By Ann O’Connell , Attorney UC Berkeley School of Law
Updated by Glen Secor , Attorney Suffolk University Law School
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Most business contracts these days are made without handwritten signatures on paper copies. An electronic contract is a contract created and signed electronically. Electronic contracts are as legal and enforceable as traditional paper-and-ink contracts. Electronic contracts provide valid and convenient solutions for businesses—you can sign them anytime and anywhere.
An electronic contract (an "e-contract") is an agreement created and signed electronically—no paper is used. The basic requirements to form an e-contract are the same as for a paper contract:
In the case of an e-contract, mutual assent includes the intent to make the contract electronically. (We cover the requirements for e-contracts in more detail below.)
An electronic signature (an "e-signature") is a digital file or symbol—such as a scanned pen-and-ink signature or a typed name—that someone attaches to or places on a document to show that person's intent to sign the document. An e-signature can also come from an action, such as clicking on an "Accept" or "Agree" button.
People e-sign documents in many ways, including by typing their name into the signature area, pasting in a scanned version of the their signature, clicking an "I accept" button, or using more sophisticated digital signature technology (see below).
Chances are you encounter e-contracts all the time. Here are some examples of e-contracts:
Many people and businesses use software applications to request an e-signature. Common electronic signature software applications include:
Federal legislation enacted in 2000, known as the Electronic Signatures in Global and National Commerce Act (ESIGN), made most e-contracts and e-signatures as legal and enforceable as traditional paper-and-ink contracts and signatures for transactions in interstate and foreign commerce.
In addition, all states have adopted either the Uniform Electronic Transactions Act (UETA) or their own e-signature laws that make electronic signatures and contracts valid. You will need to research your state's e-signature law to determine when and how e-signatures are allowed. The combination of federal and state laws ensures that most e-contracts and e-signatures are valid regardless of where the parties live or execute the contract.
Under ESIGN, UETA, and most state laws, people and businesses must take certain steps to make e-contracts and e-signatures valid and enforceable. These steps often include the following, but you should check your state's electronic signature laws for additional or different requirements.
To make sure that they're complying with the relevant law, businesses and people who regularly use e-contracts should consult with an attorney to review their electronic practices and disclosures.
The Government Paperwork Elimination Act (GPEA) addresses transactions between citizens and the federal government. The GPEA created requirements and incentives for the federal government to make electronic versions of its forms available online.
Many federal consumer transactions—such as paying taxes and registering trademarks—can now happen online. State governments have followed the federal government's example—for example, most now allow consumers to e-file and e-sign documents involved in corporate and vehicle registration.
Some legal documents—most of which aren't contracts—must be signed in traditional paper-and-ink format. ESIGN specifically excludes:
Even though ESIGN doesn't apply to these documents, some state laws might allow e-signatures under certain circumstances. For example, many courts allow pleadings and motions to be e-signed when the parties follow specific court procedures.
Also, ESIGN's e-contract exclusions are subject to change—ESIGN lets federal regulatory agencies allow e-signatures if the agencies determine that the relevant exclusion is no longer necessary for the protection of consumers, and eliminating the exception wouldn't increase the risk of harm to consumers.
If you've received an e-contract you're expecting from a source you know who asks for your e-signature, you can probably determine whether it's safe to sign yourself. If it's a legitimate contract that doesn't need to be signed in ink-and-paper format, your e-signature is likely legally binding. Likewise, if you need someone else to sign a contract and an e-signature is allowed in that case, then you can probably send them an e-contract. Just make sure your document is secure and you've met the additional requirements.
But if you're not sure whether your situation allows for an e-contract, you should speak with an attorney. They can help you determine whether your e-signature is binding and whether your e-contract is a valid substitute for a paper contract. A lawyer can also help you review your contract to make sure it has the required elements to be enforceable.