Gabe Teninbaum was stuck in a precarious situation when he had to close on his mortgage refinance on March 24.
At this point, states were in lockdown due to the coronavirus outbreak. Teninbaum, who is director of the Institute on Law Practice Technology & Innovation at Suffolk University Law School in Boston, said he called his bank to ask whether the transaction could be done electronically, but “the short answer was no.”
The bank said Teninbaum could not delay the closing while keeping his refinancing rate, so he felt he had to act. Teninbaum drove with his wife and young children to the bank’s law firm. His family waited in the car while he went in to sign. The office was empty except for the attorneys involved, he recalled. They wore blue surgical gloves and “cloroxed everything.”
After he signed about 50 documents, he went to the car and it was his wife’s turn.
The wet signature requirement, that a document be signed in-person and with ink, could see its demise as social distancing practices take hold across the globe in an effort to stop the spread of coronavirus.
Covid-19, as the disease caused by the virus is known, has accelerated the already growing use and acceptance of electronic signatures to such an extent that wet signatures may soon become relics for attorneys.
We’re “clearly at an inflection point” and “there will be no turning back,” said Margo H.K. Tank, the co-chair of DLA Piper’s U.S. financial services sector practice in Washington.
Rise of eSignatures
Since two pieces of legislation—the Uniform Electronic Transactions Act in 1999 and the Electronic Signatures in Global and National Commerce Act in 2000—were enacted, the use of eSignatures has steadily made inroads into almost every type of consumer and commercial transaction, like signing on pads when shopping at the grocery store or pharmacy.
Forty-eight states, plus Washington, D.C., Puerto Rico, and the U.S. Virgin Islands have adopted some form of the UETA, Tank said. New York and Illinois have their own electronic signature law, she added.
The ESIGN Act was enacted to make sure the states didn’t vary from uniformity in their adoption of UETA, she explained, calling it a “federal backstop” to UETA.
Both are procedural laws saying if a document requires a signature, the signatories can use eSignatures because they have the same legal status as ink signatures, Tank said.
Electronic signatures are used roughly equally in consumer and commercial transactions, Tank said. And lawyers who “understand the law underpinning their use,” are also “eager” to use them, she said.
However, there are certain legal transactions not within ESIGN’s scope that are still done in person, including wills, testamentary trusts, adoptions, and divorces, Tank said. But states can and have enacted their own laws to enable eSignatures in such matters.
Tank said the question right now is how lawyers and clients can do business in the current climate if they can’t e-sign.
She pointed to the example of online notarization, which has been “exploding” in the wake of the virus. Before coronavirus, 23 states allowed remote online notarization.
Now, at least 19 states have enacted emergency, short-term measures to enable RON.
Lawyers have to follow the law when wet signatures are required, even though it may expose them and others to the coronavirus.
The insistence on wet signatures on documents “is causing all kinds of distancing issues for lawyers doing closings,” Lucian T. Pera said in an email. Pera is an attorney with Adams & Reese in Memphis whose practice includes legal ethics.
These are often very important transactions involving real estate where courts have historically been difficult about any deviations from the traditional or required elements, Pera said. For example, for an affirmation with a formula that requires the signature in the presence of the notary, there “may be no legitimate substitute for the notary and signer being in the same physical space, even if 6 feet apart,” he said.
“My sense is that some lawyers are simply doing this in person, even under a shelter-in-place order,” Pera added.
The benefits of using eSignatures instead of wet signatures in the age of Covid-19 “far outweigh the negatives,” said Connor Jackson. Jackson is a founding partner of the national healthcare firm Jackson LLP whose practice focuses on regulatory compliance in telemedicine. He is based in Evanston, Ill.
But there are some things to be cognizant of, including authenticity, he said.
“It’s crucial to confirm that the email address being used for obtaining the e-signature is unique and private to the signer,” Jackson said.
If it’s not, then authenticity can’t be verified beyond confirming that someone with access to that email address signed the document, he explained.
If an entire family uses the email address email@example.com, for example, and Jane Doe is trying to digitally and securely sign something, “most programs would technically permit anyone with access to that email account to assert that they’re Jane and to execute the document on her behalf,” Jackson said.
Reflecting on his closing experience, Teninbaum said he doesn’t see economic benefits to requiring wet signatures. For the firms, offices aren’t necessary and they can save copying and related costs, he said. For the consumer, they can save time and money by avoiding travel.
Teninbaum said wet signatures remain a common practice, like a lot of legal practice processes, simply because of inertia.
“The more I thought about it, the situation was emblematic of everything that’s broken with the legal system,” Teninbaum said.
“If we just paused and evaluated the way we work in light of new tools and technologies, situations like this one wouldn’t occur anymore.”