In our communal efforts to tamp down the spread of COVID-19, virtual meetings are replacing in-person ones. Our efforts to implement social distancing have left many wondering what they should do when they need to get documents signed – whether it is executing a contract or notarizing a signature – when in-person meetings are not possible or desirable and people are working remotely and may not have access to printers and scanners. This article explores using electronic signatures and notarization under New York law, and identifies important areas for consideration when engaging in complex transactions.
Electronic signatures may be acceptable
Pursuant to New York's Electronic Signatures and Records Act (ESRA), electronic signatures have the same force and effect as handwritten signatures for many documents. Under New York law, properly executed electronic signatures will have the same force as a handwritten signature if they otherwise comply with evidentiary requirements. Note, however, that electronic signatures are not approved for all documents types. For example, this method cannot be used for wills, trusts, powers of attorney, healthcare proxies, orders not to resuscitate and certain negotiable instruments.
The ESRA provides that a wide range of digital objects may serve as an eSignature. These objects can be as simple as typing one's name or as sophisticated as an encrypted hash of a document's contents. As with handwritten signatures, the signer must show intent to sign the document electronically. This intention can be shown by typing one's name or drawing a signature with a mouse, among other actions indicating that the signer understands that using the digital object has the same import as applying a handwritten signature.
An electronic signature needs to be appropriately associated with the document and should be linked with the record during transmission and storage. For example, an electronic signature is appropriately associated when it is embedded on the face of a document like a handwritten signature or associated with the document through an embedded link. A signature object can also be maintained separately, but it needs to be logically associated through a database, index or other means.
Note, however, New York courts have found typed signatures insufficient where the document being signed was a scanned attachment to an email and the signature was typed in the body of an email when the signature could have been included in the attachment that had been scanned.
Best practices when considering whether an electronic signature is appropriate, especially in the context of international transactions
- Determine what law governs the contract and whether that type of agreement can be signed electronically under the law of that jurisdiction.
- Identify the location of parties signing the contract, the location where performance will occur, as well as any other jurisdictions where litigation relating to the contract could be brought and determine if the laws in those locations impact the use of electronic signatures.
- Include language in the contract indicating that it will be signed electronically and the manner of signature, and that all parties agree that such methods shall have the same legal and evidentiary effect as a handwritten signature. Moreover, it is prudent for the electronic signature to be embedded in the document so that it is clear to the signer what content is being signed and so the electronic signature cannot be separated from the contract.
- Circulate executed copies of electronically signed documents to the parties.
- Consider whether using an electronic signature platform, such as DocuSign or Adobe Sign, is appropriate for your transaction. One benefit of platforms such as these is that they are useful in preventing the manipulation of the contract after execution. Unscrupulous parties to a contract have been known to insert pages or content into a contract and these platforms offer one method to guard against this type of manipulation.
- Consider whether it is possible to execute a contract in counterparts and use a handwritten signature which is scanned along with the contract. Many jurisdictions, like New York, will accept scanned copies of contracts as originals in court proceedings provided that there are no authenticity issues. Should the contract need to be litigated in a foreign jurisdiction that does not recognize electronic signatures, this method may be preferable (especially if originals may be exchanged at a later date).
- When in doubt, it is advisable to check with legal counsel to determine what is required for your specific transaction to help ensure that the use of an electronic signature will not impact the enforceability of the contract.
Virtual notarization is permitted in New York until April 18, 2020
Usually, notarizing documents in New York requires the signer to be physically present before a notary so the signature can be authenticated. In light of COVID-19, however, New York is temporarily suspending the requirement that the signer be physically present before the notary. On March 19, 2020, Governor Cuomo relaxed the requirements around notarization by issuing Executive Order 202.7, which in part temporarily allows notarization using audio and video technology. Unfortunately, the signer must have access to technology to electronically transmit a physically signed document to the notary.
- 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.
- The video conference must allow for direct interaction between the person and the notary (e.g. no pre-recorded videos of the person signing).
- 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.
- The notary may repeat the notarization of 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 30 days after the date of execution.
This new process is only valid until April 18, 2020, but the timing could be extended by future executive order.
We are all adjusting and adapting our business processes in light of COVID-19, including re-thinking how we sign documents. Tools like using electronic signatures or video notarization may be important to helping companies figure out how to proceed as businesses try – or are required – to limit in-person contact. It is important to make sure that documents are properly executed in this new environment so their enforcement cannot be challenged later based on how they were executed. Norton Rose Fulbright would be happy to assist your company navigate signature authentication issues with respect to particular transactions or other needs stemming from the impact of the coronavirus.