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From a Click to a Contract - Formation and Enforcement of Agreements in the Digital Age

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From a Click to a Contract - Formation and Enforcement of Agreements in the Digital Age

Electronic communications and e-signatures have amplified the speed and number of contracts entered into everyday. The rapid changes in technology have also imposed rapid changes on a legal system that is traditionally slow to adapt - the Uniform Electronic Transaction Act has been implemented in almost every state for close to 20 years, yet many attorneys still insist on printing, signing and scanning signature pages. In this CLE course, attorney and eDiscovery specialist Aaron Cronan will cover some of the most important implications for contract formation and enforcement in the digital age. He will focus on a legislation overview, electronic signatures, Statute of Frauds, UCC, assent of the parties, Browser/Clickwrap, and best practices. This session will include examples and case law from across the county to identity trends and traps.

Presenters

Aaron Cronan
Senior Attorney
Cronan Law LLC

Transcript

Aaron Cronan: Welcome to the CLE of, From a Click to a Contract, Formation and Enforcement of Agreements in the Digital Age. I am Aaron Cronan, and I will be the presenter of these materials today. I want to start by kind of giving you the lay of the land for my background and why this topic was kind interesting to me and why I bothered to put it together and present it. My experience has been one of being on the cusp of when technology started to overtake an interface directly with the legal market.

   I've been kind of on the edge of everything sort of trailing behind me technology-wise, as I kind of came through. So I'm a true Gen Xer from that perspective. So I've sat on both sides of the table. So it's sort of like my parents talking about having black and white television. This conversation is directed probably at Gen X and older, I would imagine. But it would be helpful maybe for some perspective for new attorneys coming up as well.

   So effectively, I came out of law school from Hastings in 2000 and I was the last class to be taught how to do book research. We started off on books and were not allowed to use the Lexis or Westlaw tools until we had learned at least a couple projects through book research and had to Shepardize through the old books and everything. I can't even conceive of trying to do book research now. The tools ares so much better for digital use, to be able to search things and to Shepardize and look things up and click on links. The entire process of what we do as attorneys in research is built for. I mean, it perfectly matches up with what the technology can offer us.

   So the that's one place where I saw that, we've just had a massive improvement in functionality and speed based on the technology that's become available. It was also at the era of the dot-bombs. So I was planning on coming out and working in a tech company and they were folding like a house of cards, when I got out of school. So I kind of went off into a different direction, worked at defense firm and they did not have computers at their desks. We did not have computers until 2002. So we were still dictating and giving letters to our assistant to type up through our dictation on tape of all things. Which that system may or may not ... There's still, I think a benefit to dictation with a human actually typing things. But I found, the prospect of dictating something and not being able to see what I had written was frustrating. And it took a lot of getting used to.

   So now my firm, we moved into pure file sharing and servers and having our data in the cloud. And so we don't even have things localized. I dealt with some cases that I was starting to again, run into these electronic evidence issues, and I was drawn towards electronic discovery as a problem that needed solving. I now do consulting in electronic discovery. And my office is basically 90%, I would go to so far as to say, 98% paperless and virtual and digital with most everything happening very quickly over the internet. Storing things, making copies of things. And along with that came, this immediate rub-up against the use of paper for signing.

   We have this completely digital process. And then all of a sudden we have to jump out into an analog paper world. Physically get a paper in front client, or even myself, and sign it and then get it back into the digital world and then send it off to the court or to the other parties. And that to me, appeared to be really inefficient and was one of the reasons why I started looking into what's the real ... We have these eSigning tools and all the courts are moving towards allowing us to do the slash S signature. What is the law behind that? And it seems like a law that most people don't really pay attention to. So I dug into it and discovered that, there's plenty of law in this and we just seem to be kind of ignoring it.

   So one of the things we're going to go through is the digital impact, we're going to discuss in greater detail a little bit more about all of the angles in which the digitization of our jobs have impacted the way that we practice and how this specifically impacts electronic signatures. And the idea of contract formation and consent or assent. And when that actually takes place, because the digital tools that we have at our disposal have changed the landscape of how those things work.

   A lot of the times we can still apply analogies from the old world to the new, it doesn't always map up. So there has to be specific adjustments made to adjust for how digital tools are changing that landscape. We're going to talk about the legislation specifically. I'm going to go through the eSign legislation and the UETA. I'll try not to bore everybody too much with that but I think it's helpful to hear some of the actual language that has already been contemplated and go through that.

   The statute of frauds is an interesting topic, when we're dealing with all of these electronic records and when it's satisfied and when it's not satisfied. And how something as old as a statute frauds plays in, we're going to discuss signing inside an email. And when that is consent, we're going to talk about our assent. We're going to talk about assent when you use websites and the concept of clickwrap and browserwrap and what those look like. We have some jurisdictional splits on the level of intention that is necessary to show assent. We'll go over the differences between paper signing, electronic signing, and then just kind of summarize things.

