Now that many of us are working from home and social distancing, can we still close deals in the US with signed agreements? Are electronically signed contracts really enforceable? Laws such as the statute of frauds and the Uniform Commercial Code require many types of agreements to be in writing and signed by the parties. (And even if an agreement isn’t required to be in writing, it really should be.) But does that written contract have to be printed on paper and signed in ink to satisfy those laws?
Fortunately, most contracts can be entered into electronically without the need to print the agreement and sign it with a pen. Recognizing that business in today’s world is often conducted at least partially electronically, forty-nine U.S states have adopted statutes providing that electronically signed agreements and electronic records of agreements have the same legal effect as a paper contract. Forty-seven states adopted the Uniform Electronic Transactions Act (UETA) to facilitate electronic commerce while Illinois and New York adopted similar statutes allowing for the enforceability of electronic signatures and records. At this time, Washington is the only state without a statute for electronic signatures and records. For transactions involving interstate commerce, the Federal Electronic Signatures in Global and National Commerce Act (ESIGN) provides for the enforceability of electronic signatures and records.
ESIGN and UETA are designed to modernize existing contract law requirements for writings. The primary concept of ESIGN and UETA is that a signature or record of an agreement cannot be denied legal effect solely because it is in an electronic form. Simply put, an electronic signature is the legal equivalent of a traditional “wet ink” signature. For example, Section 7 of the UETA provides that an electronic record will satisfy another law’s requirement that a record be in writing. With respect to evidentiary rules, Section 13 of the UETA states that a record may not be excluded from evidence solely because it is in electronic form.
An electronic signature can take many forms. Both ESIGN and UETA define electronic signatures broadly to be an electronic sound, symbol or process that is attached to or logically associated with a contract and adopted with the intent to sign the contract. The laws do not prescribe the use of certain technologies to implement electronic signatures. There are several well-known commercial providers offering electronic signature services that comply with ESIGN and UETA.
Certain types of agreements are excluded from the scope of ESIGN and the UETA such as wills and testamentary trusts. Although not specifically excluded, real estate deeds and mortgages may still need to be in paper form to satisfy local recording requirements. Even if a contract is within the UETA’s scope, for the UETA to apply to a transaction, the parties to that transaction must agree to conduct business electronically. Although this requirement can be satisfied informally and can be inferred from the parties’ conduct, we recommend including language in the contract allowing for electronic signatures and providing that delivery by PDF is the same as delivery of a paper original or otherwise opting in to UETA.
Existing laws allow us to use readily available services to create legally enforceable contracts with electronic signatures. We have the technology and the legal framework to keep closing deals while working remote.
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