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Email signature negotiation

hi I think we're going to get started welcome to today's webinar East signatures pitfalls with using emails and text messages and contract negotiations this webinar is hosted by the law firm of crookedness and Bluestein I'm Cheryl Howard I'm joined by my colleague Jason Curtin we're both practicing attorneys here at courteous and Bluestein for those of you who aren't familiar with our firm produce and Bluestein is a small firm of 19 attorneys and we provide legal services in the areas of public nonprofit for-profit general corporate law health and social services law education real estate development finance property management public and private civil litigation labor and employment law I work in real estate transaction law and adjacent as a member of our litigation department combined with many years of experience regarding the use of e-signatures and various contract negotiations we've provided our contact information on the powerpoints in our firms web address so you can learn more about our firm and our practice areas before we get started the GoToWebinar program that we're using today provides you with and opportunities to submit questions at any time during the discussion you'll find the questions tab on the program's sidebar where you can type in your questions only we the presenters see the question so you can remain anonymous and at the end of the presentation will address questions that have been submitted during our Q&A session to the extent that time allows now let's get started we're first going to review what an e-signature is then she'll will review the Massachusetts law and I will provide you with some key differences between federal and Massachusetts law last we'll give you some practical advice all right so we wanted to start by giving you a good working definition of what an e-signature is for statutory purposes so as you see on the slide and each signature is an electronic sound similar process attached to or logically associated with a record and executed or adopted by a person with the intent to sign and as you'll see that intent piece becomes very critical I was going to talk about the first bullet so any signature is a unique stamp that a signer places on a document as you can see it doesn't need to be a person's name to give you some examples it could be a manually signed signature that's then PDF to fax others a voice message a typed name biometric identifiers such as fingerprints Redskins clicking I agree of click-wrap agreements pressing 9 to indicate acceptance the definition is designed to be flexible and to allow for different technologies now with regard to the second element attached to or logically associated with the record it's a less looked at element in the 3 element test I think a key way to think about this element is to distinguish a voice message from a phone call so if you're speaking with the other side in transaction by phone and you tell them I agree to sale this piece of real estate that conversation isn't recorded it's just a phone call but if you left a voice message and you said in your voice message I agree to the terms that you proposed yesterday let's close tomorrow that then is a recorded that's a recorded record that is able to satisfy the second element with regard to the third element it's much more interesting executed or adopted by a person with the intent to sign now that the key aspect of that is intent to sign now when you're thinking about intent principle inquiry is determining whether that party did indeed intend to be bound by the terms of the contract and you're going to have the parties own testimony that oh I intended to sign when I sent that email but you're also going to have the facts and circumstances that surround that signing so the very form of how a party has electronically signed is often very suggestive of that party's intent to sign so let's say we have trail Howard speaking to a vendor of croquettas and Bluestein and she receives a contract from the vendor and on that last page of the contract is a signature page in trail prints out that signature page she takes her pen and she signs her name to that signature page then scans it into the copier attaches it to an email of hers and then sends it to Council for the vendor there's a lot of deliberateness in that act and that deliberateness shows intent she went through all those steps to convey her signature to the other side now let's contrast that to Sheryl repulsive lying to an email in which the other side had sent her a proposed contract and she responds I know Sheryl wouldn't do this but she responds and she says by way of a response email I agree period and in sending that email the other side her signature block automatically generates on the bottom of her email so the other side seeds I agree and indeed the signature block of Sheryl Howard now that signature block very much can constitute an electronic signature but to what extent did she show her intent to be found by that proposed contract that she received well she didn't show that much deliberateness did she she just wrote a message with two words I agree period in that signature block automatically generated so I think it's important to think about intent along a spectrum of deliberateness how how deliberate was that that signature was it the manual signing of a document that was then PDF or is it much more like this email whereas two interlock was automatically generated so I wanted just to kind of follow up on that with an example of what we see and how these electronic signatures can play out in contract negotiations many businesses including ours conduct contract negotiations over email as we noted Massachusetts doesn't require an official signature in a digital sense and as Jason just mentioned the fact that your email automatically stamps an email that you send with your name could potentially cause a problem even though you know it might not have the requisite intent there's still that risk so I want to pass along a practice tip to invoice at consequence include what constitutes the agreement in the record and limit the impact in the email sending the records so for example you want to put language in the actual contract that says when you intend to be bound and you also want to make sure that you communicate that to the parties upfront I work with an attorney who whenever we start a new negotiation he always says you know just at the beginning of this let's confirm that we're both going to