A cornerstone of United States contract law is the general application of the Fraud Statute to contractual agreements. Emerging forms of electronic commerce and new types of contractual relationships have begun to question the very idea of defining the four corners of a contract. Many obstacles related to contractual relationships arise with the proliferation of electronic commerce, especially in determining what constitutes a valid signature. Traditionally, the Fraud Statute is a collective term that describes various legal provisions that deny the enforcement of certain forms of contracts unless they are in writing and signed by the accused party. The problem with this traditional Fraud Statute idea is how it relates to electronic commerce in determining whether the party charged with the contract has actually “signed” the contract for enforcement purposes.
Various forms of legislation dealing with Internet law have attempted to define and describe digital and electronic signatures for the purpose of determining applicability. In general, there are two broad categories of signatures when it comes to electronic contracts.
- Electronic Signatures (“E-Signatures”)
- digital signatures
I. Electronic Signatures
The Uniform Electronic Transactions Act (UETA) defines an electronic signature as “an electronic sound, symbol, or process attached to or associated with an electronic record and executed or adopted by a person with the intent to sign the record.” UETA, §2. Often referred to as ‘click-wrap’ agreements, these forms of electronic signatures have a broad presumption of enforceability through laws such as UETA and the Electronic Signatures in Global and National Commerce Act (ESGNCA/”E-Sign”). These acts make it clear that binding contracts can be created through the exchange of email or by simply clicking “yes” to the click license agreements that we have all accepted with all types of Internet transactions. Like the UETA, the ESGNCA requires that consumers affirmatively consent to click agreements and that the seller must provide the consumer with a clear and conspicuous statement about the effect of agreeing to click, but probation is rarely allowed to prove or disprove intent to hire. ESGNCA§101(c)1. Simply by clicking “I agree” the intent is presumed.
The widespread enforceability of electronic signatures is also recognized as fully valid for liability protection purposes by the Digital Millennium Copyright Act. DMCA§512(3)(A)(i). As a relatively established area of Internet law, it is important to understand the enforceability of electronic signatures, whether or not the intent is stated from the face of the agreement itself. Since these click match agreements are presumably enforceable, it is important to inform your customers of the potential dangers of accepting the terms of an online transaction without fully understanding what they are agreeing to. Merely agreeing to these terms may interfere with your customer’s right to the court system for dispute resolution, as per-click arbitration clauses are generally enforceable as well. Your clients will not be able to rely on the Fraud Statute to demonstrate that there was no intention to hire. With electronic signatures, intent is an objective standard, usually determined by the simple click of a mouse.
II. digital signatures
Unlike electronic signatures, digital signatures are most often used as a means of demonstrating affirmative intent. The problems with digital signatures do not stem from involuntary agreement to the terms, but from the security and confidentiality of digital signatures. Generally speaking, digital signatures are encrypted electronic signatures that are authenticated as genuine by a third party (often called a certificate authority). Unlike the more general electronic signature, a digital signature must be uniquely and strictly in the sole custody of the party using it. Unlike electronic signatures, where a typed name, company name or even a logo can force a party to charge for their mere presence, digital signatures offer the contracting party higher levels of security and efficiency. The general types of signatures will not be opposable as a digital signature. Due to the authentication requirements of a digital signature, it should be recommended that customers rely on the use of digital signatures for any high profile or high liability electronic contract.
The use of digital signatures will only increase in the future, as parties to all transactions will seek a higher level of information security without fear of accidentally agreeing to unfavorable terms. While there is an inherent fear of paperless transactions, especially with lawyers and more traditional businesses, the use of digital signatures makes trading faster, safer, and more effective, and should be recommended to clients where appropriate. The use of digital signatures is even more effective when it comes to international trade, so it is no longer necessary to fly abroad to prove intent to sign a contract.
While it is important to understand and closely advise clients on the use of various forms of signatures for e-commerce, it is also imperative to understand that we are still in the early years of a technological revolution, and that part of being an effective advocate is staying up to date. to date on progress in the law. Electronic and digital signatures are just the beginning. Technological advances will soon allow widespread use of biometric identification as a means of demonstrating intent to hire. Contract law principles will continue to evolve with technology, and while the application of contract principles and the Fraud Statute will not change substantially, their interpretation and use most likely will.