Electronic Contracts: Legally ‘Going Green’
There are a variety of ways for an alarm company to spread its green footprint.
One of the most commonly discussed and easily considered areas of going green is the reduction of the use of paper.
A key legal question is whether or not alarm dealers can reduce the use of paper by using electronic contracts with electronic signatures? The answer is “Yes!”
Currently being used by a small number of alarm dealers, the use of paperless contracts electronically signed by customers is certainly an available method for going green, but it does require adherence to a variety of rules and regulations in order to be properly conducted.
The law with respect to the use of electronically signed agreements is found in two principal codified acts. The first is the Uniform Electronic Transactions Act, which is a uniform code that virtually every state has adopted in one form or another. It sets forth the state requirements for electronic signatures. Because having different requirements in different states made it difficult for a business to comply on a multi-state basis, the federal Electronic Signature in Global and National Commerce Act (E-Sign) was adopted in the year 2000. This column will focus on the E-Sign Act.
Electronic contracts and electronic signatures are valid and enforceable. Sec 101(a) of the E-Sign Act provides in part: “Notwithstanding any statute, regulation, or other rule of law…with respect to any transaction in or affecting interstate or foreign commerce… a signature, contract or other record relating to such transaction may not be denied legal effect, validity or enforceability just because it’s in electronic form…”
Therefore, if a law requires a record to be in writing, an electronic record satisfies the law; and if a law requires a signature, an electronic signature satisfies the law. The general rule is that absent fraud or mistake, one who signs a contract is bound by a contract that he has had an opportunity to read, whether he does so or not.
E-Sign impacts how the contract may be formed. It does not change basic contract law. Many jurisdictions require that an alarm agreement be in writing. An electronic agreement can satisfy this written requirement if certain procedures and disclosures are followed. However, because of the nature of the security industry and the significance of having a good contract because of liability limitation issues and other matters, compliance with the E-Sign rules is very important.
The alarm dealer must still comply with basic contract law. For example, if you use an electronic signature process for an in-home solicitation (e.g. use an electronic signature pad), this does not alleviate your obligations to provide the appropriate notice of cancellation, although you may be able to give it in electronic form. Also, if you give an equipment warranty it must comply with state and federal warranty requirements. Generally, the terms and conditions of your electronic contract will be the same as your paper contract, and must comply with any unique laws regarding security agreements that are found in various states such as limitations on automatic renewals and disclosures of licenses.
The consumer must receive the necessary disclosures and affirmatively consent to such use and not withdraw consent in order for the alarm dealer to effectuate a valid electronic agreement. There are numerous requirements that must be followed to ensure that the electronically signed contract will be binding and enforceable.
A full discussion of the requirements are beyond the scope of this article, and you should seek professional counsel to guide you through the requirements. Also, I strongly recommend that an alarm dealer who intends to use electronic agreements and signatures engage the services of a company that specializes in creating and storing electronic signatures. There are many such services, including eOriginals (www.e-originals.com), DocuSign (www.docusign.com) and EchoSign (www.echosign.com). You can find most of them with a simple computer search for “electronic signatures.”
Q Can I sell or obtain financing for electronically signed contracts?
A “Yes,” providing the usual parameters and contingencies of such a sale or financing are satisfied.