reserve our clients rights to make changes to any documents that we exchanged and that the agreement will not be considered final until we've exchanged PDF signature pages you know that's that's a great way to handle it because it provides that clarity the other piece is that if you're going to delegate contract negotiations to lower to your employees or to agents such as brokers or attorneys then be sure to disclose upfront the extent of their authority then make sure they pass that along to me to the other side so for example if you require all leases to be signed by the president or CFO but you have a lower tier employee negotiating the basic terms of that least make sure they tell the other side you know listen this contract needs to be needs to go through final approval at the CFO level you know I'm going to negotiate it but you know just keep in mind that once we have once we've reached the end of our negotiations I still need that additional approval you know that's very helpful in terms of creating that record so now I'm going to go through kind of the Massachusetts statute and then Jason will highlight some key federal differences there is a uniform electronic signatures Act that's been adopted in various forms by many - most states including Massachusetts Massachusetts adopted the uniform acts with very minor changes in 2004 so we've had the statute on the books for a while I'm going to give you some background first applicability when does the law apply it applies only to transactions where the parties have agreed to conduct the transaction by electronic news that sounds great but please note that whether the parties have agreed is a factual inquiry and it's going to be determined from the context and the surrounding circumstances including the party's conduct so that's very critical it doesn't require necessarily a written agreement that you've agreed it can be inferred from what you do so the practice tip here is that silence can be problematic the parties can agree or not to conduct all are part of the transaction electronically and they can vary the terms of the statute by agreement being clear about what you intend both in the email and the contractor document being negotiated is very helpful to try to demonstrate when you when you intend for the law to apply and again on course of conduct as I mentioned it be your agreement to conduct the transaction electronically can be inferred by what you do so insist on the same level of formality for all amendments extensions etc for example if you required a manual signature that it's exchanged to get PDF or er fax require that for every amendment or extension of that contract I have a very good example of this it was the case I had last year where my client was fortunate enough to inherit a piece of commercial property and he didn't want to be in the property management business so he wanted to sell the property and he engaged in negotiations with a commercial property manager and they came to terms and executed at purchase and sale agreement now the purchase and sale agreement was signed by both parties the frigate enceladus signature page each party manually signed the signature pages and then actually sent them by mail to one another the term with regard to modification in that PDF PDF that if the terms of the pns were to be changed they had to be changed by way of a signed writing and that became very important because during the due diligence period the buyer alleged to have found many deficiencies in the property that merited in his opinion a 40% reduction in the purchase price that was on the pns my client was pretty upset but brokers for both parties decided to try to come to an agreement on what would be a fair renegotiated price and during that renegotiation my clients broker sent a text message to the other side's broker saying okay we agree to that price that you proposed and the new closing date will be July 2nd and that broker sent a text message after speaking with my client who at that time agreed to the price but had thought in his mind that he was going to get a written modification agreement and he would have the opportunity to review it and sign it well what do you know the other side drafts that proposed modification my client reviews it and decides that he does not want to sign it but the buyer insisted on closing at that renegotiated price set my clients broker had agreed to and so the issue became did the brokers text message to the buyers broker constitute execution of that modification agreement was it a signed writing because the underlying pns requires that any modification including the purchase price had to be done by way of a signed writing well we know that in the case law courts are beginning to accept more and more text messages as constituting signed writings 2016 we had two cases st. John John's Holdings and Donnie s who the courts in both cases held that text messages constituted an effective writing for purposes of executing a purchase and sale agreement or modification of a purchase and sale agreement but when you look at the course of conduct of the parties through the pns it was to execute a contract by manual signatures that were then actually exchanged not by way of an electronic signature so the idea that a text message from my clients broker constituted writing sufficient for modification to pns was arguably not sound when you looked at the course of conduct between the parties so that that was a key fact in thinking about whether that text message counted a constituted a signed writing now another big issue that we're going to be talking about is to what extent did the buyer broker I mean the sellers broker have authority to bind my client to this revised purchase price by way of a text message if you look back at the pns it was my client who signed the pms not his broker so the issue of agency and apparent authority becomes very important when looking at execution of electronic signatures so just to kind of highlight a few more key points from the statute you know the statute is really clarified that an e-signature that meets the legal report requirements will be enforceable the legal requirements are going to sound very familiar from that definition of you signatures that we gave you the signature has to be attached or low to block Dodd logically associated with the e records made with the intent to sign the record and the signature has to be attributable to the signer it has to be the act of a person but the statute makes it clear that an electronic record or a