Electronic contracts and signatures October 19, 2011

October 19, 2011

 

*************

**************

Question

***************

Ken,

Thank you for your daily updates.

I have a question about the use of DocuSign and using a paperless contract system. Assuming we are using the “correct” contracts with DocuSign. What I want to know is if you have an opinion on using paperless contracts and having the customer sign them via an iPad or tablet onsite. DocuSign then emails the customers copy to them and we are able to keep them on file or print them off. Specifically, is emailing the customer these documents satisfactory for the 3-day right of rescission? Any insight you can offer on this topic would be helpful.

DocuSign, the paperless company, is adamant that any contract "signed" through their

software will hold. http://www.docusign.com/support/faqs

Thanks,

Randy Chipman

***************

Answer

***************

There is a Federal statute, Electronic Signatures in Global and National Commerce Act, which authorizes electronic signatures. States also have electronic signature statutes, and it's easy to understand how electronic signatures should be and are accepted in place of traditional paper contracts with original signatures.

What I had more trouble with was how electronic signatures complied with the myriad consumer statutes and regulations for residential sales, such as the 3 day cancellation notice, font size and color, required language, warning provisions, requirement that a fully executed copy of the contract be left with the consumer and more.

Electronic contracts on line, filled out by the the consumer clicking through the contract and then with a final click accepting the contract, is also fairly understandable. But what about getting an electronic contract signed at the house. It can be in connection with a sale or signing a consumer up for monitoring or service.

The answer is below. How many alarm companies are prepared to embrace this technology at this point is another issue. The consumer can consent to electronic compliance, and apparently that consent can itself be electronic. Here's info on the statute - and now you know as much about it as I do.

*************

From an FTC and Dep. Of Commerce report on Electronic Signatures and

Consumer Consent Provision

 

Section 101(c)(1)(C)(ii) of the Federal Electronic Signatures in Global and

National Commerce Action provides that information required by law to be in

writing can be made available electronically to a consumer only if he or she

affirmatively consents to receive the information electronically AND the

business clearly and conspicuously discloses specified information to the

consumer before obtaining his or her consent. Section 101(c)(1)(A) and (B).

The disclosures include: (1) whether the consumer may request to receive the

information in non-electronic or paper form; (2) the consumer's right to

withdraw consent to electronic records and the consequences- including

possible termination of the relationship- that will result from such

withdrawal; (3) the transaction(s) or categories of records to which the

consent applies; (4) the procedures for withdrawing consent and updating the

information needed to contact the consumer electronically; and (5) how the

consumer may request a paper copy of the electronic record as well as what

fees, if any, will be charged for the copy. Section 101(c)(1)(B)(i)-(iv).

In addition, business must provide the consumer with a statement of the

hardware and software needed to access and retain the electronic record.

Section 101(c)(1)(C)(i).

Moreover, Section 101(c)(1)(C)(ii) states that a consumer's consent

to receive electronic records is valid only if the consumer "Consents

electronically or confirms his or her consent electronically, in a manner

that reasonably demonstrates that the consumer can access information in the

electronic form that will be used to provide the information that is the

subject of the consent." Section 101(c)(1)(C)(ii) overlays existing state

and federal laws requiring that certain information be provided to consumers

in writing. It also provides the framework for how business can comply with

the underlying statutory or regulatory requirement to provide written

information to consumers electronically- whether the information is a

disclosure, a notice, or a statement of rights and obligations- within the

context of a business-to-consumer transaction.

