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Are electronic signatures on agreements valid? Will I be able to enforce the agreement? Is blockchain the ultimate electronic signature?

Business is increasingly being conducted digitally, including electronic execution or confirmation of agreements. Pen on paper is being replaced by the exchange of PDF signatures, website confirmation buttons, software PIN signatures and a diverse range of electronic signatures. Agreements can be concluded by signing a tablet using a finger or stylus, affirmation by audio or video, and other methods. This trend is likely to eventually segue into proving the validity of agreements through blockchain technology. (A discussion of blockchain technology and the law will take place in a future newsletter)

Are these electronic signatures and confirmations valid? In most situations, the answer is “yes”.

Virginia’s Uniform Electronic Transactions Act (UETA), Va. Code §§59.1-479, et seq. and federal Electronic Signatures in Global and National Commerce Act (ESIGN), 15 U.S.C. §7001, et seq. permit electronic signatures for a broad range of agreements. UETA defines electronic signature as “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.” Under UETA, (a) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form; (b) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation; (c) If a law requires a record to be in writing, an electronic record satisfies the law; (d) If a law requires a signature, or provides for certain consequences in the absence of a signature, an electronic signature satisfies the law.

Certain requirements must be met in order to enforce an agreement executed by electronic signature. UTEA requires that the parties must have “agreed to conduct transactions by electronic means”. Under UTEA, “(w)hether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.” Therefore, it is preferable to have a provision in the agreement which expressly states that the agreement may be signed electronically and evidenced by electronic signatures. An exchange of e-mails, text messages or other electronic correspondence may be a sufficient course of conduct to establish an agreement.

As with all agreements, the party attempting to enforce the agreement in court must prove the validity of the electronic signature by demonstrating that the signature is verified, unique to the signer, and under the control of the signer. In order to successfully contest the validity of an agreement, a party must demonstrate that the agreement could have been changed after the signing or that the process for obtaining the signature was unreliable. Businesses that enter into agreements through electronic means must adopt consistent practices to ensure that such agreements will be considered valid in a court of law. This can best be accomplished by always obtaining signatures, by documenting consent to execution by electronic signatures, and by storing electronically signed agreements in an organized manner and database.

Many commentators have remarked that certain documents in Virginia cannot be executed by electronic signature or electronic means. Included on the list are wills, codicils, testamentary trusts, negotiable instruments, confession of judgment promissory notes, investment securities, and secured transactions governed by the Virginia Uniform Commercial Code (UCC). However, a credible argument can be made that some (and maybe all) of these documents can be executed in electronic form. For example, it would seem that a holographic will written by hand with a stylus on a tablet should be enforceable. Of course, one should not take a risk by testing the limits of electronic signatures without legal precedence.

 

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The attorneys of Gross & Romanick, P.C. possess substantial experience with respect to drafting, revising, and negotiating a broad range of business agreements and transactions. In order to simplify and streamline the contract execution process, we regularly utilize electronic signatures. Our firm represents clients in business transactions and civil litigation in the state and federal courts of Virginia, Maryland and the District of Columbia.Please consider our law firm for all of your business legal needs, including registered agent services, litigation, contract review, buying and selling businesses, business start-up and formation, commercial leases, evictions, employment matters, and debt collection. Go to www.gross.com to learn more about us. Call us at 703-273-1400 or send an e-mail to law@gross.com.

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About Our Law Firm

Gross & Romanick, P.C. is a law firm located in Fairfax, Virginia. Since 1980, our attorneys have dedicated themselves to providing cost efficient legal services to individuals and businesses in Northern Virginia and the Washington, D.C. Metro Area. We meet our clients’ needs by applying hard work with integrity to find creative and practical legal solutions. Our extensive business litigation experience, and our understanding of the transactional mistakes that often lead to expensive courtroom battles, helps us to advise our clients on business deals and the resolution of commercial disputes. To learn more about our firm, visit: www.gross.com or call us at 703-273-1400