   So talking about the digital impact, there's no question. I work in this industry, the volume of data and just communications has increased dramatically. I don't have any specific numbers on it, but I can tell you that ... We can create entire rooms of banker boxes of documents in a fraction of the time that we used to. And it's happening all the time, to the point where managing it is becoming a big deal. But the good news is, you can search it very quickly, if you use the right tools.

   So we've increased the ease of creation of doc content of documentations and communications, and we've increased the volume dramatically. It's changed the way that we form and sign documents. For example, we've got text messaging that ... I just had a case where we went to arbitration and all the evidence was text messages between two trucking companies. The way that we sign documents is being impacted and thus this conversation and changes in scope, and the terms can happen on the fly. And at least now, we've got a written record of it because a lot of times that was happening in face-to-face or phone calls. And as much as people love to get on the phone, or they tell me they love handshake deals. As attorneys, I think we can all agree that having a written record, at least, if your clients on the right side of the argument, having a written record can be very helpful. It's usually the exculpatory evidence you need in the communications.

   So looking at the digital transactions, the angles on this is, we're going to look at eSign and the statute of frauds, and then assent. We have had the E-signature law in place, the federal law in place for 20 years. Actually, over 20 years. If you can see the slide that I'm putting up, or if you imagine an ink signature. Now, the only thing ... We can use handwriting analysis to determine whether or not that signature was signed by the actual person. But other than the fact that it looks like a pen was sitting on one point longer than it normally would have, or that the line thickness or the speed at which the pen was moving. Those are all pretty soft. It's certainly not a science. And I think there's a lot of question about the validity of the forensics in that as a way of authenticating a document.

   This comes into play because I had a case that I'll talk about in a minute, that dealt with forgery and was very problematic. And had we used eSigning this wouldn't have been a problem. Compare that to the next sample, which is a demonstration of an eSign tool and all the information that comes out of it. And I had to redact a bunch of it because it gave you the name of the file. It gives you the document identification, it has a unique identifier. It shows you the IP address of the signer. It shows you the email address of the signer. That as a gate, had to be somebody that at least had access to that person's email address. It shows you the time that it was signed and it indicates that they have the entire record in front of them. It's one bundle, one PDF, completely sandwiched together, wrapped up in one file that is then emailed to multiple places.

   So there's a clear record of what the contract was, and when it was signed. There's a comment from the Uniform Law Commission, when preparing the eSign law. That states, "There's no benefit to any party to an electronic transaction with very few exceptions in requiring that they be memorialized on paper with signatures that are manual." And I think that is a wonderful quote. I mean, that really summed up kind of my sense of this and my experience was, and I still have it too. That we had this sense that things have to have a hand to ink signature to have this gravitas to them. And that's really the only logical explanation, even though it's not really logical, for why we are insisting on ink signatures.

   And I just had a case, even though I'm such a proponent of eSigning, but we were signing the stipulated dismissals as counsel. And I felt the need to print it and sign it by hand and pop that back in, even though everything else in the document, we had eSigned with a slash and typing our names. So that's an interesting hangup that we have. I think if you look back to old English law, when you were transferring property and you gave a clod of dirt to the buyer. There may be something that's kind of innateness that wants to have the ceremony around it. And we do lose some of that ceremony when we're doing eSigning. That said, our silly hangups should not really be the reason why we are using a less optimal option for signing things, that's way better to authenticate.

   It's much easier to authenticate a signature on a document, where we have all the IP address, and I can tell you the time it was, and we have the email address of the user. As opposed to, just showing up with a piece of paper that has ink on it. So now, I'll tell you the story regarding this fraudulent contract. So there was a seller of a business, a gentleman, an older gentleman. And I think he knew he was ill and sold to an employee and the employee, she took over the business and started making payments on the business. And everything was great.

   I got brought into the case because there was a question about the contract and the dispute was, as soon as the seller died, the buyer stopped making payments. And when the heirs came and said, "You need to keep making payments." She showed this contract that had different terms than the contract that they had. And she said, "Oh, well. When we swapped out this page and he agreed that if he passes, I don't have to make payments and here's the agreement." My job was to try to locate the original document that she drafted and determined when it was written, because if we could find it, and the date of creation was after his passing, then we could make a fair assumption that page was fraudulently formed and counterfeited and inserted into the contract.

   Ultimately, we were not able to retrieve the original document because I finally whittled it down. And the laptop that I suspected it was drafted on, conveniently got stolen according to the defendant, stolen out of her car while sitting inside a hotel. And she never called the police. And long story short, they go to settle the case. She rolled over and they ended up settling something. It was a good outcome, but the lesson learned is a couple fold. One is, had there been an emailing, even if they just scan and the document and emailed it. There would've been a complete record of that document in multiple places on the day that it was signed. And that is my ... Takeaway number one is, always scan the entire document and have a copy of it with a timestamp or some sort of way of authenticating when it was created. And that is one of your first lines of defense against having somebody change out a document like this.

