Hi, I’m Cliff Ennico, Legal Editor of SBTV.com and author of the bestselling book Small Business Survival Guide, so you’re planning on signing a contract with somebody else. You put together a bunch of papers, you overnight them to the other person and lo and behold the next day, an email comes in to your office with a PDF file, a photocopy of the contract with the other party saying that you’re on it but we call a digital or electronic signature. Is it valid? Can you rely on it? Can you sign the document in the same way? What’s the law here?
Well the good news is that electronic signatures are just as valid as paper or pen and ink signatures. There’s a federal law and some state laws too just about every state now that say that you cannot decimate against someone juts because they sign their documents in a digital or electronic fashion. Those signatures are, for legal purposes, just as valid as a pen and signature. That’s the good news.
But there’s some bad news too. This law is only date from 1998 and 1999. The Cache Law is still developing in this area and there are lots of questions that we lawyers can’t answer about when in a specific instance digital signatures will be valid. Now when we talk about digital signatures, we’re talking about two things. The most common digital signature is what we call an encrypted signature. This is a situation in which someone signs a document and does and sends it to you using what is called a private key. It’s a piece of software that basically says to the other person, “I am Cliff Ennico and I am the person who affixed this signature to the document”. The typical thing with digital signatures is not whether or not they’ll be enforceable. That’s easy. The law states clearly that they will be. The difficult thing with digital signatures is proving when a digital signature is authentic.
Let’s say you get an email with a PDF file and there is a Cliff Ennico signature on the document. Ok, that is my signature and maybe you’ve seen my signature before. You’ve compared it to a bunch of others and it looks like my signature but how do you know that one of my employees didn’t just misappropriate my signature and stick it on a whole bunch of document and send them to people hoping that he gets me into a legal trouble. What if this is, in other words a forgery? You don’t know. The only thing you can be sure of is that if I am using a private key and that private key was too sent along with the document, then you do know that it’s probable that I did not sign that document, that that is probably a forged signature. What you should do in that case is email me back and say, “Hey Cliff, just out of curiosity. I didn’t see your private key on this, you know, what’s the story here? Is this really your signature?” And by the way, that’s a very good practice to engage in, in any of that.
Whenever someone send you a digital or an electronic signature and you’re not sure if it’s valid or not, don’t just rely on it. Send an email or call the person up and say, “Hey I just got your document. You know, tell me, did you in fact sign that document? Is this signature valid? Are you intending to be legally bound by that?” And get an email, preferably an email back from me saying “Yes, just to know, I’m sorry I forgot to send you all the stuff with the document but yes, I did sign that. I intend to be legally bound on that document. We’re fine. We’re off to the races. Now let’s get to work and start fulfilling this contract whatever it is.” That is the best way in the long run to handle digital signatures. Whenever you get a digital signature and you are not a hundred percent sure that it’s from the person that you are dealing with, let’s say for example, you don’t have a course of dealing, what you’re doing is kind of get a contract every week. And every Friday at three o’clock, you get this week’s purchase order from the other person. In a situation like that, I think you are more entitled to rely because you always know that three o’clock on Friday, Cliff Ennico sends you a purchase order. In a situation like that, I don’t think you have to go into all the diligence that you’d have to do with other situations. But if it’s a situation where you’re really not sure, just send an email to the other person saying, “By the way, I did receive your PDF file copy attached. Is this your signature? Do you intend to be legally bound?” And then get an email back from me saying, “Yes I did sign it. That is my signature. I intend to be legally bound.” And make sure you print out and save those email messages for future reference because if I ever deny this contract down the road, if I ever try to claim that that was a forged signature or someone misappropriated my private key and was using it without my permission. Those emails are going to be the only defense you have or the only evidence you’re going to be able to prove in court or submit in court, proving that I indeed was the signer of that document and that I intended that document to be signed by me.
I’m Cliff Ennico for SBTV.com.
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