Is your electronic signature enforceable?

Dear Alex: I would like to know once and for all, are electronic signatures enforceable or not? In the course of my business, I have been required to go into our bank branch to physically sign financial documents, our commercial real estate broker emailed our real estate documents for e-signature, most of our contracts are scanned and emailed, but some vendors require original signatures. It seems inconsistent and is very confusing!

If this issue seems confusing, that is probably because the law itself leads to confusion, which subsequently leads to businesses being confused when they implement their own contracting policies.

California was the first state to adopt the federal Uniform Electronic Transactions Act (UETA), which called for electronic signatures and electronic contracts to carry as much legal weight and enforceability as written, printed documents and hand signatures (with certain exceptions).

The UETA has been adopted by 46 other states, and is enforced in the District of Columbia, Puerto Rico and other federal territories. In California, the UETA is codified Civil Code Sections 1633.1 et seq. and applies to all electronic records or signature created, sent, communicated, received or stored on or after Jan. 1, 2000. The confusion arises because of the many exceptions to this rule, both in its federal form and that California has carved out on its own.

Although most common contracts and business agreements are enforceable by electronic signature, there are certain types of documents, generally of the sort that are subject to higher risk of fraud, which do require original signatures, or in which electronic notice is insufficient (such as in termination of a tenancy). The exceptions are where confusion sets in.

There are many exceptions, and most of them are identified by acronyms and references to other code sections. Some of the more typical exceptions include wills, codicils, and testamentary trusts. In the business realm, many of the documents and records governed by the Uniform Commercial Code (UCC) are excepted from the UETA, primarily as they relate to sophisticated financial transactions.

Real estate contracts, although they fall within one of the articles the UCC listed as an exclusion to the UETA, are permitted to be conducted electronically and are enforceable by electronic signature. Similarly, Article 2 of the UCC related to the sale of goods, falls within the UETA and transactions subject to that Article may be conducted electronically.

In practice, the majority of day-to-day contracts among small businesses may be made and signed electronically. One of the most familiar implementations of electronic signatures are the ubiquitous online “Terms and Conditions,” which so many software providers require.

Although clicking “I Accept” in response to innumerable pages of small print is a prerequisite to using the software, and I will admit to having accepted terms and conditions without reading them, that mouse-click creates a binding agreement.

Alex Myers is a business attorney with Myers & Associates in Napa. Reach him at alex@myers-associates.com or 707-257-1185. The information provided in this column is not intended as legal advice, nor does it create an attorney-client relationship. The information is not a comprehensive analysis of the law — if you need legal advice, contact an attorney.

This column was revised for LinkedIn, and originally ran in the Napa Valley Register on July 21, 2015. You can read it on the Register's website here: http://tinyurl.com/pu9h72n