Sign at the Blinking Cursor

By SmallBusinessComputing Staff | Posted October 01, 2000
by Robert J Wagman

The Electronic Signatures law, finally passed by Congress this past summer, has now gone into effect. Most coverage of the legislation simply states that documents sent electronically will have the same force as documents containing physical signatures and signed documents transmitted as facsimiles. That's not the whole truth, and businesses and consumers need to understand the fine print -- and decifer a lot of legalese --before they toss their pens in favor of encrypted passwords and digital signature cards.

First, the law only covers specific types of contracts: Documents "affecting interstate commerce" will not be "denied legal effect" solely because they are transmitted electronically or "because an electronic signature or record was used in its formation." In other words, the law relates only to documents covering transactions in interstate commerce. Many states are adopting a model law called the Uniform Electronic Transactions Act (UETA) that applies to a wide range of documents not in interstate commerce. But if your state has not adopted the UETA, the federal law might not apply to a purely local transaction.

Furthermore, under both the federal law and the UETA, both parties to an electronic contract must mutually agree, in advance, to use and to recognize electronic signatures in the contract or document. This agreement must be explicitly stated, and should be part of the document.

Finally, the federal law specifically exempts a wide range of documents. Electronic signatures are still not valid on family law matters including prenuptial agreements, divorce decrees, adoption papers, wills and documents modifying wills, many types of residential landlord-tenant documents including evictions and foreclosures, court documents, and insurance terminations. It also excludes documents filed with federal, state, and local governments -- at least until they're ready to accept them, that is.

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