The contract signature requirement is older than our US common law. Beginning in 1677, and by some accounts earlier, with an act of English parliament, certain contracts must have been in writing and signed by the party against whom enforcement was sought to be enforceable.[i] These included contracts for marriage, for services that by their terms required performance for more than one year, agreements to transfer interests in real estate, wills and executor contracts, sureties and contracts for the sale of goods over a certain value, to name a few. Many states codified the rule.[ii]
However, over time, a number of exceptions developed. In most states, only the material terms of a contract must be in writing. For the sale of goods, later codified in the Uniform Commercial Code, this means quantity, as all other terms can be determined using a reasonable “gap filler.”[iii] For services, this means the identification of the parties, the service and timing sufficient for a court to determine the parties’ intent.[iv] Thus, not all terms need be in writing or, if in writing, signed by either party.
A number of legal defenses also developed to match commercial realities These include admission by the party opponent,[v] partial performance consistent with the terms of the alleged contract,[vi] and promissory estoppel.[vii] Additionally, between merchants – that is, parties charged with specialized knowledge and/or regularly dealing in the goods at issue – a letter of confirmation from one merchant to which the other, having reason to know of its contents, fails to object within a reasonable times (typically ten days).[viii]
With the advancement of electronic communication, it was only natural for contract communication to advance electronically, as well. There is, interestingly, a long history of contracting electronically in the US -- one of the very first means of negotiating was by morse code, another was via telegraph and telegram, and, when phone lines laced the country, it was only a matter of time before fax lines, and faxed signatures, were to follow.[ix]
It seemed uncontroversial to the National Conference of Commissioners of Uniform State Laws, then, to codify what had been assumed – electronic signatures, like faxed signatures, are a mark intended to identify the sender and, thus, should be given the same effect.[x] E-SIGN went into effect in October 2000 to affirm that contracts with electronic signatures may not be denied legal effect.[xi] The substantive contract law applies to the case, and the Act renders electronic signatures as good as ink ones.
The Conferenced proposed the UETA for States to enact, and it works in unison with E-SIGN. Perhaps this is why 47 States adopted the proposed law without significant changes, and the 3, New York, Washington and Illinois, that did not adopted similar laws within a few years of E-SIGN’s enactment.
Internationally, the United Nations Convention on Contracts for the International Sale of Goods (CISG), though eliminating the merchant’s unilateral contract rule and certain parts of the “knockout” rule for contract formation, is largely in accord and exists between 83 countries, at least 56 of them without any changes.[xii]
In all three of these Acts, the traditional signature is replaced with any mark, symbol or sound intended to identify the sender.[xiii]
Where terms are not in writing, the court can glean the parties’ intent, objectively, from their course of dealings, conduct and performance and the common usage in the particular trade. What is not stated explicitly the court can find implicitly—and therein lies the problem.
While an email signature may not have been controversial, what has become controversial is the sometimes slippery slope to contract formation with a click of “SEND.”
This can come as a surprise to parties who negotiate via email- moreso for companies that hold them out as having the authority to do so - and even moreso when they commit to an agreement but disagree upon unstated, or nonessential, terms. Here enters the court.
No Physical Writing? No Problem - Alliance Laundry Systems, LLC v. Thyssenkrupp Materials, NA.[xiv] In this case, a buyer and a seller negotiated for the sale of steel by email. When the company failed to deliver, the buyer sued. The seller claimed no contract formed because the parties had no physical writing and did not agree to transact business electronically, as they must under the UETA. The court viewed the parties’ emails and concluded that, as a “practical matter,” if “the parties reached an agreement electronically, they will likely also show that the parties agreed to conduct the transaction by electronic means.” The UETA “authorizes parties ‘to agree’ to conduct transactions by e-mail and directs courts determining whether parties have so agreed to consider the ‘surrounding circumstances, including the parties’ conduct.” Thus, the court can view email negotiations to determine whether parties, by their conduct, agree to contract electronically and, if so, what they agreed to do.
Interpreting Emails– Dana Limited v Grede Holdings, CI 14-3963, Lucas County Court of Common Pleas, Ohio – In this automotive case, the buyer and the seller disagreed whether they contracted for the sale of certain parts to build axles, despite an email confirmationbetween them stating simply that the buyer agreed to the seller’s attached, unsigned, proposal. In addition to arguing their email exchanges were not a “signed writing,” an argument the court quickly rejected, the seller claimed the email exchanges lacked essential terms one would typically find in an automotive supply agreement. In turning to the email chains, spanning several months, the court concluded the parties contracted. The court also used their email discussion to interpret terms, such as payment productivity, that the seller alleged were ambiguous in their email confirmation. While the parol evidence rule would preclude evidence of a contemporaneous or prior oral agreement, the rule did not preclude parol and unsigned evidence to establish the parties’ intent.
Similarly, UCC §2-202 ("Final Written Expression: Parol or Extrinsic Evidence") states that agreed terms … may not be contradicted by evidence or any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented(a) by course of dealing or usage of trade[xv] or by course of performance[xvi] and (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement …. Those, too, the court can glean from emails.
“Subscribed” Writings – Kloian v. Domino’s Pizza.[xvii]A cautionary case, here the applicable substantive law required agreements to settle lawsuits to be “subscribed,” meaning signed at the bottom. While the court found the parties had signed their settlement electronically, because the purported agreement lacked a signature at the bottom of the document for the party against whom enforcement was sought, the agreement was unenforceable. This case serves as a reminder that the substantive law of contracts controls – the E-SIGN ACT, the UETA and its counterparts merely render electronic marks signatures for substantive law purposes.
[i]'Charles II, 1677: An Act for prevention of Frauds and Perjuryes.', Statutes of the Realm: volume 5: 1628-80 (1819), pp. 839-42
[ii]Cosgigan Jr., George P. (1913). "The Date and Authorship of Statute of Frauds". Harvard Law Review26: 329 at 334–42.
