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The New Way You Sign – And You Didn’t Even Know It

You may be surprised to know that a quick, informal e-mail you send from your iPhone at a stoplight could be found to create a binding contract that results in liability for you.  With the move toward a “paperless” environment, states have passed laws that allow for the creation of a contract through e-mails or electronic signing, including the Uniform Electronic Transmissions Act (UETA) and at the Federal level, the Federal E-Sign Act (E-Sign).  Courts are also more frequently enforcing contacts that are made through email and other electronic communications, including in situations where one party claims they had no intent to be bound without a traditional written and manually signed contract. 

Under basic contract law, the test of whether a contract was formed will be whether the parties had a mutual agreement or understanding which will be evidenced by the presence of an offer, acceptance and consideration.  Under E-sign, electronic records can be used to establish that a person electronically executed a digitally presented agreement by affixing a digital signature or by clicking an ‘agree’ or ‘accept’ function button.  Under UTEA however, agreements can be formed simply by the words used in communication and without any formal execution.

UTEA does not require a record or signature to be created, generated, sent, communicated, received, stored, or otherwise processed or used by electronic means or in electronic form.  It applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.  However, a party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. That right may not be waived by agreement.

As a result of these laws, business owners and their employees are wise to slow down from the fast pace of e-mail when dealing with customers, vendors, or parties with whom they are negotiating a dispute with, and consider whether they are making an agreement and whether they intend to be bound absent a final (or traditional I should say) written contract that is manually signed with pen.  If not, the party sending the communication should consider making a clear statement that the formation of a legally binding agreement is not intended without a manually affixed signature on an original document.  We can help business clients create form language for repeated use in their electronic communications depending on whether they have a strong need not to be bound by e-mail, or perhaps to have e-mail serve as a method of binding the parties to the communication.

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