Electronic Signatures and Enforceable Contracts
By Jessica E. Murphy, Mirick, O’Connell, DeMallie & Lougee, LLP
In the current economy, it is commonplace to execute and exchange contracts entirely electronically. Businesses that want to operate in this electronic universe need to understand how to create enforceable electronic contracts.
In 1999, the United States began to develop a comprehensive approach to electronic signatures and records that we rely on today to create enforceable contracts. The Uniform Electronic Transfers Act (UETA) was drafted establishing the validity of electronic records and signatures, and adopted in nearly every state. The following year, Congress by enacting the Electronic Signatures in Global and National Commerce Act (ESIGN Act), 15 U.S.C. § 7001(a). Together, UETA and ESIGN established that electronic records and signatures, with few exceptions, have the same legal effect as paper documents and wet ink signatures. Contracts, signatures, or records shall not be denied legal effect solely because they are in electronic form or because an electronic signature was used in its formation.
The laws do not limit the type or form of electronic signature available for use. Any electronic symbol or process that shows your agreement with a document or terms is acceptable. This includes a cut-and-paste image of your signature, typing your name, “/s/” signature or an e-sign software. An electronic signature is valid under UETA and ESIGN if it satisfies four (4) requirements:
- Intent to be bound. An electronic signature, like a traditional wet ink signature, is valid only if the party intended to execute the document.
- Consent. A party must consent to do business electronically. Establishing consent in a business-to-business transaction can be a simple term in the agreement or by pattern and practice, but consumer transactions require additional protections to show informed consent.
- Association of the signature with the document. There must be evidence that the electronic signature belongs to the document signed.
- Retention of the electronic signature in a form capable of accurate reproduction.
It is not diffcult to properly use electronic signatures in business, but it requires more than simply digitizing existing contracts and forms. Different applications also require analysis of the best type of electronic signature to minimize the risk of fraud. Companies transacting business in or with the United States should verify compliance with the UETA and ESIGN and develop best practices to insure their electronic contracts are enforceable.
Jessica E. MurphyGGI member firm
Mirick, O’Connell, DeMallie & Lougee, LLP
Corporate Finance, Law Firm Services
Boston (MA), Westborough (MA), Worcester (MA), USA
T: +1 508 898 1501
Mirick, O’Connell, DeMallie & Lougee, LLP is a full-service business law firm with offices in Worcester, Westborough, and Boston, Massachusetts, USA. Excellence in work. Excellence in client service. Excellence in value.
Jessica E. Murphy, Esq. is Of Counsel in the Litigation Department, Construction Group and Creditors’ Rights, Bankruptcy and Reorganization Group. Her practice focuses on counseling clients and litigating on credit and collection issues, commercial disputes and construction cases.
Published: Litigation & Dispute Resolution Newsletter, No. 12, Spring 2020 l Photo: H_Ko - stock.adobe.com