Presenting a live 90-minute webinar with interactive Q&A E-Signatures and Electronic Loan Documentation: Complying with ESIGN/UETA, Interplay With the UCC Navigating Issues of Enforceability, Authentication of E-Signatures and Admissibility THURSDAY, SEPTEMBER 15, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Ed Snow, Partner, Burr & Forman , Atlanta Jason G. Beckham, Counsel, Burr & Forman , Atlanta The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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The Legal Challenges in e-Signatures: Key Pointers to Ensure Validity September 15, 2016 Jason Beckham Ed Snow Counsel Partner Burr & Forman Burr & Forman jbeckham@burr.com esnow@burr.com
What We Will Cover Today I. Introduction to ESIGN and UETA II. Electronic Signatures--What Are They? III. “Pre - Electronic” Signature Law— Ensuring Validity IV. Electronic Signature Law--Provisions and Practices to Ensure Validity V. Electronic Signature Law--Third Party Documents and Evidentiary Considerations to Ensure Validity VI. Relevant e-Signature Case Law Update 6
I. Introduction to ESIGN and UETA: A Brief History of Electronic Transactions Law With the rise of e-commerce, states were going to make their own electronic signature laws. Circa 1999, National Conference of Commissioners on Uniform State Laws drafted the Uniform Electronic Transactions Act (“UETA”) to avoid non -uniformity and urged the states to adopt it. States started adopting UETA, but often with changes, making the law less uniform. 7
A Brief History of Electronic Transactions Law Some states (NY, IL, and WA) insisted on their own laws rather than follow NCCUSL. Concerned that state e-commerce law was not going to be uniform enough, the federal government enacted in 2000 the Electronic Signatures in Global and National Commerce Act (“ESIGN”) ESIGN pre-empted state e-commerce laws that varied in certain ways from UETA. 8
UETA and ESIGN Main Points: 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. 5. In a proceeding, evidence of a record or signature may not be excluded solely because it is in electronic form. 9
Exclusions under UETA and ESIGN Laws regarding wills, codicils, and testamentary trusts The UCC, except Section 1-107 (Waiver of Renunciation of Claim or Right After Breach), Section 1-206 (Statute of Frauds for Kinds of Personal Property Not Otherwise Covered), Article 2 (Sales), and Article 2A (Leases) Other laws (e.g., notice of the cancellation or termination of utility services; certain notices of default, etc., in consumer transactions; notice of the cancellation or termination of health or life insurance benefits; and notice of the recall of a product, or material failure of a product, that risks endangering health or safety, among others) 10
UETA, ESIGN and Commercial Loan Closings? While the law has permitted electronic commercial loan closings since the late 1990s in most cases, commercial banks have yet to fully embrace electronic closings, with today’s “dual track closings” with emailed PDFs to fund followed by wet signatures embracing the new law so long as it is backstopped by older law. Why haven’t banks fully embraced electronic commercial loan closings? 11
UETA, ESIGN, and Loan Documents Some reasons for not closing commercial loans solely by electronic means: Some banks won’t fund without an inked promissory note (even if Article 3 of the UCC is irrelevant). Some lenders must physically pledge an inked note to a funding source as collateral. Borrower’s counsel may not be ready to give closing opinions over electronic documents. Fear that courts will not find electronic signatures attributable to the party to be charged. 12
II. Electronic Signatures: What Are They? The heart and soul of UETA and ESIGN are these two points: 1. A signature, contract, or other record relating to a transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form. 2. A contract relating to a transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation. 13
What is “ electronic ”? Relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities What is an “ electronic signature ”? An electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record 14
What is a “ transaction ”? An action or set of actions occurring between two or more persons relating to the conduct of business, commercial, or governmental affairs What is a “ record ”? Information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form 15
UETA and ESIGN V. Contract Law UETA and ESIGN do not change contract law. They simply supplement contract law, to permit parties to transact business electronically. As supplemented by UETA and ESIGN, the law of contract formation, the basic elements of validity and verification of inked signatures continue in the electronic signature realm, albeit with some additional considerations. 16
III. “Pre - Electronic” Signature Law — Ensuring Validity When signatures are required: Statute of Frauds – Certain contracts are enforceable only if “there is a written memorandum” of the contract. Restatement (Second) of Contracts (1979) § 110. – A written memorandum is “… evidenced by any writing, signed by or on behalf of the party to be charged” Rest 2nd § 131. General contract law requirement of assent – Open-ended meaning, with focus on intention. 17
What is a signature? Intention. – Key issue is intent, not the form the signature takes. – Restatement 2 nd Contracts § 134: A “… signature may be any symbol made or adopted with an intention , actual or apparent, to authenticate the writing as that of the signer .” – UCC § 1-201 - has defined “signed” to mean “using any symbol executed or adopted with present intention to [adopt or accept] [authenticate] a writing.” – A signature stamp or machine, if authorized, is a signature. 18
What is a signature? Cases: – Smith v. Greenville County, 188 S.C. 349 (South Carolina 1938). “A ‘signature’ may be written by hand, printed, stamped, typewritten, engraved, photographed, or cut, from one instrument and attached to another…” – Griffith v. Bonawitz, 103 N.W. 327 (Neb. 1905). “A 'signature' is whatever mark, symbol, or device one may choose to employ as representative of himself .” – Joseph Denunzio Fruit Co. v. Crane, 79 F. Supp. 117 (S.D. Cal. 1948). Office to office teletype correspondence with negotiations and final “acceptance” was “signed” in a manner sufficient to satisfy statute of frauds. 19
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