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Covid-19

Remote Execution of Contracts and Remote Notarization

Executive Order 202.8 issued by Governor Cuomo in New York on March 20, 2020 closing non-essential places of business[1] (available here) and similar orders in other states will impair the ability of parties to exchange “wet ink” signatures to contracts that they enter into as they work from home. Applicable federal and state legislation makes contracts executed by “electronic signature” enforceable without the need to deliver signature pages executed by the parties with pen and ink. New York has adopted the Electronic Signatures and Records Act (“ESRA”) codified as State Technology Law §§ 301 to 309. For contracts involving interstate or international commerce, the federal Electronic Signatures in Global Commerce Act (“E-Sign”), 15 U.S.C § 7001 et seq. applies. All states other than Illinois and New York have adopted legislation based on the Uniform Electronic Transactions Act (“UETA”) promulgated by the Uniform Law Commission.[2]

The basic rule in each of these statutes is the same - a signature may not be denied legal effect solely because it is in electronic form, where electronic signature is generally defined as 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 the intent to sign the record. In addition to transmission of an image of signature page signed by a party or use of commercial e-sign program that inserts signature into a document, an e-mail accepting the terms of a contract is a sufficient signature where the parties have agreed to conduct transactions by electronic means. The agreement to do so may be express or inferred from the surrounding circumstances. A contract may include a provision stating that the parties intended to be bound by the exchange of images of signature pages or by other electronic means, including e-mail acceptance, or the agreement to be bound may be inferred from the parties’ course of dealing such as by expressing their assent through the messages that they exchange.

There are exceptions to the categories of transactions to which e-sign legislation applies. The federal E-Sign statute applies to “transactions” and “contracts.” New York’s ESRA does not apply to “any document providing for the disposition of an individual’s person or property upon death or incompetence, including wills or trusts” or to any negotiable instrument and other instruments of title such as bills of lading and warehouse receipts where possession may confer title. UETA excludes wills and trusts. UETA also excludes contracts subject to the UCC except for contracts governed by Article 2 (Sales) and Article 2A (Leases), but the definitions of “signed" in Article 1 (§ 1-201(b) (37)) and the definition of “authenticate” in Article 9 (§ 9-102(a)(7)) provide substantially similar rules.

Remote Notarization in New York

In New York, deeds and mortgages and other documents affecting title to real property must be acknowledged before a notary public or other officer in order to be recorded in the real estate records. Although there are exceptions for certain professionals including lawyers and doctors, sworn statements submitted in support applications made for governmental action or in New York state court proceedings must be notarized. A properly acknowledged document is prima facie evidence that it was executed by the person who purported to do so. See CPLR 4538.

By Executive Order No. 202.7 dated March 19, 2020 (available here), any notarial act that is required under New York State law is authorized to be performed with the party executing the document appearing before the notary by video conferencing so long as the person executing the document to be notarized is in New York State. The Executive Order only operates through April 18, 2020, but may serve as the impetus for permanent legislation in New York. Other states have already adopted statutes authorizing remote notarization based on the Revised Uniform Law on Notarial Act promulgated by the Commissioners on Uniform State Laws[3] and other model statutes which permit notarization where the notary is in a different location than the person executing the document, including where the document to be notarized is itself an electronic document.

As federal, state and local governments continue their efforts to address the COVID-19 pandemic, rules governing business operations are rapidly changing. The Carter Ledyard team is monitoring developments in this area and will issue updates as the situation evolves.

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[1] Carter Ledyard has published a Client Advisory detailing the workforce reductions for non-essential businesses in New York mandated by Executive Orders 202.6, 202.7 and 202.8, and identifying the categories of businesses designated as “essential” and thus exempt from New York’s mandatory workforce reductions. This advisory is available at https://www.clm.com/publication.cfm?ID=5684.

[2] Illinois has promulgated its own statute governing the use of electronic signatures. See Electronic Commerce Security Act, 5 ILCS 175.

[3] Available at https://www.uniformlaws.org/viewdocument/final-act-no-comments-27?CommunityKey=2c04b76c-2b7d-4399-977e-d5876ba7e034&tab=librarydocuments.