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Electronic Signatures – The Enforceability of E-mails and Texts as “Signed Writings”
By: Carolyn L. Morehouse
The use of e-mail, text, and other electronic messaging is now commonplace in the construction industry. Owners, design professionals, contractors, and subcontractors frequently rely on electronic communications to make project and scheduling changes, contract modifications, and other key decisions on a project, enhancing project efficiency. However, the increased reliance on electronic messaging can also create confusion as to which communications are legally enforceable.
The Illinois’ Electronic Commerce Security Act
For nearly twenty years, federal, state and international law have recognized the enforceability of electronic signatures in a wide variety of commercial transactions. In 1998, Illinois adopted the Electronic Commerce Security Act, 5 ILCS 175/1 et seq. (“E-Commerce Act”), which provides that, in most contexts, an electronic signature is legally equivalent to a traditional, original signature. 5 ILCS 175/5-115(a). It also gives legal effect to electronically-stored records by providing that “[i]nformation, records, and signatures shall not be denied legal effect, validity, or enforceability solely on the grounds that they are in electronic form.” 5 ILCS 175/5-110. Illinois’ law is modeled after the federal Electronic Signatures in Global and National Commerce Act (“E-SIGN”) and similar to the Uniform Electronic Transaction Act (“UETA”).
Like its federal and state counterparts, Illinois’ E-Commerce Act applies to most commercial and consumer transactions, but excludes wills, living wills, trusts, and health care powers of attorney. 5 ILCS 175/5-115(b)(2). The statute provides specialized rules for instruments of title, where possession of the instrument is deemed to confer title. 5 ILCS 175/5-115(c). The statute also includes an exception for any instances in which recognizing an electronic signature would be inconsistent with or repugnant to the intent of a particular law. 5 ILCS 175/5-115(b)(1).
The E-Commerce Act does not require the use of electronic signatures in transactions between private contracting parties. More importantly, it expressly allows private contracting parties to waive the provisions of the statute allowing electronic signatures, thereby permitting the parties to prohibit or otherwise limit the enforceability of electronic signatures in their transactions. 5 ILCS 175/1-110.
Legal Requirements for a “Signed” Writing in the Construction Context
In the construction context, a “signature” or “signed writing” may be required by either law or by agreement. For example, construction contracts frequently require that any change orders, or other contractual modifications be signed in writing by one or both parties. Similarly, contracts for materials or other goods may prohibit any modifications, except by a “signed writing.” 810 ILCS 5/2-209 (Illinois Uniform Commercial Code). Illinois’ statute of frauds also requires certain documents to be “in writing” and “signed by the party to be charged therewith.” 740 ILCS 80/0.01 et seq.; see also 810 ILCS 5/2-201(1)(requiring “some writing sufficient to indicate that a contract for sale has been made between the parties and signed by the party against whom enforcement is sought”).
What Constitutes a “Signature” under the E-Commerce Act?
Under the E-Commerce Act, the terms “signed” or “signature” include “any symbol executed or adopted, or any security procedure employed or adopted, using electronic means or otherwise, by or on behalf of a person with intent to authenticate a record.” 740 ILCS 5-105. By definition, a “signature” is not limited to the signatory’s name, but can encompass any symbol or other security measure used with the intent to authenticate the document, including any image or mark that is hand-written, computer-generated, stamped, or otherwise, or any indication that the document has been authenticated by a specific individual.
Letterhead, E-Mail Signature Blocks, and Text Messages May Be Construed as “Signatures”
Letterhead and e-mail signature blocks may constitute a “signature” sufficient to satisfy contractual “signed writing” requirements. In Princeton Industrial, Products, Inc. v. Precision Metals Corp., 120 F. Supp. 3d 812, 818-821 (N.D. Ill. 2015), the court found that a standard e-mail signature block satisfied a contract’s “signed writing” requirement. In that case, the buyer and seller had entered into an agreement for the sale of certain machined parts. Id. at 815. Under the terms of the parties’ agreement, the original purchase orders could be modified only by “written instrument signed by an authorized representative of the purchaser.” Id.
The court held that an e-mail sent by the purchaser’s representative, which requested a change in the amounts ordered, constituted a “written instrument” signed by the purchaser. Id. at 818-21. In rendering its decision, the court focused on the fact that the e-mail included a standard e-mail signature block, which included the name of the sender, her position, the name of the company, its address, and the sender’s contact information. Id. at 818-19. The court reasoned that the signature block met the requirements of a “signed writing” necessary to modify the original purchase orders, as well as the Uniform Commercial Code’s statute of frauds, which requires “some writing sufficient to indicate that a contract for sale has been made between the parties” which was “signed” by the purchaser. Id. at 818-21.
