Legal importance of digital signatures
A cornerstone of United States contract law is the general application of the Fraud Statute to contractual agreements. Emerging forms of electronic commerce and new types of contractual relationships have begun to challenge the very idea of defining the four corners of a contract. Many obstacles related to contractual relationships arise with the proliferation of electronic commerce, especially in determining what constitutes a valid signature. Traditionally, the Fraud Statute is a collective term describing various legal provisions that deny the enforcement of certain forms of contracts unless they are in writing and signed by the accused party. The problem with this traditional idea of the Statute of Fraud is how it relates to electronic commerce in determining whether the party charged with the contract has actually “signed” the contract for enforcement purposes.
Various forms of legislation dealing with Internet law have attempted to define and describe digital and electronic signatures for the purpose of determining applicability. In general, there are two broad categories of signatures when it comes to electronic contracts.
- Electronic Signatures (“E-Signatures”)
- digital signatures
I. Electronic Signatures
The Uniform Electronic Transactions Act (UETA) defines an electronic signature as “an electronic sound, symbol, or process attached to or associated with an electronic record and executed or adopted by a person with the intent to sign the record.” UETA, §2. Often referred to as ‘click-wrap’ agreements, these forms of electronic signatures have a broad presumption of enforceability through laws such as UETA and the Electronic Signatures in Global and National Commerce Act (ESGNCA/”E-Sign”). These acts make it clear that binding contracts can be created by exchanging emails or simply by clicking “yes” on the click license agreements that we have all agreed to with all types of Internet transactions. Like the UETA, the ESGNCA requires that consumers affirmatively consent to click agreements and that the seller must provide the consumer with a clear and conspicuous statement about the effect of agreeing to click, but parole is rarely allowed to prove or disprove intent to contract. ESGNCA§101(c)1. By simply clicking “I agree” intent is presumed.
The widespread enforceability of electronic signatures is also recognized as fully valid for liability protection purposes by the Digital Millennium Copyright Act. DMCA§512(3)(A)(i). As a relatively established area of Internet law, it is important to understand the enforceability of electronic signatures, whether or not the intent is apparent from the face of the agreement itself. Since these click fit agreements are presumably enforceable, it’s important to educate your customers about the potential dangers of agreeing to the terms of an online transaction without fully understanding what they’re agreeing to. Merely agreeing to these terms may interfere with your customer’s right to the court system for dispute resolution, as click arbitration clauses are also generally enforceable. Your clients will not be able to rely on the Fraud Statute to demonstrate that there was no intention to contract. With electronic signatures, the intent is an objective standard, usually determined by the simple click of a mouse.
II. digital signatures
Unlike electronic signatures, digital signatures are most often used as a means of proving affirmative intent. The problems with digital signatures come not from inadvertent agreement of terms, but from the security and confidentiality of digital signatures. In general terms, digital signatures are encrypted electronic signatures that a third party (often called a certification authority) authenticates as genuine. Unlike the more general electronic signature, a digital signature must be solely and strictly in the sole custody of the party using it. Unlike electronic signatures, where a typed name, company name or even a logo can force the party to charge by its mere presence, digital signatures offer the contracting party greater levels of security and efficiency. General types of signatures will not be enforceable as a digital signature. Due to the authentication requirements of a digital signature, it should be recommended that customers rely on the use of digital signatures for any high-profile or high-responsibility electronic contract.
The use of digital signatures will only increase in the future, as parties to all transactions will seek a higher level of information security without fear of accidentally agreeing to unfavorable terms. While there is an inherent fear of paperless transactions, especially with lawyers and more traditional businesses, the use of digital signatures makes trading faster, safer and more effective, and should be recommended to clients where appropriate. The use of digital signatures is even more effective when it comes to international trade, so there is no longer a need to fly abroad to prove the intention to sign a contract.
While it is important to understand and zealously advise clients on the use of various forms of signatures for electronic commerce, it is also imperative to understand that we are still in the early years of a technological revolution, and that part of being an effective advocate is staying up to date. to date on developments in the law. Electronic and digital signatures are just the beginning. Technological advances will soon enable widespread use of biometric identification as a means of demonstrating intent to hire. The principles of contract law will continue to evolve with technology, and while the application of contract principles and the Fraud Statute will not change substantially, their interpretation and use almost certainly will.