 

 

Link to E-Sign act:

http://www.fca.gov/download/public%20law%20106-229%20e-sign.pdf

 

 

101: (c) CONSUMER DISCLOSURES.-

(1) CONSENT TO ELECTRONIC RECORDS.-Notwithstanding

subsection (a), if a statute, regulation, or other rule of law

requires that information relating to a transaction or transactions

in or affecting interstate or foreign commerce be provided

or made available to a consumer in writing, the use

of an electronic record to provide or make available (whichever

is required) such information satisfies the requirement that

such information be in writing if-

(A) the consumer has affirmatively consented to such

use and has not withdrawn such consent;

(B) the consumer, prior to consenting, is provided with

a clear and conspicuous statement-

(i) informing the consumer of (I) any right or option

of the consumer to have the record provided or made

available on paper or in nonelectronic form, and (II)

the right of the consumer to withdraw the consent

to have the record provided or made available in an

electronic form and of any conditions, consequences

(which may include termination of the parties' relationship),

or fees in the event of such withdrawal;

(ii) informing the consumer of whether the consent

applies (I) only to the particular transaction which

gave rise to the obligation to provide the record, or

(II) to identified categories of records that may be

provided or made available during the course of the

parties' relationship;

(iii) describing the procedures the consumer must

use to withdraw consent as provided in clause (i) and

to update information needed to contact the consumer

electronically; and

(iv) informing the consumer (I) how, after the consent,

the consumer may, upon request, obtain a paper

copy of an electronic record, and (II) whether any fee

will be charged for such copy;

(C) the consumer-

(i) prior to consenting, is provided with a statement

of the hardware and software requirements for access

to and retention of the electronic records; and

(ii) consents electronically, or confirms his or her

consent electronically, in a manner that reasonably

demonstrates that the consumer can access information

in the electronic form that will be used to provide

the information that is the subject of the consent;

and

(D) after the consent of a consumer in accordance

with subparagraph (A), if a change in the hardware or

software requirements needed to access or retain electronic

records creates a material risk that the consumer will

not be able to access or retain a subsequent electronic

record that was the subject of the consent, the person

providing the electronic record-

(i) provides the consumer with a statement of (I)

the revised hardware and software requirements for

access to and retention of the electronic records, and

(II) the right to withdraw consent without the imposition

of any fees for such withdrawal and without the

imposition of any condition or consequence that was

not disclosed under subparagraph (B)(i); and

(ii) again complies with subparagraph (C).

(2) OTHER RIGHTS.-

(A) PRESERVATION OF CONSUMER PROTECTIONS.-

Nothing in this title affects the content or timing of any

disclosure or other record required to be provided or made

available to any consumer under any statute, regulation,

or other rule of law.

(B) VERIFICATION OR ACKNOWLEDGMENT.-If a law that

was enacted prior to this Act expressly requires a record

to be provided or made available by a specified method

that requires verification or acknowledgment of receipt,

the record may be provided or made available electronically

only if the method used provides verification or acknowledgment

of receipt (whichever is required).

(3) EFFECT OF FAILURE TO OBTAIN ELECTRONIC CONSENT

OR CONFIRMATION OF CONSENT.-The legal effectiveness,

validity, or enforceability of any contract executed by a consumer

shall not be denied solely because of the failure to

obtain electronic consent or confirmation of consent by that

consumer in accordance with paragraph (1)(C)(ii).

(4) PROSPECTIVE EFFECT.-Withdrawal of consent by a consumer

shall not affect the legal effectiveness, validity, or

enforceability of electronic records provided or made available

to that consumer in accordance with paragraph (1) prior to

implementation of the consumer's withdrawal of consent. A

consumer's withdrawal of consent shall be effective within a

reasonable period of time after receipt of the withdrawal by

the provider of the record. Failure to comply with paragraph

(1)(D) may, at the election of the consumer, be treated as

a withdrawal of consent for purposes of this paragraph.

(5) PRIOR CONSENT.-This subsection does not apply to

any records that are provided or made available to a consumer

who has consented prior to the effective date of this title to

receive such records in electronic form as permitted by any

statute, regulation, or other rule of law.

(6) ORAL COMMUNICATIONS.-An oral communication or a

recording of an oral communication shall not qualify as an

electronic record for purposes of this subsection except as otherwise

provided under applicable law.