What You Need to Know About Electronic Signatures for California Transactions

September 24, 2021by admin

What You Need to Know About Electronic Signatures for California Transactions

Electronic Signatures in California Transactions

Electronic signatures are commonly used in most real estate transactions in California. The use of electronic signatures and records in transactions including real estate transactions in California are governed by two acts which came into effect in 2000: the California Uniform Electronic Transactions Act (UETA) (CC §§1633.1–1633.17), and the Federal Electronic Signatures in Global and National Commerce Act (E-Sign Act) (15 USC §§7001–7031; Pub L 106–229, 114 Stat 464).

E-Sign Act’s Preemption

The E-Sign Act preempts other electronic signature laws, meaning that it works to overlay or amend state and federal laws. This override is because of the Supremacy Clause in the U.S. Constitution. For example, California, through its UETA, attempted to override some consumer protection through the UETA, but the E-Sign Act overrode those provisions. However, the E-Sign Act provides that states “may modify, limit, or supersede” the E-Sign Act if that state adopts legislation similar to the federal UETA as approved by the National Conference of Commissioners on Uniform State Laws (E-Sign Act, § 7002(a)(1)). In effect, most of the California UETA is valid and in effect in conjunction with the E-Sign Act. All states in the U.S. have adopted the UETA or similar legislation. 

The UETA Gives Electronic Signatures Legal Force

An electronic signature is defined as an “electronic sound, symbol, or process attached to or logically associated with an electronic record” (UETA, § 1633.2(h)). 

The UETA allows most parties to conduct business electronically by giving electronic signatures the same legal status as handwritten ink signatures. In other words, a contract can be signed electronically and have the same effect of binding all parties to the contract as if it was signed in ink. Before the UETA was in effect, a doctrine called the “Statute of Frauds” required that certain contracts, including many in real estate, be signed with an acceptable signature. For example, the signature had to be handwritten in ink or made with a rubber stamp. The UETA and the E-Sign Act authorize the use of electronic signatures and records in real estate transactions.

Some Transactions Are Excluded from the UETA

Both acts have certain exclusions, such as when other legislation is applicable to a transaction.  Most real estate transactions do not fall under any exemptions. Perhaps the most common exemption from the UETA is where other legislation governs the signing of “wills, codicils, or testamentary trusts” (UETA, § 1633.3(1)).

Some Risks of Electronic Signatures

Including an electronic signature at the bottom of an e-mail was held to be binding by some courts, but the Court of Appeals in California has stated that when a signature is automatically generated, the signature “is not much different than a preprinted letterhead” and therefore not necessarily binding (Neman Real Est. Invs. (Cal. Ct. App. July 11, 2017), unpublished/noncitable, citing Donovan v. RRL Corp. (2001), 26 Cal.4th 261, 278).

Therefore, even though within California automated signatures in e-mails are not a big risk, if you are involved in transactions across states it is important to know that courts in other states (e.g., New York and North Dakota) have enforced transactions where automated signatures were at the bottom of e-mails.

Consent is Needed for Using Electronic Signautres

Importantly, parties must consent to conducting a transaction by electronic means for an electronic signature to make the transaction enforceable (UETA, § 1633.1 et seq). Written/express or implied consent can both be valid. However, whether the consent can be implied will depend on the type of transaction. For example, a client’s voicemail authorizing counsel to sign for the execution of a land sale is not valid consent (Dilonell v. Chandler, (Cal. App. 2d Dist. 2018), unpublished/noncitable). 

Consent is required for both business and consumer transactions. This is why when signing a document electronically, you should be prompted to consent or accept to signing electronically after viewing a contract or terms (this is known as “clickwrap” or “click-through” agreements). If consent is not obtained, the transaction may not be enforceable.

How Are Electronic Signatures Authenticated?

An electronic signature can be authenticated if it “is attributable to a person if it was the act of the person” (UETA, § 1633.9(a)). This means to prove an electronic signature is real, one must show that the signature is actually the signature of the person one is claiming the signature belongs to. This can include evidence of security procedures (ibid) and circumstantial evidence — — this is not a high bar (See e.g., Ruiz v. Moss Bros. Auto Grp. (2014), 232 Cal. App. 4th 836).

What You Need to Know About Electronic Transactions

Since 2000 when both the UETA and E-Sign came into effect, the ability of parties to conduct business and consumer transactions electronically have became widely used and accepted, and a variety of electronic methods have emerged to comply with the legislative requirements of UETA and E-Sign. For example, DocuSign® has become a popular online platform for electronic transactions. 

Electronic signatures have become common practice in business and consumer transactions, and continue to shape how transactions occur, and the products we use for those transactions.

Simantob Law Group is a law firm of business attorneys and real estate lawyers. We have represented the business and real estate legal needs of individuals and companies, from start-ups to regional and national US corporations for over 20 years. Please contact us at 310.281.0041 or complete our online contact form to discuss your legal guidance/documentation needs. 

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