By Loren Ungar | Rose Law Group Attorney
The World is well on course to become totally digital. Many businesses are paper-less and even more homes have gone the same route. It’s easier, quicker and the environmentally friendly decision to make but many more grey areas are coming to light including the validity of an electronic signature. Is your electronic signature acceptable in a contract? Is your “ok” email to the pool cleaner an acceptance for extra services?
Arizona, like 46 other states, has adopted the Uniform Electronic Transaction Act (“UETA”), which recognizes “electronic signatures” the same way as “ink” signatures if they meet certain legal requirements.
Initially, under the UETA, an “electronic signature” must consist of “an electronic sound, symbol or process … that is executed or adopted by an individual with the intent to sign the record.” A.R.S. § 44-7002(8). Simply using email to communicate and transmit documents does not trigger the UETA. The UETA does not supplant common law principles of contract formation. The UETA and the courts require that the circumstances surrounding the electronic signature show that it was adopted with an intent to do a legally significant act. The UETA still retains the logical common law rule that a signature is only valid if the signer intends to sign something.
Second, the electronic signature must be “linked to, or connected with, the electronic record being signed.” UETA § 2, official cmt. 7. The official comments to the UETA illustrate the concepts in play. “In the paper world, it is assumed that the symbol adopted by a party is attached to or located somewhere in the same paper that is intended to be authenticated, e.g., . . . the classic signature at the end of a long contract.” UETA § 2, official cmt. 7. In the digital world, such “tangible manifestations do not exist.” Id. Thus, the record or documents attached to an email need to be logically associated with an electronic signature to evidence a similar level of connection.
Finally, the UETA applies only when the parties to a transaction have agreed to conduct it by electronic means. A.R.S. § 44-7005(B). Parties, however, do not have to expressly agree for an electronic signature to be effective. The UETA allows consent to be implied by the actions of the parties in transacting electronically. Whether the parties impliedly agree to conduct a transaction by electronic means will be determined from the context and surrounding circumstances of the transaction, including the parties’ conduct. Therefore, where parties have been negotiating a contract only through email correspondence or have agreed to all of the terms over email, the courts will more likely find the parties have impliedly agreed to transact under the UETA.
Importantly, if these requirements are met, the UETA holds that you can have a binding contract even if you only negotiated over email. Any defense that one’s signature was not written down on “paper” or non-enforceable because it is in electronic form is specifically rejected by the UETA, which provides legal recognition of electronic records to the same extent as a traditional “ink” contract or signature. A.R.S. § 44-7007.
One must be careful when transacting business using electronic means, especially when using signature blocks in emails. With so many contracts being negotiated and prepared through email, one could be deemed to have electronically signed an agreement based on the content of that email. While it is not possible to cover every aspect of UETA in a short summary, this summary highlights some important aspects one must be aware of when conducting business online.
To further discuss the validity of electronic signatures or other litigation matters, Loren Ungar may be reached at 480.240.5650 or firstname.lastname@example.org.