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Are You Ready for the E-Sign Revolution?
In 2006, we wrote an article for CampLine entitled “Electronic Communication — Legal and Practical Issues to Consider In the Information Age.” That article discussed the myriad ways that camps and campers were using the internet and electronic devices in their operations — and the legal and risk management impact that use had on camp operations — before, during, and after camp. That article is still relevant, but in just four years, we have seen a dramatic increase in Internet use and activity — including pressure on organizations to convert their previously paper forms and contracts to an electronic equivalent. In this article, we focus on the use and enforceability of electronic contracts — the importance of understanding the issues, and the detriment to your camp if you don’t.
We have both been approached by a variety of clients, including many camps, about converting paper forms to an electronic equivalent. Many of these forms are intended to be binding contracts, and some of them are not. You can probably guess the most common reasons for a camp’s desire to convert to electronic forms — these include: 1) decreased costs and staff time in handling the forms; 2) convenience in obtaining information and exchanging, storing, and retrieving forms; 3) reduced environmental impact (saving trees) and 4) potential increase in participant forms completed, signed, and returned.
The Federal Electronic Signatures in Global and National Commerce Act (E-SIGN Act)1 was created to officially recognize electronic contracts. The E-SIGN Act provides (among other things) that a contract cannot be found unenforceable simply because it is in electronic form, and that an e-signature is acceptable in a variety of iterations. For example, everyone is familiar with clicking “yes” or “I agree” to the purchase of products on the Web. Electronic signatures can also include typing in a signature, adopting an online signature, or some other format. The key is that the person signing the electronic record did so with the intent to enter into a legally binding contract. As discussed in comments to the Uniform Electronic Transactions Act (UETA), as adopted by many states:
The idea of a signature is broad and not specifically defined. Whether any particular record is "signed" is a question of fact. Proof of that fact must be made under other applicable law. This Act simply assures that the signature may be accomplished through electronic means. No specific technology need be used in order to create a valid signature . . . . In any case the critical element is the intention to execute or adopt the sound or symbol or process for the purpose of signing the related record. (UETA, Section 1, official comment)
Considering the compelling reasons listed above, and the fact that an electronic signature is legit, it seems like a no-brainer to convert to electronic forms.2 However, a serious concern is that many camps and organizations are going through the electronic conversion process without considering the legal requirements and practical implications. This can lead to contracts that are ultimately not upheld (as enforceable) or other problems.
Compounding the problems are third-party vendors who contract with camps to assist them with electronic registration and marketing. These vendors may be well-versed in a variety of electronic communication and database management techniques. As part of their services, they may also encourage the camp to convert to electronic forms. However, not all vendors are aware of the legal ramifications of electronic contract conversion. As a result, the camp that works with a third-party vendor, but does not consult with legal counsel regarding the legal aspects of electronic conversion, may overlook these important issues in their push to transition to electronic forms.
This article will provide you with a starting point to consider the legal and practical issues in electronic contract conversion, with a couple of real life examples. Work with your legal counsel to assist you in developing a conversion plan that considers practical value and legal issues.
Electronic Contracts — Practical Issues
Using the Web to collect and exchange information with your camper families is a valuable tool. As we’ve said before, an effective information exchange is vital in all aspects of camp operations — electronic or otherwise. Dealing with families electronically sends a signal that the camp is mindful of cost and convenience issues, and is current in its administrative and operational strategies. Potential campers, accustomed to the e-world, might be surprised to find their parents were actually putting pen to paper in the enrollment process.
The camp may collect registration information from campers, provide informational materials, and may also seek electronic signatures on documents they contemplate will be binding contracts. These could include terms of agreement (e.g. refund, cancellation, return) or a participation agreement or health form (requiring an acknowledgment and agreement), for example.
It is important that the camp consider the structure of its online process (on its Web site) so that it is clear to campers and their families. Consider that the applicant is engaging in a process and needs directions on how to navigate the process, what they will see in the process, what they will be accomplishing when they are there, and what happens when they get out on the other side.
Consider an introductory page at the site that explains the various aspects of the electronic process, and what it entails. Will the individual simply be reviewing information? Electronically signing any binding contracts? Completing information? Does the camper (if a minor) need to be present in the electronic process (for example, to complete information or assist in completing forms)? Can the individual get back into the site if they’ve only partially completed the process, and will their information be saved? Will they be making payment at any stage of the process? These and other matters should be addressed up front, so the applicant understands what is being asked of him or her and the expected outcome of the process.
