In most cases, the law re- quires that an agreement be both in writing and signed by those involved for that agreement to be enforceable. If two parties are entering into a contract online, these writing and signature requirements may apply.
Generally, a signature is "any symbol executed or adopted by a party with present intention to authenticate a writing." Therefore, a signature need not be ink on paper -- rather, the issue is the intent of the signer. A symbol or code on an electronic record, intended as a signature by the signer, should meet the requirement set out by the statute of frauds.
The technology industry has created systems and procedures for satisfying the business and legal requirements of authenticity, integrity, nonrepudiation (involving holding the sender to the communication sent), writing and signature, and confidentiality. The primary tool in use today is a "digital signature."
A digital signature is an electronic substitute for a manual signature and is generated by a computer software program rather than a pen. It serves the same function as a manual signature, and a lot more. A digital signature is not a replication of a manual or typed signature scanned into your computer, such as "signed, John Smith." In technical terms, digital signatures are created and verified by a special application that generates cryptographic messages.
A digital signature has many advantages over a manual signature. Both are used to signify authorship, acknowledgment, and acceptance of terms. A digital signature, however, also serves an important information-security purpose that a manual signature cannot. Digital signatures allow the recipient to determine if the digitally signed communication was changed in any way after it was digitally signed. This feature provides integrity and authenticity to a communication. A manual signature does not have that capability. Additionally, a message sender can include information about the sender's authority and job title as well as the sender's identity encrypted into the signature.
Although the law is still evolving in this area, most states have passed statutes authorizing the use of digital signatures and outlining details for their use. Most of the state laws are based on the "Electronic Signatures in Global and National Commerce Act, (15 USC 701)" and on the American Bar Association Guidelines for Digital Signatures. These guidelines can be downloaded, free of charge, at www.abanet.org/scitech/ec/isc/dsgfree.html.
If the proper guidelines are followed, digital signatures meet all of the legal requirements for electronic contracts. Digital signatures accomplish the following: They can provide a means to verify the integrity of messages sent; prevent repudiation by the sender once the authenticity and integrity of a communication have been established; verify the source of an electronic message; and satisfy the requirement for a writing and signature required by the statute of frauds.