Posted by & filed under Electronic Signatures.

Jul 21, 2021

By Scott Havn, Esq. and Jean C. Arnold, Esq.

The question: “Are electronic signatures legal,” usually comes up regarding credit applications, personal guaranties, and other routine business documents. The short answer is, “Yes.” However, there are caveats and practical considerations before using electronic signatures for all documents and circumstances.

Even before the pandemic and the need for social distancing, businesses, and government were relying on electronic signatures and records to operate efficiently. The Uniform Electronic Transactions Act (UETA) was developed to provide guidance and conformity to electronic signatures and records. Although states were not mandated to adopt UETA, 49 states have adopted the Act, with Illinois the last to adopt their version in 2021. The only state which has not adopted UETA is New York, and they have their own statute with similar provisions.

Under UETA electronic records or signatures have the full effect of law and specifically:

  1. A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.
  2. A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.
  3. If a law requires a record to be in writing, an electronic record satisfies the law.
  4. If a law requires a signature, an electronic signature satisfies the law.

Thus, an electronic signature will be adequate on a credit application or similar document.

UETA also defines electronic records and signatures:

  • Electronic Signature is “an electronic sound, symbol or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” Examples: PIN, adopted signature, password, biometrics, or even a signature that has been scanned in PDF or a picture taken. 24-71.3-102 (8)
  • Electronic Record – UETA defines “a record created generated, sent, communicated, received or stored by electronic means.” 24-71.3-102 (7)
  • Record – “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. 24-71.3-102 (13)

Under UETA, an electronic record is not limited to Docu-sign or other commercial electronic systems; it also includes scanned signatures, emails, faxes, etc. If your customer signs a document, takes a picture of it with their phone, and sends it to you via email or text, that would be considered an electronic record and signature.

However, just because a signature falls under the definition of electronic signature does not mean that it is valid under UETA.

There are four requirements that must be met for “legal” validity:

  1. Each party intended to execute the document.
  2. The parties have consented to do business electronically. Further, a party may refuse to conduct other transactions by electronic means.
  3. The e-signature must be associated with the record and the system utilized in consummating the transaction must keep a record reflecting the process by which the signature was created or generated.
  4. Records of the transaction and e-signature must be retained electronically.

To meet the requirements of Number 1 between businesses, the parties do not need to have an express agreement. Intent can be inferred by the conduct of the parties, such as emails, past conduct, etc. If there is a consumer involved, it is best to have express consent every time with an opt-out provision.

UETA does not apply to all circumstances or scenarios; in fact, it specifically does not apply to:

  • A law governing the creation and execution of wills, codicils, or testamentary trusts;
  • [The Uniform Commercial Code other than Sections 1-107 and 1-206, Article 2, and Article 2A]; (3) [the Uniform Computer Information Transactions Act].

States have added their own specific exclusions. As an example, the Colorado statute adopting UETA excludes:

(II) Default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence of an individual, provided that nothing in this subparagraph (II) shall prohibit any record related to a foreclosure from being sent or received in electronic form or by electronic means between the owner of an evidence of debt or the attorney for such owner and the office of a public trustee or sheriff, nor shall anything in this subparagraph (II) prohibit the office of a public trustee or sheriff from receiving or storing any record related to a foreclosure in electronic form or by electronic means;

It is important to note that just because UETA does not apply in specific circumstances, that does not mean that electronic records or signatures are not allowed. Other statutes, such as the Uniform Commercial Code contain specific requirements for using electronic records that must be followed.

In most routine business circumstances, an electronic signature will be adequate as long as the four requirements of an e-signature are met. However, it is best to consult your legal advisor in your state as to electronic signatures; especially signatures on: titles, negotiable instruments, security agreements, promissory notes, and real estate documents. These documents are excluded under UETA and require specific “legal” safeguards.

Jean Arnold, Esq., is a partner with Arnold & Arnold, LLP [], founded in 1994. She is a licensed Colorado attorney. Her practice focuses on real estate and construction law, representing credit unions, lenders, landlords, owners, construction managers, engineers, contractors, subcontractors, and suppliers. She is a frequent presenter, teacher, and corporate trainer on contracts, construction law, real estate, mechanics’ liens, landlord-tenant law, secured transactions, creditor bankruptcy, collections, and ethics topics. She is a member of the Colorado Bar Association Real Estate and Construction Law sections. She has served on the Real Estate Section Council as a member and officer since 2015. She is the current Chair of the Section (2020-2021). She is an annual speaker for ASPE’s Colorado Chapter and has taught at the Colorado Estimators Academy presenting on estimator ethics and Contracts 101. She has her JD, MBA and BSBA degrees from the University of Denver. Prior to and during her college, graduate and law school attendance, she worked as a project engineer and estimator for an electrical subcontractor.

Scott Havn is a partner at the law firm of Arnold & Arnold, LLP in Littleton, Colorado. He has been with the firm since 1998. Scott’s practice focuses on mechanic’s lien law, verified claims, commercial collections and construction law. He graduated cum laude from Hamline University School of Law in St. Paul, MN. Scott is licensed to practice law in Colorado, Wyoming and his home state of Wisconsin.

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