Contracts

Electronic Signatures

Image from the collections of the Massachusetts Historical Society.Perhaps an electronic signature, such as “/John Hancock/” doesn’t elicit the same sense of importance as a parchment signed in ink, but still electronic signatures are becoming more common.  This article reviews the rules governing enforceability and provides some tips for you if you’d like to use electronic signatures.

Enforceability

Under Texas law, electronic signatures are enforceable.  Under the Uniform Electronic Transactions Act (Tex. Bus. & Com. § 322.007), “A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.”

Like written signatures, an electronic signature may be contested on the grounds that it was not affixed by the person to whom it is attributed.  (It’s still not okay for someone to forge your signature!)  Proof of the “act of the person” in affixing his or her electronic signature can be presented in any manner, “including a showing of the efficacy of any security procedures applied to determine the person to which the electronic record or signature was attributable.”  What does that actually mean?  Think about security questions you answer when you sign some documents online, like “What was your address in 2001?”  Questions like this can be used in conjunction with your credit history to determine if the respondent is, indeed, you.

Best Practices for Electronic Signatures

If you want to use electronic signatures there are a few simple things you can do to optimize enforceability.  Under the Act, “[t]he effect of an electronic record or electronic signature attributed to a person under Subsection (a) is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including the parties’ agreement, if any, and otherwise as provided by law.”

What does that mean?

As a practical matter, your ability to enforce an electronic signature will be aided by including a clause in the agreement itself which discusses the fact that you’re signing electronically.  For example:

This agreement may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.  A facsimile or .pdf copy of a signature of a Party hereto shall have the same effect and validity as an original signature.   The Parties acknowledge and accept that the other Party’s electronic signature shall have the same effect and validity as an original hand-written signature.

Additionally, having good recording keeping, which should include the email record whereby you received the electronic signature, will help prove the authenticity of the signature should it ever be challenged.  If you’re executing contracts or documents with people that  you do not have any direct contact with, you may wish to implement a security program that utilizes a series of challenge questions to establish identity.

Old School – Physical Signatures in a Digital World

By the language of the statute, a contract cannot be denied legal enforceability solely because it uses electronic signatures.  However, this doesn’t prevent parties from electing to avoid electronic signatures.  Should you so desire, a contract can be written so that it is not effective without written signatures.  You could even specify a location at which it must be executed.

This agreement may be executed in two or more counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.  The parties agree that electronic signatures shall be insufficient to execute this agreement.  This agreement must be signed in writing and in person at [ADDRESS] by both parties to be effective.

It may be inconvenient, perhaps impractical.  But, that’s the beauty if contracts – they are what you make them.

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