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As of Oct. 1 of this year, typing your name at the bottom of an e-mail may be enough to create an enforceable contract. Such is the result of the legislation passed by Congress this summer that recently took effect. The Electronic Signatures in Global and National Commerce Act, or E-Sign (certainly one of the better abbreviations for federal legislation), was enacted to facilitate electronic commerce. E-Sign is a federal statute, P.L. 106-229, that affects transactions involving interstate commerce conducted electronically. WHITE HOUSE SPELLS OUT STATUTE’S INTENDED BENEFITS When President Clinton signed E-Sign, the White House issued a press release summarizing the intended benefits of the law. The press release stated that the law will: � Eliminate legal barriers to using electronic technology to form and sign contracts. � Require that consumers affirmatively consent to doing business online and benefit online from consumer protection. � Ensure that government agencies have the authority to enforce these laws, protect the public interest and carry out their mission in the electronic world. THE HEART OF THE LAW IS DECEPTIVELY SIMPLE. Written in a syntax despised by English teachers but loved by legislators, which features definition in the negative, the law’s operative provision reads: With respect to any transaction in or affecting interstate or foreign commerce: � a signature, contract, or other record relating to such transaction may not be denied legal effect, validity or enforceability solely because it is in electronic form; and a contract relating to such transaction may not be denied legal effect, validity or enforceability solely because an electronic signature or electronic record was used in its formation. Translated into everyday English: � Electronic documents can create contracts. � Electronic signatures can bind parties to a contract. The law lists some instances in which electronic signatures are not valid. For example, you still have to go to your lawyer’s office to sign your will or a divorce decree; an electronic signature simply will not do. But the intent of Congress was clear: it is the rule and not the exception that electronic documents and electronic signatures shall be bona fide legal instruments. DEFINE ELECTRONIC RECORD, ELECTRONIC SIGNATURE Now comes the interesting part. You may be wondering, just what is an “electronic record,” and just what is an “electronic signature?” The statute defines these terms as follows: “Electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities. “Electronic record” means a contract or other record created, generated, sent, communicated, received or stored by electronic means. “Electronic signature” means 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. Legislators and technologists call the law “technology neutral.” It is not intended to favor any particular form of technology over another. Wisely, Congress did not build obsolescence into the law by prescribing the means to create an electronic record or an electronic signature. For example, most experts interpret the catch-all phrase “or similar capabilities” in the definition of the term “electronic” to include biometric properties. Thus, this law is seen as placing an imprimatur on emerging validation techniques such as retinal scans, digital fingerprints and voiceprints. What is clear, in the vernacular of today’s technologists, is that signatures and documents no longer need be “wet.” A signature consisting of electrons stored in patterns of zeroes and ones is just as valid as a signature that flows from the ink of a pen. SOME KEY TERMS YOU NEED TO KEEP IN MIND Most discussions about electronic signatures quickly evolve into a discussion about technology. Some key terms to keep in mind: Electronic signature:A signature created by any of numerous electronic and technological means. Digital signature:A technology-specific electronic signature that relies on encryption to assure authenticity. PKI (public key infrastructure):A common method of digital signature encryption that relies on a publicly available key (a numerical algorithm) and a private key to create an electronically safe signature. Digital certificate:A service provided by a trusted commercial entity that authenticates the identity of a holder of a private and public key. The complexity of the terminology reflects the developing nature of electronic signature technology. Digital signatures, a subset of electronic signatures, are the most commonly used method of signature authentication and verification in commercial transactions. Many experts believe that as biometric techniques of identification become more accurate and less expensive, such techniques will become the predominant tools for electronic identification. TRADITIONAL WAYS vs. WAYS OF THE INTERNET The issue behind electronic signatures has its foundation in one of our most fundamental principles of law: namely, that before a party can be held accountable for certain obligations, that party must have agreed to