What are the Requirements for an E-Contract?
What are the requirements for an e-contract? E-contracts is a type of contract or agreement between two or more parties that only exists in an electronic form.4 min read
What are the requirements for an e-contract? E-contracts are any type of written contract or agreement between two or more parties that only exists in an electronic form. It was created, signed, and transmitted in an electronic form alone. This saves on postage fees and doesn't waste paper.
Given how fast technology advances, the creation of electronic contracts that could be signed without the parties ever meeting face to face was inevitable. The Electronic Signatures in Global and National Commerce Act (ESIGN) is a federal law that makes electronic signatures as valid and enforceable as those signed by hand. The law does clarify that electronic signatures are only valid when both parties have agreed to this method for obtaining signatures.
An electronic signature can include either your initials or your full name. Other options include clicking an agreement button or scanning and pasting an image of a person's actual signature.
Click-through contracts are another type of electronic contract. These are typically found in online user agreements. This contract is where the user clicks on “I Agree” at the conclusion of a user agreement before you can sign in and use the software or online service.
Cryptography is a way to scramble information when sending, and the recipient can unscramble it on their end via a decryption key. PKI, or Public Key Infrastructure, is one of the more common standards used in online cryptography. PKI works by using an algorithm that scrambles and encrypts documents and electronic contracts so that only authorized users can view the information.
Electronic Contract Terms
Like standard contracts, electronic contracts have the same elements. The first is the offer, which is the desire to enter into a legal relationship. You must communicate the important terms in a clear manner to create an offer that the invitee can accept. Compose the offer in clear and simple language that is unambiguous. It should fully disclose all rights and obligations, as well as clearly express that a binding legal relationship will be formed if the offer is accepted.
Electronic acceptance will be deemed effective when it's communicated or sent, not when it's received or acknowledged. Any contract that is enforceable needs to have consideration, which is an exchange of promises that represent a binding legal obligation.
Tips for Creating Electronic Offer that is Binding
- Attempt to configure the webpage so that all the terms will be viewable when the page is loaded without needing to scroll down, install software, download information, etc.
- Contracting parties should be able to easily read and navigate through the terms. Don't rush them through the terms by adding webpage timeouts, and they should be able to read as many times as they want before accepting.
- The terms should be near the acceptance button, and the option to decline should be as prominent as the same method as an option to agree.
- Make sure the terms are accessible online once the contract has been formed.
- Highlight the important terms in a different color or font size so that they stand out.
- Separate out contract terms from any marketing text, and ensure they do not contradict any other information on the website.
Tips for Valid Acceptance
- You should require the parties to accept contract terms in a way that will affirmatively confirm assent.
- Have a typed signature at the end of an e-mail or document.
- Have a checkbox for click-through agreements before the user hits the “I accept” button.
- Contracting party will expressly acknowledge that using an online service or website once they are provided sufficient notice of the terms and any failure to reject them will constitute acceptance.
- Automated electronic signature processes should allow verification by all parties.
How Does the ESIGN Act Protect Consumer of Goods?
The ESIGN Act and the UETA, which is the Uniform Electronic Transactions Act, both help clarify that one or more emails do meet the signed writing requirements. The UCC, or the Uniform Commercial Code, is the primary law that governs the sale of goods, and it provides for legal recognition of electronic contracts.
Internet businesses are obviously concerned with enforcing contracts, and in many states, the Statute of Frauds states that you must have any agreements in writing for the sale of any goods that exceed $500. Under UETA, an electronic transaction will satisfy the requirement under the Statute of Frauds to be considered to be in writing. A signature can also be legal when you click on the “I Agree” button or any other electronic signature permitted.
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