Electronic contracts and electronic signatures

In order to have a valid written contract, the document which contains the details of the agreement has to be executed in one form or another. Whilst most forms of contract, with notable exceptions, such as land contracts, do not even need to be in writing and can be valid even if verbal, with important

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In order to have a valid written contract, the document which contains the details of the agreement has to be executed in one form or another.

Whilst most forms of contract, with notable exceptions, such as land contracts, do not even need to be in writing and can be valid even if verbal, with important business contracts it is not only important to have certainty it is also important to ensure that the right person with the right authority has clearly agreed the contract. An increasingly popular way of doing this, especially with business being far more global, is via electronic contracts.

The emergence of digital signatures in ecommerce has created a modern headache for commercial lawyers, particularly in the United States which tends to lead the way in internet and ecommerce law, and it poses the question: what constitutes a valid signature?

There are two types of signatures: Electronic Signatures (E-signatures) and Digital Signatures and the complexities of each, within American Law, are detailed below:

Electronic Signatures

Electronic signatures are defined by the Uniform Electronic Transactions Act (UETA), which states that binding contracts can be created by email exchanges or by clicking “yes” in appropriate tick boxes, such as software licence agreements, provided the vendor clear explains to the consumer the consequences of their actions.  Consequently, consumers should read agreements in their entirety and not just click “yes”. They need to be aware of the pitfalls of agreeing to such contracts, such as its affect on the consumer’s ability to access justice through the judicial system (due to arbitration clauses contained within such agreements).

Electronic signatures are enforced by the Electronic Signatures in Global and National Commerce Act (ESGNCA). Under this act, the general rule is that by clicking “yes” or by engaging in email exchanges that formulate a contract there is a general presumption that both parties intend to be bound by the agreement.

Digital Signatures

Digital signatures are those with a third party authenticates. They are usually encrypted and used only by one party, a bit like a digital fingerprint or a coded message. Whilst electronic signatures usually consist of a name or a logo (easily replicated and usually set to go on the bottom of all company emails) and are easily enforceable, digital signatures offer greater security. They are not  as easily enforceable and any changes made to a document after its digital signature automatically invalidates the digital signature.

The use of digital signatures is on the increase because of this extra layer of security and efficiency, not to mention their efficiency.

Generally speaking we are still in the early years of ecommerce and all its creases are far from being ironed out and there will be constant advancements in this area of law for some time to come. It is increasingly likely that in years to come both digital and electronic signatures could be made redundant in exchange for another medium of showing intent to enter into a contract.

Debbie Serota • Uncategorized

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