Are E-Signatures Okay to Use?

In California, the use e-signatures for contracts is permitted by law. There are, however, a few caveats including issues with respect to:

  • Verification of identity
  • Potential for forgery
  • Heightened possibility that one party will claim “I did not sign that contract”

For a contract to be binding here in California, there must be an agreement by both parties and the contract must adequately identify the obligations of the parties. There is no set-in-stone method of forming a contract. This means that the California courts will look to the actual facts involving the contract formation to determine if the parties truly came to an agreement. Many actions can be seen as evidence of consent or assent to the contract. A signature on a written contract is the most common method of consenting or assenting to a written contract. However, there are many other methods of agreeing such as saying out loud, “Yes, I agree” or taking actions that are consistent with agreement such as performance of one’s obligations under the purported contract.

Under these basic and general rules of contract formation, e-signatures are a valid method of consenting or assenting to a contract. Indeed, one is not required to sign electronically. I “click” on a box on a website that says “I agree” is sufficient for courts to find that a contract has been formed. Thus, the use of a signature block or an image of your signature is sufficient for you to be bound to contract terms.

As noted, however, there are some steps that should be taken if you are going to rely on e-signatures from another party. Procedures should be in place to verify the correct source of the e-signature. As an example, e-signatures are now commonly used for real estate purchase/sale agreements. This practice has evolved from the common use of facsimile signatures. With respect to faxed signatures and e-signatures, procedures are in place to verify and confirm the agreement. Real estate brokers are in place generally for both sides of the transaction. Among their many responsibilities, the brokers have the obligation to verify that the faxed signatures or e-signatures are valid. Further, many buyers are financing, and the lending personnel will also confirm the validity of any faxed or electronic signatures.

In this manner, we can see that, if e-signatures are to be used, various additional procedures should be put in place to ensure that the signatures are valid. An experienced San Diego corporate attorney can provide advice and counsel in setting up these procedures. The “endgame” is to make sure that the persons signing with e-signatures cannot legitimately argue that they did not agree to the contract. Requiring other steps will help eliminate any argument. For example, if you are planning to accept e-signatures, you might consider requiring that the contract containing an e-signature be emailed from a verified account or device. And the email should receive a response of some sort. Both steps help to prevent an e-signature user from claiming that the e-signature is not valid. There are software products on the market that can help streamline the process.

Contact San Diego Corporate Law

For more information, contact attorney Michael Leonard, Esq., of San Diego Corporate Law. Mr. Leonard focuses his practice on business law, transactional, and corporate matters, and he proudly provides legal services to business owners in San Diego and the surrounding communities. Mr. Leonard can be reached at (858) 483-9200 or via email. Like us on Facebook.

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