Sign on the Digital Line

With every passing year, Colorado’s real estate contracts are getting longer and longer. Our state’s current Contract to Buy and Sell Real Estate is over 20 pages long. But the long-windedness isn’t anything new; the statute of frauds, which requires that real estate contracts be in writing, has roots that span back to the English Parliament of 1677. 

Aiming to prevent contractual misunderstandings and fraudulent activity, the 1677 legislation stipulated that an oral contract wouldn’t suffice, and that a written contract must be used for transactions where a large amount of money was at stake. Influenced by their English counterparts, this legislation was adopted by the founders of the New World. 

And as with many of our rules and regulations, there’s much debate over how to interpret 17th-century laws in a 21st-century world. With the inception of devices like fax machines and computers and today’s preference for emails and texts, there’s been a growing universal acceptance of the e-signature. 

While e-signatures seem like a new technology, as with most advances, they truly are evolutionary versus revolutionary. Let’s go back to the 1830s, when Morse code was first used to send electric messages via telegraph. A revolution in long-distance communication, Morse code was able to send enforceable contracts and agreements. In fact, the enforceability of such contracts via Morse code went all the way to the New Hampshire Supreme Court in 1869 with Howley vs. Whipple. 

In terms of e-signatures as we know them today, the idea was first floated in 1976 by Stanford cryptography pioneers Whitfield Diffie and Martin Hellman. While they envisioned a digital signature scheme, they only theorized such a scheme, but never implemented it. It wasn’t until 1988, when Lotus Notes 1.0 became the first widely marketed software package to offer such digital signatures. Around the same time, fax machines became the du-jour device for transmitting time-sensitive, high-priority documents. 

At the turn of the 21st century, the 106th Congress passed the Electronic Signatures in Global and National Commerce Act, commonly known as ESIGN. ESIGN created four major requirements for an electronic signature to be recognized as valid under U.S. law, which are: Intent to sign, Consent to do business electronically, Association of signature with the record, and Record retention.

Unsurprisingly, litigation around e-signatures versus handwritten signatures have skyrocketed in the last 20 years. Most recently, emails and even text messages have been disputed—and included—in what the courts consider a “binding” legal contract. And today, e-signatures are well established as the most trusted way to sign real estate documents and other legally binding contracts online.