Traditionally, there have been a series of difficult issues associated with having contracts online. Last year, the U.S. Congress passed a new law known as the �E-SIG� law, which endorses online contracts, making it easier to do business online. The E-SIG law does this by authorizing all electronic signatures, electronic consents and the exchange of contractual terms via email and other electronic means such as through a Web site.
    Many of the issues not solved by E-SIG still remain, and the new law itself creates a brand new series of legal problems. Some of these matters will be discussed in the Legalese section of the June 2001 issue of e.bill magazine. As a primer to the June 2001 issue, this article discusses the E-Signature law, some of the new issues that the new law has engendered and concludes with some pointers for ensuring compliance.
    The E-Signature Law
    Here are a few of the many classic issues for online contracts:
    � Is an electronic communication a �writing� that will satisfy a legal requirement that an agreement be reduced to writing?
    � Although an electronic communication is less �fleeting� than the spoken word, is it as stable as a hard copy communication? Is an electronic filing system enough? Must paper back-ups exist? How do we know the agreement hasn�t been tampered with?
    � Can an electronic signature authenticate the parties as well as or better than a pen signature can? (Electronic signatures are described below.)
    � If a contract can be entered into by electronic means, where was it formed for purposes such as jurisdiction and taxation? What is the choice of law analysis � especially when one eligible jurisdiction allows electronic contracting and one does not?
    There is a �crazy quilt� of state laws on the enforceability of an electronic contract. The states have different sets of laws, with different terms, applications and definitions. Electronic signatures are permitted for a variety of varied purposes in these states; some require a certain kind of technology and others do not.
    In an attempt to remedy the inconsistent and incoherent crazy quilt of state laws, the UETA (Uniform Electronic Transactions Act), which generally provides electronic contracts cannot be denied validity solely on their basis of their being electronic, was enacted in 18 states as of July, 2000.
    E-SIG normally does not supercede the UETA but some states such as California passed versions of UETA that might be superceded by the new federal law.
    Under the new federal E-SIG act, no contract may be deemed without legal effect solely because it was made by electronic means or using an electronic signature or because it was delivered electronically. This is the key impact of the new law. By and large, electronic contracts must be recognized as valid as their paper counterparts.
    What counts as an electronic signature? There are no minimum standards. Anything that the parties agree to count as an electronic signature can count as one, but authenticity is not guaranteed. Initials, happy faces, sounds through a speaker on the computer, signatures on emails; these may be electronic signatures.
    Of course, E-SIG does not mean all electronic contracts or contracts using electronic signatures are valid. A contract may be invalid for other reasons.
    E-SIG does not require any person to agree to use or accept electronic records, signatures or contracts. Consumers must affirmatively consent to the use of electronic records where the law otherwise requires that information relating to the transaction be made in writing. And businesses must tell consumers they have a right to hard copies.
    E-SIG does not apply to certain kinds of contracts such as those on adoption, divorce or other matters of family law, certain sales and leases, notice of cancellation of utilities and so on.
    Remaining � And New � Legal Issues
    Every advance in the law creates new gray areas and ambiguities. E-SIG presents many new legal uncertainties for which there is no room here for discussions such as in connection with the use of automated or electronic agents that in effect make contracts without human assent.
    There are also uncertainties on how electronic records are to be stored and made available on request to users and consumers. Businesses that otherwise must provide certain kinds of disclaimers and other consumer protections must determine how to comply with E-SIG and a variety of overlapping and sometimes inconsistent state and federal laws on these disclosures.
    Key Provisions
    There are many issues raised by electronic contracts. For those moving forward to take advantage of the Internet and digital technology, here are a few key things to keep in mind:
    1. Select governing law, jurisdiction for disputes. Make sure the agreement cites the right state and the law that you can live with.
    2. Choose digital signature technology of sufficiently high security. Announce your standards to the world and employees and avoid charges that you assented to an agreement putatively bearing your signature of a different or lower level of security.
    3. Make sure you can locate your contracts and can demonstrate that a print out � such as one you might make for the court � is exactly what the other side signed.
    4. Express in the e-contract the intention to make a contract. Make sure all parties are aware they are actually signing an agreement and that you have something you can use to convince the court two years down the road, when the defaulting party claims they did not understand what their mouse click or email assent meant.
    Curtis Karnow is a partner in the E-Business Group of the nationwide law firm Sonnenschein Nath & Rosenthal. He specializes in intellectual property litigation and technology law including computer and Internet issues and in complex commercial and class action litigation in state and federal courts. Mr. Karnow is the author of a volume of essays including Future Codes: Essays in Advanced Computer Technology and The Law (Artech House: 1997) and has also served as Assistant United States Attorney for the Eastern District of Pennsylvania. For more information, please visit the law firm�s Web site at