Are Online Contracts Legally Binding – Michigan Business Attorney Explains Online Contracts and e-Signature

Oct 19, 2023 | Business Law

Online contracts have revolutionized the way individuals and businesses engage in transactions. With the click of a button, you can enter into agreements, make purchases, and conduct business dealings from the comfort of your home or office. The rise of online contracts can be attributed to the rapid advancements in technology, particularly the widespread availability of the internet and user-friendly platforms.

However, you might ask, “Are online contracts legally binding?” The answer is yes – online agreements can be legally binding, provided they meet the necessary legal requirements. Let our knowledgeable Michigan business attorney discuss why online contracts are considered valid and enforceable.

Online Contracts 101

Online contracts, also known as electronic contracts or digital contracts, are agreements entered into and executed over the internet or other electronic communication platforms. These contracts are similar to traditional paper-based contracts in that they outline the terms and conditions under which parties agree to conduct a transaction, provide a service, or establish a legal relationship. However, unlike traditional contracts, online contracts are created and signed electronically, often without the need for physical signatures or paper documents.

The Electronic Signatures in Global and National Commerce Act (E-Sign) established the legal validity and enforceability of electronic contracts, ensuring that online transactions are equivalent to their paper-based counterparts. Though the medium of communication is digital, online agreements adhere to the same legal principles as traditional contracts. To be legally binding, an online contract must have the following key elements:

    • Offer. One party must make a clear and specific offer.
    • Acceptance. The other party must unambiguously accept the terms of the offer. 
    • Consideration. There must be an exchange of something valuable between the parties. 
    • Intention to Create Legal Relations. Both parties must intend for the agreement.
    • Legality of Purpose. The purpose of the contract must be legal. 
    • Capacity. Both parties must have the legal capacity to enter into a contract.

Infographic image of key elements of online contract

Courts generally uphold the validity of online contracts, provided that the essential elements are present and the process of entering into the agreement is fair and transparent. Having a qualified Michigan business attorney review or draft an online contract for you ensures that legal requirements are met and your interests are protected.

The Validity of e-Signatures

Many online contracts are formed through user interactions such as clicking “I Agree” buttons, marking checkboxes, or simply using a service after being notified of the terms. Other online agreements require e-signatures to formally indicate acceptance of the contract terms and conditions.

Electronic signatures, or e-signatures, are digital equivalents of handwritten signatures or other agreement symbols used to validate and authenticate electronic documents, transactions, or online contracts. Under E-Sign, e-signatures are recognized as valid, allowing businesses and individuals to conduct transactions, enter agreements, and sign documents electronically.

E-signatures can take various forms, such as typing a name, using a stylus or finger to sign on a touchscreen device, or utilizing advanced cryptographic methods to ensure the security and integrity of the signed document. With the use of e-signatures, parties involved in online agreements can sign from anywhere in the world, reducing the time and effort required for printing, signing, scanning, and sending physical copies. 

Enforceability of Online Contracts in Michigan

Michigan has adopted the Uniform Electronic Transaction Act (UETA), which serves as a significant legal framework governing electronic transactions within the state. Michigan UETA ensures the validity, legal effect, and enforceability of electronic contracts and signatures.

Under MEUTA, contracts, agreements, and other records created, signed, or stored electronically have the same legal standing as those on paper. The act applies to a wide range of transactions, including business contracts, consumer agreements, and government documents, allowing parties involved to conduct their affairs through digital means.

Like contracts on paper, online agreements are generally admissible in legal proceedings. For instance, in the case of Harpham v Big Moose Home Inspections, Inc., the defendants argued that the plaintiffs electronically signed a written inspection agreement and supported their argument with evidence explaining the electronic signature process. The court found the defendants’ evidence of electronic signature admissible and sufficient, highlighting compliance with MUETA. As a result, the court ruled in favor of the defendants.

Let a Michigan Business Attorney Review or Create Your Legal Contracts Today

While online contracts offer convenience and accessibility, these agreements must be formed in a manner that adheres to legal standards, providing transparency and clarity to all parties involved. Disputes often arise when people are uncertain if they understood the agreement or received enough information about the terms.

Bowen Law is here to assist you with all your online contract needs, ensuring your agreements are clear, comprehensive, and compliant with relevant Michigan laws. From reviewing and drafting contract terms to negotiation and dispute resolution, our experienced Michigan business attorney can provide you with expert guidance and support throughout the entire process. To schedule a consultation, call us at (231) 726-4484 or contact us here.

DISCLAIMER:

The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only.

Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.

If you have legal questions, please contact us at: (231) 726-4484

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Disclaimer:

The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only.

Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.

If you have legal questions, please contact us at:
(231) 726-4484

Muskegon Business Law Attorneys of David T. Bowen, P.C. pursue cases of Business Law, Real Estate, and Estate Planning in Muskegon Michigan

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