undertake such obligations. How do we know if someone has agreed to do something? In informal circumstances, perhaps by a handshake or a nod of the head. In more formal circumstances, by taking pen to paper and signing a document. But these traditional forms of validating assent do not transpose well to the Internet. Thus the issues behind electronic records and signatures are age-old concerns of authentication and validation. How can parties to an agreement verify the contents of what they have agreed to? How can parties to an agreement authenticate that each is the person they purport to be? E-Sign allows parties to presume the validity of electronic documents and electronic signatures. Presumption is a long way from certainty. The validity of a contract is always susceptible to claims of fraud, mistake and incapacity. A party to a contract may attempt to dissolve a contract on the basis that the signer was an impostor, or that the document was altered after it was signed, or that the party signing was not capable of understanding the contract (e.g., a minor). These issues are magnified on the Internet, where “mouse-to-mouse” replaces “face-to-face.” How does a seller on eBay know whether her rare antique has been purchased by an adult or a child? E-Sign provides a base case for an answer but, like life, that answer may change as more facts are discovered. Many commercial contracts contain a clause such as “This document may not be modified except by a writing signed by each party.” When that was drafted, perhaps the Internet did not exist. Now vice presidents of each company exchange e-mails in which an adjustment to price is discussed. Has the contract been amended? It all depends, which is probably not the answer management wants to hear. It is better not to leave such details to chance. E-Sign contains a provision stating that the law “does not require any person to agree to use or accept electronic records or electronic signatures.” If you are a large organization, it is a good idea to identify by name or by title in a contract those individuals who can bind the organization. If you do not want an e-mail to be considered a binding document, specify in the contract the kind of document that can bind the parties. It may be a good idea to review large or significant contracts to determine whether they need amendment before a problem situation arises. If you do business over the Internet and rely on a “click-wrap” or “click-through” form of agreement with your customers, you may want to alter the agreement in light of E-Sign. The validity of such agreements has always been uncertain. In some circumstances, courts have found these agreements to be binding; in other circumstances, not binding. An issue that troubles courts is whether a user’s clicking on a pop-up window really constitutes assent. With E-Sign, a more prudent approach to obtaining consent may be to ask users to sign a statement that they have read and agree to such terms and conditions, and have that statement delivered to the company as an e-mail. In an effort to promote electronic commerce, Congress included an intriguing section on “electronic agents,” more commonly called “bots.” Sec. 101(h) states that a contract entered into by an electronic agent is binding on the principal. So if you shop by bot, make sure your bot is well-behaved and knows its limits. WHAT’S ON THE HORIZON? GUIDELINES, FOR SURE On April 1, 2001, certain provisions of the law will take effect that address the retention of electronic records. Essentially, E-Sign permits companies to satisfy record retention requirements by use of electronic records. It is expected that the secretary of commerce will publish guidelines on electronic record retention before the April deadline. The regulation and validation of electronic documents and signatures does not end with E-Sign. To date, 22 states have adopted similar laws, based on a model statute called the Uniform Electronic Transactions Act, or UETA (definitely not as catchy as E-Sign) for short. UETA plugs some holes that were intentionally placed in E-Sign. According to Senator Andrea F. Nuciforo Jr., D-Pittsfield, who serves as chairman of the joint Committee on Banks and Banking, an electronic signature bill will be introduced in the Massachusetts Legislature this year. Sen. Nuciforo supports the proposed measure and comments, “I expect that the Massachusetts bill will look very much like the uniform act that has been considered by other states throughout the country. A Massachusetts UETA will provide our state courts with jurisdiction and will validate E-signatures for Massachusetts transactions that do not affect interstate commerce,” he said. It is often said that one of the virtues of the Internet is that no one knows if you are a dog. Now, however, if you bark, your woof is your word. Mr. Kelman practices at Boston’s Posternak, Blankstein & Lund , where he represents technology clients and focuses on cyberlaw issues. He can be reached by email at Peter Kelman.

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