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E-signature’s and the Law: A Practical Guide

E-signature’s and the Law: A Practical Guide

The so-called “e-sign” law is a federal law that makes the signature on a contract valid if it is signed electronically, unless it is prohibited by agreement or by some State laws. Phil Green was the Chair of the California State Bar– Standing Committee on Cyberspace Law at the time the State of California was passing laws like the E-Sign law and was instrumental in integrating California law with Federal law.

We help our clients comply with privacy, contracts, and best legal practices. The “old days” are not gone however, and as simple as this concept seems today, proving an e-signature has not been easy, and it is still a challenge to prove there is an agreement made online. It is hard to show that a person clicking a box on her computer with a mouse on a screen image of an “OK” actually read and understood what the agreement is. Since e-Sign, the courts have come to accept that indeed clicking “OK or “I AGREE” or by checking “I have Read and Understood the Agreement,” the customer has consented to those terms and conditions.

Beware of a website without a User Agreement or Terms and Conditions and a Privacy Policy. If you click on the OK you are making a binding legal agreement. The Website owner can enforce the terms against the consumer.

The law is 15 USC* § 7001. It says, “Notwithstanding any statute, regulation, or other rule of law (other than this title and title II [15 USCS §§ 7001 et seq. and 15 USCS § 7021]), with respect to any transaction in or affecting interstate or foreign commerce– (1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and (2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation….”

The reason for this was (in 2000 when it passed), that e-commerce was gaining in volume of sales over the ‘brick & mortar’ business and it was becoming clear that many agreements would need to be electronically signed. The issues were those of authentication, how do we know the person who “signed” in e-format is really the person who signed it? And confirmation, how do we know that the person signed knew what they signed and agreed to it?

As the law has progressed for over 13 years the courts have figured out ways to interpret it and best practices for e-commerce have evolved to make an e-signature a good as a pen-and-ink one.
*USC means United States Code.