Technology Law - Beware of Creating an Enforceable Agreement Via Email

It is no secret that a great deal of modern business is conducted via email.  What most people don't realize is that an email exchange can be construed as creating a valid and enforceable contract, sometimes inadvertently.

If an e-mail or chain of e-mails clearly states an offer to enter into a transaction with all of the material terms, and the recipient / offeree responds by email accepting the terms, then it is entirely possible that an enforceable contract has been formed — without any printing or actual exchange of signatures. 

With the adoption of the Uniform Electronic Transactions Act (“UETA”) in most states and the passage of Electronic Signatures in Global and National Commerce Act (“ESIGN”) by the federal government, the stage was set to allow contracting via email.  Each of these acts is based on the principle that electronic signatures carry the same legal effect as handwrittten signatures.

Both laws accomplish this by establishing a procedural approach to meeting “writing” and “signature” requirements:

1. A document or signature cannot be denied legal effect or enforceability solely because it is in electronic form;
2. A contract cannot be denied legal effect or enforceability solely because an electronic record was used in its formation;
3. If a law requires that a record be in writing, then an electronic record satisfies the law; and
4. If a law requires a signature, then an electronic signature satisfies the law.

Under ESIGN and UETA, parties must agree to use electronic signatures and records. Between businesses, consent to do business electronically can be established either explicitly or by implication based on the parties’ interactions

Federal and state law specify certain types of documents that cannot be signed electronically, including wills, trusts and estates; marriage, divorce, adoption, and other family agreements; court documents and filings; utility service terminations; eviction, foreclosure, and repossession notices; health and life insurance termination notices; documents referring to the handling or transportation of hazardous materials, real estate purchase agreements and deeds.  While this list will vary from state to state, generally these types of agreements require a writing, signed (in ink)by the parties.

What does all this mean?  Be careful in your email exchanges that contain the material terms of an agreement. If all you intend is to negotiate the terms and issues leading to a formal written and signed contract accepted by both parties, make sure that you explicitly say that in your e-mails. On the flip side, if you are trying to enter into a contract via email, there are safeguards to take to make sure you have a complete and enforceable agreement - which you should consult with your attorney about.  You could also check out an electronic document services such as DocuSign.

My technology law practice can help you deal with issues like this, along with other technology law issues including licensing agreements, e-commerce, and click-wrap agreement for websites.

Comments

[An Bui, DocuSign Social Media]

Thanks for helping others learn more about how electronic commmunications can create legal agreement. DocuSign is an electronic signature and contract execution tool that documents the agreement process digitally. Our Chief Legal Officer, Ken Moyle, often writes, talks, or otherwise lectures about ESIGN.

Thanks again for the informative post!