   The other obvious option is, make sure, if you're going to stick to the paper universe is to make sure that they initial every single page. From that day on, I've put an initial signature or initial line on every single page of a contract and had everybody initial that part, at least my client initials that part of the contract. That has been kind of a huge lesson learned. And it just really underscores the importance or the vulnerabilities of paper. That paper signing for all of its sanctimony and gravitas lacks a lot of the safeguards that we get from eSigning because the email communications and I will lean on this. The emails communications become a record that is almost immutable. It is very hard. If somebody can fake an email, but they can't fake a lot of the data that comes out of the email or the metadata. And they can't fake the fact that it's sitting on my hard drive. It's sitting on my server, it's sitting on your hard drive, it's sitting on your server, and it's a good chance it got CC'd to a couple other people.

   So you now have five or six instances of this document that existed at that specific time. And all you need to do is go grab one of those and compare it to the document that they're presenting. The ability to successfully counterfeit or fraudulently edit a contract becomes almost zero at that point. So the legislation, the eSign legislation that was enacted in 2000 under 15 USC 701, clearly mandates that a signature may not be denied validity solely because it is an electronic form. And that the signature is an electronic sound, symbol or process attached to, or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.

   It doesn't have to be a squiggly ink line. It can be any number of things that are shown to be the intent. You're not required to accept eSignatures on either side, so you can opt out of it. And matter of fact, you have to consent to eSigning, which is one of the reasons ... And this shows up in both laws. One of the reasons you'll always see that initial box in HelloSign or DocuSign or any of the signing tools. At the top, where you have to click a button or click a box and agree to use eSigning. For retention of originals, the eSign law basically states that a contract is contained in its original form, or that original form is satisfied. If the record accurately reflects the information set forth in the contract, and it remains accessible for the required period of time.

   Notaries can be stored electronically, as long as all the other requirements are attached or logically associated with the signature. But there is a requirement that has to be in-person in this law. Now, there were a number of COVID exceptions that have been put in place at the time of this email, or this CLE is being recorded. We did impose a number of ... At least Oregon did, some alternative options for notaries, but the default is that you need to be in-person. So we're going to see, if those things are going to stick, any of those adjustments.

   So now we're going to look at the Uniform Electronic Transactions Act, which I'm going to just refer to as the UETA. So that came out in 1999, and that was a uniform set of laws to try to bring more uniformity across the country. And I believe at this time, we're looking at 48 states have implemented some form of it. In my state of Oregon, where they have implemented the UETA and the UETA expressly validates electronic records, signatures, and contracts. That's step one.

   So the UETA allows for electronic records and information for retention purposes provides certainty in an area with a lot of potential cost savings and efficiency. It's good that we're taking a little time to pay attention to it. So the scope of the UETA, it applies to electronic records and electronic signatures relating to a transaction. It does not apply to wills, codicils or testamentary trusts. It does not apply to uniform commercial code other than a couple exceptions. And it does not apply to the Uniform Computer Information Transactions Act.

   We're just going to kind of roll through these by section. I summarized them, and I'm going to try to make this as interesting as possible. Section five deals with the use of electronic records and electronic signatures and variation by agreement. So it does not require that you have electronic means for your contracts. The parties must agree to conduct transactions by electronic means. Now, this is determined by context and the surroundings. So I think a fair example is, the custom in practice is, you're emailing each other and you make terms and you agree to them that you've likely ascended to it just implicitly. And you'll find that in a number of the cases that we look at. So continuing with section five. Agreeing once to do electronic documentation or signing is not a waiver of future rights. You can always refuse to continue on. You can refuse and force people back into paper. So that's an option, you're not trapped in it. Other terms can be waved by agreement, but the waiver of your right to bail out of electronic signing is not waveable.

   Moving on to section seven. We're looking at legal recognition of electronic records, signatures, and contracts. So this is, what is the legal status of these agreement or all these documents? A record or signature may not be denied legal effect or enforceability solely because it is an electronic form. So that takes away one of the big hesitancy everyone seems to have, which is, "Oh, it doesn't seem that it's as valid." And that is not the case. The law specifically, in most states says that that is not the case. A contract may not be denied legal effect or enforceability solely because it is an electronic record, solely because an electronic record was used in its formation. So there, we have it.

   A comment from the drafters in section seven, note that subsections A and B are designed to eliminate the single element of medium as a reason to deny effect or enforceability to a record signature or contract. The fact that the information is set forth in electronic, as opposed to paper is irrelevant. Section C states that, if a law requires the record be in writing, then an electronic record satisfies the law. If the law requires a signature, this is D. A signature, an electronic signature satisfies the law. So we have an interesting example here. And this is an example that highlights, even though you satisfy the UETA, you still have all the other conditions of contract formation and other laws that might apply as an underlying. It is sufficient for signing, but not sufficient for the contract to be formed.

   So in this example, we have Adam. I'll call, Adam and Betty. That's going to be the people who we'll refer to throughout our discussion. We have Adam emailing to Betty, and he says, "I here by offer to buy widgets from you, delivery next Tuesday." And this slash, and let's say, he signs his name, Adam. Whatever. And then Betty writes back to Adam, "I accept your offer to buy widgets for delivery next Tuesday." And the slash and a B. So here we have an illustration that, the actual contract cannot be denied solely because of its electronic. And in fact, the slash Ss would show a clear intent to sign the document. So we have satisfaction there, more than likely.

