Digital Signatures

First and Foremost, the use or acceptance of a digital signature shall be at the option of the parties.

Under California law, certain types of contracts must be in writing in order to be enforceable. As per the Statute of Frauds and codified by California Civil Code §1624, the following must be in writing and signed by the party to be charged: (i) a contract involving the sale of goods $500 or more; (ii) consideration of marriage; (iii)  Contracts by the executor of a will to pay a debt of the estate with his own money; (iv) when one party becomes a surety for another party’s debt or other obligation; (v)  that which cannot be performed within a year; (vi) an agreement employing an agent/broker to purchase, sell, lease, or procure real estate for compensation; and (vii) transfers of real property. There are however some exceptions to the above which exceed the scope of this article.

Party to be Charged:

For purposes of this article, we will be focusing on the statement above; “signed by the party to be charged.” California Civil Code requires that there be a writing sufficient to indicate that a contract has been made that is signed by the party against whom enforcement is sought.

It goes without saying that a “wet” or original signature wherein someone physically signs their name would be sufficient to indicate that one has assented or otherwise agreed to the terms of the contract. That however begs the question as to the enforceability of a copied/scanned signature as well as a digital signature.

Electronic Signatures:

An electronic signature is the use of symbols or other data in digital form attached to an electronically transmitted document as verification of the sender’s “intent” to sign the document. Think of it as attaching a copy of your signature to a document through the copy and paste function of your word processing software, similar to making a photocopy. Additionally, an electronic signature can be a simple as adding your initials to an electronic form, or Clicking “agree” on an electronic “terms and agreements” for computer software.

On the other hand, a digital signature is created through the use of encryption software which secures the data associated with a signed document and helps verify its authenticity.

Digital Signatures:

In addition to a certificate of authority allowing one to determine the authenticity of the signed, a digital signature can also detect whether the signed document was altered or changed in any way that would invalidate it. With the use of encryption, electronic messages are signed with the sender’s private decryption key which can be later verified.

Due to the rising use of digital media, California has enacted the Uniform Electronic Transactions Act. Under Civil Code section 1633.1 et seq.,  a digital signature shall be defined as “an electronic identifier, created by computer, intended by the party using it to have the same force and effect as the use of a manual signature; and (ii) an technology used to create a digital signature must be capable of creating signatures that are unique to the person using it, capable of verification, under the sole control of the person using it, and linked to data in such a manner that if the data are changed, the digital signature is invalidated.

Despite the above, in order for digital signatures to be used, all parties to the contract must have first agreed to conduct the transaction by electronic means through conduct, context, or expressed assent.

Additionally, once a party has agreed to conduct a transaction via electronic means and digital signature, they may refuse to continue to do so at any time during the transaction and in future transactions.

Creating a Digital Signatures:

According to DocuSign, a registered trademark, “Digital signatures, like handwritten signatures, are unique to each signer. Digital signature solution providers, such as DocuSign, follow a specific protocol, called PKI. PKI requires the provider to use a mathematical algorithm to generate two long numbers, called keys. One key is public, and one key is private.”

“When a signer electronically signs a document, the signature is created using the signer’s private key, which is always securely kept by the signer. The mathematical algorithm acts like a cipher, creating data matching the signed document, called a hash, and encrypting that data. The resulting encrypted data is the digital signature. The signature is also marked with the time that the document was signed. If the document changes after signing, the digital signature is invalidated.”

Adobe Sign, a registered trademark,  works much like that of DocuSign as well as some of the free services that are available. Digital signatures use a certificate-based digital ID and PIN for signing. Digital IDs are typically issued by Trust Service Providers. Adobe Sign uses a “Document Cloud solution that is a cloud-based, enterprise-class e-signature service that lets you replace paper and ink signature processes with fully automated electronic signature workflows.”

Conclusion:

California law provides that agreements may not be denied legal effect because they are in electronic form or have electronic signatures in that an electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.

Notes:

Except for a separate and optional agreement, the primary purpose of which is to authorize a transaction to be conducted by electronic means, an agreement to conduct a transaction by electronic means may not be contained in a standard form contract that is not an electronic record.

Express written consent may avoid any future disagreement between the parties in the electronic/digital signature’s validity, through conduct or context. In today’s electronic age, your signature by electronic means can be copied from your signature elsewhere and forged.

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Disclaimer: Every situation is different and particular facts may vary thereby changing or altering a possible course of action or conclusion. The information contained herein is intended to be general in nature as laws vary between federal, state, counties, and municipalities and therefore may not apply to any given matter. This information is not intended to be legal advice or relied upon as a legal opinion, course of action, accounting, tax or other professional service. You should consult the proper legal or professional advisor knowledgeable in the area that pertains to your particular situation.

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