Legal aspects of electronic signatures: now that an electronic signature is recognized as a legal signature and firmly rooted in U.S. law, the future looks very promising for its use.

With the advent of e-commerce, it is incumbent upon contracting professionals to understand this new legal environment, as businesses will be entering into increasing numbers of contracts based solely on electronic communications. A primary issue that arises is the use and legality of electronic signatures. This article will review the existing legislation and regulations addressing electronic signatures, and examine the conditions under which an electronic signature is considered legal.

The digital age and e-commerce has ushered in a whole new set of issues relating to how transactions are conducted between buyer and sellers, and what actually constitutes a "legal signature." The law is very permissive as to what constitutes the legal signature of an individual. It is consequential, therefore, that contracting professionals have sufficient knowledge of the concept of a legal signature in our ever changing digital environment that continues to encroach more and more into our everyday business practices.

Definitions of Various "Signatures"

The law recognizes any type of signature, as long as the person making it intended it to be his or her signature. Many people are under the mistaken belief that they need to use their full name in a signature, but there is nothing in the law that requires this condition. Initials can substitute for one or both given names, and even an initial is an adequate substitute for the surname. The law is so loose in what constitutes a legal signature that a signature does not have to be legible to be adequate.

The only requirement is that the signature or mark was intended as the person's legal signature and was meant to be affixed to be the document. Legal signatures do not need to be made in pen and ink. A typewritten signature is also acceptable (but may prove difficult in a court-room), as is a mark or cross made by a person unable to write. Another person may even sign for another individual, as long as it is done in the person's presence and at his or her direction. (1) With such a wide discretion in the law, it is easy to conceptualize many different scenarios where contracting professionals could possibly run into problems.

Electronic Signatures

The term "electronic signature" is used to describe a full range of electronic means to confirm the sender of a message. They range from a file, including graphical images (which are simple but unreliable), to biometric techniques, such as iris scans (which are complex but reliable). (2) Under the Electronic Signatures in Global and National Commerce Act (E-SIGN Act), an electronic signature is defined as "an electronic sound, symbol, or process attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record." (3) By defining electronic signatures so broadly, even telephone keypad agreements (e.g., "press 9 to agree, or 7 to hear the menu again") are considered legally enforceable electronic contracts under the E-SIGN Act. The act of entering a log-in name and password may also be deemed a legal signature. Therefore, a contract may not be denied legal effect because it is in an electronic format; nor can a contract be denied legal effect, solely because an electronic signature was used in its formation. (4)

Digital Signatures

Some people use the terms "electronic signatures" and "digital signatures" synonymously. Although this is not incorrect--as digital signatures are actually a form of an electronic signature--the term "electronic signature" is used to describe the full range of electronic means to confirm the sender of a message. (5)

To define digital signatures and how they work, it is helpful to begin by clarifying what they are not. A digital signature is not a just a digitized graphic image of a handwritten signature because the graphic image alone can be cut and pasted on to any electronic document, making forgery a simple matter. This is an important distinction: "Digital" signatures have nothing to do with "digitized" …