   The emails do qualify as a record under the statute of frauds. However, they do not state a quantity and therefore, they're unenforceable under UCC Section 2-201(1). So that is a failure, not because it's an electronic record, but because it is an insufficient communication to satisfy the UCC. So the corrected illustration, in illustration two, has A emailing to B. And he says, "I hereby offer to buy a 100 widgets for a $1,000, delivery next Tuesday." And then signs it with a slash S and then Betty writes to Adam, "I accept your offer to purchase a 100 widgets for a $1,000 next Tuesday." Slash SB. So here we have the same analysis as one, as far as signing. They clearly showed intent to sign a document. They were negotiating and trying to enter into an agreement. And then we do have satisfaction of the UCC. So now we have an actual functioning, binding agreement.

   Moving on to section nine, we have attribution and effect of electronic record and electronic signature. An eSignature is attributable to a person, if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable. It is determined from the context and surrounding circumstances at the time of its creation, execution or adoption, including the party's agreement, if any, and otherwise as provided by law.

   So one of the things that we can look at is, if you actually signed a document through electronic signing, and it was the whole rigamarole through one of the eSigning tools. That's going to be a pretty clear indication that you were intending to sign the document. As we're going to go through some examples later on, we're going to see, whether or not there was a clear intention to sign, starts to break down. Short of the eSigning tool, using the slash S is a clear indication of intention to sign. And that's, what's being implemented as sort of a standard across the board. We use it with federal filings. You can use it ... That's how the USPTO is using signatures of documents. Everyone can sign it with the S slash. Our local courts have started to use that as well.

   Moving on to section 11. Notarization and acknowledgement. Notarization can be signed and stored electronically. But again, in this case, you still have to be there in-person. And I'll be curious to see, if the COVID restriction or COVID flexibilities that allow for people to be remote. And maybe we implement other methods of verification. Like, you have a visual on through some sort of visual meeting, like Zoom. And then there's a use of an identification that is transmitted electronically, or you show the ID. Those are all potential options for eliminating the in-person requirement.

   Number 12, retention of electronic records and originals. Record retention laws are satisfied by an electronic record that accurately reflects the information set forth in the record after it was first generated in its final form. And it remains accessible for later reference, it must migrate from a legacy system. So this is kind of important to note. So as long as you have a document that reflects the information on it and you don't swap pages out, that is now a record that is being retained, if it's electronic. So you can scan it, or it could've never been out of the electronic format. If you've generated a PDF that is then eSigned, that record will count. What doesn't count is, if it's sitting on a system that you can't access. If you've migrated away from a technology or the server's no longer accessible, or you can't boot it up. The fact that the ones and zeros are sitting on a hard drive some place does not count. It has to be accessible.

   We've seen issues with this in all kinds of data or medium being outdated and starting to become obsolete, where you can't access them anymore. Effectively, anything that was on tape is now becoming ... One, the tape is degrading and two, the tools are not being made anymore. I don't know how many of you are sitting on VHS tapes like I am. If you don't digitize them, you're not going to be able to get anything off of them because you can't buy VCRs anymore. And the tape is becoming brittle. The actual emulsion on the ... The magnetic emulsion on the tape is starting to break down. So good idea to get that stuff scanned, if you want to keep your old family videos and digitize them.

   Admissibility of evidence is section 13. It deals with that. And quick summary is, in a proceeding evidence of a record or signature may not be excluded solely because it is in electronic form. Section 15 deals with the time and place of sending and receipt. And this is when it starts getting really interesting, because this is where the model to traditional paper signing starts to break down. Unless, otherwise agreed. An electronic record is sent when it, one is addressed properly to the recipient designated IP system and can be retrieved. Two, is correctly formatted for that system. And three, enters an IP system outside, the control of the sender. So that would be, to use email because it is probably the easiest, since we need to have it properly addressed. That means you've got the right email address and it is designated for their IP system. Let's say, their email system and is correctly formatted for that system. So it's got to be the right email format that all the systems agree upon. And it leaves your system and enters another system.

   So it doesn't have to get into their system to be sent, but it does have to leave yours. So it launches. If you've got a sent email in your inbox that shows it was sent and can verify it was sent. That's a pretty good case that you actually sent the email. However, if you're not connected to the internet, the fact that you addressed it and pushed send doesn't satisfy the law. It would have to have actually left and there should be records of that on other servers and ways to verify whether that happened.

   The second part of this is, when it was received. So under Part B, unless otherwise agreed an electronic record is received when it enters a recipient's designated IP system and can be retrieved. And two, is correctly formatted for that system. So again, the format counts, you can't send somebody garbage and expect it to count or something that's formatted for another system. The moment it lands in their system it's deemed received. So there's no requirement that you actually look at it or verify that it was received as long as it hit your IP system.