Electronic Contracts — Legal Requirements
What is the big deal? You may think: “Everyone is using electronic contracts, so it must be safe.” Well, it is a big deal. Here are the nuts and bolts:
The E-SIGN Act recognizes electronic contracts in a variety of settings. In addition, as we discussed earlier, many states have adopted the Uniform Act — UETA. For states adopting UETA, that law will govern e-signatures, as it is consistent with the E-SIGN Act and its directives regarding application of state law.3 Electronic signatures are thus considered a valid way to enter into binding contracts. The e-signature can take a variety of forms: “. . . an electronic sound, symbol, or process attached to or logically associated with a record” with the important result that, whatever it is, it is “. . . executed or adopted by a person with the intent to sign the record.”4 However, the E-SIGN Act, UETA, and any alternative e-sign laws have other requirements in terms of a document’s ultimate enforceability as a binding contract. Work with your legal counsel to understand the application of your particular state’s signature law (as well as case law) in conjunction with application of the E-SIGN Act. As mentioned above, in states adopting UETA, organizations can look to those states’ e-sign laws, but in states that have adopted something other than UETA, organizations may be subject more directly to the E-SIGN Act.5 We have taken the liberty of presenting the following as what we perceive to be general requirements, but there may be additional or different e-sign requirements relevant in your jurisdiction or in specific situations.
Here are some of the issues:
An important requirement of a legally binding contract (electronic or paper) is that there be successful contract formation — that is, there must be an offer by the camp and a valid acceptance by the signing party. Critical here are clear instructions to the signer on the nature of the contract and the process for acceptance of its terms. In other words, it must be clear that the individual understood and intended to enter into a legally binding contract. In addition, the terms of the contract should be available to the signer for viewing, printing, and/or storage, in conjunction with the acceptance of those terms (with appropriate direction on how they can print or store a copy of the document they are signing).
The signing party must have voluntarily agreed to enter into the electronic transaction, and have the option of revoking that consent in regard to other transactions. As a result, the signer should have the option of signing a paper version, and understand how to access that alternative for any particular transaction they may decide not to enter into electronically (for example, a PDF that the signer can download and print).
Another important issue is authentication. This is critical for two reasons: 1) to assure the person who shows up at camp is in fact the camper / camp family who signed the record; and 2) in the event the camp needs to rely on the document to enforce its contractual rights.
First, there must be a way to verify that the individual signing the electronic contract is who they purport to be. This is oftentimes accomplished through a password, credit card data, and/or other manner (UETA, Section 9, official comment mentions “[n]umerical codes, personal identification numbers, public and private key combinations . . .” or “security procedures”). This is called verification or “attribution” — meaning that the signature can be attributed to that person.
Second, your software, database, and record-keeping procedures must allow you to collect and record appropriate information, store (retain) it, and then retrieve a specific document at a later date in the form in which it was electronically signed, with all relevant information. Relevant information can include date signed, identity of signatory and signature, any boxes required to be checked or information required to be completed, version of form signed, personal information received with forms (e-mail, password tied to individual’s account, credit card number), etc. In addition, and importantly, you must be able to verify the integrity of your system and of your process. For example, business practices and database management systems should be meticulous and set up in a manner to avoid any later argument that the database may have been corrupted, or physically or technologically tampered with.
In addition to meeting electronic signature legal requirements, the contract must still meet the substantive legal requirements of an enforceable contract, under applicable law, including unique requirements for specific documents (for example, those containing release or other liability shifting [exculpatory] language).6
In Moore v. Minnesota Baseball Instructional School, (2009 Minn. App. Unpub. LEXIS 299, March, 2009), a Minnesota Appeals Court upheld a release of liability, executed electronically, despite the fact that a copy of the electronic document could not be produced. In that case, Terry Moore, a ten-year-old boy, suffered serious injuries when accidentally hit in the eye by another minor during some free time at a baseball camp.
Terry’s father filed suit against the camp on his son’s behalf, claiming the camp was negligent. The court affirmed a lower court’s decision to dismiss the father’s claim before trial (summary judgment), on the basis of the mother’s signed electronic release. Among other things important to the court, although a copy of the electronic release could not be located, the camp representative testified that Terry could not have enrolled in the camp unless one of his parents had electronically signed the release form; there was a record indicating that Terry’s mother had chosen to electronically complete the registration process; and Mrs. Moore did not deny that she had completed the electronic release; she simply did not recall, and testified she “must have.”
Don’t be fooled by this ruling. The Moore court didn’t even have the opportunity to review the electronic contract — it simply accepted the document based upon circumstantial evidence! (Apparently, testimony from a camp employee indicated that the camp routinely destroyed these documents because they also contained what the camp felt was “personal information.” [The release was apparently part of a document that also included medical information.] As a result, the camp’s efforts to create an electronic record were thwarted by its own policies!) Unlike the camp in the Moore case, organizations are best served by understanding e-sign law requirements, and properly obtaining and retaining its electronic contracts. The requirements of federal and state e-signature laws can be critical to the ultimate enforceability of a contract — should your camp need to rely on it. (See our detailed summary on the Moore case at OutdoorEd.com, Adventure and Recreation Law Center: “Electronic Releases of Liability – What’s the Scoop,” August, 2009, for more details on the case.)
