Business Article

 
Electronic Documents!  Are they enforceable? By Martin B. Greenbaum, Esq.
Greenbaum Law Group, LLP
www.CollectionLaw.com 

 

Every day millions of transactions occur online. Credit is granted for orders placed by email, received by fax and made through websites and web portals. Some go sideways. When it’s time to collect, are the emails, faxes and clicks good enough?  How about the electronically stored copies of original documents that were actually received, then imaged and discarded? Yes, in general (which is about all a lawyer can say).  Here’s why.  

            Electronic Signatures.  

A signature is a mark or sign on a document that shows approval, knowledge, acceptance and obligation.  Historically, royals imprinted rings, crests or logos in wax to make their seal. Soldiers who couldn’t write were told to make an “x” on their enlistment forms.  Merchants impressed or embossed a crest or mark to accept a contract. Over 100 years ago, electronic signatures emerged in commerce when telegrams, sent over hard wires with Morse Code, were enforced by courts.  

 Now signatures come in different forms. Original documents are now faxed, emailed, scanned, and sent by photo over the Internet. Laws have caught up to commerce.  The “Uniform Electronic Transactions Act”, now approved by 47 states with the other 3 having similar versions, makes electronic signatures enforceable.  These signatures are letters, characters, numbers or symbols executed or adopted with intent to sign.   

A signature on a credit application, purchase order, order, quote, contract or note, sent electronically is enforceable when it was intended by the parties that the person sending would be bound.  For example, the submission of a credit application by fax or email, with a signature on the image, is valid and enforceable when the party submitting intended to obtain credit by submitting it to the vendor.   

Of course this doesn’t address the forgery or identity theft issues, which basically follow existing law.  The recipient needs to verify the signature is authentic in the same way as an original signature not made in the presence of witnesses.  Such methods may include phone verification, course of conduct, placement of orders, payment history on the account and many other facts and circumstances.  

So in general, signatures received electronically are enforceable if intended to be the signature of the person to be bound.  Adequate state laws already provide for that enforceability and no changes in the text or to the agreements are generally necessary.   

However some businesses want to be more explicit about their receipt of electronic signatures.  They want specific language for their agreements.  Keep in mind that often courts find specific language to be more of a limitation than an expansion.   

If your business wants specific language, we are recommending that you consider including a phrase in documents (as advised by your lawyer) that confirms electronic signature validity.  Such a phase might be something like…  

“The parties agree and consent that an electronically transmitted, scanned, emailed, faxed or photographically transmitted signature is intended to be an original signature, shall have the same force and effect as an original ink, signed or sealed signature, and may be relied upon as an original signature for all purposes.”  

The Paperless Business or Office.  

What about the electronic retention of original signatures and documents?  Many businesses are now paperless or are going paperless.  Original documents are scanned or photographed and retained in electronic version.  Can the electronic version of an original document, where the original document has been discarded, lost or destroyed be enforced?  

This is really a question of what the law calls the “Best Evidence Rule”.  With origins in early English Common law, the best evidence of a document is the original, if it exists and can be located.  If the custom and practice of a business is to image originals for electronic retention and dispose of the original, then the electronic copy of the original (the “secondary evidence”) becomes the “best evidence” of the agreement.  

Of course any party may challenge the authenticity, accuracy or authentication of the document.  But those challenges are equally applicable to originals.   

There is no specific need for specialized language in contracts or documents authorizing original destruction and electronic retention.  But if your business wants specific language to include in things like terms and conditions, notes, guarantees, master services agreements, etc,  we are recommending that you consider including a phrase in documents (as advised by your lawyer) that confirms electronic retention validity.  Such a phase might be something like…  

            The parties also agree and consent that all documents, whether originally signed and physically or electronically transmitted, scanned, emailed, faxed or photographically transmitted may be stored, preserved and retained in electronic form and be valid and enforceable for all purposes as if stored, preserved and retained in original form.”  

            So go to it with electronic documents.

 

Martin B. Greenbaum is a California Collection Attorney and the senior attorney with the Collection Law Firm of Greenbaum Law Group LLP.  See his website at www.collectionlaw.com.

 

Legal Disclaimer: This article contains the opinions of the author and does not constitute legal advice or the rendition of legal services.  You should consult your own attorney for specific questions related to your specific legal issues.  No attorney-client relationship has been created by the author writing and publishing this article nor by your reading and taking, or not taking any action based on the content hereof.

 

© Martin B. Greenbaum 2013


About Martin B. Greenbaum

MARTIN B. GREENBAUM is the senior attorney with the law firm of Greenbaum Law Group, LLP and limits his practice to collection and loss recovery.  Mr. Greenbaum is rated "AV" by Martindale-Hubbell Law Directory, the highest rating given by the most prestigious attorney rating directory in the United States. 

He attended UCLA for both his undergraduate and law degrees. He acquired intensive trial experience while serving as Deputy District Attorney with the Los Angeles District Attorney's Office for almost five years. Since then, he has been engaged in collection, enforcement of judgments, and debt recovery.  Greenbaum Law Group LLP has its’ principal office in Newport Beach, California with satellite locations in San Diego, Beverly Hills and San Francisco

www.collectionlaw.com                       

 

 

 

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