Electronic signatures on contracts are now commonplace. Wet ink signatures may be transitioning to the status of a “legacy technology.” Legislation has been enacted to confirm the validity of electronic signatures. See, e.g., Civ. Code, § 1633.7(a) (Uniform Electronic Transactions Act.)
An electronic signature may be legally valid in principle. However, the party seeking to enforce an actual contract signed electronically has the burden of proving that the contract is legitimate. Signature in electronic form does not automatically render the document enforceable. A traditional paper contract with a wet ink signature must still be authenticated as valid, in order for a court to admit it as evidence, and actually establish the existence of a binding contract. The same requirement applies to an electronic contract with an electronic signature. The party seeking to enforce the contract must prove to the court that it is authentic.
Ruiz v. Moss Bros. illustrates pitfalls inherent in the intersection of time-honored evidentiary requirements and new electronic procedures. Ruiz v. Moss Bros. Auto Group, Inc., 232 Cal.App.4th 836 (2014). In that case, an employer sought to enforce an arbitration agreement. The employee’s electronic signature was on the agreement. But the employee stated he could not remember signing the document. The employer’s evidence established that the document at issue was part of an update to the employee handbook, that each employee was required to log into the company’s HR system using the employee’s login ID and password, and review and sign the document.
The court found that this evidence was not sufficient to prove that the contract was signed by the employee. The court acknowledged that the Uniform Electronic Transactions Act confirms that a signature is not invalid because it is done electronically. Civ. C. § 1633.7. However, the court also indicated that any document, paper or electronic, must still be authenticated before it can be used as evidence. Evid. C., § 1401. That requires sufficient evidence to allow the court to conclude that the writing is what the proponent claims it is.
In Moss, the employer failed to bridge the gap between the fact that that all employees were required to sign the document electronically and a showing that the particular employee had signed the document at issue. The court faulted the employer because the employer did not provide evidence showing on what basis the employer inferred that the electronic signature was the act of the employee.
The court asserted that it is not difficult hurdle to authenticate an electronic signature. The court pointed to the Uniform Electronic Transactions Act, which states that an electronic signature is attributable to a person if it was the act of that person, and that this may be shown in any manner, including by showing the reliability of the security procedures applied to determine the person to which the electronic signature is attributable. (Civ. C. § 1633.9(a)). The employer’s generalized statement that all employees were required to use their unique ID to log in and electronically sign the form was insufficient.
The Court pointed out that the following information was not offered by the employer, impliedly suggesting that it would have supported the authenticity of the signature: (i) the electronic signature in the employee’s name could have only been placed on the document by someone using that employee’s unique login and password; (ii) the date and time printed next to the electronic signature indicated the date and time the signature was made; and (iii) all employees were required to use their unique login and password when they logged into the system and signed electronic documents, and that based on the foregoing, the employee had apparently signed the document.
Each of these factors could have easily been presented by the employer. The employer failed because it failed to explain to the court in detail the facts and circumstances demonstrating the security procedures used to associate the signature with the employee.
In order to adequately prove up an electronic signature, an employer may want to present several layers of evidence. First, the general nature of the electronic system should be established, including: (a) each employee sets up his/her own account; this requires each employee to establish a unique “log in identification” and unique password; (b) the employees are instructed to keep those credentials confidential; (c) each employee account can only be accessed through use of the log in credentials, and those credentials are not accessible to others; and (d) other security features and protocols, as appropriate. Second, the existence of the employee’s own account should be established, i.e., (a) the fact that the employee was instructed to set up the account, and (b) in fact an account was set up in the employee’s name, and, (c) to the extent available, examples of employee’s use of the account in the regular course of employment for various purposes, including submission of other documents; and (d) the employee’s reliance upon or non-objection to previous actions and elections taken through the electronic system. Courts will authenticate the electronic signature when presented with this type of detail. See, e.g., Tagliabue v. J.C. Penney Corporation, Inc. (2015) 8780577 (Westlaw Dec. 15, 2015).
For parties using and relying on third party electronic signatures in a different context, careful thought should be given as to how the parties will establish that the electronic signature was the act of that person, including the security procedures in place to protect the authenticity of the signature.