DIGITAL SIGNATURES AND THE INTERNET

Obviously, more and more communication is being conducted via the Internet or e-mail. Both business and consumer transactions are involved. Items of substantial monetary value are purchased and shipped by agreement and direction established and documented solely in an electronic form. In addition, instructions are issued that can have substantial economic consequences. Examples include directions or responses provided during the execution of large construction or manufacturing projects and for which confirming “hard copy” correspondence is not provided.

In the event of a dispute, this new communication method can cause problems of establishing the authentication or validity of the electronic communication. An obvious issue may be whether the party to whom it is attributed did, in fact, send the e-mail message. In the antiquated days prior to the 1990’s, contracts were signed, and sometimes witnessed and the signatures acknowledged to be authentic in the presence of a notary (a person registered and empowered by the state to seal the validity of the signature. Although directions were given verbally, that was commonly understood to be a poor business practice. The necessity of confirming documentation was well understood. Facsimile messaging also provided the ability for near instantaneous transmission of signed written communication.

It is not well understood that e-mail and Internet communication does not provide this same formality and basis for validation. In fact, in this electronic age, computer viruses and hackers appear to be more prevalent than forgers of written documents. Technology for creating “digital signatures” has existed for some time. This appears to be part of the major operating system software programs. However, there has been little legal recognition or validation of these software programs. The Uniform Computer Information Transaction Act (UCITA) does not address digital signatures. However the Uniform Electronic Transactions Act (UETA) has been drafted to fill this gap. The final draft was agreed to in July 1999. It has not yet been adopted by any state, but has been introduced as a bill in Colorado, Indiana, Maryland, Nebraska, Ohio and Virginia.
Section 7 of UETA states in part that:

“A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.

A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.

If a law required a record to be in writing, an electronic record satisfies the law.”

If a signed written document is required by law in order that the transaction or communication be valid and binding, an electronic signature meeting the requirements of UETA will satisfies the law.

The applicability of these provisions, however, requires utilization of encryption technology. The encryption must make the document unreadable prior to the transmission such that only a party possessing the key for the decoding may read it. There must also be separate encryption of elements of the document to show authorization by the sender. This is sometimes called the “digital signature.” This obviously is not merely the use of a legible script “personal signature” that can be created by standard computer operating systems.

It can be expected that we will all have to become more familiar with encryption software as we participate in the growing e-commerce.