& UETAESIGN COMPLIANCE

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.

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.

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.

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 bank’s storage and access concerns. UETA aimed to rectify this by streamlining and unifying these laws to allow for electronic retention.UETA

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.

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

Document Management Solutions When implementing ESIGN/UETA compliant document management solutions, specific guidelines and requirements must be followed. The system must be able to:document management solutions 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

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.

Square 9 offers ESIGN and UETA compliant document solutions for your business needs. It’s award-winning SmartSearch solution improves inefficient paper processes to automate and structure your document management needs. Square 9’s GlobalForms, allows for quick and easy creation of customized web based forms as well as the ability to apply electronic signatures. Contact Square 9 today to learn more.