UETA and ESIGN Compliance

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UETA ESIGN
Compliance
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Changing Landscape

• As contract management transitions into a
  paperless world, documents must remain compliant
  with government regulations. Many companies are
  seeking online solutions to eliminate paper
  systems to keep up with the transition. This
  opens questions pertaining to the legitimacy and
  enforceability of online contracts. Fortunately,
  strong precedents exist relating to the validity
  of online contracts and specific guidelines must
  be followed.

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ESIGN UETA

• The passage of Electronic Signatures in Global
  and National Commerce Act (ESIGN) and the
  adoption of the Uniform Electronic Transactions
  Act (UETA) solidified the legal landscape for use
  of electronic records and electronic signatures.
  ESIGN and UETA establish that electronic records
  and signatures carry the same weight and legal
  effect as paper documents and handwritten
  signatures.

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ESIGN

• The intent of the federal ESIGN Act is that a
  contract or signature may not be denied legal
  effect, validity, or enforceability solely
  because it is in electronic rather than paper
  form. That means electronic documents are subject
  to the same legal scrutiny of authenticity that
  applies to paper documents.
• Prior to the ESIGN Act, there were many state
  laws requiring certain contracts be on paper with
  handwritten signatures. This caused confusion as
  to when contracts could be handled over the
  Internet (or other electronic means). The ESIGN
  Act states that if the parties agree to use
  electronic signatures to seal their transaction,
  the agreement is valid despite any state law to
  the contrary.

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UETA

• State-based compliance comes in the form of UETA.
  It was developed to provide a legal framework for
  the use of electronic signatures and records in
  government or business transactions, and makes
  electronic records and signatures as legal as
  paper and manually signed signatures.
• For example, before the adoption of this Act,
  states required banks to retain physical copies
  of all checks. Besides the organizational efforts
  this took, it had significant storage space
  implications. Keeping these checks in electronic
  rather than paper form simplified a banks
  storage and access concerns. UETA aimed to
  rectify this by streamlining and unifying these
  laws to allow for electronic retention.

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UETA Scope

• The Act is limited by the fact that it only
  applies to transactions related to business,
  commercial (including consumer), and governmental
  matters. Transactions with no relation to
  business, commercial, or governmental
  transactions are not subject to this Act.
  Unilaterally generated electronic records and
  signatures which are not part of a transaction
  also are not covered by this Act.

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Choosing Electronic Signatures

• In choosing whether to use electronic signatures,
  companies should
•  
• Evaluate the risks of the transaction
• Evaluate the effectiveness of the electronic
  signature method
• Evaluate the cost of the available alternative

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Document Management Solutions

• When implementing ESIGN/UETA compliant document
  management solutions, specific guidelines and
  requirements must be followed. The system must be
  able to
• Digitally verify who signed a document
• Prevent and detect tampering and log data to
  identify the responsible party
• Comply with applicable electronic signature laws
  and other laws
• Meet applicable legal requirements
• Provide an audit trail to prove compliance and
  provide evidence in the event of wrongdoing
• Verify that all required data meet legal and
  business requirements
• Prevent incomplete, erroneous, or unauthorized
  changes from being processed

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Noncompliance Consequences

• In determining whether electronic records or
  electronic signatures may be sufficiently
  reliable for a particular purpose, one should
  consider the state and federal laws that apply to
  the transactions, the relationships between the
  parties, the value of the transaction, the risks,
  and the cost of management and preservation of
  electronic records.
• Violations of either ESIGN or UETA can have
  severe consequences and a negative impact on
  business. Not only could people be incarcerated
  but very large fines can be imposed for
  noncompliance.

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