Today, many people enter into contracts using electronic tools such as email, text message, phone messages, etc. Will contracts using these methods create binding contracts? Can these methods be used to change contracts that were entered into using paper and pen?

There are two laws, one federal and one state that generally answer these questions. One is called the Uniform Electronic Transactions Act (UETA) and the other is called Electronic Signatures in Global and National Commerce Act (E-Sign). For the most part, these laws are very similar. There are differences in the law but they address many of the same issues.

Generally speaking, what many people know about business law and contract law, the issues remain the same regardless of how the contract was formed. However, the creation or formation of contracts can be different.

UETA and E-Sign does not apply to all types of contracts. There are some types of contracts that still require paper and pen. UETA only applies to electronic records and signatures that relate to a “transaction” which is defined as those interactions between people relating to business, commercial, or governmental affairs. UETA has the limited objective of ensuring that electronic records and electronic signatures are the equivalents of paper records and manual signatures.

UETA applies only to transactions in which each party has agreed to conduct themselves by electronic means. It does not require the use of electronic records or signatures. Agreement to use electronic means between the parties may be derived in several ways:

• Express Assent or Agreement.
• From the context and surrounding circumstances, parties’ intent.
• An express “trading partner agreement” that describes how the parties will proceed with e-contracting.

Agreement to use electronic means between the parties may be derived in several ways which could include in some circumstances, the use of a business card that includes an e-mail address may be an indication of assent to contract electronically. The fundamental principle embodied in E-Sign is the fact that a signature, contract, or other record relating to any transaction may not be denied legal effect or enforceability solely because it is in electronic form or an electronic signature or record was used in its formation.  The major effect of E-Sign is that “with respect to any transaction in or affecting interstate or foreign commerce, a signature, contract, or other record relating to a transaction will not be denied legal effect, validity, or enforceability solely because it is in electronic form”.

For business owners, it is so important to realize how electronic means could create a contract, intentionally and unintentionally.  Even if a contract has already been negotiated, signed using paper and ink, electronic means could be used to change the contract.  Thus, it is important to know the impact and how to protect your company going forward.  If you have any questions, please feel free to contact us.