Many readers of Transform magazine (http://www.transformmag.com) have asked us what types of electronic signatures will hold up in court. We put the question to this month's experts: two attorneys who have contributed their expertise to electronic commerce committees.
Thomas J. Smedinghoff, Partner, Baker & McKenzie, Chicago
To qualify as a substitute for a handwritten signature under U.S. law, an electronic signature must: (1) consist of a sound, symbol or process, (2) be attached to or logically associated with the electronic record being signed, and (3) be made with the intent to sign the electronic record.
There is a big difference, however, between an electronic signature that merely satisfies the three requirements listed above and a trustworthy electronic signature that can be proven in court. Making an "X" on a paper contract can constitute a legally enforceable signature, but proving who made the "X" may be difficult. Similarly, clicking a mouse on an "I accept" button or typing a name on an e-mail message can both qualify as legally enforceable signatures. But by themselves, they offer no evidence as to who clicked the mouse or typed the name that appears on the electronic document. Consequently, proving the validity of the signature to a court or government agency may be difficult at best. The key is in knowing (and being able to prove) who typed the name or who clicked on the "I accept" button. In some cases, the process surrounding the making of the signature may provide the requisite evidence. But to say that they are legally enforceable may be illusory, as the ability to establish who signed the document may be limited.
Thomas P. Vartanian, Partner, Fried Frank Harris Shriver & Jacobson, Washington, DC
The marketplace is constantly defining when it needs an electronic signature, such as a digital signature, to make a transaction work and when a "click wrap" concurrence is sufficient. As the law on click wrap contracts expands and parties are able to merely click "I Agree" to make a purchase or enter into an agreement, the need for digital signatures is reduced.
The functionality of an electronic signature is only as good as the end user's ability to generate it and accept it. For example, until every real estate recording office in the country accepts electronic mortgages, we will not have a truly electronic mortgage business.
The law regarding the ways in which an electronic signature can be proven in court is still developing. The fact that technology exists does not always mean that the law has changed rapidly enough to facilitate it. Regulators and courts want signatures that work, meaning they create a binding contractual relationship and their validity can be proven. The proof of such a transaction has always focused around pieces of paper and wet ink signatures. Proving that a click of the mouse created an agreement takes some careful planning, not to mention a different level of proof. It will take time for technological capabilities and the law to catch up.
This article originally appeared in Transform magazine, August 2003.