The Law of Contracting Electronically

Sign on the Dotted Line?

Sign on the Dotted Line?
What happened to the ritual of signing a contract? The "signing pen" may have gone the way of buggy whips. The Uniform Act defines 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. Whether a particular document is "signed" is a question of fact. Proof of the signature must be made under other applicable law. Examples of signatures are your voice on an answering machine, your name as part of an e-mail and the business name on a fax. Actual digital signatures are certainly signatures within the Uniform Act but are not required. The critical element within the Uniform Act that determines a signature is "the intent to do a legally significant act." In our opening scenario, the e-mails indicating that the seller agreed to sell at the offered price and then arranged to meet with you to exchange the copier for payment would be evidence of such intent.

If the parties form an electronic contract, will there need to be a paper record created to serve as evidence? The Uniform Act provides that if a law requires a person to provide, send or deliver information in writing to another person, the requirement is satisfied if the information is provided, sent or delivered in an electronic record capable of retention by the recipient at the time of receipt. If the sender or the sender's information-processing system inhibits the ability of the recipient to print or store the electronic record, this provision of the Uniform Act isn't met. The recipient must be able to get to the electronic record, read it and return to the information in some way at a later date.

Where other laws require certain information to be posted in a specific manner, as is typically the case for warranty disclaimers, the Uniform Act requires that the electronic record post or display the information in the same manner, and that this provision can't be waived.

Who Are You?
Given that entire transactions may now be accomplished without the parties ever being in the same room, state or country, how do you ensure identity? The Uniform Act states that an electronic record or signature is attributable to a person if it was the act of a person as determined from the context and surrounding circumstances at the time of creation, execution or adoption. Examples of records or signatures being attributed to a person include typing your name in an e-mail or your employee typing his or her name in an e-mail order you authorized. It could also constitute a person's computer program, if it's programmed to order goods upon receipt of inventory information and then issues a purchase order that includes the person's name as part of the order.

The Uniform Act also provides for electronic notarization of documents. The notary will need to be in the room with the signer, must fulfill all the requirements of the notary such as satisfying himself or herself as to the signer's identity, and swear to the identification. The notary must electronically sign the document. So long as the substantive requirements of other applicable law has been fulfilled and are reflected in the electronic record, the notarization will be as effective as if was transcribed on paper.

Records may be maintained by electronic means under the Uniform Act. As long as there is a reasonable certainty that the electronic record accurately reproduces the information, they hold the same weight as paper.

Online contracting is as enforceable and valid as paper contracts, so be as careful in committing to purchases or sales as you would if the buyer or seller was in front of you. Hitting the send button for an e-mail is far easier than signing your name to a contract but may have the same effect. In the case of the copier sale, the seller was just as bound to the transaction as he would have been if you and he had signed a paper contract.

Laura Plimpton has 26 years of experience as a corporate lawyer, business owner and management consultant. She has reviewed and drafted more than 12,000 contracts. She is the author of Business Contracts: Turn Any Business Contract to Your Advantage from Entrepreneur Press.

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