09/ 09/ 2004
by Jeffrey Moses
Traditionally, contracts have required the signatures of all parties involved to be enforceable. The unique and individual signature of a person traditionally has been the means to verify receipt of an item or to acknowledge the understanding of and agreement to terms within a contract.
But purchase agreements and other types of contracts are no longer limited to the exchange of paper documents. Every day, millions of transactions and agreements occur and are finalized over the Internet. These contracts also require acknowledgement of understanding by all parties involved. But the question has arisen: “What constitutes a legal signature when a contract is exchanged solely by digital means?”
To validate the legality and enforceability of digital signatures, the Uniform Electronic Transactions Act was approved in 1999 by the National Conference of Commissioners on Uniform State Laws.
This act sets forth certain guidelines regarding digital signatures that can be adopted by state legislatures. As long as a state’s law on this matter does not differ substantially from the UETA, it will be enforceable. When it does differ, the UETA regulations will hold forth. This assures that a nationwide standard for digital signatures will be maintained.
The purpose of the UETA is to “remove barriers to electronic commerce by validating and effectuating electronic records and signatures.” By adopting UETA guidelines in their legislation, states can guarantee that digital signatures are as legal as handwritten signatures on paper documents.
Digital signatures can take the following forms:
- Typing in a signature in a Web site or e-mail field designated for the purpose.
- Scanning an individualized personal signature and pasting into a document.
- Attaching a pre-scanned signature to a document (when a signature is pre-scanned, it will not vary from document to document).
- Clicking an “I Accept” button on a Web site.
A number of other methods are being developed, including hardware that records signatures, hardware that scans the fingerprints of individuals and unique key codes that are as individual as signatures.
Some types of contracts are not legally binding through use of digital signatures. These include:
- Notices from utility services of termination or suspension
- Notices of foreclosure, eviction or default on payment
- Notices pertaining to court decisions or orders
- Notices of product recall
- Various other notices that may result in financial loss, extreme inconvenience or danger to health if the notification were not received
Adapting to digital signatures can save some small businesses thousands of dollars yearly in mailing, production and copying, and storage. Digital signatures can speed up business, allowing companies to make purchases or finalize contracts instantaneously, without use of mail or even fax.
When establishing a Web site that will make use of digital signatures or “I accept” buttons, consult with your attorney regarding disclaimers and alternative methods of acceptance that state or federal law may mandate.
Agreeing to a contract by using a digital signature or acceptance is legally binding. Just because you’re not signing a piece of paper does not mean that you can change your mind later. As when entering any contract, consult with your attorney if you have questions or need clarification of any matters in the contract.