   Under D, unless otherwise expressly provided, an electronic record is deemed to be sent from the sender's place of business and to be received at the recipient's place of business. This is important, because you could be all over the country, all over the world, sending and receiving emails and signing contracts. But where is the determined locus of that agreement taking place? For purposes of this subsection, the following rules apply. If the sender or recipient has more than one place of business, the place of business with the closest relationship to the underlying transaction is that location. If the sender or the recipient does not have a place of business, the place of business is the sender or recipient's residence.

   So example is, if you're emailing from home or your hotel, and that's not really related to where the actual transaction's taking place, and this is a part of the digital signing that can create quite a bit of complication. Jurisdiction has always been an issue. The fiction of where something's happening with parties in different states and whether or not they avail themselves are constantly fought over. The best thing we can do as attorneys is, make sure that we've dealt with that issue in the contract that everybody's signing. Unfortunately, we all know that our clients are doing things without us holding their hand at all times. And it is likely, that nobody's even thinking about that when they're setting up their terms.

   So why place of business matters? Again, where you're sending from doesn't really matter with regards to the transaction, you can be literally anywhere. You could be in a space station and send an electronic document. The physical servers bear no relationship to the party's locations, or intentions. So it doesn't matter where you're sending from. And it doesn't matter where the email travels through. What matters is, what are the parties agreeing to and how does it relate to the actual transaction?

   Subsection E. An electronic record is received, even if no individual is aware of its receipt. So the paper analog would be an office that is sent mail and just lets it pile up in their inbox and does not actually open it. That is not the sender's problem. That is the recipient's problem. So in most of the instances, unless you have in-person service requirement, if you can show that it was sent. For our purposes, it's the equivalent of a tracking number for confirmation of delivery. If you can show that it was actually received at the location, then it doesn't really matter whether they opened their email.

   The signing and sending and receiving gets colorful, when we rub-up against the mailbox rule, which we probably don't deal with every day, but for a little bit of refresher from back in law school. The mailbox rule is an offer by mail is not effective until it is received by the offeree. The offer is not there until it's received by the offeree, but acceptance is effective, as soon as it is posted. So the revocation of an offer must be received by the offeree before posting the letter of acceptance. So that was a mailbox rule.

   If the offers received by the offeree and a letter of acceptance is posted at the same time, or even before or after the revocation is posted by the offerer. The acceptance wins, if you can't show that the revocation was received before the acceptance was posted. So acceptance wins in a heat between the two. So how does this apply to electronic communications? So generally, acceptance is effective when sent, regardless of whether it reaches the offerer. So that's restatements. A contract is created upon mailing of the acceptance, regardless of when or whether the acceptance was received. So the act of putting it into the system, into the mail system is effective for under the mailbox rule.

   So in the email universe, there is a mild trend in a lot of jurisdictions that there's a rebuttable presumption that emails are received once sent. If you can show you sent an email, you have a valid copy of it in your inbox, and you have your forensics person or whatever authenticate that it was sent out. That you're going to be able to argue that you have beat mailbox rule. If you did not get the revocation in your inbox and you sent the email, then your acceptance wins. There's a couple of cases that I cite here that might be worth looking at.

   Now, let's move over to one of the other ... Probably one of the oldest issues that the electronics situation is rubbing up against. And that's the statute of frauds. So the statute of frauds was approved in British Parliament in 1677. That was a very different time. The idea that this is going to be completely relevant in the way contracts are formed today is kind of an interesting question. It did not contemplate that you could send a text message through a computer that you keep in your pocket all day long instantaneously. And that it could be received by somebody around the world, in milliseconds. They didn't see that coming. Even 20 years ago, we really didn't see that coming.

   So as a little refresher, we have the statute of frauds, which requires that a contract must be in writing and subscribed by the party to be charged for the sale of an interest in land, the sale of goods for $500 or more under the UCC. Contracts in consideration of marriage, contracts that cannot be performed within one year of the contract being made and contracts for suretyship. So the writing question is easy. I think that's one that we pretty much have satisfied. For example, the Oregon law defines writings as contracts made by telegraph and all communications sent by telegraph and signed by the sender or by the authority of the sender. Now, I don't love the term telegraph. I think that is an archaic term that needs to be changed, and it's not broad enough, but it's been implemented in ways that indicate that it would contain the emails and other electronic communications.

   By comparison, we have the New York Code is 5-701(b)(4). Defines a writing as the tangible written text produced by telefacsimile, computer retrieval or other process by which electronic signals are transmitted by telephone or otherwise shall constitute a writing. This is a little bit more flexible. It appears to be broad enough to easily absorb the electronic and text messaging and other messaging with the computer retrieval language. So writings that are emailed or written back and forth in these texts could satisfy the statute of frauds. It's the signatures, where the conflict is likely to live. That is the most frequent problem. Do we solve that with the UETA and eSign? That's a great question.

