How Legitimate Are Digital Contracts and Agreements?

Attorney at Law Ken Kirschenbaum discusses the legality and strength of various electronic documents.

How Legitimate Are Digital Contracts and Agreements?

A growing number of organizations know to plan for a disaster. Digital images of contracts and agreements are stored and backed up. But ever wonder how legitimate they’ll be should fire destroy the original paper contracts?

Ken Kirschenbaum has been practicing law since 1974. Focused on helping businesses in the security and alarm industries, Kirschenbaum knows a thing or two about contract law-and about digital imaging. Kirschenbaum, of the New York-based firm Kirschenbaum & Kirschenbaum, sheds some light on the legalities of digital imaging and contract law.

Part of a Process

According to Kirschenbaum, digital images of documents are regularly binding. “All businesses need to prepare for disaster recovery,” he says. “So, obviously original contracts cannot be maintained in more than one location. It makes sense that reliable copies would be admissible in court.”

Faxed copies of documents are also acceptable, as long as there is a practical explanation as to why an original cannot be provided. In addition to such explanations, Kirschenbaum says a general account of business processes will have to be made.

“When you introduce a scanned copy of the contract [in court],” Kirschenbaum says, “you will need to explain that your business practice is to scan the contract. You will need to testify that you use a PDF format that insures the scanned copy cannot be altered and that it is a true and exact copy of the original.”

Further, says Kirschenbaum, the court will want to fully understand the process you employed, from handling the paper document to scanning and storing it. “Of course, this type of testimony is only necessary if there is some question that the electronic copy is not an exact copy,” he says.

Paperless Contracts

Some contracts exist without paper originals. Modern-day law accepts digital “assent” as evidence of agreement. In other words, what used to be represented by a pen-marked signature can now be represented by a simple click of a mouse.

Kirschenbaum cites Specht v. Netscape Communications Corp. as a New York 2001 case setting precedent for assent “evidenced by a ... click of a computer mouse transmitted across the invisible ether of the Internet” under certain circumstances. The catch, though, is that the mouse click has to be clearly indicative of a pact. “Any sign, symbol, action, or even willful inaction may create a contract,” Kirschenbaum says, “so long as it is unequivocally referable to the promise.”

So now that cyber contracts are permissible under certain conditions, it’s useful to know that there are, essentially, two types of paperless agreements: click-wrap and browse-wrap.

A click-wrap agreement is employed most often by software companies. “Potential licensees are presented with the proposed license terms and forced to expressly and unambiguously manifest either assent or rejection prior to being given access to the product,” he says. In other words, when you download an application, you’re prompted to accept the terms of use. If you don’t accept the terms, the application will not be installed on your computer.

Kirschenbaum points out that specific points or details in the execution of certain click-wrap agreements can be critical. “The rules of contract law are still applicable to these agreements,” he says. “A court in any particular case, depending on the facts, could hold that a click-wrap agreement is void or a particular provision be struck if it finds that the agreement or provision breached any of the established rules of contract law.”

The other type of digital contract is a so-called browse-wrap agreement. These do not require the active consent of the user, and in many cases are not enforceable by law. It’s typical with browse-wrap agreements, Kirschenbaum says, for a “notice of a license agreement” to appear on a Web page. However, once you click to go review the agreement’s conditions, you find you’ve already agreed to the terms — even though you didn’t know them! In short, browse-wrap agreements enable you to agree to a contract without having displayed the documentation of that agreement.

“The enforcement of [browse-wrap] agreements has been inconsistent,” Kirschenbaum says. “It appears that designing a “click-wrap” agreement in conformity with traditional contract principles is the most prudent way to provide online contracts.”

Geoffrey Oldmixon is a Springfield, Mass.-based freelance writer and editor.

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