Electronic Contracts and Electronic Signatures Under E-Sign and UETA

Thu, Mar 20th, 2025 | by Miles Mediation and Arbitration | Article | Social Share

By Donna V. Smith

The digital revolution has fundamentally changed the way businesses and individuals conduct transactions. Electronic contracts and electronic signatures have become vital to modern commerce, enabling efficiency and convenience. The federal Electronic Signatures in Global and National Commerce Act (E-Sign), and the Uniform Electronic Transactions Act (UETA) provide the legal framework for electronic contracting in the United States. Laws at both the state and federal level generally allow electronic signatures to have the same validity as traditional “ink” signatures. In the employment context, these laws cover a range of documents including contracts, settlement agreements, restrictive covenants and more.

Background to Electronic Contracts and Signatures

Traditionally, contracts required handwritten signatures and physical documentation to be legally binding. However, as transactions have increasingly shifted to digital platforms, electronic contracts and signatures have emerged as essential tools for enabling secure and enforceable agreements. E-Sign and UETA establish the validity of electronic contracts and signatures, ensuring legal recognition across various transactions.

Scope of E-Sign and UETA

E-Sign (2000) is a federal law that provides a legal framework for electronic records and signatures in interstate and international commerce. UETA, adopted by most states, Washington D.C., Puerto Rico and the U.S. Virgin Islands in 1999, complements E-Sign by providing detailed provisions for electronic transactions at the state level. A notable exception is the state of New York. However, New York’s Electronic Signatures and Records Act (ESRA) allows electronic signatures to be used in place of handwritten signatures for most documents. ESRA applies to both private and public entities.

General Rules and Exclusions

Key Provisions:

• Both E-Sign and UETA establish that electronic signatures and records have the same legal effect as their paper counterparts.
• They allow contracts to be formed electronically, provided parties have consented to electronic transactions.
• The laws facilitate automation in business, commercial transactions, and governmental matters, enabling the use of electronic agents to execute contracts.

Exclusions:

Despite their broad scope, E-Sign and UETA exclude certain transactions, including:

• Wills and testamentary trusts
• Family law matters, such as divorce and adoption
• Court orders and official government documents
• Certain notices, such as utility disconnections and eviction notices

Key Considerations in Electronic Contracting

Use of electronic agents: Electronic agents—automated software that can execute contracts—are increasingly used in electronic transactions. UETA and E-Sign recognize electronic agents as valid contract actors, provided they operate within predetermined parameters.

Proving an electronic signature: A threshold question often arises—did the employee personally make an electronic signature?

An employee may challenge whether the person who signed via an electronic platform was in fact the employee. To enforce an electronic contract, parties must demonstrate the authenticity of an electronic signature. Common methods include:

• Digital certificates and encryption
• Audit trails and time-stamped records
• Multifactor authentication

An employer may require that an employee access and sign documents through the company’s intranet using a unique user identification and password. Or, the employer may require that an employee confirm that the employee signed by sending a confirming email via a company assigned email address.

Consent to Conduct Electronic Transactions

Employers should take note that UETA only applies when all parties agree to conduct the transaction electronically. Specifically, UETA provides, “[w]hether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.” Notes to the UETA provide that a “critical element is the intent of a party to conduct a transaction electronically.”

Best practices for employers include language in the document being signed that all parties have agreed on the use of electronic signatures and also in the communication transmitting the document for electronic signature. These precautions are particularly important in matters where an employee may use any argument possible to invalidate the document, such as noncompete agreements. Further, and by way of example, mediation agreements are not enforceable under Florida law unless the agreement is reduced to writing and signed by the parties in accordance with Florida Rule of Civil Procedure 1.730(b).

Record Retention and Entity Governance

Businesses must comply with legal requirements for retaining electronic records. E-Sign and UETA establish that electronic records must be accessible and capable of accurate reproduction for future reference.

Entity governance considerations include:

• Adopting policies for electronic contract execution
• Ensuring compliance with state and federal laws
• Implementing cybersecurity measures to protect digital agreements

UCC Considerations

Although specifics of requirements under the Uniform Commercial Code (UCC) falls outside the scope of this commentary, it is worth noting here that the UETA and E-SIGN have limited application to agreements governed by the UCC, other than provisions related to sale and leasing of goods. However, the UCC includes provisions which allow for electronic signatures in a wide range of circumstances.

Conclusion

Electronic contracts and signatures have become indispensable to modern commerce, and specifically transactions and agreements in the employment context. E-Sign and UETA establish the legal foundation for their enforceability, enabling employers to engage in electronic transactions with confidence. Employers can take proactive steps each time an electronic signature is requested to bolster the validity of the signature.

First, take steps to be able to prove that all parties consented to the use of electronic signatures. Second, take steps to confirm the identity of the person signing the document, including acknowledgement of the signature by the employee. Third, determine whether a written document and signature is required in a specific circumstance, such as a mediation agreement, in order to enforce the agreement.

*Originally published in the Daily Business Review and reprinted with permission.

About Donna V. Smith

Donna Smith is a highly effective mediator and arbitrator who has enjoyed a 35 year-long career in the field of labor, employment, and business law.

As an attorney, Donna represented both employers and employees at highly acclaimed law firms. Her vast experience on both sides of the table uniquely impacts the dialogue between parties who are navigating solutions to resolve their disputes. As a mediator, her clients praise her demeanor, patience, and commitment to roll up her sleeves to keep working through even the most unusual challenges.