Electronic Contracts

As the dynamics of technology are changing, traditional contract law has also been affected in the recent years. Prior to year 2000, electronic signatures faced numerous legal problems which challenged their authority. But under a federal law called the Electronic Signatures in Global and National Commerce Act (“ESIGN”), electronic signatures are just as valid and enforceable as those signed by the contracting party's own hand. As such, electronic contracts are now the same as traditional, paper contracts, with the exception that they are executed on the web or by using electronic media.

Generally, an agreement (i.e., a contract) is created when there is an understanding and acquiescence regarding the terms and conditions between the respective parties. There must be an offer, acceptance and consideration. As such, an electronic contract is formalized when the parties (i.e., two individuals or entities) show their consent to the material terms, which is memorialized in a written document. The consent can be either express or implied. For example, it is express when the user enters his/her name in the “I Agree” button on the website. It can also be implied if the user continues to use the website with the understanding that by using the website he/she has accepted its terms and conditions.

A user agreement, terms of service, or terms of use, is provided to website visitors to provide the ground rules for website access and usage. They generally contain terms and conditions which reduce the website owner’s exposure to liability. In today’s high-tech world, most of the disputes relate to whether there was contract formation. Stated otherwise, was the other side properly notified of the terms and conditions of the agreement?

A user agreement, terms of service, or terms of use, is provided to website visitors to outline the ground rules for website access and usage. They generally contain terms and conditions, which reduce the website owner’s exposure to liability. The Uniform Electronic Transactions Act (“UETA”) is one of the uniform acts which was proposed by the National Conference of Commissioners on Uniform State Laws (“NCCUSL”). Its main purpose is to provide a universal body of law to the states related to the validity of electronic contracts as a viable medium of agreement. The State of California has incorporated this act in Civil Code sections 1633.1 et seq. This law defines an "electronic record" as an enforceable writing which a court may review to ascertain the terms of an agreement between contracting parties. This statute defines an "electronic record" as information which is created, generated, sent, communicated, received, or stored electronically. It seems to include e-mails, website terms and conditions, license agreements contained in a software installation program, and purchase orders as enforceable agreements.

The readers must be advised that the UETA includes a list of transactions that are not covered by its terms. Stated otherwise, there are certain transactions which will not be given legal effect if finalized electronically. Obviously, providing a comprehensive list would be lengthy. Nevertheless, the following items should provide a better understanding of the types of excluded transactions:

1. Wills, codicils or testamentary trusts
2. Transactions involving negotiable instruments
3. Bank lending transactions
4. Foreclosure and eviction notices
5. Consumer matters (e.g., credit reporting, and medical information release forms)