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House Passes Digital Signature Bill
ElDaveo writes "Story on CNN.com: 'Forget pen and paper. In the 21st century, signing your John Hancock could be a mouse-click away. The U.S. House of Representatives has approved a bill that would allow U.S. consumers to electronically sign their name over the Internet.'" Good. Maybe now I won't need to deal with so much paper in the future. On the downside, maybe some script kiddie will hack my signature and find cool things to buy online.
Several posts thus far have accused the Congress of being "brain-dead" or "ignorant" of technological issues. While the conclusion may be true, this bill is not evidence therefor. Indeed, far to the contrary, this bill is an extraordinary step: Congress is getting government OUT OF THE WAY of technologists and the marketplace.
To the contrary, these postings manifest a lack of understanding of the *legal* purpose and effect of a signature (which is all that the bill addresses). One post stated:
Signing a document has two purposes:
* authenticity
* non-repudability
However true this might be for practical uses of signatures, the signing of a document for legal purposes has nothing whatsoever to do with either "feature," as they appear to be understood here. ("Authentication" doesn't mean what I think he thinks it means.) Indeed, nothing about paper-on-ink signatures, which are trivially forged and transferred from one document to another, provides either of the cited functions.
And it is certainly true that a panel of computer lawyers at the ABA (and the state of Utah) felt that a set of express standards for signatures by electronic means to assure authentication of and non-repudiability by the signer. On the other hand, the clear trend today in state legislatures is instead to adopt more minimalist bills, such as the one that passed the House, that simply assure that electronic instruments are treated no more or less formally as paper writings. Here's why:
In almost all of the United States, we still have a body of law entitled the "Statute of Frauds," which provides that certain types of agreements (e.g., sale of goods > $500, transfer of real estate) are unenforceable unless a "sufficient memorandum" is signed by the party against whom enforcement is sought. Other laws likewise require formalities for certain documents, such as deeds, wills, assignments of certain kinds of intangible property and the like be signed by certain parties.
Here, the purpose of these laws is, supposedly, to avoid swearing matches by giving the world an incentive to make physical, tangible manifestations of the subject matter of the agreement. But the effect of the law is that a market participant, even though he had agreed in full to a contract and even if he fully intended at the time to go through with it, may actually avoid its enforcement later on the purely technical ground that there exists no writing signed by him.
Interestingly, except for certain instruments, the tangible manifestation is not as important as the fact that it was made: you could enforce a document with credible testimony that a signed writing existed in the past. In any case, it is that manufacture of that manifestation that is important for legal policy.
The signature itself, for legal purposes, does not serve to authenticate who was the document's signer, or to avoid repudiation: it is merely to authenticate the document as the one agreed to by the parties -- to distinguish, for example, a draft from the "real thing." The legal technicalities of signature are few. The following have all been found to be valid:
- printing an "X"
- making a scratch on the paper
- shaving a name on the side of a cow
- writing someone else's name
- typing your name
- asking Western Union to type your name
which of course does nothing to identify the signer or to assure non-repudiation. Nor does the common law require that document to be signed, if the signature is placed on another instrument (or bovine mammal) in such manner as to manifest intent to authenticate that document. Papers have been written with bizarre examples of what constitutes a signature. Under the UCC, a signature is any fixed tangible manifestation of an intent to authenticate the document.
On the other hand, when I am attending the closing a zillion dollar sale of a chain of hotels, and the principal of the seller walks up to one of the documents, notes that he heard he could sign "Minnie Mouse" or scrawl an "X," on another piece of paper, I politely ask him (if he is not illiterate) to write his name in cursive on the contract itself. If he refused, I'd advise my client to consider putting off the closing.
Why? Because while these methods of signature are legally sufficient if *he* in fact *intended* to sign, I might still someday need to use these documents to evidence those facts. The legal sufficiency of a document is an entirely different thing from the practical security that sometime, someday, he might change his mind and "misremember" why he signed "Minnie Mouse," or marked only a vertical line or "X." (Remember, it is all about the manifestation of an intent to authenticate.)
On the other hand, for less signficant transactions, we hardly care one way or the other whether or not we can prove or disprove *WHO* signed the document or why -- we just want there to exist barely minimal legally sufficient documents to avoid a technical defense based upon the Statute of Frauds.
Its all about Eggs in Baskets. The realities of the marketplace determine what "technologies" for signature an individual will use, and what "informal," but legally sufficient signatures will be accepted. Each buyer and seller will decide for himself and herself what to require of the other.
Many valid signatures are commercially unacceptable for those reasons. On the other hand, while this is a non-problem, the concern is that a commercially acceptable signature might be held to be invalid! The law serves only to provide the minimum requirements for a signature to be valid (as opposed to "commercially acceptable.") The marketplace determined what technologies they will use and accept.
Which brings us to the ESA. Assymetric encryption now provides (under certain circumstances) greater security to prove authenticity, which is an excellent reason to use electronic signatures in lieu of "traditional" technology, particularly for on-line transactions. On the other hand, it is not for the law to determine what technology should be used -- the law should only undertake to assure that a sig is valid and leave it to you and me to decide what we will accept.
The mind-loss would be to adopt some 50 plus pages of specification as to what is and what is not a valid signature and providing an entire new kind of litigation on the formalities of a contract. "Sorry, you don't get to keep the house, your certification authority's license expired the day beforehand." Such technical defenses would be brain-loss at best.
Whether a vendor should accept the following e-mail:
"I will buy five million widgets at $25,000 apiece, 2%/10 net 30. love andy"
is entirely up to him. Whether a court will enforce these price terms if Andy admits he sent it, on the other hand, is another issue entirely. On the other hand, if commercial exigencies make it practical and financially more efficient to permit that exchange by e-mail, the law should not get in the way.
As an aside, it is almost certainly the case that the foregoing e-mail would satisfy the Statute of Frauds. Its just that in the absence of case law, a market participant can't be assured that it is. We abundance-of-caution-types would stick to pen-to-paper, even if it cost a bit more and took a bit longer, because we KNOW that the courts will accept that. It is for these people that this law exists -- to give them some comfort concerning what is almost certainly the law today -- there will be no technical defense to enforcing an agreement on the ground that the agreement was signed in electronic form. It is up to the market participants to determine if the mode of signature used gives them enough comfort that they will be able to prove that the document was in fact signed by the other party.
Hat's off to a Congress that showed, in this case, a far greater savvy about electronic signatures than the ABA and many technologists. ESA does precisely what it is supposed to do, make crystal clear that a technical defense on the ground that an electronic document is not a "writing," and that a typed signature is not a "signature," while leaving it to the marketplace to decide what signature technology they will prefer to use.