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Enforceability of Electronic Signatures: the "E-Sign" Act

Posted by attorney Justin Lowenthal

The Electronic Signatures in Global and National Commerce Act ("E-Sign") (15 USC 7001-7031) grants parties the ability to contract electronically, defining an "electronic signature" broadly as "an electronic sound, symbol or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record. 15 USC 7006(5). E-Sign states that any signature, contract, or other record cannot be denied legal effect, validity, or enforceability solely because it is in electronic form (15 USC 7001(a)(1)), and any contract cannot be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation. 15 USC 7001(a)(2). E-Sign, however, does not require any person to agree to use or accept electronic records or electronic signatures. 15 USC 7001(b)(2).

E-Sign requires that an electronic signature possess three elements (15 USC 7006(5)):

  1. A sound, symbol or processs;

  2. Attached to or logically associated with an electronic record; and

  3. Made with the intent to sign the electronic record.

Electronic signatures can obviously take many forms, and can be created by many different technologies. However, if the law requires that a record of a contract be retained, an electronic record is only adequate for the purpose, provided that 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). The legal effect, validity, or enforceability of an electronic record "may be denied if such electronic record is not in a form that is capable of being retained and accurately reproduced for later reference by all parties or persons who are entitled to retain the contract or other record." 15 USC 7001(e). The courts have also found that a lack of competent evidence of a party's assent to the terms of an electronic record is sufficient grounds to decline enforcement of the agreement allegedly agreed to electronically.

While it is generally safe to assume that E-Sign preempts California's version of the Uniform Electronic Transactions Act ("UETA") (Civil Code 1633.1-17), the scope of E-Sign's potential preemption of California's version of UETA is unclear. It is therefore advisable to consult with legal counsel before assuming that an electronic record of a contract is enforceable.

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