First, what is a signature?

A signature is any symbol executed or adopted by a party with the intention to authenticate a writing. The key is that there's no requirement this be ink on paper, but instead shows that it can be any symbol provided the symbol is used with the intent of signing. This is why copies of signatures (such as on a fax), stamps or seals, and fingerprints can be used for signing on paper.

What is an electronic signature?

Like the signature above, an electronic signature is an electronic mark that's related to the electronic record or data that is being signed, such that the user has applied that symbol to indicate his intent to sign. It is important that the electronic symbol be related specifically to the party who is signing, that there's proof the symbol was applied with intent to sign, that the data being signed can be proven to be the original data (hasn't been tampered with), and be such that all parties to a signature are allowed to have independent copies.

How is electronic signature defined in the U.S. E-SIGN Act?

From Section 106 (Definitions), "The term 'electronic signature' means 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."

However, for such an electronic "symbol" to be legally binding, it is important that the symbol provide authentication of the party who created it, ensure that what was signed cannot be altered, ensure that the party understood that by creating the symbol the party was willingly signing, and that the party is able to keep an original of the data and his electronic signature for his own records. This is why an "I Agree" button isn't sufficient (it typically lacks authentication, does not ensure that the data agreed to cannot be changed later, and does not provide the user with an electronic copy of the data and the signature for his own records).

What do the courts say about electronic signatures?

Lawsuits are rarely filed to contest whether something was signed, but instead focus on whether the parties lived up to the obligations outlined in a document, and what the reasonable meaning is behind the terms in the document. Case law throughout the United States has repeatedly upheld the legality of electronically signed documents. In fact, simple email has been found to be legally binding in terms of contract law because promises and intent can be determined and thus the parties are held accountable.

Is it legal?

Yes, electronic signatures are legally recognized, even when a statute uses terms like "in writing" or "signed."

Can anything be signed electronically?

Not everything, but most common documents can be. The ESIGN Act specifically forbids a narrow range of documents that may not be signed electronically. The exceptions primarily relate to wills, codicils and testamentary trusts; adoptions, divorce or other matters of family law; the Uniform Commercial Code, as in effect in any State, other than sections 1-107 and 1-206 and Articles 2 and 2A; court orders, notices and official court documents (including briefs, pleadings and other writings) used in connection with court proceedings; notices of cancellation or termination of utilities; notices of default, acceleration, repossession, forecloseure or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence; notices of cancellation or termination of health insurance or benefits or life insurance benefits (excluding annuities); notices of product recalls or material failure of a product that risks endangering health or safety; or documents related to transportation or handling of hazardous materials, pesticides or other toxic or dangerous materials.