In an unreported case, an adult man experienced distress during an organized race event, dying a few days later. He had reportedly signed both a paper and electronic version of a form (in favor of the race organizer) containing an assumption of risks and release of liability (“release”). The personal representative of his estate filed suit against the race organizer and others, claiming that their negligence caused the decedent’s death.
The race organizer filed a motion for summary judgment before trial, claiming, among other things, that the estate’s negligence claims should be dismissed on the basis of the decedent’s release. Unfortunately, the defendant organizer could not find the paper version of the release (signed on site, before the race began). The electronic version of the release form showed that the decedent had printed his signature, agreeing to the release; however, a box required to be checked (indicating his approval to the various terms of the release) showed blank on the print-out copy of the electronic form produced for the court. Anticipating that the court might question this detail, the defendant submitted a signed affidavit (sworn statement) from its employee, indicating that the decedent could not have electronically completed the registration process unless he had checked the box — in other words, it was simply a glitch in the electronic process and database (managed by a third-party vendor).
In its order refusing to dismiss the case before trial, the court recognized that if the decedent’s release form was enforced, the estate’s claims would be dismissed. Although the court recognized that the decedent had electronically signed the form, it found that the blank box created an ambiguity, presenting questions of fact that needed to go before the jury.
The case provides an opposite result to the defendants’ win in the Moore case and points to an important issue: The form executed and signed online — when presented to the court — should look identical to that executed by the signer. This includes not only the online signature, but any boxes required to be completed or checked as well. In Moore, the defendant camp was lucky, despite sloppy practices — certainly not something a camp should hang its hat on.
Electronic Documents and Database
Don’t let the perceived simplicity and convenience of online forms tempt you into glossing over the importance of e-sign laws — including the appropriate preservation of your online documents and the integrity of your (or your vendor-managed) database. When you are creating online forms that you intend to be binding contracts, you must ultimately be able to demonstrate the integrity of the documents and the process if you need to rely on those documents at a later date.
If you are working with a third-party vendor to develop and manage your online registration, your database, or your online forms, work with your legal counsel to assess the vendor’s understanding of e-signature laws, and address those issues appropriately if you go online with your forms. Ask if the vendor has worked with legal counsel to address e-signature laws; if so, your attorney can coordinate on legal concerns — if not, your attorney can work with your vendor to address the issues. Consider a contract with the third-party vendor that outlines the scope of the vendor’s responsibilities and protects the camp from mistakes made by the vendor (in the online process or otherwise) that may expose the camp to liability.
Issues with Minors and Their Parents
Special issues arise when camps ask a parent of a minor to sign, want both parents to sign, or ask that the minor sign certain documents. In addition, if the parent is registering more than one child from the same family, the database (although it may have features that allow it to fill in the blanks for the parent’s second or third child’s registration) must be able to create and preserve contracts or documents separately as they relate to each different child. Be sure you have appropriately addressed these issues in your documents and process.
If you’ve already converted to online forms, seek informed legal counsel to review your process as a “dummy” and provide feedback — from both a practical and legal perspective. If you are contemplating electronic conversion, get informed legal counsel to assist you. Importantly, check your online forms process — and have a few friends or colleagues navigate it as well — to assess whether it is user friendly for your camper families, while also meeting your camp’s needs. Ignorance can be bliss in some cases, but not with electronic contracts.
© 2010 Charles R. (Reb) Gregg and Catherine Hansen-Stamp
*This article contains general information only and is not intended to provide specific legal advice. Camps and related organizations should consult with a licensed attorney regarding application of relevant state and federal law as well as considerations regarding their specific business or operation.
1. 15 U.S.C. 7001
2. There are a few exceptions — that is, contracts that cannot be executed in electronic form — such as wills. (See 15U.S.C. 7003; UETA Section 3.) Most of these exceptions appear not to affect camps in their direct operations with camper participants. However, as always, check with your legal counsel in any particular case.
3. 15 U.S.C. 7002.
4. 15 U.S.C. 7006(5); UETA Section 2(8).
5. That is, federal law may preempt (supersede) state law; see 15 U.S.C. 7002; see also: “How the New E-Sign Act Will Affect E Commerce,” © 2000, Alston & Bird LLP, GigaLaw.com.
6. See our previous CampLine article, “Releases Revisited” (Spring 2007 CampLine), and “The What and the Why of Camp Releases” (January/February 2007 Camping Magazine) regarding enforceability issues specific to these documents.
Charles R. (Reb) Gregg is a practicing attorney in Houston, Texas, specializing in outdoor recreation matters and general litigation. He can be reached at 713-982-8415 or e-mail firstname.lastname@example.org; www.rebgregg.com.
Catherine Hansen-Stamp is a practicing attorney in Golden, Colorado. She consults with and advises recreation and adventure program providers on legal liability and risk management issues. Hansen-Stamp can be reached at 303-232-7049, or e-mail email@example.com; www.hansenstampattorney.com.