Updated October 14, 2020: 

E contracts, or electronic contracts, are a type of contract formed online. The interaction between the parties in forming the contract can be by many different electronic means: e-mail, through a computer program, or by two electronic agents programmed to recognize the formation of the contract.

Rules regarding the formation, governance, and basic terms of an e-contract are included in The Uniform Computer Information Transactions Act. Contract law principles and remedies apply to e-contracts. E-contracts with e-signatures just like traditional paper contracts are legal and enforceable. The same basic requirements of a binding contract are required of both: an offer, an acceptance, consideration, competency, capacity, etc.

Companies that work and communicate online with consumers can use e-signatures to conduct their business. Websites that connect two businesses, B2Bs, can also use e-signatures to form enforceable contracts in requesting services or ordering supplies. The law now allows these companies to conduct business entirely online. Businesses save big with this ability and can pass on those savings to their consumers.

E-Contract/E-Signature Definition

An e-contract is a contract created and signed electronically. You may have written a contract in Microsoft Word, but instead of printing it out, you email it to someone, and they sign it electronically and email it back to you.

Most of us understand e-contracts are formed when you click the "I Agree" button. We, as consumers, click that button at the bottom of the page containing the long and complicated document of terms of the license before you can download the app, listen to the music, start using the program, etc.

This is efficient and easy; however, it can cause a problem. It is easier to miss an important provision or confuse a person’s meaning when reading an online consent form, text message, or email than when you are speaking with them face to face.

Another way you may have signed with your e-signature is by typing your name into a signature box and then checking the box below it that says you understand that this is your legal signature.


Other means of providing and obtaining e-signatures have been developed, including:

  1. A means of capturing a fingerprint digitally
  2. Electronically recording your signature with hardware

See the Worldwide Web Consortium’s (W3C) developments to follow along with new progress.

Cryptographic Signatures (PKI)

Electronic signatures are different than digital signatures. "Digital signature" is the term used when identifying cryptographic signatures. "Electronic signature" is the term for a paperless way to provide a signature online.

Cryptography is the science of securing information. Cryptographers work with systems that scramble information and then unscramble it. These experts use Public Key Infrastructure (PKI) as their method of signing contracts online because it is the most reliable and secure.

When you use PKI to sign a document, it encrypts the online document to be accessible only by parties that have been authorized. If only authorized parties have the key to access the document, then PKI protects against anyone else fraudulently signing the document.

Requesting Paper Contracts

Federal laws regarding e-signatures allow parties to a business contract to use paper contracts if they would like. Consumers may opt out of using e-contracts.

Before a consumer provides consent for the formation of an electronic contract, a business must notify the consumer that paper contracts are available and that the consumers, even if they consent to e-documents and e-signatures, can revoke that consent and require a paper agreement be sent to them.

The notice must:

  1. Delineate the fees and/or penalties the consumer may get stuck with if they opt for paper agreements instead of electronic
  2. Indicate whether the consumer's consent is regarding this one particular transaction at hand or more in the future
  3. Describe the hardware and/or software requirements used when reading and saving the e-documents
  4. Tell the consumers of any change in said hardware and/or software and
  5. Give consumers the option, free of any fee or penalty, to revoke their consent to e-documents.

Consumers are not forced to accept electronic documents from businesses. However, it may be seen as unfair that citizens preferring paper due to a personal preference or inability to use technology allows a business to charge an additional fee to them for a paper contract.

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