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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 4

In the last several articles, we’ve discussed some history of electronic signatures in commercial transactions and corresponding legislative attempts to keep up with and regulate the process.  In our final article discussing the use of electronic signatures in commercial transactions, we will highlight some practical aspects of proving the existence of an electronic signature in a breach of contract context.

First, we should point out there is more than one way to sign a contract electronically.  The term ‘electronic signature’ may be used interchangeably to describe distinct means of signing:

  1. Signature Stamp (or scanned version of a signature);
  2. Electronic Signature (such as used in the federal court system);
  3. Digital Signature (encryption used to authenticate a document);
  4. Clicking through after agreement with certain terms (generally after a user enters log-in credentials to verify his identity).

If you are dealing with a contract dispute where a buyer or seller claims that he did not sign or authorize a contract (repudiation), or where the buyer or seller claims that the content of the contract is different from the contract he actually signed (fraud or mistake), then the first step is to identify how and when the contract was signed.  The buyer or seller probably used one of the methods of electronic signing above.

Depending on the type of business and the protocol of the particular business, it should be easy to identify when the contract was electronically signed. 

Once you know how and when the contract was ‘signed,’ the next step is to identify the evidence you will need to present to prove it.  Remember, the ultimate goal is the same as in traditional contract litigation — to prove a defendant signed the contract with knowledge of the contract terms. 

Some factors to consider and methods to help prove the defendant’s electronic signature and contract terms are: 

  • Whether an Electronic Signature System Provider was used to secure the electronic signature.  DocuSign and VeriSign are common providers, though there are many others in the marketplace.  If a signature system provider was used in your transaction, you will need to notify your attorney as well as the system provider so the necessary proof can be gathered.
  • A Custodian of Records, if any, to establish the existence of the contract or electronic version of the contract kept in the ordinary course of business.
  • Circumstantial evidence that the defendant behaved in a manner as if he had signed the contract.
  • Evidence or testimony to establish login procedures were required to conduct electronic transactions.  (This element will establish the agreement to conduct business electronically.)
  • System Activity Logs.  This information can establish which web pages were accessed by a signer, what actions were taken, and when those actions were taken.
  • Document metadata.  If available, this information can include when a document was viewed and from where, when it was signed, whether it was modified, and where it was sent afterward.  This evidence should be presented by a qualified expert.
  • Document security.  Again, an expert should be prepared to testify how a business’s computer system is secured to prevent tampering after a document is signed, or to prevent fraudulent log-ins.  Audit procedures used to ensure reliability and security should be a part of this expert’s testimony. 
  • Document retrieval.  A systems expert should likewise be prepared to testify how documents are retained and retrieved in a reliable manner.

When the rubber meets the road, you need to know your legal counsel is prepared to prove your right to recovery in a contract dispute situation.  Make sure your law firm is prepared to keep pace with technology.  The attorneys at Glass & Goldberg are committed to helping you minimize risk and manage uncertainty, 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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