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Understanding Electronic Signatures

Many of us frequently use email and other electronic means of communication everyday, therefore it is extremely important to understand the legal consequences of such communications. Because of the broad terms of the Uniform Electronic Transactions Act, (the "UETA"), almost any electronic communication could be legally binding. Making Electronic Signatures Stick, a recent article in the Michigan Bar Journal outlines some very useful procedures and precautions business people should take to ensure that their electronic communications are not given an unintended effect; or, conversely, are given their intended effect.

Electronic Signatures & the UETA

An electronic signature is defined by the UETA as "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record." Importantly, a "record" is defined as "information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form." The drafters of the UETA used very broad terms so that the statute would apply to a wide variety of technologies already in existence or yet to be developed. For example, a record may be created and signed simply by using voice mail. To accomplish this result, one would merely have to speak their "record" and sign it by adding an expression of assent. Thus, because the definitions of "record" and "signature" are so broad the critical component regarding electronic communications, as in traditional agreements, is the intent of the signator.

The most common place an electronic signature is used today is in email communications. Many of us often include a signature block or simply "sign" each email that we send. In many cases, a signature block, initials, or your name could be construed as an electronic signature and therefore could create an enforceable agreement under UETA. Thus, it is extremely important that all email messages which contain anything that could be construed as a signature include an unambiguous statement regarding the effect or meaning of the sender's signature.

The authors of Making Electronic Signatures Stick suggest that all emails contain a standard disclaimer that would unambiguously state that the email is non-binding unless otherwise stated. The following is a sample statement which was recommended in the article and which our firm has adopted:

Neither the information in this block, the typed name of the sender, nor anything else in this message is intended to constitute an electronic signature unless a specific statement to the contrary is included in this message.

If one desired to create an email of binding effect, one would simply type their name in the message and affirmatively state that their typed name is intended to be their electronic signature (i.e., "My typed name is intended to be my electronic signature"). This would create an unambiguous expressing of assent or intent to be bound.

Additional Recommendations For Businesses

Any business that communicates regarding business transactions or negotiates contracts for goods or services via email should take a few additional measures to clarify the effect or meaning of email communications. In situations were an underlying agreement is the foundation for the relationship between two businesses or transaction participants, the underlying agreement should address the issue of electronic communication. First, the underlying agreement should address the issue of whether or not the parties may place and receive orders or amend or modify the underlying agreement through the use of electronic communications. In the event that the parties decide to allow electronic communications, such as email, as a communication medium the agreement should identify the email addresses or accounts through which binding email communications may be sent and received.

For any organization that has several employees who have business email accounts and regularly communicate through email, it may also be wise to establish a policy regarding required disclaimers and signature blocks. For example, all employees who do not have authority to contractually bind the business should include a disclaimer to that effect below their signature block.

Conclusion

Many business people and their employees use email or other types of electronic communications freely and with little thought regarding the legal effect of such communications. For many of us, it simply seems less formal than a communication written on paper. However, as a result of UETA, these informal communications may have an unintended effect. Accordingly, one must make the intent of their email communications clear.

There may be several policies or disclaimers in addition to those discussed above which would be advisable to adopt depending on your particular business or industry.

Dated

04/14/2008

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