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Enforcing Electronic Signatures in Commercial Contracts – Background, Current Law, and Practice Tips
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Enforcing Electronic Signatures in Commercial Contracts – Background, Current Law, and Practice Tips – Part 1

Businesses around the world are in a constant state of flux as newer, faster technologies emerge to enhance the flow of communication and productivity.  Time is money in the truest sense, and every technological advancement a business implements can represent money in the bank.  As a commercial litigation and transactions law firm, we consider it inherent in our mission to consider the advantages and disadvantages of applying technology in a commercial environment.

In this series of articles, we will discuss e-signatures in commercial transactions, their legality and enforceability, and some practice points for presenting evidence of an e-signed contract if you find yourself in court.

First, we should review some basic history concerning the legal recognition of e-signatures.  The enforcement of e-signatures in a contract setting can be traced back to telegraphs in some jurisdictions.  The number of jurisdictions enforcing electronic signatures grew with the advent of the fax machine, and again with the widespread use of e-mail.

Contemporary examples include business conducted at ATM’s after inputting one’s PIN number, debit transactions authorized via PIN numbers, authorizing credit card transactions via pen pad devices, and agreeing to site use terms with the click of a mouse.

Prior to the enactment of statutes specifically governing electronic signatures, the enforceability of e-signatures varied by jurisdiction and turned on precedent set by case law in those jurisdictions.

Federal lawmakers finally considered the issue in the late 90’s and the National Conference of Commissioners on Uniform State Laws (NCCUSL) promulgated the Uniform Electronic Transactions Act (UETA).  The UETA was patterned after the UNCITRAL Model Law on Electronic Commerce, the 1996 brainchild of the United Nations, and was drafted in response to the growing need for U.S. law to govern electronically consummated transactions.

The UETA was adopted by eighteen states in 1999 and 2000, some with significant variations to the model law.  Congress responded by codifying the UETA into federal law in 2000 at 15 U. S. C. §§ 7001 et seq., and thereafter the law became known as the “E-Sign” act.  E-Sign preempted state law, with a few exceptions, which we will discuss in a later article.  It was then no longer up to states whether they would adopt the E-Sign legislation, but whether they would adopt law making variations and exceptions to the federal law where permitted.

To date, forty-seven states, the District of Columbia, Puerto Rico, and the Virgin Islands have adopted the model UETA with limited variations.  Illinois, New York and Washington, have not adopted the uniform act, but have enacted their own statutes pertaining to electronic transactions, addressing the limited areas where state law is not preempted by federal E-Sign law.  In our next article, we will discuss the basic tenets of the UETA, and continue following the law to its present application.

If the ultimate goal of your business is to maximize profit while minimizing risk, contact an experienced commercial litigation and transactions attorney for advice before you begin implementing any technology that may jeopardize the enforceability of your contracts.  The attorneys at Glass & Goldberg are committed to helping you minimize risk and manage uncertainty before, during, and after the deal, and can help structure your transactions process to meet your goals.

Glass & Goldberg provides high quality and cost-effective legal services and advice for clients in all aspects of business litigation and transactional law.  Call us at (818) 888-2220, email us at info@glassgoldberg.com, or visit us on the web at www.glassgoldberg.com to learn more about the firm and to sign up for future newsletters.

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