E-Sign Legislation - The milestone in the e-signature history



The US President Mr. Bill Clinton signed the E-SIGN Act (Electronic Signatures in Global and National Commerce Act) electronically using the E-Lock Digital Signature Solution on 30th June 2000. With the passage of this bill electronic signatures and on-line contracts gained legal acceptance.
As per the law - “a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form”. As has been said by Sen. Spencer Abraham, R-Mich., a key backer of the bill - “This legislation will eliminate the single most significant vulnerability of electronic commerce, which is the fear that everything it revolves around could be rendered invalid solely by virtue of their being in electronic form”.
Government's philosophy behind the E-sign Act
A. E-Business is perceived as a virtual business place where the parties engaging in business do not know each other and remain anonymous. e-business is more than just point-to-point transactions on the Internet and commercial trading through electronic signals. It is also a finely tuned, flexible and locally managed global exchange of important and crucial data, ideas and talent. It involves real people, money, relations and opportunities. E- business depends upon security and trust.
The E-Sign Bill was passed to ensure this very security and trust in electronic transactions. The Government's aim in approving this legislation was to ensure that American businesses and consumers take advantage of the digital revolution. The legislation represents an important advance of law in the electronic age. In order to give equal opportunity to all and maintaining the policy of “technological neutrality”, the bill takes care not to favor any particular technology or any particular provider of digital signature software.
Benefits of this legislation
The legislation gives legal recognition to electronic signatures and online contracts. The use of electronic signatures shall make it much easier for businesses and consumers to transact business over the Internet and benefit from the efficiencies resulting from advances in technology. It shall bolster e-commerce by eliminating companies' fears about the enforceability of online transactions. Although more than 40 states had adopted laws that validated the use of electronic signatures, those laws were not uniform. The uniformity provided by the E-Sign Act shall accelerate the use of electronic signatures and electronic records.
Almost all types of traditional business shall now be able to conduct online transactions like the Banking, Financial Services, Insurance, Medical and Heath care Industries, Pharmaceutical companies, Government Services, Corporate Human Resources, Corporate Approvals and Processes, Supply Chain Management etc. to name a few. Through digital signature legislation, contracts can be signed online and crucial decisions can be taken instantaneously, increasing the speed of transaction to the time it takes to point and click a mouse.
The E-Sign law also provides for consumer protection by obtaining consent from consumers before entering into any electronic transaction. No company can force its consumers to partake in any electronic transaction against their will and the consumer has the option to back out at any point of time. This shall give consumers the incentive to conduct online business without any fear. As has been said by Representative Thomas Bliley (R-Virginia) during a floor debate - “Today a consumer can apply for a mortgage or get a quote on life insurance policy (online) but when it comes time to close the deal, a consumer must physically sign the contract, but E-sign shall now allow the entire transaction to be done electronically and the transaction shall have the same legal effect and enforceability as a paper contract”.
The main features of the legislation
President Bill Clinton signed the Electronic Signatures in Global and National Commerce Act, also known as the “Millennium Digital Commerce Act” and the “E-SIGN bill” on June 30, 2000. The bill provides Electronic signatures the same legal status as handwritten signatures and gives legal validity to electronic records and contracts. It authorizes businesses to replace paper records, such as warranties, contracts, and notices, with electronic records regardless of whether the transaction is conducted online or offline and regardless of whether the consumer has the equipment and ability to access information electronically.
The act aims to,
  1. Eliminate legal barriers to using electronic technology to form and sign contracts, collect and store documents, and send and receive notices and disclosures
  2. Allow parties to establish their own procedures and requirements for electronic contracts, agreements and records, and makes it clear that these electronic documents have the same legal effect as paper transactions
  3. Require companies to obtain prior consent from consumers in order to receive documents electronically as well as demonstrate that individuals have the necessary software and equipment to receive the materials
  4. Require that consumers affirmatively consent to doing business on-line and benefit on-line from consumer protections equivalent to those in the paper world
  5. Require companies to detail how they will store electronic records in a secure manner
  6. Allow consumers to opt out at any time and again receive documents on paper and
  7. Ensure that government agencies have authority to enforce the laws, protect the public interest, and carry out their missions in the electronic world

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