In the course of my legal practice, I draft and negotiate many contracts. While doing so, my primary focus is on the words written into the document to memorialize the duties and obligations of the parties to the contract. However, in the new electronic age, I am learning that my focus must expand beyond the terms of the contract to the mode of how the parties are entering into the contract. More specifically, parties entering into electronic contracts over the internet. Fortunately, federal and state laws are in place to add certainty and reduce risks when entering into electronic contracts over the internet via electronic signatures.
The Electronic Signatures in Global and International Commerce Act (Electronic Signatures Act), passed in 2000, removed the uncertainty relating to entering into electronic contracts over the internet and helped facilitate electronic transactions. The Electronic Signatures Act gave electronic contracts the same effect as the traditional paper contracts. Since then, a uniform act (the Uniform Electronic Transactions Act, “UETA”) was created to standardize various state laws relating to electronic contracts and electronic signatures. Forty-seven states have adopted the UETA into their state laws (Illinois, New York and Washington haven’t adopted the UETA, but do have laws recognizing electronic signatures).
The UETA makes it relatively easy for parties to enter into enforceable contracts over the internet via electronic signature. An electronic contract is an agreement created and “signed” in an electronic only form, without the use of any paperwork. Pursuant to the UETA, an “electronic signature” is an electronic record, symbol, or process attached or logically associated with an electronic record and executed or adopted by a person with the intention of signing/agreeing to the record (i.e., the terms of the contract). An “electronic record” is a record created, generated, sent, communicated, received or stored by electronic means.
The UETA does not specify any particular form or type of electronic signature for the formation of an electronic contract. An electronic signature of an electronic contract can be effectuated in a number of ways — i.e., pressing an “I accept” of “I agree” button; digital certificates, smart cards, and biometrics. All such methods can satisfy the general contract law requirement of acceptance as long as the other party to the electronic contract can show that the electronic signature was the act of the person who they claim accepted the electronic contract. The act of the person signing electronically may be shown in any manner.
The UETA holds that an electronic record or signature may not be denied legal effect or enforceability solely because it was created electronically. However, the information being provided, sent, or delivered in an electronic record must be capable of retention (by storing or printing) by the recipient at the time of receipt.
Further highlights of the UETA which add certainty and reduce risks with respect to entering into electronic contracts are as follows:
(1) In order for an enforceable transaction to be conducted electronically, the parties to he agreement must agree to conduct the transaction by electronic means;
(2) If a law requires a record to be in writing, an electronic record satisfies the law;
(3) If a law requires that a contract be signed, an electronic signature satisfies the law;
(4) If a law requires a signature or record to be notarized, acknowledged, verified, or made under oath, said requirement is satisfied if the electronic signature of the person who performed the notarization, acknowledgement, or verification is attached to or logically associated with the signature or record;
(5) If a law requires that a record be retained, the law is satisfied by retaining an electronic record of the contract information if said information accurately reflects the information in its final form and remains accessible for future reference; and
(6) Evidence of a record or signature may not be excluded in a legal proceeding solely because it is in electronic form.
Most of us have already entered into electronic contracts without giving much thought to the legal requirements of contract formation or that contracts must be in writing. In our new electronic age, we should expect to see more contracts, for wider variety of goods and services, presented in electronic form rather than on paper. Rest assured that there are laws in place to protect parties who enter into electronic contracts rather than the old fashioned way. Hopefully, the laws can keep pace with the ever evolving world of e-commerce.