Electronic Contracts and Signatures

Business Agreements in the Digital Age

In an earlier blog, we looked at the enforceability of an oral agreement. With the advent of the Internet, though, more and more business is conducted online. You can ask the parties to a contract to sign, scan and e-mail/fax you copies of a contract, but that can be a real hassle. Fortunately, the U.S. Congress passed a specific law in 2000, the Electronic Signatures in Global and International Commerce Act (ESGICA), which specifically addressed concerns about e-contracts. Under ESGICA, electronic signatures and electronic agreements have the same legal force as paper documents and handwritten signatures.

How Do You Create a Valid Electronic Contract?

An electronic contract can be created in a number of ways:

• You can prepare a contract using a word processing program and e-mail it to another person
• You can have the terms of an agreement on a website—this is essentially how business is conducted on the Internet. There may be a “click to agree” button or something similar. There may also be language that states that by sending in your order, you agree to be bound by the terms of the agreement.

As a general rule, to be enforceable, a contract must be signed by all parties (though there have been opinions upholding a contract where all the parties did not sign, but the court determined from the facts that they intended to be bound by the agreement). With digital agreements, because it’s not possible to sign in the traditional sense, a number of accepted methods of electronically signing have evolved:

• Typing the signer’s name in a signature box
• Clicking a button that says “I accept”
• Scanning a copy of a handwritten signature and pasting it into a signature box
• Using “cryptographic” signatures

What is a Cryptographic Signature?

Cryptography is a process that involves scrambling and unscrambling data or information. The most common cryptographic tool involves scrambling an entire document and providing keys to only those individuals who are parties to the agreement, thereby preventing unauthorized or fraudulent signatures.

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