signature cannot be denied legal effect or enforceability because it's an electronic form of course your fraud forgery can still be an issue but keep in mind that can even be an issue for manually signed hard copy documents if there's a law in general with a few exceptions that requires a signature or writing electronic records or signatures satisfy that requirement and you cannot exclude you can exclude evidence of records solely because the record is in electronic electronic form so that gives you kind of a good basis for relying upon electronic documents and electronic signatures the result is that the electronic signature will satisfy the statute of frauds that's a term that comes from the English common law which requires certain types of contracts to be signed in writing for example from the English common law an agreement made upon consideration of marriage had to be in writing to satisfy the statute of frauds again you know the state the electronic signature act in Massachusetts is not intended to supplant other applicable law including statute of frauds but it does allow an electronic signature to satisfy that requirement I wanted to give you a little more detail on the third bullet which is when the signature is attributable to the signer this is where you must show that the east ensure with the act of the person it doesn't override existing law on attribution again fraud forgery still issues the act of the person can be shown by demonstrating the efficacy of security procedures so to the extent that you're using a third-party vendor that has some mechanism for requiring the person demonstrate their identity that can be helpful again it can be determined by the context and surrounding circumstances at the time of creation execution or adoption including the parties agreement so having good language in the document is helpful and the statute doesn't go into detail regarding whether when once the signature of one person can be attributed to another those usual considerations regarding authority apply so again depending on those security procedures applicable to contexts and circumstances the parties agreement and otherwise it's provided by law just a few final take homes from the statute you know again it's designed to accommodate different technologies I signature a physical signature or a type name is not required in the non digital sense and I wanted to go into whether security procedures are required the answer is no the statute doesn't mandate any particular security procedures on number providers you know brokers are deploying this technology to get offers of offers and purchase and sale agreement signed I would say that if you're going to look into using a third party provider that the two key pieces would be ease of use and that they do include some level of security so that you can demonstrate the person signing has authority but the statute doesn't provide any particular presumptions and doesn't mandate any particular use of security procedures and last you know while the focus of this presentation is on these signatures I want to mention some of the provisions of the statute regarding electronic records because some of you may be starting to store records electronically so in general for notices if the parties have agreed to electronic transactions any notice is required by law to be sent electronically provided the record is capable of retention by the other part they have to be able to print and store the records so if you've ever clicked on kind of an I agree button often there's an option to print the language and this part of the statute is where that requirement comes comes from again it doesn't override existing law regarding how notices are posted displayed or sent on the issue of record partition record retention the theme of establishing electronic records as the functional equivalent of paper it continues you can rely upon an electronic record to the same to the same system that you can rely upon a paper record it allows you to convert your hard copy originals to electronic format information that stored electronically is effective for audit evidentiary and archival purposes and the focus then becomes the integrity of the record rather than on holding the original for legal effect the record needs to be accurate and you need to have the ability to access it at a later time you know this can be a particular issue considering how quickly technology becomes obsolete so for instance if you saved all of your records on floppy disk you'd have to find a way of converting those files to a method of storage that you could now access and then last on delivery of records the recipient must generally be able to print and store the record for legal effect so no snapchat I was going to touch very briefly on when an electronic record is Santa received you know there's general default rules you know it's sent when the record leaves the control of the sender has to be properly addressed to the recipient not to a system and if the sender has done something to preclude retrieval that would impact whether the message is considered sent so the statute there are some areas of law where you cannot use these signatures the UCC except for sales and leases in connection with wills consoles and testamentary trusts this is a relatively intuitive example you know while I think it's unlikely that a hacker is going to access your email system and sign a bunch of leases on your behalf it's probably more likely that our relative would be able to access the computer or an email account to someone and sign a will on their behalf and at the time you can test the will the signatory is likely to be deceased so authentication becomes particularly problematic in that context and then transactions governed by certain other bodies of law court orders notices or other official court documents notices of default acceleration repossession foreclosure or addiction or the right to cure in the leasing context and then insurance product recalls and hazardous materials now Jason's going to highlight some of the key differences between Massachusetts law and federal law the federal law is known as a sign it was enacted in 2000 now the elements that we've already gone over with regard to electronic signatures applies well to you sign there are some differences however Z when it comes to and I'll go over those differences but when you're thinking about whether it's a sign or me whether that applies if you're working in Massachusetts it's very likely new added but you are going to be in the federal