The online world is one that is being redefined every day. When a contract is signed by two parties online, what is or is not considered legally binding? Is an email enough to signify consent? On which year's legal basis would you judge an email to be a binding document, or how might you verify the validity of consent submitted through an online form?
With technology advancing so rapidly, an email used as evidence to signify legal consent in 1997, for example, could be heavily scrutinized in 2008 because of the advances with anti-fraud and authentication technologies (which could determine whether a given person in fact did or did not send the digital message to begin with) that have been implemented in the years since.
Along the same lines, when you agree to purchase or use a service online and check the "I Agree" box, just how binding is that, really? Even a digital signature box (where you "draw" your signature using your mouse/cursor) is at best only a gist of what your actual hand-written signature might actually look like. So what it comes down to is reasonable expectation on the part of both parties to employ adequate means of identifying both the entity issuing the contract, as well as the party signing it.
In 2000, the E-sign Act was enacted under President Clinton, and created to help define the legal structures governing what would or would not constitute a valid "digital signature". In no way does it stipulate that one must sign their name as a signature in a box, as opposed to merely checking an "I Agree To These Terms" box when agreeing to and "signing" a digital contract online.
The full text of the Act can be found here:
http://www.ftc.gov/os/2001/06/esign7.htm
The breakdown Wikipedia article can be found here:
http://en.wikipedia.org/wiki/Esign
What it does do is set forth reasonable terms by which both the buyer and seller of a service may enter into a legally binding contract that is enacted digitally. If the customer can adequately prove they are the ones purchasing or signing up, and the seller can adequately verify the information to be correct (such as through the use of anti-fraud screening software that cross-references the customer's IP address, billing information, phone number, etc), then both parties are acting within the scope of the E-sign Act, and for all intents and purposes it can be considered a legally-binding agreement.
At the same time, as a legally-binding agreement, there is a thing in contract law called the "spirit of the contract", a legal philosophy that a binding agreement should not have unreasonable expectations or hidden rules which conflict with the purpose of the contract. If the contract seems adversely weighted in favor of one party, then in a court of law you could call into question and argue against the overall spirit of the contract -- and subsequently, the contract could be declared void by the legal system.
But even more importantly than that, a contract implies an agreement between both parties. In exchange for paying for a service or product, a buyer expects the seller to deliver those services or products. If the seller does not, the contract is broken, and it can be argued that the seller failed to deliver on their part of the deal. That can throw the entire contract out the window, leaving the seller without much legal weight to enforce any other aspects of the agreement. Additionally, it can open up the door for legal actions to be taken by the buyer to recoup their losses caused by the seller.
And that really is the bottom line. Not whether a digital contract can be called into question because there was no physical signature, but instead whether the legal basis for the contract is legitimate. And, whether it can be reasonably proven that both parties did agree to enter into that contract, and one of the parties failed to meet their obligations. In that sense, whether it be for an online service like web hosting, a product you buy through an e-commerce store, or one that you sell to someone through eBay, a signed digital contract works the same as a signature-based paper contract.
David Anderson
Principal, Canvas Dreams LLC
