How e-mail and other online technology impact contract issues

E-commerce is here to stay, and it’s easy to see why — transacting business online offers near-instant communication and the ability to retain all correspondence in an easily storable and retrievable digital form.

However, with those abilities come special considerations. For example, does an e-mail meet the procedural or formal requirements of a contract? After all, most of us think of a contract as a paper document that is signed in ink by the parties involved. Can this “signing” be done online?

“A company that conducts a substantial — or even a small — portion of its business via e-mail would do well to carefully consider whether it is properly documenting all of its transactions,” says Courtney D. Tedrowe, a partner with Novack and Macey LLP.

Smart Business spoke with Tedrowe about how doing business online affects contract issues and about some things you may need to consider.

Has the advent of e-mail as a means of transacting business changed the law regarding what is needed to form a contract?

No, the fundamental elements of contract formation remain the same. In general, there must be an offer, an acceptance of that offer, mutuality and then consideration given by each side. However, although these fundamental contract elements remain unchanged, the media used in contract formation have changed radically over the past few decades.

Now that business is conducted through e-mail, instant messaging and Web sites, the law has been forced to adapt old rules to these new practical commercial realities. For example, there are many laws — some ancient — that require contracts to be in writing and signed by one or all parties to the contract. The law has been grappling with the question of whether and to what extent e-mail confirmations or e-mail chains are sufficient ‘writings,’ and whether they contain valid signatures.

What is a situation in which this would be an issue?

One major example is the Statute of Frauds, which exists in some form in all 50 states and which requires that certain contracts be, among other things, in writing and signed by the party to be bound by the contract. Ordinarily, the Statute of Frauds requires a signed writing when the contract is for a sale of goods for a price in excess of a certain amount, when it cannot be completed within the year, when it relates to marriage, when it is a contract for the sale of real estate or when it creates a surety obligation.

If your contract falls within one of these five categories, then it is highly likely that a signed writing is necessary for that contract to be enforceable.