Going Paperless. Are Electronic Contracts and Signatures Enforceable?

by Matthew M. Young, Esq.

As more and more businesses embrace the concept of the phrase “going paperless”, more and more people are asking the question: Are electronic contracts enforceable and are the signatures used on such electronic contracts enforceable in a court of law?  The short answer to this question is yes!  In 2000, congress passed the Federal Electronic Signatures in Global and National Commerce Act (E-Sign Act).  At the state level, 47 states passed the Uniform Electronic Transactions Act (UETA) (only IL, NY and WA have not adopted UETA, and yet have passed legislation governing the use of electronic signatures and records). With the adoption of E-Sign and UETA, electronic contracts and signatures have the same force and effect as paper contracts signed in ink, which we typically associate with enforceable contracts.  To be clear, any signature, contract or record may not be denied legal effect, validity or enforceability solely because it is in electronic form and not in writing or not signed or affirmed by signature. 

As with any law or regulation, it is important to review its definitions to understand how the regulation applies.  Under E-Sign and UETA, an electronic record is defined as “a contract or other record created, generated, sent, communicated, received, or stored by electronic means.”  An electronic signature is defined as “an electronic sound, symbol, or process, attached or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”  Therefore, a web generated document that is signed with a “click the box” checkmark would satisfy the definitions of an electronic record and electronic signature.  As another example, you could write a contract on your computer and email it to a third party for acceptance; if the third party replies to the email accepting its terms, such a reply could create an enforceable agreement. 

As with any regulation there are exceptions.  In order to protect consumers, certain electronic documents are invalid and unenforceable including those related to:

  • Wills and Trusts
  • Domestic Relations matters
  • Court Orders
  • Notices of Utility Turnoff
  • Foreclosures and Evictions
  • Cancellation of Health Insurance
  • Serious Product Recalls or Failures

Even if the agreement you are entering is not one of those excluded above, a party to any agreement cannot be forced to enter into an electronic agreement.  Under E-Sign and UETA, consumers who prefer traditional, paper contracts can elect not to enter into an electronic contract.  The Credit Union must obtain its member’s consent in order to enter into an electronic contract.  Moreover, Credit Unions entering into electronic contracts with its members must provide certain disclosures including the following:

  • The right to receive notice or record in paper form
  • The ability to withdraw consent to receive electronic records
  • Identifying records subject to consent
  • Procedures to withdraw consent
  • How consumers may obtain a paper copy

In addition to the foregoing, the Credit Union must also provide a statement to its members, outlining any hardware and software requirements necessary to receive electronic records.  If the hardware or software requirements change, the Credit Union must notify its members of the change and give the member the option, without penalty, to revoke his or her consent to use the electronic records. 
So long as you adhere to the disclosure requirements above and are not using electronic contracts in the excluded contexts above, a court will accept an electronic contract and electronic signature.  However, much like traditional paper and ink counterparts, every document intended to be entered into evidence at trial must be “admissible.”  Is the document what it purports to be?  Does the document present the intent of the signatory?  How was the signature created and how was the document accessed to for signature?  These are admissibility questions that must be answered whether an agreement involves an electronic signature or a traditional ink signature. 

To be sure, traditional paper documents containing signatures enjoy more creditability than electronic signatures, which are viewed more critically by the court.  There are ways to overcome this skepticism but that is the subject for another article.  Stay tuned!

Matt Young is an associate in the Credit Union Practice Group at Weltman, Weinberg & Reis Co., LPA. He can be reached at 216.739.5726 and myoung@weltman.com.


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