Enforcing an Electro ...

Enforcing an Electronic Contract? SGMT* (*Sounds Good to Me!)

March 21, 2013 | by Kevin C. Baltz

We live in an electronic world.  Everywhere you look, someone is punching away on an iPhone, iPad, laptop or even a Blackberry.  As a society, we’ve gotten to the point where we would rather update our Facebook status than speak to the person sitting next to us on the train.  As you might expect, businesses have followed suit.  A person is now able to purchase just about anything without leaving the house.  In fact, businesses routinely rely on the World Wide Web (commonly known as the “internet”) for advertisement and actual sales.  The question is, “can one really enforce an electronic contract?”  Thanks to the Uniform Electronic Transactions Act (UETA), the answer is “yes.”

The National Conference of Commissioners on Uniform State Laws (the “Uniform Law Commission”) adopted the UETA with the intent of “removing barriers to electronic commerce” by establishing uniform laws to be applied to such commerce.  See UETA (1999).  According to the Uniform Law Commission:

UETA does not attempt to create a whole new system of legal rules for the electronic marketplace. The objective of UETA is to make sure that transactions in the electronic marketplace are as enforceable as transactions memorialized on paper and with manual signatures, but without changing any of the substantive rules of law that apply. This is a very limited objective—that an electronic record of a transaction is the equivalent of a paper record, and that an electronic signature will be given the same legal effect, whatever that might be, as a manual signature. The basic rules in UETA serve this single purpose.

See Uniform Law Commission Electronic Transactions Act Summary.  UETA is currently enacted in 47 states.

Under UETA, an “electronic signature” is defined as “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”  The primary operative language of UETA is contained in Section 7, which provides:

SECTION 7. LEGAL RECOGNITION OF ELECTRONIC RECORDS, ELECTRONIC SIGNATURES, AND ELECTRONIC CONTRACTS.

(a)          A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.

(b)            A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.

(c)             If a law requires a record to be in writing, an electronic record satisfies the law.

(d)            If a law requires a signature, an electronic signature satisfies the law.

See UETA, § 7. Consequently, UETA was expressly drafted, inter alia, with the intent of satisfying any state Statute of Frauds requirements.  However, UETA “applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct.”  See UETA, Section 5 (b).  Thus, under UETA, consent to enter into an electronic transaction is essential.

A recent case from the Supreme Court of Tennessee dealt with the enforcement of an electronic signature under UETA. In Waddle v. Elrod, 367 S.W.3d 217 (Tenn. 2012), the appellee, Ms. Waddle, asserted a claim against the appellant, Ms. Elrod, alleging that Ms. Waddle had transferred property to Ms. Elrod under undue influence. On the eve of trial, Ms. Waddle and Ms. Elrod entered into a settlement agreement under which Ms. Elrod agreed to return her interest in the property to Ms. Waddle. However, Ms. Elrod subsequently refused to execute the formal settlement agreement and alleged that the Statute of Frauds, Tenn. Code Ann. § 29-2-101, barred enforcement of the settlement agreement.

In reaching its decision, the Waddle Court examined the following email exchange between counsel:

Greg:

This confirms that we have settled this case on the following terms:

Elrod deeds property interest back to Waddle, Both [sic] parties sign full release, Waddle bears no court costs.

Let me know if I have correctly stated our agreement.

Thanks,

Mary Beth

At 5:02 p.m., Mr. Reed responded:

That is the agreement. I understand that you will draft the deed and take a shot at the court’s order. No admission of guilt is to be included.

Greg Reed

Id. at 220-21.  Based upon this email exchange, the Court held that “[t]he parties, through their attorneys, evidenced an intent to finalize the settlement by electronic means; thus, the UETA applies … Pursuant to section 47-10-107(c), the emails counsel exchanged constitute a signed memorandum, note, or writing for purposes of the Statute of Frauds.”   Id. at 228 (citing Crestwood Shops, L.L.C. v. Hilkene, 197 S.W.3d 641, 651-53 (Mo. Ct. App. 2006)).   Accordingly, the Waddle Court enforced the settlement agreement and required the transfer of the real property at issue.

“The UETA, recognizing that all sorts of transactions are now routinely conducted by electronic means on a daily basis, obviates the need for a handwritten signature.”  Waddle,  367 S.W.3d at 228-29.  Consequently, in this electronic age, UETA provides the means to enforce an electronic transaction where a party, by his or her conduct, has consented to the transaction.

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