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E-Signatures: Are We Building Sufficient Electronic Evidence?

As organizations adopt electronic signatures, a question of whether the strength of the evidence being created is sufficient remains. We have all seen simple solutions on the Web where consumers sign by clicking an "I Agree" or "I Hereby Sign" button. These solutions are easy to build and easy to use. But will an "I Agree" button stand up as evidence in court?

Quality of signature evidence is especially important to financial institutions such as banks and insurance companies. The Office of the Comptroller of the Currency cautions that even though signature law is liberal in its definition of what might qualify as an electronic signature, banks need to ensure they can prove their e-commerce records. The OCC observes that while a simple symbol may qualify as a "signature," a bank may still not be able to enforce that signature if its electronic records are inadmissible as evidence in court. (OCC Advisory Letter 2004-9, "Electronic Record Keeping," June 21, 2004.)

Institutions want to sell products and services via the telephone or the World Wide Web. Some are tempted to use a simplistic method for signature, such as a mouse click, the push of a button or the typing of one's name, where the final record of the signature becomes a mere notation in a database. But institutions should assess the long-term value of such a signature.

Litigation over loans, insurance policies, securities trading and so on often plays out years after the original documentation is signed. If the institution needs its customer to sign a contract, a disclosure or a disclaimer, but the institution possesses weak evidence of the signature when the matter is adjudicated, the institution can suffer dearly. The obligations of the customer may be unenforceable. Or limitations of the institution's liability may be ineffective. Or a clause mandating arbitration may be void, thus forcing the institution to litigate in an inconvenient, undesirable court.

Consider the experience with computer records, such as databases, as evidence in court. American courts have long accepted computer records, but under some conditions. Typical computer records are "hearsay," which are not admissible as evidence into the courtroom. However, an exception to the hearsay rule is that business computer records, shown to be reliable, are admissible. In theory, that sounds good for institutions that keep database records of customers typing things or clicking on this or that.

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