Is an Electronic Signature Legally Enforceable?

It’s no surprise that digital contracts and other records are becoming the norm in not only consumer-facing transactions, but especially in ones between businesses. In this post, we look at the question to what degree is an electronic or digital signature on such documents actually enforceable?

Per usual, let me run through the caveats: I am only licensed to practice law in Arizona.  This article only addresses Arizona law.  If you’re an e-commerce or other business utilizing digital agreements and signatures in another state or states other than Arizona, I strongly encourage you to consult the laws of those states or a lawyer licensed in those jurisdictions. 

The Arizona Electronic Transactions Act

In my Phoenix startup technology law practice, I have definitely noticed more and more clients who have chosen to have their agreements executed by “e-signature” or digital signature means.

Like well over half of its sister states, Arizona has adopted the Uniform Electronic Transaction Act (“UETA”) in the form of The Arizona Electronic Transactions Act (the “Act”). The Act specifically addresses not only electronic contracts and records but also the electronic signatures that might accompany them.

Basically, the Act recognizes electronic signatures as being the same as traditional, physical “ink” ones (see A.R.S. §44-7007).  Moreover, from the admissibility into evidence standpoint, A.R.S. §44-7013 makes it clear that evidence of a signature “may not be excluded solely because it is in electronic form.”

What Is a Valid, Electronic Signature in Arizona?

What does it take for an electronic signature to actually be valid? A.R.S. §44-7031 lays out the elements of a valid and binding electronic signature in the state. In general, a signature is a “secure electronic signature” if, having applied a security procedure, it can be shown to have met each of the tests below at the time the e-signature was made: 

  1. It was unique to the person using it
  2. It was capable of verification
  3. It was under the sole control of the person using it, and 
  4. It was linked to the electronic record to which it relates in such a manner that, if the record were changed, the e-signature would be invalidated

The Act also includes a useful presumption relating to e-signatures under A.R.S. §44-7033.  Specifically, under §44-7033(B), there is a presumption that a secure electronic signature is the electronic signature of the party to whom it relates (although this presumption is a rebuttable one).

Making Your Clients E-Signatures Enforceable

Although the AETA certainly makes formation of agreements through the use of electronic means much easier and improves consistency of their treatment, e-commerce and more traditional businesses utilizing or planning to utilize electronic or digital contracts and forms in Arizona or with Arizona clients should take special care to make sure their critical documents and records requiring a customer or other party’s electronic signature meet the standards set forth in A.R.S. §§ 44-7001 through -7051 in order to aid their enforceability and improve certainty in their commercial dealings.  

Ben Bhandhusavee is the Managing Attorney for BHANDLAW, PLLC, a Phoenix business and technology law firm working with start-up companies, creative intellectual property, Internet and digital media matters, and complex corporate M&A and technology transactions.  Ben can be reached at (602) 222-5542 or by e-mail at bbhand@bhandlaw.com