On April 16, 2020, New York Governor Andrew Cuomo extended “New York on PAUSE” to May 15, 2020. Given current circumstances, social distancing and remote work is expected to continue into the future to reduce the spread of COVID-19. Yet, despite the current and potential future constrictions, business must continue. To do so, documents—contracts, legal papers, and others—are required and they still require signatures. Electronic signatures provide an alternative to handwritten signatures. If you are not familiar with electronic signatures—now may be the time to become acquainted.
Federal and New York law authorize the use of electronic signatures for certain documents. This alert provides background about the use of electronic signatures in New York and temporary provisions that broaden their use during the COVID-19 crisis.*
Laws Governing Electronic Signatures
Federal Law: The Electronic Signatures in Global and National Commerce Act (“ESIGN”) “facilitate[s] the use of electronic records and signatures in interstate or foreign commerce.” 15 U.S.C. § 7001, et seq. ESIGN provides that a transaction or document “may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.” Id. Most U.S. states have passed a form of the Uniform Electronic Transactions Act (“UETA”) which is similar to ESIGN. This alert will focus on New York law.
New York State Law: In New York State, the Electronic Signature and Records Act (“ESRA”) provides that, with certain exceptions, electronic signatures have the same validity and effect as a “signature affixed by hand.” NYS Technology Law § 304(2). Electronic signatures are presumptively valid when used in contracts, correspondence, and legal proceedings. ESRA defines an “electronic signature” as “an electronic sound, symbol, or process, attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the record.” NYS Technology Law § 302 (3). Under ESRA, the New York Office of Information Technology Services is responsible for promulgating rules and regulations authorized by the bill and their website provides interpretative guidance for laws and executive orders passed in response to COVID-19.
Documents Which May Be Signed with an Electronic Signature
Contracts and Correspondence: In New York, contracts, leases, and other transactional real estate documents are valid with electronic signatures. An “electronic record” is defined in New York State as “information, evidencing any act, transaction, occurrence, event, or other activity, produced or stored by electronic means and capable of being accurately reproduced in forms perceptible by human sensory capabilities.” NYS Technology Law § 302(2). New York courts have held that an electronically memorialized contract has the same legal effect as a contract memorialized and subscribed on paper for interstate contracts under the federal ESIGN law. See e.g., Naldi v. Grunberg, 80 A.D.3d 1, 12, 908 N.Y.S.2d 639 (2010).
Legal Documents: Electronic signatures may be used in legal proceedings. Section 306 of the New York Technology Law governs how an electronic record or signature may be used in a legal proceeding. “In any legal proceeding where the provisions of the civil practice law and rules are applicable, an electronic record or electronic signature may be admitted into evidence pursuant to the provisions of article forty-five of the civil practice law and rules including, but not limited to section four thousand five hundred thirty-nine of such law and rules.” NYS Technology Law § 306.
Documents That May Not Be Signed with an Electronic Signature
It is important to note that not all legal documents will be considered valid in New York if signed electronically.
Estate Planning Documents: ESRA excludes electronic signatures on certain estate planning documents, appointments of fiduciaries, and certain health-care related consents. NYS Technology Law § 307. The estate planning documents excluded from ESRA include: “[a]ny document providing for the disposition of an individual’s person or property upon death or incompetence, or appointing a fiduciary of an individual’s person or property, including, without limitation, wills, trusts, decisions consenting to orders not to resuscitate, powers of attorney and health care proxies.” NYS Technology Law § 307(1). Estate planning remains important and can be done during the COVID-19 crisis. (Dunnington Partner Sue Rothwell previously provided a guide to estate planning during the COVID-19 Pandemic.)
Certain Negotiable Instruments: ESRA also excludes “negotiable instruments and other instruments of title wherein possession of the instrument is deemed to confer title, unless an electronic version of such record is created, stored or transferred pursuant to this article in a manner that allows for the existence of only one unique, identifiable and unalterable version which cannot be copied except in a form that is readily identifiable as a copy.” NYS Technology Law § 307(2). Examples of negotiable instruments that require a signature if a unique electronic version does not exist include checks, notes, and drafts. See NY UCC § 3-104.
Immigration Documents: Usually, U.S. immigration documents require hard copy handwritten signatures. However, due to the COVID-19 crisis, U.S. Citizenship and Immigration Services (“USCIS”) has temporarily waived certain “wet” signature requirements. USCIS “will accept electronically reproduced original signatures for the duration of the National Emergency” for forms that normally require an original “wet” signature. Importantly, USCIS also requires a party that submits documents bearing an electronically reproduced original signature retain copies of the original documents containing the “wet” signature. USCIS will also accept scans, copies, or faxes of Form I-129, Petition for Nonimmigrant Worker, for submissions dated after March 21, 2020. USCIS provides guidance about acceptable signatures during the Covid-19 Crisis here.
Notarizing Documents in New York During COVID-19
Governor Cuomo’s March 19, 2020 Executive Order No. 202.7 provided temporary notarization guidelines for documents. The Executive Order provides the following guidelines:
- The person seeking the notary’s services, if not personally known to the notary, must present valid photo ID to the notary during the video conference, not merely transmit it prior to or after;
- The video conference must allow for direct interaction between the person and the notary;
- The person must affirmatively represent that he or she is physically situated in the State of New York;
- The person must transmit by fax or electronic means a legible copy of the signed document directly to the notary on the same date it was signed;
- The notary may notarize the transmitted copy of the document and transmit the same back to the person; and
- The notary may repeat the notarization on the original signed document as of the date of execution provided the notary receives such original signed document together with the electronically notarized copy within thirty days after the date of execution.
The New York Department of State provided further guidance here. Critically, the notary may not, in turn, use an electronic signature to notarize. The New York Department of State’s guidance states that the person using the notary’s services may use an electronic signature as long as the notary witnesses the electronic signature. However, the notary must print out and actually sign the document in ink because an electronic signature cannot be used to officiate the document. The notary also should indicate that the remote notarization was made pursuant to the Executive Order.
Standard Electronic Signature Clause
A party negotiating a contract during the COVID-19 crisis (and when electronic signatures are otherwise contemplated) should consider inserting a clause authorizing electronic signatures to avoid any ambiguity about their validity. Contracts will vary.* An example clause:
Electronic Signatures. Each party agrees that the electronic signatures, whether digital or encrypted, of the parties included in this Agreement are intended to authenticate this writing and to have the same force and effect as manual signatures.
Electronic Signature means any electronic sound, symbol, or process attached to or logically associated with a record and executed and adopted by a party with the intent to sign such record, including facsimile or email electronic signatures pursuant to the New York Electronic Signatures and Records Act (N.Y. State Tech. §§ 301-309) as amended from time to time.
Electronic Signature Services
Though COVID-19 has disrupted our lives and our businesses, electronic signatures and remote notarizing are bound to expand dramatically and this may be the time to implement changes to your corporate or personal security procedures when signing documents. Dunnington is a full service law firm and its experienced attorneys and staff are ready to assist you with any questions concerning legal issues, electronic signatures and remote notarization.
*Required Disclaimer: This alert is provided for informational purposes and does not constitute, and should not be considered legal advice. Specific facts and circumstances will differ. Neither the transmission nor the receipt of this information shall create an attorney-client relationship between the transmitter and the recipient. You should not take, or refrain from taking, any action based upon information contained in this alert without consulting legal counsel of your own choosing. Under applicable professional rules of conduct, this informational publication may be considered attorney advertising. Dunnington does not endorse nor take any position whatsoever concerning any third party entities mentioned in this alert.