Whether you can use electronic signatures to bind parties to a legally enforceable contract in California depends on the parties’ agreement and the method of signature. Be careful to fulfill the below requirements, or a court might find that the agreement you thought you signed actually is unenforceable.
California’s Uniform Electronic Transactions Act (“UETA”) governs the use of electronic signatures on agreements subject to California law. California Civil Code §§ 1633.1-1633.17. The UETA defines an electronic signature as “an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.” California Civil Code § 1633.2(h).
Not only must a person have intent to sign the electronic record, but the signature must be attributable to that person. In practice, this often means showing that there was an effective security procedure in place ensuring that the person who signed the document was the same person whose electronic signature was affixed. California Civil Code § 1633.9(a); see Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal. App. 4th 836.
Further, the parties to the contract must agree to execute the contract electronically before it is signed. California Civil Code § 1633.5(b). Whether parties did agree is determined from the circumstances of the transaction, including conduct. Including a clause in a standard form contract that authorizes execution by electronic means is not enough; instead the parties to a form contract must have a separate, optional electronic authorization agreement.
Two recent California court cases highlight the seriousness with which courts view compliance with the UETA requirements. In one case, employees agreed to an arbitration clause by logging in to software using each employee’s username and password, then electronically signing an acknowledgement form. The court found that the agreements were not enforceable because the employer could not show that each signature was attributable to the signer. See Ruiz v. Moss Bros. Auto Group, Inc. (2014) 232 Cal.App.4th 836. In another case, the parties exchanged phone calls, emails, and texts, finally reaching an agreement and each sending a confirming email stating that they agreed to the contract. The court found that the contract was not enforceable because the parties had not agreed that signing the contract would be electronic and typing a name at the end of an email was not enough. See J.B.B. Inv. Partners, Ltd. v. Fair (2014) 232 Cal.App.4th 974.
Interpretation of the UETA as it applies to business contracts may be tricky, so consult a lawyer to help protect your business. Michael Leonard, Esq., of San Diego Corporate Law, named a “Rising Star” for 2017 by SuperLawyers, has a wealth of experience drafting and reviewing contracts. To schedule a consultation, e-mail San Diego Corporate Law or call Mr. Leonard at (858) 483-9200.