Is a scanned or electronic copy of a contract legally binding, or is a signed original required to enforce a contract?
UPDATED: February 20, 2013
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The “real” issue is not usually whether a faxed contract is legal, but:
(a) is an electronic record acceptable as the best evidence of a contract, and
(b) is the attestation, or “electronic signature,” acceptable as a formal requirement of accepting a contract?
Decades ago, when fax machines and PCs were much less common, so many jurisdictions (courts) refused to accept fax signatures that very few companies accepted them as acceptable originals. As technology became more common, this rule changed, industry by industry. But not until Utah (1995) acted was there the beginning of accepting electronic documents and signatures as authentic.
There are also important differences between electronic records and electronic signatures. While this advice is about electronic records generally, much of the advice also applies to signatures.
The bottom line is that faxes and electronic transmissions are now routinely accepted as sufficient evidence of what they purport to be. Decades ago, some states began to accept faxes as interim evidence of an agreement. Because faxes often degenerated, however, they were not always determinative of the evidence...in fact, often being dismissed as hearsay. Many court houses required an original within a certain period of time, to replace flimsy fax sheets. But, happily, as fax records became less susceptible to data errors and fax paper was replaced by permanent printing, they also gained in credibility.
Playing Electronic Tag
Many people still mistakenly believe that only an “original” signature is enforceable. This would require an original of the contract, signed by the parties, and not a copy, fax, or scan of the contract. Rules of evidence have always addressed this issue, however, by placing a burden on any party that loses original documentation (this is part of the 2010 dust-up over mortgage foreclosures by robo-signers, who have no access to original documents).
However, it is no longer the case that electronic acknowledgments or forms bear the burden of being authenticated.
Copies of electronic contracts, faxed versions of contracts, and scanned or electronically stored versions, are all “good” contracts and enforceable: although still capable of being rejected if proven unreliable. Contracts are now very commonly executed (or signed) electronically, at least partially, by fax or scanned copy, with one person signing, then transmitting the contract in some form to the other, who then signs it and transmits a countersigned version back.
The most significant issue, with signature of a faxed or scanned document, is whether it can be proven that the party, which purportedly signed the contract, did in fact sign it. Since the parties were not together at signing, fraud is somewhat more likely than when original contracts are signed together. Now that technology has established its durability, the use of electronic documentation has passed the threshold of legal reliability. Still remaining are matters of proof or evidence, which does not go to the fundamental validity of electronically executing contracts.
Conclusion: Electronic Records versus Electronic Signatures
Again, electronic records (with laws in every state) should not be confused with electronic signatures (which vary widely by industry). There are laws and—often acknowledged in the contract—private agreements between the parties to allow electronic signature (such as by computer or over the Internet) of many documents. Formalities of contracting must still be met, as well as some technical capacity (such as encryption software) required.