context and a sign will apply when it comes to federal documents that you might be signing or with regard to documents that relate to interstate or foreign transactions now a key difference between a sign and you Etta deals with consumer consent form you Etta our state law the standard is very permissive consent is determined from the context and surrounding circumstances so very broad in bate but when it comes to under esign consumer consent is very rigid if a writing is required that writing needs to be clear it needs to be a clear and conspicuous statement informing the consumer of their right to a paper record their right to withdraw consent and how to do so the scope of consent and requirements to access and record retention now you're probably very familiar with these documents because it's all the fine print that you receive in all those Bank advertisements or statements you get from a financial adviser so that is a key difference now to address some particular issues when it comes to academic records let's discuss parental consents I know that's important to a lot of our education clients now there's an interplay between federal and state law that's interesting when it comes to academic records so first off electronic signatures for parental consent are enforceable under US under the state law except that what is being accept what is being consented to if there's a federal law that applies to what's being consented to then you need to look to that underlying federal law when it comes to the enforce ability of these signatures so that comes into play when you're when you're discussing academic records to third parties so when it comes to academic records to third parties there's a federal law that controls that's known as the Family Education rights and Privacy Act fortunately that Act specifies acceptable forms of consent that includes electronic signatures so schools can rely on parental consent for the release of academic records that are signed electronically now for healthcare entities I know hip is very important and in the HIPAA context health care providers need a patient signature for transmission of health records to third parties our electronic patient signature is acceptable yes the US Department of Health and Human Services has say that an electronic signature is a sufficient signature for an authorization form also a HIPAA covered entity such as a doctor hospital does not need to verify the identity of the purported signer of an electronically signed document I have not found an instance in which HHS has questioned the legal effect of an electronic signature that otherwise complied with non hip related state and federal laws so if you were to meet the e sign standard or the mieta standard depending on which law controls then for HIPAA purposes the electronic signature is enforceable so what's in it for us so you know first there are real efficiencies that come with new technologies we all use email to quickly exchange comments and documents and to negotiate terms the ability to exchange signature pages via email or via electronic signature means that parties can have a fully execute executed contract in hand without the need to deploy couriers and overnight mail to get signature pages exchanged and secondly it's probably consistent with your current practice you're likely already using electronic signatures so this is a case where the statute is really catching up to the practice however I did want to recommend that you adhere to some general standards you know first be clear about intent both in communications with the other side and in the documents themselves spell out when you intend to be bound and remember kind of get highlighting Jason's example saying kind of will be bound by a sign writing it's not good enough that you need to be very specific about what technology you're going to be using make sure that agents or employees understand their scope authority and that they communicate that to the other side if someone is only allowed to sign contracts under $5,000 and they're negotiating a much bigger contract make it clear who what additional approvals are required and make sure they communicate that to the other parties take a look at your company's policies do you have a policy regarding use of Technology do you allow employees to use text messages or cell phones take a look at that policy and think about the ramifications for electronic documents and electronic signatures do you have a policy regarding signing Authority for the company this can be very helpful because often employees don't have a clear understanding of when they can find something for the company putting that in writing saying you know the CFO or the president needs to sign on your leases or something along those lines or setting out specific dollar thresholds in that policy can be really helpful and last employee training if you have employees negotiating contracts it's important to do some training I wouldn't just stick those policies in the handbook you know that they need to communicate that make sure they understand the ramifications of that training when they're entering into negotiations with third parties and on that point training of employees with regard to more informal means of communication I think is important employees need to know that if they are engaging in business by way of text message or LinkedIn or other more informal forms of communication that there is a chance that they could be finding their company to the terms of an agreement that they don't intend to and you don't want to get into these wrangles over whether a signature is in fact enforceable when it comes to the issues of intent and authenticity and what I mean by authenticity is whether the person that signed is in fact the the person that the signature appears to be of you don't want to get in litigation over those two issues because they oftentimes require a fact-finder and if you need a fact-finder and litigation that often means that you need to litigate a lot to get to a judge or a jury at trial to determine those those factual issues so it's best to avoid getting into issues of intent and authenticity by having a very clear policy that your employees follow we wanted to highlight some concerns about the use of these signatures your first fraud or forgery there's a sense that electronic records may be more susceptible to fraud or forgery although I don't know that that's necessarily borne out kind of in practice again you know using a third party vendor or requiring a manually signed