Rebecca S. Glos Partner, Watt, Tieder, Hoffar, & Fitzgerald, LLP.
April 5, 2023

Electronic Signatures On Contracts: Are They Truly Compliant

As companies move to work-from-home situations in the wake of the COVID-19 pandemic, the issue of whether electronic signatures are legally recognized becomes more relevant.  For many platforms, an electronic signature merely requires logging in, clicking a button, or typing your name.  This process, which replaces the mighty pen and quill, is so effortless that oftentimes an electronic signature may feel like it does not carry the same weight as a handwritten signature.  Thus, the question that we should be asking ourselves is whether the law recognizes this type of signature as being valid?  Additionally, if electronic signatures are, indeed, valid, are there exceptions on whether they can be used?

Difference Between “Electronic” And “Digital” Signatures

Before delving into this issue, an understanding of some related terms may be helpful.  In basic terms, an electronic signature (or “e-signature”) is any signature created or captured through a computer or other electronic device.  Electronic signatures can include touch-sensitive screens where you use your finger or a stylus to sign your name as you would on a paper document.  Electronic signatures can also include forms where you merely type in your name and perhaps other identifying information, then check a box stating that you intend to sign the document.  They cover the full range of technologies and solutions to create signatures electronically such as:

  • Clicking “I Agree” on a website;
  • Signing with your finger on a mobile device;
  • Typing your name or PIN into an online form; or
  • Using e-signature software

A digital signature, on the other hand, is a subtype of electronic signatures that uses encryption called public key infrastructure (PKI) to associate a signer with a document and to protect the signed document.  Once a document is digitally signed, it is locked and no additional signatures, annotations, or form fill-ins are allowed.  If the document is changed at any time after signing, the signature is considered invalid.  Certain states, such as California, have enacted regulations adopted by the Secretary of State which define the types of technologies that are acceptable for creating digital signatures for use by public entities.

To summarize, an e-signature is a generic term for any signature transmitted electronically (whether it is a digitally written signature or a signature generated through an electronic document signing service), whereas a digital signature has more advanced features that keep the signature secure.

Enacted Legislation Regarding Use Of Electronic Signatures: ESIGN And UETA

In 2000, the U.S. federal government passed the Electronic Signatures in Global and National Commerce Act (“ESIGN”) (15 U.S.C. Section 7001 et seq.) which grants legal recognition to electronic signatures and records in the United States if all parties to a contract choose to use electronic documents and to sign them.  This piece of legislation made electronic signatures legal in every U.S. state and territory where federal law applies.  It places electronic signatures on the same level as handwritten signatures in terms of legality.  Generally, the following components must be present for electronic signatures to be fully protected and upheld under ESIGN:

  • Evidence of a clear intent to sign the document;
  • Expressed consent to conduct business electronically;
  • An option to opt out of doing business electronically; and
  • Distribution and retention of the digital documents.

In some states and territories, the precursor to ESIGN, the Uniform Electronic Transactions   Act (“UETA”), is in effect.  UETA is one of the several United States Uniform Acts proposed by the National Conference of Commissioners on Uniform State Laws and holds that electronic signatures are legally binding if certain requirements are met.  As with ESIGN, under UETA, an electronic signature may be used when a signature is required by law with certain exceptions.  The documents exempt from UETA include wedding certificates, birth and death certificates, wills, and other estate documents.  Of the 49 states in the U.S., only New York (along with the District of Columbia, Puerto Rico, and the Virgin Islands) has not adopted UETA.

The primary difference between ESIGN and UETA is the level at which they were enacted.  ESIGN is a federal digital act whereas UETA is a state level act which 49 out of the 50 states have adopted.  Where federal law does not apply, ESIGN cannot be enforced.  At the state or territory level, UETA can be used for electronic signature protections.

Some states, such as California, have enacted their own regulations governing the use of digital signatures in addition to what is required under ESIGN and UETA.  For instance, under California Government Code section 16.5, a digital signature shall have the same force and effect as a manual signature if and only if:

  • It is unique to the person using it;
  • It is capable of verification;
  • It is under the sole control of the person using it;
  • It is linked to data in such a manner that, if the data is changed, the digital signature is invalidated; and
  • It conforms to regulations adopted by the Secretary of State.

Exemptions Under ESIGN and/or UETA

ESIGN and UETA do not apply to all transactions.  The parties must have “agreed to conduct the transaction electronically” in order for the acts to apply.  Additionally, even with such an agreement, certain types of transactions and associated documents are excluded from ESIGN and UETA (as adopted by the applicable state).  In particular, the protections afforded by ESIGN do not apply to:

  • Wills, codicils, or testamentary trusts;
  • A State statute, regulation, or other rule of law governing adoption, divorce, or other matters of family law;
  • The Uniform Commercial Code, as in effect in any State, subject to certain limited exceptions;
  • Court orders or official court documents;
  • Notices of cancellation of utility services;
  • Notices of default, foreclosure, or eviction of an individual from their primary residence;
  • Termination notice for health or life insurance policies;
  • Recall notices for products that pose a considerable risk to health or safety; and/or
  • Any document legally required to transport hazardous materials, pesticides, or other toxic substances.

