’t a good idea to have the entire country operate under different electronic signature laws. Just like the E-Sign Act, UETA says that a signature cannot be denied legal effect or enforceability just because it is made in an electronic form. Similarly, an electronic contract cannot be denied effect because it is electronic either. This means that, in the U.S., your electronic signature is your bond.
Enforceability in Europe
The European Union, however, takes a more nuanced approach. The E.U. creates standardized law across the entire Eurozone that must be adopted by E.U. member states. In this context, the Electronic Signatures Directive is the principal piece of E.U. legislation covering electronic signatures, which it separates into two forms: electronic signatures and advanced electronic signatures.
Electronic signatures take the form of a simple digital signature with no authenticating meta data or, in other words, indicators of reliability. Advanced electronic signatures are those that are uniquely linked to the signing party and have some standard of reliability that makes clear that the signing party’s electronic signature is only under his or her control.
But all of this will change in July 2016 when a new E.U. directive goes into effect. The new directive, titled “Regulation on Electronic Identification and Trust Services for Electronic Transactions in the Internal Market” (eIDAS), is intended to resolve conflicts between E.U. member states and create a new framework whereby E.U. nations can use their own national electronic identification schemes to confirm identity when electronically signing documents.
Some European countries, such as Germany, Belgium, and Luxembourg, issue electronic IDs to their residents, and the eIDAS regulation now creates a standard that allows software providers, such as DocuSign, to integrate e-signatures that are enforceable under the law. DocuSign has purchased a majority stake in E.U.-based OpenTrust, another software provider, presumably to ensure eIDAS compliance.
What does all of this mean for ecommerce? In the United States, there is almost no effective difference in physically signing a contract versus electronically signing it. Both options are likely enforceable. If you are signing a contract with an E.U.-based supplier or wholesaler, you can best ensure the enforceability of that contract, starting in July, by using an eIDAS-compliant signature provider, such as DocuSign. Since there is a presumption that such signatures are valid, you can rest assured that, when using an eIDAS-compliant provider, your supplier or wholesaler’s word is its bond.