The seller argued that because the sender’s e-mail signature block was a “standard contact information block,” which was “automatically generated by her e-mail system” and appeared on all of her e-mails, rather than “overtly typed,” there was no evidence that the sender had any “intention of authenticating the e-mail.” Id. at 819-20. Therefore, the seller reasoned, the signature block did not constitute a “signature” sufficient to modify the parties’ original purchase orders. Id. The court rejected this argument, noting that the sender’s signature block identified the e-mail as coming from the sender, a person with authority to bind the purchaser–and not someone else. Id. at 820. As a result, the signature block shows that the e-mail is not a forgery, but authenticates it as the sender’s writing. Id. The court noted the difficulty of distinguishing between a “physically keystroked name” and an automatically-generated signature block, and the resulting “swearing contests” that would occur as to how the signature was created. Id. Although decided under the federal E-SIGN Act, the Princeton Industrial Court found that E-SIGN’s signature requirement was not “meaningfully different” than the signature requirement under Illinois’ E-Commerce Act. Id. at 819.
The Princeton Industrial Court noted that even before business was regularly conducted by e-mail, the “signed writing” requirement was found to be satisfied by unsigned letters printed on corporate letterhead. Id. at 820 (citing, e.g., Monetti, S.P.A. v. Anchor Hocking Corp., 931 F.2d 1178, 1185 (7th Cir. 1991), and Automotive Spares Corp v. Archer Bearings Co., 382 F. Supp. 513, 515 (N.D. Ill. 1974)). The crucial element is the author’s intent to authenticate to document as his or her own. Id.
Outside of the construction context, courts from other jurisdictions have disagreed as to whether an e-mail, alone, is sufficient to create an enforceable contract. In Kluver v. PPL Montana, LLC, 293 P.3d 817, 822-824 (Mont. 2012), the court held that a memorandum of understanding memorializing a settlement agreement, which included the sale of land, was sufficient to create an enforceable agreement. The court found that the fact that the attorney’s name was typed in the “From” section of the e-mail, and that the e-mail included a statement that “This Memorandum has been reviewed and approved by the parties and their counsel,” was sufficient to satisfy the statute of frauds. Id. at 822-23. In contrast, other courts have found that an e-mail is not sufficient to meet the statute of frauds’ “signed writing” requirement, at least where the parties contemplated formalizing a separate settlement agreement with original signatures. See e.g., J.B.B. Partners, Ltd. v. Fair, 232 Cal. App. 4th 974, 988-990 (1st Dist. 2014), as modified Dec. 30, 2014.
Text Messages May Also Constitute a “Signed Writing”
A text message has also been deemed to constitute a “signed writing” sufficient to satisfy the statute of frauds. For example, two Massachusetts courts have recently considered whether a text message can satisfy the statute of frauds, and thereby create an enforceable contract for the sale of real property. In each case, a prospective purchaser sued the seller, arguing that text messages created an enforceable agreement for the sale of land, sufficient to overcome the statute of frauds.
In St. John’s Holdings, LLC v. Two Electronics, LLC, 2016 WL 1460477, *3-*5 (Mass. Land Ct. 2016), the parties’ respective agents exchanged text messages, incorporating letters which contained essential terms regarding an agreement for the sale of land. The court found that a text message sent by the seller’s agent was sufficient to satisfy the statute of frauds. Id. at *6-*10. The St. John’s Court emphasized the fact that the agents typed their names at the end of key text messages. Id. at *9. Observing that they did not include their names at the end of subsequent, less formal text messages, the court found that the parties intended to be bound to the “signed” text messages they exchanged. Id.
In a subsequent decision, Donius v. Milligan, 2016 WL 39256577, *2-*3 (Mass. Land Ct, July 19, 2016), the brokers had exchanged text messages agreeing on the price and the closing date. Id. at *4. Although the court noted that “text message and emails can potentially satisfy the Statute of Frauds,” it found that the text messages at issue lacked the essential terms necessary to create an enforceable contract. Id. The court also found that there was no evidence that the seller’s broker had authority to bind its client to the agreement, rendering any alleged agreement unenforceable. Id. at *5.
Conclusion
Construction contracts frequently require many modifications, including change orders, to be made in writing, signed by one or more parties (or even non-parties). However, as the use of e-mail and text messaging on construction projects increases, it becomes less clear as to whether these less formal means of communications will create binding contract modifications. Construction industry participants should be mindful that all of their written communications, whether by letter, e-mail or text message, can be construed as a “signed writing” sufficient to create a binding contract modification. To minimize uncertainty, they should also consider specifying in contracts which types of communications are necessary to create valid contract modifications, and identifying the specific company representatives who have authority to enter into such contract modifications. Parties should also be consistent in how their representatives use and sign e-mails and texts, to avoid any ambiguity as to whether the author intended a formal contract modification.
© Laurie & Brennan, LLP 2018