Because electronic signatures have become more common in the business community, now is a good time to review some of the legal issues that arise in the use of electronic signatures.
There are a number of statutes that give legal effect to electronic signatures in many instances, and electronic signatures have been accepted as valid by the courts. The use of software such as DocuSign and Adobe Sign (previously known as EchoSign) is becoming common. This software offers some features and related services that are not available to negotiators who are simply exchanging emails. From a legal standpoint, the most noteworthy feature is an audit trail that can be used in court to show the circumstances surrounding the execution and delivery of the documents, and to authenticate the signatures.
Attorneys often have to introduce documents in court proceedings. It is not simply a matter of handing a copy of the contract to the judge. A witness with knowledge must identify the contract and testify that the parties did in fact execute and deliver the contract. If the representatives of each party were together in a room and watched each other sign the document, it may not be difficult to provide that testimony. But if the documents were transmitted over the internet, and the only evidence is that the sending party received an email confirming the agreement, it may be more difficult—particularly if the opposing party denies sending the email confirmation. DocuSign and Adobe Sign keep a record of when the contract was emailed to the parties, when they signed the contract with their electronic signatures, and when the signed contract was returned to the sender. They also offer security features intended to confirm the identity of the signer.
This audit trail can assist the party seeking admission of the document in a court proceeding. In one case, for example, Schrock v. Nomac Drilling, LLC, 2016 WL 1181484 (W.D. Pa. 2016), the defendant claimed that the EchoSign electronic signature on the agreement was not his. He claimed that the email transmitting the document was directed to a company email address rather than to an email address that was personal to him. However, the court agreed with the plaintiff that the signer's identity was adequately verified by the fact that the signer entered the last four digits of the defendant's social security number, as required by the EchoSign software, and evidence showed that the defendant was present on the worksite at the time of the e-signature. The Schrock case has no authoritative force because it is a lower court opinion and was not published, but it illustrates that some courts are willing to accept the procedures offered by e-signature software to authenticate the signatures.
However, it can also be a hindrance if the parties have been less than diligent in following the procedures required by the software. For example, the software inserts a code on each page of the document to ensure that the document to which the signature was affixed was the same document provided to the party for signature. In business, however, it is not unusual for parties to sign signature pages in advance of closing and then for those pages to then be attached to a completed final version of the agreement at closing. In the final document, the code may appear only on the signature page, which might make it difficult to authenticate the document in court.
In another unpublished lower court proceeding, Scholar Intelligent Solutions, Inc., v. New Jersey Eye Center, P.A., 2016 WL 5745112 (D.N.J. 2016), the plaintiff relied on a DocuSign signature, and the defendant denied signing. The court found that the lack of a DocuSign code on the signature page raised a significant issue that required a trial since the other pages of the contract did have such a code.
The software might also insert into the document alerts that there were irregularities in the execution or delivery of the documents. The software, for example, might warn that one or more of the signatures could not be authenticated or are missing, or that the document has been changed in some way. In some instances, those warnings may not be entirely accurate in their description of the issue. For example, it may be that only some of the parties executed the document electronically. The signatures of those who signed in ink may be reported as missing because they were not added to the electronic version of the document. The warnings may in some instances help the parties comply with all of the procedures imposed by the software, but if the parties do not follow up on those warnings or procedures, then the final signed document may raise ambiguities that might motivate a court to require additional proof or simply deny admission of the document into evidence. Moreover, an attorney who is being asked to give a legal opinion based on such documents might balk at doing so.
Although there are a number of reported cases where the courts have admitted documents signed electronically and there are statutes that require them to do so in some instances, there are few reported cases in this area as of the current time. There is little doubt, however, that the expanding use of electronic signatures and software designed to facilitate electronic signatures will continue to give rise to disputes that will need to be resolved by courts. Parties who use such software should be aware that the software is very demanding in its authentication procedures. If the parties are not able to comply with those procedures, then it might be better to use a more traditional, non-electronic method of executing and delivering the documents.
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