   So the electronic signature, as refresher is an electronic sound, symbol or process attached to, or logically associated with a contract and executed or adopted by a person with the intent to sign the record. And that's out of the eSign law. So here's an example. We've got Adam writing or Betty writing to Adam, and she says, "Dear Adam, I want to buy your house for $600,000, no contingencies." And this is an email. And she signs it slash S, slash Betty Balm. And then underneath that is her signature block. The automatic signature block that most of us have in our emails that just pops up.

   This email, I would argue is the clearest intent of signing. That slash S slash is a clear indication of an intent to sign a document. So this looks like an offer, and Adam writes back, "Dear Betty, that sounds good. Let's do it." Slash S slash, Adam Allen. And he also has his signature block. These two emails appear to be the cleanest intention to sign the document, whether or not the terms of the document are satisfactory to form a binding contract. That's another question, but arguably, yes. And they signed the agreement electronically. Those are valid signatures under both sets of laws and in most states.

   So now we have a situation where the same email's written from Betty to Adam and Betty doesn't do the slash S and just writes her name, but then she also has the signature block underneath. In most jurisdictions, one would argue that that is ... Because it's redundant of the signature block, that there was an intention to apply her name to it. I think that would be a good argument that someone might make. It's still formal in that, she uses her full name and it's redundant to the signature block. So there should be an implication of an intention to adhere her name to the terms.

   In contrast to that, now we're going to do a sliding scale of, we start at one end where the intention was clear. And now we're just going to keep sliding down to the other end, where the intention is less clear. We have Adam writing back saying, "That sounds good. Let's do it." And just writes his name, Adam. And then below that is his signature block. Again, Betty might be able to argue that Adam was intending to sign the document. I think Adam, if he wanted to get out of the deal, we'd make the case. I thought we were just still talking and I didn't sign it because I didn't use my full name, possibly a good argument. The intention of Adam is very unclear at that point.

   Now, we have Adam writing to Betty where he responds and he doesn't sign his name at all. And the only thing is the automatic signature block. In some jurisdictions that may still be sufficient. In many others, it is not. It's certainly not in California because that is an automatic signature block. It could happen without you even realizing it. I mean, we all have that little notice of confidentiality at the bottom of the email, that just happens. And there's not necessarily any intention behind that. Other than, it's a way of identifying who wrote the email.

   In another example, Adam doesn't have the automatic signature block. He just has his name and just his first name. Again, he had to intentionally type it there, more than likely. I think that's a question or fact that we'd have to get at, but if he typed it, he didn't use his full name. The question is whether or not that is formal enough to show his intent to sign the document. Here we have him doing the dash A. I think that would be much farther down the side of lacking the clear intent to sign. And then the next one will be this kind of emoji face with the winky face, with the tongue sticking out. There are cases that deal with emojis satisfying the intent, if they're affirmative. And the terms are clear that an emoji can be used as an assent to something. Maybe outside the statute of frauds. I think, one might argue that the statute of frauds would require a more somber, a more intentional signature, but you're just talking about something that skirts the statute of frauds, having this face might work.

   Maybe the smiley face might work, maybe sticking out the tongue is going to be an ambiguous indication, but when the symbols are unambiguous, there are cases that will point to them being satisfied as showing assent. So there's a split on this issue about where the assent line is drawn, and that is looking like it's kind of East versus West. In California, appears to be having the farthest high water mark requirement for showing assent to signing, it requires the most formality. And a lot of these are coming out of cases having to do with sort of unequal negotiations and clickwrap and browserwrap.

   But there's also, some case law out of just whether or not agreements are enforceable between two parties based on how they signed the document. What comes out of this case, JBB Investment Partners Ltd versus R Thomas Fair out California in 2014, there was a great quote. And they said, "Merely signing one's name at the bottom of an email is far from sufficient to bind that person in contract, let alone to a settlement agreement." So that sets a really high water mark. And one would argue in California that you have to have the clear assent that you're clearly intending to sign a document or sign an agreement.

   So at a minimum, you'd want to have that slash S but you'd also maybe want some language in there that says, "I agree to these terms. We agree to these terms, here's my slash signature." Some combination of that might be sufficient to satisfy this requirement. Short of that, you're not going to get a signature and definitely an automatic signature block would not satisfy that. So under California's implementation of the Uniform Electronic Transaction Act. The enforcing party must show that one, the parties agree to conduct an electronic transaction and the signing party wrote his or her name on the email with the intent to formalize an electronic transaction.

   In comparison, we have a case out of Massachusetts, where they state that the emails typed and sent by a defendant containing a salutation, consisting of defendant's name can constitute writing sufficient to satisfy the statute of frauds. It looks like they basically, allowed that automatic signature block to count as a signature of assent. In that case, there's an overlap more of, was there clear intention between the parties and was the signature blocks sufficient to sort of count as a signature? And my gut feeling is that that is too far, those automatic signature blocks should not be counted as signatures. There should be a higher level of intention.

