Are electronic signatures valid for lien waivers?
Thursday, July 06, 2017
For being such a document-intensive industry, the construction industry is notoriously slow to adopt new technology. Even when technology could significantly streamline and improve tedious business processes, it is oftentimes viewed with suspicion and distrust.
On one hand, this is understandable: Construction participants work on such small margins with such tight working capital, so they don't want to try anything new that could potentially be a problem with either margins or working capital. This is especially true of the documents that are specifically and intrinsically tied to payment, like lien waivers.
On the other hand, the law surrounding certain applications of technology is clear, and the time and energy that could be saved by implementing the use of this technology could have significant benefits for construction participants.
One of the easiest ways companies could save time and speed up the turnaround rate for waiver requests (and thus get paid more quickly) is to use electronic signatures. Receiving a waiver request, printing out a hard copy, signing by hand, then either mailing or faxing the waiver to the requesting party is a much slower process than needs to occur.
Simply receiving the waiver request (or waiver form itself) electronically, affixing an e-signature and sending it back immediately via email or through an electronic waiver portal saves time and energy, and results in quicker payment. And it's completely, legally sufficient.
For more information, read on.
Legal sufficiency of electronic signatures
The validity of electronic signatures for all manner of documents is clear. Both federal and individual state law clearly state that electronic signatures are as valid as "pen and ink" or "wet" signatures.
From the federal standpoint, the Electronic Signatures in Global and International Commerce Act (the "E-Sign Act") and The Uniform Electronic Transactions Act (UETA) both specifically mandate that electronic signatures are equally as valid as "wet" signatures. UETA, which predates the E-Sign Act by one year, was adopted by the National Conference of Commissioners on Uniform State Laws in order to urge consistency throughout state laws regarding electronic signatures by providing model drafted rules.
The model framework was adopted by 47 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands, and makes electronic signatures as valid as if the signature was handwritten. While three states that have not adopted the specific UETA framework (Illinois, New York and Washington), each of these states has its own laws permitting electronic signatures.
Additional support for the validity of electronic signatures comes from the federal E-Sign Act. The E-Sign Act was passed into law in 2000 to advance e-commerce, and it also made e-signatures valid in commercial transactions. The E-Sign Act controls in instances in which state law is silent regarding electronic signatures, or if states have made modifications to the model UETA rules in a manner conflicting with the E-Sign Act.
The black letter law is clear regarding the sufficiency of electronic signatures, for example, 15 U.S.C. § 7001 (a) (1) & (2) states that a "signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation."
This is makes it absolutely clear that electronic signatures are valid.
While there is an additional step required in the three states that require lien waivers to be notarized, they can still be electronically signed. Luckily for parties exchanging lien waivers on projects located in Texas, Wyoming and Mississippi, an electronic signature may be notarized through webcam or other video/audio technology (as applicable). For example, notaries in Virginia can notarize an electronic signature on a document via webcam, without the need to ever move from your computer or other device.
Sign electronically and get paid faster
The takeaway here is simple. If you need to provide a lien waiver, or are accepting a lien waiver and want to make sure it's valid, an electronic signature is perfectly acceptable. Accordingly, the relative immediacy of electronic wavier exchange could result in significantly faster payment.
There is no need to print, sign and mail (or even fax), and wait around for the waiver to get to the receiving party before payment. These "offline" delays can be a thing of the past, and waivers can be requested, signed, sent and received within minutes. This means faster payment and better cash flow.
Electronic signatures on lien waivers can streamline the waiver exchange process, paving the way for making electronic exchange of these crucial documents the norm. The construction industry can rest easy knowing that the lien waivers signed electronically are just as valid as those with "wet" signatures and act accordingly.
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