The definition of “signed” in the UCC includes “any symbol,” as long as it’s “executed or adopted with present intention to adopt or accept a writing.” Com C §1201(b)(37). E-Sign extends this approach to electronic signatures. Do you know when an electronic signature is permitted and when it’s not?
The Electronic Signatures in Global and National Commerce Act (E-Sign) (15 USC §§7001–7031) confirms the ability of parties to contract electronically, defining an “electronic signature” as having the following three elements (15 USC §7006(5)):
- A sound, symbol, or process;
- Attached to or logically associated with an electronic record; and
- Made with the intent to sign the electronic record.
An electronic signature can take many forms and can be created by many different technologies, such as typing the sender’s name at the end of an e-mail sent by him or her, including a digitized image of a handwritten signature attached to an electronic document, and clicking a mouse on an “I accept” button.
Under E-Sign, contracts can’t be denied legal effect, validity, or enforceability just because an electronic signature was used in its formation 15 USC §7001(a)(2).
But being permitted doesn’t mean being required: E-Sign doesn’t require anyone to agree to use or accept electronic signatures. 15 USC §7001(b)(2).
In addition, E-Sign doesn’t apply to a contract to the extent it’s governed by (15 USC §7003(a)):
- A law governing the creation and execution of wills, codicils, or testamentary trusts;
- State laws governing adoption, divorce, or other family law matters; or
- The Uniform Commercial Code (other than the articles governing sales and leases of goods), waivers under Com C §1306, and the personal property statute of frauds under CC §1624.5
E-Sign thus doesn’t apply to negotiable instruments, bank deposits and collections, letters of credit, bulk sales, title documents, investment securities, secured transactions, or funds transfers.
Further, E-Sign doesn’t apply to (15 USC §7003(b)–(c)):
- Court orders or notices, or official court documents, such as briefs and pleadings, required to be executed in connection with court proceedings;
- Notices of cancellation or termination of utility services;
- Notices of default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, an individual’s primary residence;
- Notices canceling or terminating health insurance or benefits or life insurance benefits (except annuities);
- Product recalls; or
- Any document required to accompany the transportation or handling of hazardous materials, pesticides, or other toxic or dangerous materials.
Under E-Sign, if the law requires that a record of a contract be retained, an electronic record is ok as long as it “accurately reflects the information” in the contract and the record remains accessible for later reference in a form that can be accurately reproduced. 15 USC §7001(d)(1). But even if the law doesn’t require retaining a contract, it’s a good idea to keep a record of an electronic contract for evidentiary purposes.
Some folks remain uncomfortable with them, but the convenience of electronic signatures are likely to increase their use in contracting. Just make sure you know when they’re permitted so you don’t get a rude awaking when you try to enforce the contract.
Other CEBblog™ posts you may find useful:
- 7 Contract Damages Provisions to Bargain Over
- Contract Drafting 101
- Illegal Contracts Are Enforceable. Sometimes.
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