document that's exchange by PDF or fax can help undercut that concerns Authority again confirming that the person signing the document is authorized for the company owed to accurate company is very critical on your end making sure your employees and agents understand their scopes Authority and Express that in writing to the other side similarly you can always ask the parties negotiating the documents for similar information you get an understanding of what types of approvals are required upfront and then pattern of practice again you know even if you've been very careful and you've followed our recommendations at the outset of the contract be consistent about what you require for amendments extensions modifications it's important to require that same level of formality otherwise you can inadvertently undercut all the good language that you put in your original contract other concerns so while access to computers is generally not an issue for most businesses for those of you who deal with low-income populations or populations with special needs or disabilities this may be an issue it may limit your ability to roll out have all of your forms on electronic you know I'll have all of your forms signed electronically you may need to make allowance for the fact that some of your clientele may not have access to computers in a related point when it comes to the third-party vendors that provide verification services for electronic signatures they oftentimes require a login procedure with pins and passwords that can be somewhat cumbersome and I know with my older colleagues they are intimidated by that process so there may be a chilling effect when it comes to enlisting third-party vendors by requiring the other side to follow those security procedures that are required by those vendors another issue with public perception I think were as a side becoming more comfortable with the idea of like tronic signatures I know that a manually signed documents that are then scanned and sent to the other side are routinely relied on and courts are becoming more accepting of even text messages as acceptable forms of execution on contracts but I think that there still is an underlying fear or suspicion that electronic signatures don't have that same import as a manual a signed writing and if you did have to get involved in litigation over say the enforceability of a text message how is it jury going to perceive a text message versus a manually signed signature so to be on the safe side I think the standard that we advise cueing away from the more informal means of signature and sticking more toward the deliberate forms of signature like the manually sign signature block that and that send PDF is a much safer course and lasts for notarized or witness documents or acknowledged documents the Massachusetts statute actually allows for electronic notarization or acknowledgment but our experience is that the technology hasn't really caught up to the statute in this particular area so again you sought to maintain it to the extent that document needs to be notarized we still generally recommend that you have that you that you signed that document hardcopy and have a notary notarize it so I think that concludes the main part of the presentation and we're going to open the you know to open up to questions let's take a look so Jason I have a question here that I think is in your area can an HR department rely of quality signatures so when it comes to working with employees and bringing them on board with on board a company or terminating a termination of employment there are no specific areas when it comes to HR that are excluded from that exclude e-signatures except when I am familiar with termination of health insurance and and in also licensure and benefits in those contexts you need a mint you need a manually signed original that electronic signatures are not accepted in those contexts I believe those are the own those are the only context that I'm aware of in which these signatures aren't acceptable so I think I'll tackle this next question what types of these signatures would you recommend we accept so in this area for major contracts I would recommend requiring a manual signature exchange by PDF or fax or they use a third-party vendor to electronically sign documents both of those require signing or typing on the dotted line I think that's good evidence of intent to be bound again you know helps to check off the boxes for the signature to be enforceable for lower-level contracts such as purchase orders I know those are often routinely emailed back and forth rather than formally signed that may be fine but again I would be very clear with your employees regarding what constitutes a lower level contract you know the dollar figure or the authority is established so that so that you're not inadvertently using a kind of a lower level of of signature for a contract that you would rather have be a little more formal and then are there other areas where we should not allow these signatures so I mean keep in mind the areas where the east' signatures aren't permitted such as wills or not yet recommended I just mentioned notarized documents I didn't go into detail in this but certain ago she will insert instruments just promissory notes or checks are not yet recommended even though the statute tries to anticipate a time when you could create an electronic original for most of those I would generally recommend that you stick to hardcopy originals right now but have a change of the technology develops okay we have another question what about check boxes and checkboxes constitutes a signature while looking back at the statute we know that a process or symbol can constitute the signatures you don't need someone's typed name or a cursive image of a signature to constitute an electronic signature so a checkbox could constitute a signature but in thinking about it it's not a very deliberate act you're just checking box so on that spectrum of deliberateness it's a weaker form of e signature that expresses intent so it wouldn't be a recommended form of signing electronically well I think that's all the questions so I think we'll wrap up the presentation now we'll forward a link to today's presentation and a pdf version of our PowerPoint to you in the next few days any unanswered questions or those that come in later we'll send you a detailed reply as soon as possible and we want to thank you for joining us today and we hope that you found this information helpful to you and your future business transactions thanks again