25 May Growing Popularity of Electronic Signatures
Where are the days when we would round up everyone into a conference room for a “closing” of a company purchase or sale, push paper around the table in a synchronized manner (four copies in blue ink please), and then assemble the closing packet in front of everyone and hand out copies, pins and “tombstones” to all the happy parties to the transaction?
Like many things, the “closing ceremony” has gone digital.
In today’s age, the use of electronic signatures has become increasingly popular in conducting business and executing legal documents. In Texas, electronic signatures are recognized as legally binding on legal documents, thanks to the state’s adoption of the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce (ESIGN) Act.
The UETA was enacted in Texas in 2001, and its purpose is to provide a framework for the use of electronic signatures and records in transactions. The act establishes that a contract or record cannot be denied legal effect or enforceability solely because it is in electronic form. The ESIGN Act, which was enacted at the federal level in 2000, similarly provides that electronic signatures are legally binding in interstate and foreign commerce.
Under Texas law, an electronic signature is defined as “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.” This definition is broad enough to cover a wide range of electronic signature methods, including digital signatures, click-to-accept signatures, and others.
However, it’s important to note that certain types of legal documents may require specific types of electronic signatures or additional authentication measures to ensure their validity. For example, documents related to real estate transactions may require a more secure electronic signature to meet the requirements of state law. The Texas Property Code requires that electronic signatures on real estate documents be obtained using an electronic signature that complies with the Uniform Real Property Electronic Recording Act (URPERA).
In some cases, documents may require a handwritten signature, such as wills and powers of attorney. Courts may also require original signed documents in certain situations.
In addition to complying with specific requirements for the type of document being signed, parties should also ensure that their electronic signature methods comply with any industry or legal standards that may be applicable. For example, if the signed document is subject to the Health Insurance Portability and Accountability Act (HIPAA), then the electronic signature method used must meet the requirements of the HIPAA Electronic Signature Rule.
Parties should also ensure that they have a clear understanding of the scope and effect of the electronic signature. In Texas, the UETA provides that an electronic signature is attributable to the person whose signature is affixed to the record. However, it is also important to consider issues such as the signer’s capacity to sign the document, the authenticity of the signature, and any defenses to the authenticity that may be available.
Overall, if you are using electronic signatures on legal documents in Texas, it’s essential to ensure that your methods comply with the state’s legal requirements and any applicable industry or legal standards. This may involve using a trusted third-party provider for digital certificates or other authentication methods to ensure the electronic signature method complies with the specific requirements for the type of document being signed.
With the growing trend of remote work and the increasing use of digital technologies, the use of electronic signatures is likely to continue to grow in popularity. As such, it’s important for individuals and businesses in Texas to stay informed of any changes in the law and to ensure that their electronic signature methods are up to date and compliant with legal requirements.
While some will miss the formalities of the “closing ceremony” in the office of the lawyer that has the nicest conference room, the efficiency of a digital closing, in both time and cost, with the exchange of electronic signatures evidencing the closing is clearly an acceptable replacement.
ABOUT THE AUTHOR: Bradley W. Rapp is a Shareholder at Rapp & Krock, PC in the Corporate Law and Business Transactions group and routinely advises businesses concerning non-compete agreements.
Rapp & Krock, PC presents the information in this article for general education purposes only. Although this article discusses legal issues, it is not legal advice. The law and the content of any linked website may have changed since this article was written, and Rapp & Krock, PC makes no warranty or guarantee about the continuing accuracy of the information presented. Use of this article does not create an attorney-client relationship, and Rapp & Krock, PC does not represent you unless and until we are expressly retained in writing.
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