The Uniform Electronic Transactions Act (UETA) was adopted in 1999, and it provides a framework for determining the legality of electronic signatures.
It guarantees that electronic signatures are given the same legal weight as handwritten signatures.
The UETA is applicable in both business and e-commerce transactions, and it provides some legal recourse if things go wrong in an electronic transaction.
However, it doesn’t apply to wills or testamentary trusts.
What is required by the UETA?
Now that you understand what the UETA is, you may be wondering how to ensure that your documents are UETA-compliant.
The UETA outlines four major requirements that all electronic documents must meet to be considered valid under U.S. law:
Intent to sign
Electronic signatures are only valid if both parties intended to sign, just like with handwritten signatures.
Consent to do business electronically
All parties must acknowledge their consent to conduct business electronically.
This is easier to prove when it comes to business transactions, but it can be a bit trickier if you collect signatures from consumers.
You can ensure the consumer agreed to an electronic transaction by meeting the following legal requirements:
- The customer received a copy of the UETA Consumer Consent Disclosure.
- The customer agreed to use an electronic document to conduct the transaction.
- The customer did not withdraw their consent to conduct business electronically.
Association of signature with the record
Whatever system is used to capture the eSignatures must create some sort of electronic record of the transaction.
This electronic form shows the process of how the document was signed and proves the other person used an electronic signature.
It’s not enough to just create a written record of the transaction; both parties must have access to it.
So every written record must be maintained and made available to all parties that signed the document.
What is the effect of the UETA?
As already mentioned, the primary effect of the UETA has been to give electronic signatures legal recognition.
The act states that records, signatures, and agreements in electronic form must be considered to have equal weight in law to printed or handwritten ones.
Any legal proceedings must take account of this.
In practice, the result has been a revolution in how business is done.
Without the UETA and similar legislation, it wouldn’t be possible to sign contracts electronically with confidence.
But because there’s no longer any need for a physical paper trail, organizations can take full advantage of the benefits of doing business online.
UETA in real estate: What is the impact?
One area where this has had a big impact has been the real estate sector.
After all, it’s a field of work that involves a huge number of written agreements and contracts. So it’s no surprise that the UETA has led to sweeping changes in how it operates.
In essence, the implementation of UETA has sped up the process of real estate purchase.
Documents such as development and management agreements can now be agreed remotely, with no need for physical signatures to slow things down.
This has made the whole process much more efficient, as important documents can be signed electronically by all counterparties with no need to meet face-to-face.
However, there are still certain documents that cannot be signed electronically during the real estate purchase process.
Original handwritten signatures are still necessary to authorize mortgage documents and deeds, for example.
In the long run, though, we can surely expect even these to use electronic signatures as well.
What is not affected by the UETA?
More generally, there are other kinds of contracts or agreements not covered by the UETA — or similar legislation such as the ESIGN Act.
These tend to be high-impact documents like court orders, divorce agreements, wills or adoption paperwork.
So-called “wet signatures” are still required to sign these documents so that they’re legally enforceable.
What is the difference between the UETA and ESIGN Act?
You may notice that both the UETA and the ESIGN Act are frequently mentioned any time you read about the legality of electronic signatures.
The UETA is often confused with the ESIGN Act since both exist to solve a similar problem.
Both are U.S. regulatory acts that provide guidelines for how to conduct business electronically.
These two acts work together to ensure that eSignatures receive the same legal recognition as handwritten signatures.
However, there are differences between the two. The ESIGN Act is a federal law, which means that every state must comply.
In contrast, the UETA is adopted on a state-by-state basis.
Each state gets to decide whether they want to accept or reject the guidelines laid out in the UETA. We’ll look at this more closely in the following section.
UETA adoption by State
The UETA is enacted on a state-by-state basis, so every state in the U.S. chooses whether or not to adopt this legislation.
Currently, the UETA has been enacted by 49 states in the United States, as well as the District of Columbia, the U.S. Virgin Islands, and Puerto Rico.
New York is the only state which has not adopted the UETA.
Instead it implemented the Electronic Signatures and Records Act.
This act states that electronic signatures should be given the same legal weight as handwritten signatures.
Is PandaDoc software UETA compliant?
Yes, PandaDoc software is legally binding and complies with the UETA and ESIGN Act.
You’ll receive an electronic certificate with every signed document so that you can keep an electronic record of all digital transactions.
Plus, you can add passwords to every PDF. Password-protected documents make it possible for you to create a secure digital signature every time.
How to get started with eSignatures
If you regularly create business documents and collect eSignatures, you need to find the right electronic signature software.
The right software will allow you to know that every eSignature you receive is a legal digital signature.
PandaDoc is one of the few companies that provide electronic signatures entirely for free.
When you sign up for our Free eSign Plan, you receive unlimited legally-binding electronic signatures.
Plus, you can upload and send as many documents as you want.
This means you can save money without having to sacrifice security or quality in the process. You can learn more about our Free eSign Plan here.
Here is a brief overview of some of the legal vocabulary you’ll encounter in regards to electronic signatures:
|Notarization||Notarization is the process of ensuring a document is authentic and trustworthy. An impartial Notary Public enforces the notarization process. The Notary verifies that the signature is legitimate, was signed without force or intimidation, and is credible.
Traditionally, the notarization process was performed in-person and required a handwritten signature. However, electronic signatures have permanently changed the way we conduct business, and it is now possible to get a document eNotarized.
|Obligor||An obligor is a person who is legally bound to another person by a contract or legal obligation. This term is often used in a financial setting to refer to someone who owes money to another person.|
|NCCUSL||The National Conference of Commissioners on Uniform State Laws (NCCUSL) is a non-profit association with appointed commissioners for each state in the U.S. This organization exists to discuss any areas where state laws could benefit from more uniformity.
The NCCUSL will then draft Uniform Acts and propose them to various jurisdictions. It was the NCCUSL that adopted the UETA in 1999.
|Testamentary trusts||A testamentary trust is a trust established according to the provisions laid out in an individual’s last will and testament. A trustee is then appointed to manage and distribute the assets to the beneficiaries described in the will. A single will can have multiple testamentary trusts, and each one is irrevocable.|
Conduct business with UETA-compliant signatures
The arrival of the UETA on the scene has transformed how business is done.
The ability to use electronic signatures to formalize business agreements and other contracts has meant vast increases in efficiency and huge amounts of time saved.
While this is excellent news all round, it does mean that compliance has never been more important.
PandaDoc’s UETA-compliant document workflow platform places a fully working solution on the table for you and your business.
It puts you in control of the process from start to finish, while ensuring full compliance with the relevant legislation.
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Originally was published June 2020 and has been updated for comprehensiveness in February 2023