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The Legal Validity Of Electronic Contracts


A signed written contract is extremely important in business dealings, especially if a dispute arises later about what the parties meant when they entered into an agreement.  In fact, if some transactions are not in a written form, they are not given legal effect, and a business can lose a lot of money for failing to take a few simple steps.  In the twenty first century, the requirement or need to have a contract in writing does not mean that it has to be a physical writing in ink on paper.  Electronic documentation and signing of documents is just as acceptable.

In order to have a contract, there has to be what is referred to as a meeting of the minds, meaning the parties have to be agreeing to enter into a contract, whether or not all the terms are discussed.  If an offer and an acceptance are communicated, even via text message and email, chances are the agreement will be upheld.  Some contracts, for example for the sale of real estate, are required by law to be in writing.  The form of the writing is not restricted, and could be an electronic agreement.

For interstate contracts, the federal Electronic Signatures in Global and National Commerce Act (ESIGN) gives electronic agreements and signatures made in the course of interstate commerce the same legal authority as physical signatures.  The law states that documents and signatures cannot be denied legal effect or enforceability simply because they are in electronic form.  An electronic document or signature still has to undergo authentication as any other document or signature would in a contractual dispute.

Contracts may also be formed through the clicking of an “Accept” or “I Agree” button on an electronic document. These kinds of buttons accompany online consumer “terms of service” notices from businesses.  If your business uses this kind of button, the consumer or user’s click on the button usually constitutes an acceptance of the terms of service, whether or not the user read the terms before clicking.  The consumer can be required to submit to the terms of the agreement, for example binding arbitration, even if he did not read or understand what that term meant.

Entering into a contract because of an error in texting or a rushed email could cost your business a lot of money.  In order to protect yourself and your business from accidentally binding yourself in a contract, you should take some precautionary steps.  You can add disclaimers to your emails and those of other senior management at your company, specifying that any emails you send do not constitute an acceptance or modification of an agreement.  You should also avoid texting about important issues.  If you have a preexisting relationship with the other party, make sure to include clauses in any subsequent contracts that say that agreements shall be finalized through the execution of formal legal documents.

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Charlip Law Group L.C.

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