Show Me The Ink! Why?

Print
Print Friendly

We could be writing about electronic signatures, and we will before readers get to the end of today’s posting. Mercifully, as is our habit on holiday weekends, we’ll be relatively short today – not in height or stature, but in our use of electrons.

The “Why” in our title questions “why” many parties and a lot of their attorneys insist on getting a copy of every agreement, such as a lease, bearing “ink” or original signatures. Granted that more and more people are accepting an exchange of faxed or pdf-ed agreements (without the “beautiful” ink), but many of those “accepting” parties still want the “ink.” We think that there is little need for going through the exercise of doing this except when a jurisdiction’s recording process still “demands” ink. You can’t fight City Hall. Even at that, with electronic recording rolling across the country, even recording officers don’t need to see ink.

Who are the beneficiaries of this compulsion? Try Fed-Ex, UPS, etc. Try law firms that charge for touching every piece of paper.

We don’t know where else this tid-bit of a thought would otherwise fit in today’s posting. So, we’re placing it here. Ruminations suspects the primary reason for this compulsion, and you’ve all seen it, and some readers are “guilty as charged,” is that the Luddite movement is still alive and well. Yes, as a child, there was only mail and personal delivery. Paper was King! We got comfortable. Change is unsettling. We can’t figure out why we are uncomfortable, so we just want to stick with the old practices. Let’s be careful not to let the carbon paper smudge the typewriter platen.

We’re thinking this issue will fade away. After all, the limited liability company revolution really ramped up in 1995 after the Internal Revenue Service issued a critical tax procedure ruling. Today, limited liability companies are ubiquitous (though not comestible). Yet, after 20 years, there are practitioners who remain somewhat skeptical about whether they really work and are here to stay.

Ruminations thinks the same (the thing about LLCs) is true about inked signature documents.

Before we get real fancy and parse the “law” or try to “sell” anyone as to whether the law is certain enough to give comfort to those who would be giving up “holding the ‘real’ thing,” let’s look at the following clause:

It is not necessary that this document bear original “ink” signatures. This document, with signatures that are photocopied, telecopied, in pdf form or reproduced from an original signature, is as valid as if it contain original “ink” signatures.

Why not?

Now, we aren’t even “talking” about a true electronic signature. For those, there are a number of pretty pervasive laws. One of those is the (Uniform) Electronic Transactions Act, known to its friends as “UETA.” It has been adopted in all states but for Washington, Illinois, and New York. Puerto Rico hasn’t adopted it either. New York and Illinois have their own flavors of such an Act. Washington has something, but it may be “old time.” As to Puerto Rico, we couldn’t figure that out in the time allotted. “No se,” as we say.

Without elaboration, UETA says that if the parties agree that their document can be signed electronically, then electronic signatures are just as binding as “actual” “ink” signatures. There is also the federal E-SIGN law to the same effect, though its provisions are less comprehensive than UETA. Each has a broad definition of what would constitute an electronic signature.

Beyond that, there are paperless residential mortgage closings taking place with signatures recorded on tablet computers like i-Pads.

So, Luddites, the train has left the station (or is that, “the rocket has left the pad”?). You don’t have to touch the paper for the executed agreement to be binding. You don’t have to lose a day or two exchanging papers. You don’t have to raise the costs of doing business. This isn’t gee-whiz, high-tech stuff.

OK, Ruminations knows it will hear, probably privately, that “We don’t do that anymore. We accept the pdf copies. All we do require is that the “inked” copies be sent to us the same day or the next day. So, there really isn’t any delay.” Would that mean that there is or is not a binding agreement when the parties have a pdf copy of the fully signed agreement?

And, absent the setting of a condition that the agreement (again, such as a lease) isn’t binding until “we get a fully signed copy,” it isn’t the act of “delivering the fully signed document” that completes the transaction; it is communicating one’s acceptance to the other party.  Under something called the “mailbox” rule, if someone receives a partially signed agreement by mail, signs it, and puts it in the mailbox, the agreement’s acceptance has been communicated.  Thus, even if the party who hasn’t seen the fully-signed document never receives a copy, if its acceptance (in this case, as indicated by the final signature) has been communicated, it is binding. [Again, assuming that there were no special conditions set that would change the offer-acceptance process, such as a requirement that the fully signed copy actually be received.]

We’ve just had a final thought, a postscript if you will. Ruminations understands the special case where one party to an agreement is an overnight courier service such as FedEx or UPS and insists on the fully executed document being sent back by use of its own courier service. If any reader can tell all of us about other special cases, please do so by adding your comment in the box so provided just below.

Print

Comments

  1. Barry Bell says:

    Do you think that the initial agreement would have to be signed in “ink”, so as to be sort of an “enabling” document for everything that would come after?

  2. George Bernhardt says:

    Ira, interesting post. I’ve tried to follow a lot of the discussion regarding electronic signatures over the past years. My concerns in asking for ink copies are three-fold (i) preventing fraud, (ii) the very lax requirements to create a contract under electronic signature laws and (iii) (as an in-house counsel) ensuring that our internal controls are observed. While you reference Luddites not accepting electronic signatures, I would argue that the more computer savvy will have a similar level of concern knowing how easy it is to create a signed document. While this clearly does not happen often, It does occur from time to time.

    In my opinion, the electronic signature laws simply make it too easy to create a contract. It is my understanding that these laws are so broad that ANY two electronic communications can form a contract – be they faxes, e-mails, voice mails or some combination. On an intent standpoint, if someone signs a document, scans it and sends me a pdf, I can get comfortable with that. On the other hand, I have a lot harder time getting comfortable with my client leaving a voice mail and then finding out the message became a binding contract. What if an employee leaves a voice or e-mail saying that he received a signed lease from the landlord and will have it signed and returned, but brings the lease to his superior to sign and the superior declines to enter into the lease? Assuming the employee that left the VM had apparent authority, is there a binding lease? I presume so, but the employee knew that he could not sign the document him/herself. Unless the employee is a lawyer, I guarantee you that the employee is not leaving messages that the agreement will be signed and returned “upon receipt of all required internal approvals” even though that may well be what (s)he means. I feel that these laws make it far too easy to inadvertently create a contract.

    I don’t think I would get comfortable with electronic signatures until some very robust system is in place that requires deliberate action to form a binding contract.

    George

Leave a Reply