Validity of Electronic Signatures in U.S. Federal Contracts

By March 7, 2024 No Comments
TILLIT LAW PLLC

The use of electronic signatures in federal contracting is governed primarily by the Electronic Signatures in Global and National Commerce (E-SIGN) Act. Enacted in 2000, the E-SIGN Act promotes the use of e-signatures in domestic and international commerce by establishing the legal equivalency of electronic records, signatures, and contracts with their paper counterparts. The E-SIGN Act is applicable to most transactions with a few notable exceptions, including required notices that directly impact consumer rights. Consistent with the E-SIGN Act, the Federal Acquisition Regulations (FAR) permit the use of electronic signatures in federal Government contracting. Specifically, FAR 4.502(d) allows federal agencies to accept electronic signatures and records in connection with Government contracts.

An electronic signature may take many forms, such as a typed name, a digitally scanned image of a wet-ink signature, or a signature affixed using an e-signature technology solution. Under the E-SIGN Act, an electronic signature refers to an electronic sound, symbol, or process attached to or logically associated with a contract or other record and executed or adopted by a person with an intent to sign the record. Similarly, FAR 2.101 defines a signature as the discrete, verifiable symbol of an individual that, when affixed to a writing with the knowledge and consent of the individual, indicates a present intention to authenticate the writing. The FAR definition expressly states that it encompasses electronic symbols.

Under the E-SIGN Act, contracts may not be denied legal effect solely because they are in an electronic form or they are executed in an electronic form. The parties’ intent to be bound is the primary consideration in determining the enforceability of an electronic signature. Therefore, scanned signatures for instance are legally binding electronic signatures as long as the parties intend to be bound by them. The FAR also requires an electronic signature to be discrete and verifiable as belonging to the signing individual. That is, the signature must be a separate, distinct, and true representation of the signing individual’s present intent to authenticate the document or record. Finally, to have a legal effect, the electronic signature, which can be a symbol, sound, or process, should be knowingly attached to the contract, document, or record at issue.

Even though the FAR allows for electronic signatures, contractors should be aware of any specific requirements that may be imposed by federal agencies due to their internal standards or formats or due to the requirements of the contract being performed. Furthermore, there may be specific instances where the use of electronic signatures may not be acceptable. For instance, electronic signatures may not be used in Government contracts involving the recall of products or the material failure of a product that potentially endangers health or safety. Additionally, federal contracts involving the transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials will likely involve accompanying transportation documents that may not be electronically signed.

Finally, the E-SIGN Act permits federal regulatory agencies responsible for rulemaking to interpret the provisions of the Act through rules, orders, and regulations under limited conditions. Any such interpretive rules, orders, regulations, or guidance must be consistent with the general rule of validity section of the E-SIGN Act. Furthermore, such rules must not add to the requirements already outlined in the section. The responsible federal agency must also find that a substantial justification exists for it to interpret the provisions of the E-SIGN Act through rules, orders, regulations, or guidance. Importantly, the methods used to implement the purpose of the agency interpretations must be substantially equivalent to the requirements imposed on non-electronic records. These alternative methods must also not impose unreasonable costs on the acceptance and use of electronic records permitted under the Act.

While requirements surrounding the validity of electronic signatures in U.S. Government contracts are relatively straightforward, contractors must nevertheless be cognizant of this general framework to ensure compliance when using electronic signatures during various stages of the procurement lifecycle. There may also be additional considerations in the context of foreign companies contracting with the U.S. Government. Such considerations may include technological compatibility, data privacy rules, and local regulations impacting foreign entities. When in doubt, contractors should seek clarification from Government officials or consult their U.S. Federal Government Contracts Attorney to ensure compliance.

This U.S. Federal Procurement Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.