The ESIGN Act-What It Is and How It Benefits You?

Aug 10, 2018

The ESIGN Act

Signed into law by US President, Bill Clinton, in 2000, the ESIGN Act made it possible for businesses and organisations to sign contracts and documents online without the need for the signing party to be present or a physical paper contract to be created. With the global economy becoming more accessible to everyone no matter what time of day it is, the ESIGN Act is seen as not just a time saving and eco-friendly measure, but a new way of doing business in our modern technologically advanced world.

This means a startup in Thailand can sign for a business loan from a bank in New York at 3:00 AM their time and get the necessary funding to get their business up and running sooner.

While a number of e-commerce related bills have been signed into law by countries around the world, none are as important or impactful as the ESIGN Act. Not only did it make it easy for business owners and consumers to sign contracts online, it also ensured that those contracts would be legal for both interstate and global commerce.

Saves Time, Money and Resources

For businesses who would hire a courier service to deliver contracts and documents for client signatures and then pay to have those contracts sent overnight back to them, this was an incredible time and resource saving tool that changed much of what the industry was used to. Previously, consumers could electronically sign documents via the internet but the signatures failed at standing up in court when one party backed out of the contract illegally.

By giving these electronic signatures a platform to stand on in which they were seen as legally binding anywhere in the world, the ESIGN Act also saw to it that any existing agreements signed electronically before October 1, 2000, were grandfathered into the act.

What Is Required of Businesses?

The ESIGN Act has certainly made it easy for businesses to get contracts signed electronically but there is more to it than that. Although a paper contract isn’t being signed physically, the act states that businesses have to “retain evidence of contractual agreements to fulfill legislative requirements and to clarify any future questions about the legitimacy of a contract or the details of specific terms.” What does this mean in simple terms? Basically, any records of the electronically signed contracts must be accurate and businesses are required to prove the accuracy of these contracts, making them accessible to both parties.

What the ESIGN Act Doesn’t Cover

Although the ESIGN Act is seen as a positive step forward for online businesses and the ecommerce industry as a whole, it doesn’t cover every type of contract. In fact, there are quite a few that it doesn’t including:

  • Wills, codicils, and trusts
  • Adoption paperwork
  • Divorce decrees
  • Certain areas of the Uniform Commercial Code
  • Court orders and notices
  • Official court documents, including briefs and pleadings
  • Notices of the termination of utility services
  • Notices of default, foreclosure, repossession, or eviction
  • The cancellation of insurance benefits
  • Product recalls or notices of material failures
  • Documentation accompanying the transportation of hazardous materials

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