How Electronic Contract Laws Can Affect Hyperlocal Publishers and App Makers

Contracts made online can help hyperlocal publishers and LBS app developers get deals finished quickly — but the convenience can be a curse as much as a blessing. And now, according a new ruling by the Tennessee Supreme Court, electronic agreements can be enforceable even if they made by an exchange of email.

Hyperlocals often rely on agreements for a variety of goods and services — such as setting up a web site, buying or selling advertisements, retaining freelancers, presenting terms of service, and transacting in more mundane contracts like ordering office supplies. These agreements do not require pen and paper; they can be done electronically. But unlike pen and paper, clicking “I accept” or sending an email may be enough to form a signed contract.

Forty-seven states have adopted the Uniform Electronic Transactions Act. The other states, Illinois, New York and Washington, are bound by the federal version known as the E-Sign Act. Both laws acknowledge agreements in electronic form are just as enforceable as agreements signed on paper. The following principles apply:

• Contracting electronically is voluntary; therefore, the parties to the agreement must agree to transact electronically.
• The parties must be able to keep a copy of the electronic agreement. This includes the ability to store, retrieve and print a copy of the agreement.
• The copy of the electronic contract must accurately reflect the information described in the transaction.
• Steps should be taken to prevent alterations of an electronic version of the agreement.
• An electronic signature can be any electronic sound, symbol, or process that is logically associated with an electronic contract. This can accomplished by something as simple as clicking “I Agree” or relying on a more elaborate digital signature process.
• The party “signing” the electronic agreement must express some intent to “sign” the agreement. For example, a statement such as “by clicking ‘I accept,’ you agree to the terms that will result in an enforceable contract, just as if you had signed your name to an agreement on paper.”

Hyperlocals should be cautious when they negotiate deals online; even an exchange of emails can create a binding contract. A fascinating example is the story of a feuding niece and aunt in which the Tennessee Supreme Court enforced a settlement accomplished by an exchange of emails.

In Waddle v. Elrod, octogenarian Earline Waddle and her niece, Lorene Elrod quarreled over rights to four acres of land in Tennessee.  The day before their dispute went to trial, the attorneys for warring family members exchanged emails to settle the dispute.  Ms. Waddle’s attorney sent the following email to Ms. Elrod’s attorney:

Greg,

This confirms that we have settled this case on the following terms:

Elrod deeds property interest back to Waddle, Both [sic] parties sign full release, Waddle bears no court costs. Let me know if I have correctly stated our agreement.

Thanks,

Mary Beth

Ms. Elrod’s attorney replied:

That is the agreement. I understand that you will draft the deed and take a shot at the court’s order. No admission of guilt is to be included.

Greg Reed

Three weeks later, Ms. Elrod told her attorney that she changed her mind. She no longer wanted to settle the case. Ms. Waddle then sought to enforce the settlement in court.  Ms. Elrod argued there was no binding agreement, but the Tennessee Supreme Court disagreed. “The UETA, recognizing that all sorts of transactions are now routinely conducted by electronic means on a daily basis, obviates the need for a handwritten signature,” the court added. “The parties, through their attorneys, evidenced an intent to finalize the settlement by electronic means; thus, the UETA applies,” the court concluded.

The lesson learned is that hyperlocals should be clear on when they intend to agree to terms of a contract. Extra caution is needed when negotiating by email. Any declaration that an offer is accepted could create a binding agreement.

Hyperlocals may also consider a more secure electronic process for deals that involve mission critical projects or a significant amount of time, resources and money. Services such as DocuSign, EchoSign, RightSignature, and other services offer a process in which parties can electronically sign agreements in a secure environment and include procedures to prevent mistakes and verify that the parties intend to sign the agreement electronically.

Brian Dengler is an attorney with Vorys Legal Counsel and journalist who covers legal issues in eMedia. He is a former vice-president of AOL, Inc., a former newspaperman, and an EMMY-winning TV journalist. He teaches new media issues as an adjunct at Kent State University and formerly at Otterbein University.

Image courtesy of Flickr user qwrrty.