As the world continues its shift towards electronic and virtual means of conducting business, lenders and lawyers remain stalwart in their commitment to physical paper, or at a minimum, PDFs with ink or e-signatures. However, our worlds are not immune to the encroachment of increasingly virtual and informal means of communicating and conducting business, even when making binding agreements. Courts in Minnesota have explicitly recognized that the signature block in emails can constitute electronic signatures.1 Courts in other jurisdictions have found that even a text message may constitute an electronic signature under certain circumstances. Because of this, it is exceedingly important to understand: 1) what can be an electronic signature; 2) when a communication will be considered an electronic signature; and 3) how to prevent inadvertently forming binding agreements through informal electronic communication.
Uniform Electronic Transactions Act
In 2000, Minnesota enacted the Uniform Electronic Transactions Act (“UETA”). Under this statute, an electronic signature is defined as “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”2 This broad definition means text messages, emails, emojis, text reactions such as a “thumbs-up,” electronic voice memos, check box, or other electronic means of communicating agreement can be electronic signatures creating an enforceable agreement. Even if an agreement is required to be in writing, under the UETA, an electronic record may satisfy that requirement.
By way of example, the 11th Circuit Court of Appeals found that the words “I [Defendant]” in a text message agreeing to pay outstanding bills constituted an electronic signature under Florida’s enactment of the UETA.3 In another case, the words “Best regards, [Defendant]” at the end of an email with a revised purchase order attached was considered to be an electronic signature of the email and the attached purchase order.4 It is easy to imagine all the ways that this precedent can wreak havoc, luckily however, the context of the communications is equally important as the words themselves when determining what constitutes an electronic signature.
The actual words alleged to be an electronic signature are only one piece of the puzzle when determining whether an electronic signature actually exists and what effect it has. In order to prove a document was executed via electronic signature, the party offering the purported signature must show: 1) that the UETA applies to the transaction; and 2) that the electronic signature is attached to or logically associated with the electronic record or document at issue.5
The UETA only applies to transactions in which the parties agreed to conduct transactions by electronic means.6 Whether the parties have agreed to do so is determined from the context and surrounding circumstances of the transaction, including the parties’ conduct. For example, in a case where the parties exclusively communicated through email and the defendant stated that she was only available via email, the court found the UETA applied.7 However, in a case where the parties negotiated electronically, but hand-signed previous versions of the agreement and indicated that they wanted “executed” or “fully executed copies” of the agreement, a court found that there was no evidence showing an intent to transact electronically and therefore the UETA did not apply.8
If the proponent of the electronic signature demonstrates that the parties agreed, either explicitly or by conduct, to transact via electronic means, they must then show that the purported electronic signature was attached to or logically associated with the agreement at issue.9
The precedential Minnesota case on this issue involved a bank selling properties acquired through foreclosure with a real estate developer.10 During the negotiations, the attorneys for the respective parties sent multiple emails with agreements attached to them.11 In that case, the court found that while the emails sent from the bank’s attorneys to the buyer’s attorney were electronically signed through email headers and autogenerated signature blocks, the context of the emails and the attached agreements demonstrated that the electronic signatures on the emails did not also constitute electronic signatures on the attached agreements.12 The Court found that the content of the emails, which asked for the parties’ approval and signatures on the attached agreements, evidenced that neither party considered the attached agreements to be final versions meant to be signed.13
How to Prevent Inadvertent Electronic Signatures
If you have made it this far, you may be thinking that this seems twice as complicated and three times the headache than it should be, and you would be right. Luckily, avoiding the issue is as easy as litigating the issue is complicated. The following are some methods one could use to potentially alleviate the risk of an unintended electronic signature:
- First, the UETA provides that any provision in the statute may be varied by the agreement of the parties. This means that including a provision in the agreement requiring a specific means of signature, electronic or otherwise, may prevent the imposition of an unintended electronic signature.
- Second, when sending draft agreements via electronic means, explicitly stating that nothing in the email or other electronic communication is intended to be an electronic signature of the attached document may avoid the inference that the parties agreed to transact via electronic means.
- Third, unless intending to submit an executed agreement via attachment, specifying that the attached agreement is a draft requiring the parties’ review, approval, and signature and specifying the means by which the parties should sign, i.e., via ink signature or affixing an e-signature to the attached document.
- Finally, as a general matter, when discussing and/or negotiating terms with the other party via electronic means, qualifying an expression of agreement with the need to execute the document via the parties’ preferred means.
1 Lange v. Olson, A21-0032, 2021 WL 4059763, at 2 n. 3 (Minn. App. Sept. 7, 2021) (citing SN4, LLC v. Anchor Bank, FSB, 848 N.W.2d 559, 567-68 (Minn. App. 2014).
2 Minn. Stat. § 325L.02(h).
3 BrewFab, LLC v. 3 Delta, Inc., No. 22-11003, 2022 WL 7214223, at 5 (11th Cir. Oct. 13, 2022).
4 US Iron FLA, LLC v. GMA Garnett (USA) Corp., No. 3:21cv943-TKW-ZCB, 2023 WL 2731714, at 9 (N.D. Fla. Mar. 2, 2023).
5 SN4, LLC v. Anchor Bank, fsb, 848 N.W.2d 559, 566-69 (Minn. App. 2014).
6 Id. at 567.
7 Crestwood Shops, L.L.C. v. Hilkene, 197 S.W.3d 641, 652-53 (Mo. Ct. App. 2006).
8 SN4, LLC, 848 N.W.2d at 567.
9 Id. at 568.
10 Id. at 562-63.
11 Id. at 566-68.
12 Id. at 567-68.
13 Id. at 568-69.