   In New York, the sender manifested his intent. Here's the case. The sender manifested his intention to authenticate the email for purposes of the statute of frauds by typing his name, Dennis, at the bottom of the January 12th, 2007, email referencing the party's contractual agreement. So here, this is pretty, clearly a lower bar than what California has set. If you can type your first name and that counts as a signature, for purposes of statute frauds. So based on this split, you don't want to take anything for chance. If our clients bring something to us and the transaction has already unwound itself, and we have the emails, then we can look at it with that eye of, what jurisdiction are we in and how much consent are we looking at? But that's something we definitely need to start looking at. Is there clear assent or intention to sign something? If your party is trying to get out of the document or the other party is trying to get out of it.

   The email signatures are going to be very fact dependent and they're going to be very state and jurisdictional dependent. So the best thing we can and do is get expressed assent and some indication of the signing intention. If I need something from my client to agree to changing scope or do something where we're going to be authorized to go do more billing work, or we don't have time for them to sign the agreement. I will email them the terms. Here's what we're going to do. If you agree to this, please write back. I agree, and then sign your name at the bottom and use the slash S. And that's what they do. And it's a pretty fast and effective way of getting that sort of rolling assent going, and allows for us to not have to slow down and move out the paper or send a formal agreement. We can just keep moving forward, but don't leave anything to chance. These emails are too easy and the text messaging is too easy to do, just out of laziness and it's going to get people into trouble.

   So now we're looking at assent and browserwrap. So in the terms of use, we have a kind of a constructive notice situation in a lot of the terms that we kind of ... When you walk onto a website, all the websites have the terms of use or terms of conditions as a link on the website. So we all know that we're going into a website and we have these conditions. And every one of them says, "By visiting our website, you're subject to the conditions." The question is, does that really attach? And so browserwrap is the idea that you've gone to the website. And it just because the very nature that you've walked into this website, you're now subject to the terms. In this one case here, Nyugen v Barnes & Noble. That there was an arbitration clause stuck into the terms of use link that was available on every page. And the court ruled that the terms of use link on every page without more was insufficient notice of the terms to imply assent. So that kind of sets the stage for this higher level of assent, where just visiting the site is not sufficient.

   Then we get into what is clickwrap, which this kind of line of cases sets up for why we have the ... With kind of California being the tail wag and the dog. Why we have now the situation where anytime you sign up for anything, you have to scroll, you have the popup box, where you have to scroll to the bottom before you can click I agree. And that comes out of some of these cases. Specifically, this one we're going to talk about here. So the clickwrap is the manifest assent, where you have to click I agree check box. And it has varying enforceability because a lot of times these are contracts of adhesion.

   In California specifically, they're going to look at some factors. Are the terms actually visible when you're clicking? That's why you have that popup window. Are the terms within reasonable expectations? And is there mutuality for a term? So one of these cases, it's Bragg versus Linden Research and the case involved this tool called Second Life, or it was a game. Sort of a social platform for virtually interacting with people. And they had a terms of service that required California as a choice of law. It required California for the forum and it required that they go through this arbitration system and it required confidentiality. And that was present in the terms of the agreement that were clicked on.

   So California unconscionability law looks at oppression through unequal bargaining positions or a surprise through hidden terms common in the context of adhesion contracts and overly harsh or one-sided results that shock the conscience. So that's the standard we're applying, when we're looking at these click graph terms. There's an argument that they indicated an acceptance of the terms, but as I'm going to get to, it's really hard for people to agree to these things because nobody reads them.

   The statement in the terms of service was that, Linden has the right at any time for any reason or no reason to suspend or terminate your account. Terminate this agreement, and or refuse any and all current or future use of the service without notice or liability to you. It's also stated that Linden may amend this agreement at any time in its sole discretion by posting the amended agreement on its webpage. And their findings of unconscionability were supported because the arbitration cost advanced were greater than court filings. So the fees that were required to file an arbitration were in excess of what the court filing costs were going to be. And the forum selection clause was also unconscionable because of the unequal negotiating circumstances. And the confidentiality clause was also unconscionable.

   At least in California, we're finding these really unbalanced terms of service agreements that are to some part not being enforceable, some parts of them. I draft terms of service. I'm sure a lot of people listening to this draft terms of service and the idea that, we have these agreements that nobody's reading. There's really no cost or incentive. There's no cost to a company or an attorney like myself to just include every single one-sided to term you can possibly imagine into the agreement on the hopes that maybe it will be enforceable. And you have these parties that are entering into these agreements who are not reading them. And then, just being surprised by the fact that there's some sneaky language in the agreement. And the notion that we would expect a person clicking one of these agreements to actually read it is ludicrous.

   The assumption that if you sign an agreement indicates that you've actually read it. For some contracts that's fine, if it's a one page sheet on, you're renting something. Fine, you might read that, but the idea that you would actually read all of your terms of service that you're subject to would actually require you to ... If it was your full-time job, as of 2012, you would have to work for 76 days to read all the terms. I actually pulled off a couple sample terms of service and found that, if you format it into a standard contract form, like we would in Word. That they are roughly between 9 and 14 pages each.