Further, UETA does not apply to transactions governed by the Uniform Commercial Code (“UCC”) other than Articles 2 and 2A (Sales & Lease Agreements).  The UCC, however, has its own provisions for electronic authentication.  Starting with UCC Article 3 (Negotiable Instruments), nothing in the UETA prohibits the use of an electronic signature on a promissory note. Because paper promissory notes are “negotiable instruments” under the UCC, hpwever, having “possession” of the “original” signed note is legally significant.  Therefore, UETA sets forth special rules as it relates to electronic promissory notes – they must be considered a “transferable record” in order to be considered a negotiable instrument.  If the promissory note is a “transferable record,” the person identified as in “control” of the record becomes the equivalent of a “holder” under the UCC.  In order to be considered a “transferable record,” however, the promissory note must meet certain criteria, which in part requires “a single authoritative copy of the transferable record” and that each copy of the authoritative copy and any copy of a copy be readily identifiable as a copy.  In short, electronic signatures cannot be used for instruments of title unless an electronic version of such record is created, stored, or transferred in a manner that allows for the existence of only one unique, identifiable, and unalterable version that cannot be copied except in a form that is readily identifiable as a copy.

Use Of Electronic Signatures On A Power Of Attorney

A power of attorney (“POA”) allows one party, the agent, to make financial decisions on behalf of another party.  Under a POA, such authority can be extended to making decisions regarding the grantor’s medical care, personal property, and/or finances.  Given the amount of discretion that is being afforded thereunder, a POA usually must be signed in front of a notary public to be considered legally binding.  In today’s climate where remote business transactions are the norm rather than the exception, a common question raised is whether a POA can be signed with an electronic signature?  The answer is not straightforward but instead depends on the nuances of ESIGN, UETA, and state laws governing the use of electronic signatures.

Under ESIGN and UETA, electronic signatures (instead of a traditional wet signature) are only authorized during a “transaction” related to “business, commercial, or governmental affairs.”  Therefore, the appointment of an agent under a POA for certain purposes may not fall within these categories.  For instance, a healthcare directive may not be considered “conduct[ing]…business, commercial, or governmental affairs.”  Moreover, many states have specific requirements for POAs related to healthcare such as how they can be executed, acknowledged, and even notarized.  If the appointment of such an agent does not fall within the statutory definition of “transaction,” neither ESIGN nor UETA would apply and, therefore, electronic signatures may not be permitted.  In short, the ability to use electronic signatures in connection with a POA largely depends on the purpose for which the POA is created, as well as any specific legal requirements related to the formation of the POA.  One must determine what state law governs the POA and whether that type of POA can be signed electronically under the laws of that jurisdiction.

If a POA for a particular use falls within the definition of “transaction” related to “business, commercial, or governmental affairs” (and, thus, an electronic signature is permitted), there is still the question of whether the document must be notarized.  While some states, such as Maine (Me. Rev. Ann. Tit. 18-A, § 5-905 (2012) (deviating from the Uniform Power of Attorney Act by requiring power of attorney to be acknowledged to be valid) and West Virginia (W. Va. Code Ann. § 39B-1-105 (LexisNexis Supp. 2013)) require mere acknowledgement, other states, such as Maryland (Md. Code Ann., Est. & Trusts § 17-110 (LexisNexis 2011 & Supp. 2012)), require a POA be witnessed and notarized.  For states that require notarization, the next question which arises is whether the notarization can be done electronically.

Traditional notarization requires that the signer be physically present before a notary so that the signature can be authenticated, while electronic notarization permits the notary’s signature and stamp to be added to a document through electronic means.  States that permit e-notarization include Arizona, Arkansas, California, Colorado, Delaware, Florida, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Montana, Nebraska, Nevada, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, and Wisconsin.  Some states, such as Virginia, Montana, Texas, and Nevada, will even allow digital notaries to remotely notarize documents from a webcam.  Once again, then, the answer to the question of whether notarization can be performed electronically depends on the laws of the state in which the notarization is to be performed.


The above describes key considerations regarding the use of electronic signatures in transactions.  Determining whether and how to use electronic signatures in a particular transaction, however, must be tailored to the parties’ specific needs and the facts of such transaction.  Further, while electronic signatures are widely accepted for many business transactions in the U.S. and internationally, there are some circumstances in which a wet signature is still required.  Understanding the governing laws within the state in which the document is to be signed (and whether the state has adopted ESIGN and/or UETA) is both prudent and necessary before deciding whether to use an electronic signature.

Watt Tieder is one of the largest construction boutique law firms in the United States, with a diverse and experienced team of attorneys representing many of the world’s leading corporations, developers and contractors on both domestic and international projects. We represent more than half of the Top 30 Engineering News Record contractors and most of the nation’s top sureties. With offices in six cities in the United States, the firm is a dynamic, mid-size boutique that provides knowledgeable and practical legal representation to the construction, surety, government contracts and bankruptcy industries world-wide.

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