UETA and ESTRA both define an electronic signature as an “
electronic sound, symbol, or process attached to or logically associated
with a record and executed or adopted by a person with the intent to
sign the record.” 4
Both regulations require that electronic signatures and records be used
voluntarily. UETA specifies that it applies to a transaction involving
at least two people. ESRA provides that an entity or person is not
required to participate. The surrounding circumstances or the nature
and particulars of the transaction documents can determine consent. 5
Neither ESRA nor UETA applies to all documents or transactions.
ESRA does not apply to, among other things, “negotiable instruments”
and “instruments [documents] of title.” This includes finance-related
documents where possession confers title “unless an electronic version
of such record is created, stored or transferred pursuant to this article
in a manner that allows for the existence of only one unique, identifiable and unalterable version which cannot be copied except in a form
that is readily identifiable as a copy.” 6 UETA has a similar exclusion
for a transaction7 to the extent “governed by the Uniform Commercial
Code (UCC) other than §1-107 and 1-206, Article 2 and Article 2A.” 8
4 UETA § 2; ESRA §302
5 ESRA §309; UETA § 5
6 ESRA §307( 2): For purposes hereof, the author will refer to this as the “Electronic Version
7 Observe the difference between ESRA’s exclusion of an instrument or document and UETA’s
exclusion of a “transaction” making it important for the lender or practitioner to be mindful of
the advantages and disadvantages of having some but not all of the documents in a particular
transaction in electronic versus written format. See also Official Comments to UETA § 3.
8 UETA § 3. A detailed analysis of each of the excluded documents and transactions is beyond
the scope of this article. However, it is important to recognize that each exclusion is apparently the function of an absence of a verifiable electronic record keeping and transfer system
for certain documents/transactions. Several of the documents and transactions excluded by
UETA and ESRA have become part of e-commerce by direct amendments to the specific
UCC articles which govern them. See Footnotes No. 10 and No. 13. The comments to UETA
acknowledge that certain documentary transactions such as real estate mortgages are not
excluded expressly but cannot be reconciled with electronic records until governmental agencies have implemented such a system and integrated third party reliance thereon. See UETA
§ 3, Legislative Note No. 3.
Since 2000, 47 states have adopted the Uniform Electronic Transactions Act (UETA), and New York enacted its own regulation, the Electronic
Signatures and Records Act (ESRA). 1 Since that time,
several developments in both law and technology have
furthered the statutes’ goal of removing barriers to
electronic-based commerce. This article will address
the latest developments in applying e-signatures to
documents of title and promissory notes as significant
evidence of financial obligations.
UETA and ESRA define several terms, but electronic
record and electronic signature are the most relevant for
financial institutions. UETA defines an electronic record
as “a record created, generated, sent, communicated,
received or stored by electronic means.” 2 ESRA defines
it as “information that is inscribed on a tangible medium
or that is stored in an electronic or other medium and is
retrievable in perceivable form.” 3
1 UE TA is found at N. J. S. A. 12A: 12-1, et seq. in New Jersey (effective June
26, 2001) and F. S. A. 668.50, et seq. in Florida (effective July 1, 2000);
ESRA is found at McKinney’s (L. 1999, Ch 4); State Technology Law,
Article 3, §301-309. (effective March 27, 2000; September 14, 2004).
These three states are cited as they are the three jurisdictions where the
author is licensed to practice law.
2 UE TA § 2.
3 ESRA §302.
The Emergence of Financial Documents
BY PAUL H. SHUR
Spurred by the rapid growth of e-commerce and online lending, e-signatures and e-documents are
becoming an essential part of business. However, both terms remain loosely defined in a legal sense. Paul
Shur examines the regulations and case law that govern their use.
UETA and ESRA define several terms, but electronic record and
electronic signature are the most relevant for financial institutions.
UETA defines an electronic record as “a record created, generated,
sent, communicated, received or stored by electronic means.”
ESRA defines it as “information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.”
PAUL H. SHUR
Goldman & Spitzer