   At this moment, as a matter of fact, the tool I'm using to record this on has a terms of service. The tool that I'm looking at for my slides has a terms of service. The email system I'm about to send this to, the hosting company has a terms of service. Every single thing I touch in the process of doing this has a terms of service, and it would take me all day to read them and we're not going to do that. So this is an economic system that is broken. There's no assurance that part of the terms of an agreement are enforceable. And there's really a lot of uncertainty on both sides of this deal.

   One estimate from 2012 was that, this was a $781 billion opportunity cost in the US alone. The idea that you have this assent in the clickwrap, terms of service, even though we are forced to scroll to the bottom. And I do actually sometimes take the time to actually scan and see what we're actually signing too. That nobody reads them. And there is often some very unexpected and potentially horrible terms in these agreements. So that's kind of the overview of signing in the digital age. The issues are really around two kind of even parties entering into agreements, just through emails or texting and whether or not they've actually signed them to satisfy the statute of frauds.

   And then there's the question on, when you're online or you're using software, and you're agreeing to terms of licenses, whether or not you've assented it to some of the more onerous terms. Those are some of the other issues we're dealing with, but overall electronic signing is valid. And the record that it's generated from it is going to be valid. And that alone is not a reason it's going to be denied admissibility as evidence. But I want to go back to my thesis, about why paper signing is not great and why we should just accept eSigning and really lean into it.

   Here's the pros of paper signing. And this is my tongue in cheek review of paper signing and why it's great. So you use ink and paper, which helps support the dying office supply industry, because they're having a hard time. And when you throw them a little bone ... If we print out our contracts, then we get to use more paper. That it's slower, that it takes a lot more time. So it's better billing, although it's administrative. So probably not great billing. That you have storage options. You can either use a banker box or you can scan it and keep it on a hard drive or both because most people are redundant and can't seem to throw both sets away. This is why, even though I've scanned my VHS types, I still hold onto them.

   You get to practice your signature because, if you're like me, my signature is kind of degrading. And then also, you get to ... It's easier to forge and alter the paper. It's a lot easier to fix somebody's hand signature on a piece of paper, when there's nobody around to tell whether or not you signed it. As opposed to sending something via email, which creates a trail of it.

   So pro tips, these are the actual pro tips. After my experience from that one case, I can't stress enough how important it is to have a signing party initial every line in the agreement. That it shows what the actual document looked like when it was created and require all the pages of the original, be scanned and then create a record of that. Email it to the other parties, email it to opposing counsel, create a record of that document in multiple places so that it cannot be altered. Because it is possible you're going to change a couple letters or change something. But if you've got a document, there's a way to verify whether or not that document matches the original document through what's called a hash. There's a way to show it without having to go line by line through each one. Although, you can do that as well. There are ways of comparing the documents.

   Pros for electronic signing and this is less tongue in cheek. One, you definitely save paper and ink, although that's probably not much of a motivator. It can be lot faster for signing and transmitting the document. I use HelloSign on my system. And I got my client to sign something with an entire audit log and all that information, the IP information, all that. And I can just take that PDF with all that information and send it to the other party's attorney. It's a lot simpler to electronically store it, keep it on your hard drive and you can make backups and keep it in the cloud. It's cheap and it's searchable. Again, there's more levels of authentication than there are with paper signing and it's a lot easier to detect forgery or fraud.

   Some of the cons. To do it right. Electronic signing, you need to have a paid service. Those are far better. Again, I refer to the two that I'm familiar with. HelloSign and DocuSign. HelloSign is paired up with my customer management software. That's kind of the tool that I use just because it's part of the service I have. It allows me to get my retainer agreement signed. It allows me to get other agreements signed by my clients. It's pretty good. The downside is, there's not a really good solution for getting the other party to countersign through one tool. And that's kind of where it gets a little weird. I could technically add the signature block of the opposing party to the document and have both the client and my client and their client sign them through the system. But you need to get expressed consent from the attorney because you're communicating directly to that other party. And that gets weird.

   It would be great, if somebody put together a tool that allowed us to handle that specifically for attorneys to have two countersigns. That would be a great thing. The PDF is still editable. Once everybody has signed it, you could flatten the PDF to an image and send it that way and send it with the original and then the flattened version. That way you have a much more difficult document to edit. And the email link that you send stuff through might not be secured. So that link hopefully expires in about a week, but if it's accessed, somebody can get at that document, if they have the link. They can usually get to it without having to log to anything.

   So pro tips. Either have opposing counsel send the document to their own client or get their permission to send it through the eSigning tool, flatten and distribute the PDF so that you have a record of it. And it's much more immutable than the editable PDF and kill the links to confidential documents. So that's the CLE, I think that the writings that we have at our fingertips through the emails and the text messaging and other messaging tools, codifies the intents of the party, and it's a lot easier for us to dig through and figure out what actually happened as opposed to our client's version of it.

   And I think that the truth is more accessible and that we have better records and communications that show us what the communications were and what the timing was. In short, we're actually in a better place to get to the truth of matters with all the electronic records and we should be able to do it faster. That's my case for eSigning being better than paper signing. Thank you.

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1h 2m 26s

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