Broker Check

Doing Business Online - the Risks of E-Contracts

April 13, 2020

With the COVID-19 epidemic forcing many businesses into online transactions, what are the risks of electronic contracts and signatures compared to hard copy documents? Law firm Locke Lord recently published a "Quick Study" detailing them:

  • Authentication: e-signatures could be forged. They can be authenticated by requiring a "shared secret" of information known only to the signer (e.g. mother's maiden name).
  • Repudiation: if an electronic document is altered after signing, a person could repudiate his/her signature. Documents can and should be electronically sealed and stored in secure environments.
  • Compliance: a document may not satisfy government rules and regulations. As with traditional contracts, they should be reviewed before use and developed using a process that incorporates all required disclosures.
  • Admissibility: courts may rule e-contracts are not admissible evidence. Businesses should develop a process that can meet legal standards.
  • Adoption: e-contracts may not be widely used. They should be field tested before release.

These risks can also exist with traditional contracts. The goal should be making e-contracts as transparent as paper documents.