11.3 Electronic Contracts
Library | Contract Law in Virginia (Virginia CLE) (2019 Ed.) |
11.3 ELECTRONIC CONTRACTS
11.301 Introduction. In Virginia, contracts can be written, oral, or electronic. Courts have largely used existing general contract law principles to address issues in the area of electronic contracts. Often, an important issue in electronic contract transactions is whether electronic signatures and records will satisfy laws that require a written and signed agreement. Virginia has adopted the Uniform Electronic Transactions Act (UETA), 782 which promotes the use of electronic commerce and makes electronic records and signatures legally equivalent to paper writings and manual signatures. Generally, a series of emails may form or modify contracts if the requisite elements of contract formation are present in the email exchange. 783 Courts have sometimes categorized contracts formed on an Internet website as either "clickwrap" or "browsewrap," but more recent cases have relied on more traditional contract principles such as notice of the terms and conditions and assent to them to establish the enforceability of an electronic contract. Virginia (along with Maryland) is one of two states to adopt the Uniform Computer Information Transactions Act (UCITA) 784 —a failed attempt to adopt a uniform law that deals with electronic contract formation. A federal statute, the Electronic Signatures in Global and National Commerce Act ("E-SIGN") 785 makes plain that electronic signatures and contracts are valid.
11.302 "Writing" and "Record" Defined. Several Virginia statutes are compatible with electronic contracts. The Virginia Code definitions of "written," "writing," and "in writing" include electronic representations of words, letters, symbols, numbers, or figures. 786 As long as the electronic
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representation is retrievable in a perceivable form, it is a writing, even if an electronic signature is not affixed. 787 Under revised Article 1 of the Uniform Commercial Code (title 8.1A of the Code of Virginia), a "record" is defined as "information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form." 788
11.303 Uniform Electronic Transactions Act (UETA). 789 The Uniform Electronic Transactions Act establishes electronic records and signatures as the legal equivalents of paper writings and manual signatures. 790
UETA governs all electronic transactions not otherwise covered by the Uniform Commercial Code where the parties have agreed to conduct a transaction by electronic means. 791 Where the parties are silent on this issue, such an agreement will be implied by using email to conduct a transaction. 792 Generally, UETA recognizes the legal effect and enforceability of electronic records, electronic signatures, and electronic contracts. 793 UETA defines an "electronic record" as "a record created, generated, sent, communicated, received, or stored by electronic means." 794 An "electronic signature" is "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." 795 In determining the validity and authenticity of an electronic signature, a court may "consider whether the electronic signature is: (i) unique to the signer, (ii) capable of verification, (iii) under the signer's sole control, (iv) linked to the record in such a manner that it can be determined if any data contained in the record was changed subsequent to the electronic signature being affixed to the record, and (v) created by a method appropriately reliable for the purpose for which the electronic signature was
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used." 796 Under UETA, a notary public may notarize documents electronically. 797 Any electronically notarized document that otherwise appears to be properly notarized is presumed to have been notarized under the laws and regulations of Virginia. 798
UETA establishes other basic electronic contract principles. Under UETA, an electronic record is considered sent when the record, in a form capable of being processed by the recipient's information processing system, enters that system and from which the recipient can retrieve the electronic record. 799 UETA introduces the concept of "transferable records"—negotiable notes under Article 3A (title 8.3A of the Code of Virginia) and documents under Article 7 of the Uniform Commercial Code (title 8.7 of the Code of Virginia) that are in electronic form. 800 Finally, UETA recognizes the formation of contracts by electronic agents so that the contracting persons or entities are bound by a transaction that may be conducted automatically by a computer. 801
11.304 The Statute of Frauds. The purpose of UETA is to facilitate the formation of an electronic contract so that the contract is not made unenforceable by any statute that requires a signed writing. For example, the Virginia statute of frauds requires contracts not to be performed within a year to be evidenced by a signed writing to be enforceable. 802 UETA provides that an electronic signature that authenticates an electronic record satisfies any traditional legal signature and writing requirements.
UETA, unlike the legislation of some other states, is technology-neutral and does not require the use of a specific technology for electronic authentication. UETA takes a flexible approach by recognizing that it is impossible to define or foresee all criteria or security procedures that may be sufficiently reliable for attribution of an electronic signature to a party. Instead, using the new concept of a "secure electronic signature," Virginia has
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adopted a more general definition of electronic signature using criteria for trustworthiness (such as integrity, authenticity, confidentiality, nonrepudiation, and reliability) to establish authentication standards. 803 The Virginia statutes use permissive criteria that a court may consider when determining the validity of an electronic signature. 804
The heightened concern about the reliability of electronic messages, however, derives from the ability to change words without detection after the electronic message is received but before it is printed. Unlike telegram, telex, and facsimile transmissions, which are also sent electronically, electronic messages are not automatically printed in a format identical to that transmitted. 805 UETA gives examples of security procedures for verifying electronic signatures that may satisfy its requirements, including a procedure that requires the use of algorithms or other codes, identifying words or numbers, encryption, or callback or other acknowledgment procedures. 806
An open issue is whether a typed email signature or email header showing the sender's name is sufficiently reliable to be considered a signature. At least one Virginia court has ruled that a series of signed facsimile transmissions satisfies the statute of frauds. 807 The same logic should apply to email messages if those messages otherwise satisfy the electronic signature statute. 808 The question of what is appropriately reliable may ultimately depend on the transaction—what may be considered reliable for a $500 transaction may not be reliable for a $500,000 transaction. UETA largely leaves the determination of the question of what constitutes appropriate attribution to custom, trade usage, course of dealing, the agreement of the parties, and the courts.
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In Goodenough v. Province, 809 a Virginia court addressed contract formation by the exchange of emails. The court noted that while Virginia courts had not addressed this issue directly, the Virginia Supreme Court had considered the issue of contract formation by the exchange of correspondence in American Industrial Corp. v. First & Merchants National Bank, 810 acknowledging that while "the Statute of Frauds does not require that the complete agreement between the parties show on the face of the signed writing, the nature and extent of the undertaking . . . must so appear or the agreement is not enforceable." 811 The Goodenough court found that the email messages between the plaintiff and a website developer supported by invoices and payment information did not constitute an agreement in writing signed by the parties, but was instead a collection of writings, some signed and some unsigned, which required additional reference to oral communications to determine the nature and extent of the undertaking. Since the agreement was unwritten, the court held that the suit was barred by the statute of limitations because it was not filed within three years. 812
11.305 Clickwrap Contracts. A clickwrap contract is one in which the website user must affirmatively indicate assent to the terms of an online contract by a mouse click. 813 Unlike the controversial "shrink-wrap license,"
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where the act of acceptance is simply the unwrapping of the software, this type of contract should be more generally recognized by the courts because a party shows assent in a more affirmative manner by pointing and clicking to indicate acceptance. 814
Clickwrap contracts are enforceable in Virginia. In A.V. v. iParadigms, LLC, 815 the court found that the student plaintiffs who submitted their work to the defendant's plagiarism detection website, by clicking "I Agree" on the site's terms of use agreement, entered into a binding agreement with the defendant that protected it from liability arising from the plaintiffs' use of the website. The clickwrap agreement provided that the services offered by iParadigms were "conditioned on [the user's] acceptance without modification of the terms, conditions, and notices contained herein." 816 Even though the plaintiffs submitted papers with a disclaimer objecting to the archiving of their work in iParadigms' database, the court concluded that the disclaimers did not modify the agreement or render it unenforceable. The court rejected the plaintiffs' theory that the agreement was an unenforceable...
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