by Roaa Al-Heeti, ATG Law Clerk

Electronic commerce is the means used to buy, sell, and trade for an increasing number of online companies who depend on credit card based sales or who offer online stock trading.1 Similarly, more and more people are using the Internet to shop for a new home. In fact, "82% of first-time homebuyers used the Internet to conduct to search for homes compared with 78 percent of repeat homebuyers ... 24 percent of buyers first found their home on the Internet" according to the 2005 National Association of Realtors® Profile of Home Buyers and Sellers.2 While the transition to online contracts and e-commerce was an easy one for industries that have always used electronic media, such as computer manufacturers, real estate contracts usually are not completely electronic. Even if a real estate contract is delivered electronically, a paper copy is printed and the signature is provided in ink. If contracts were to be signed and completed in an electronic manner from beginning to end, the potential savings could be in the billions of dollars.3 To realize the full potential of electronic commerce, state and federal laws have been created that protect and regulate the use of electronic signatures.

Illinois law requires that "written" signatures either be in the handwriting of the signor or in the form of an electronic signature, as defined by the Electronic Commerce Security Act. 5 ILCS 70/1.15; 5 ILCS 175/1-101 et seq. The Electronic Commerce Security Act (the Act) aims, in part, to "facilitate electronic communications by means of reliable electronic records," "facilitate and promote electronic commerce, by eliminating barriers resulting from uncertainties over writing and signature requirements," "minimize the incidence of forged electronic records, intentional and unintentional alteration of records, and fraud in electronic commerce," and "promote public confidence in the integrity and reliability of electronic records and electronic commerce." 5 ILCS 175/1-105. The Act provides a general framework for the use of electronic signatures that creates a uniformity that parties may elect not to use by agreement. 5 ILCS 175/5-110.

Illinois Statutes and Administrative Code

The Act broadly defines an "electronic signature" to be "a signature in electronic form attached to or logically associated with an electronic record." 5 ILCS 175/5-105. The Act also provides broad protections for the use of electronic signatures. First, the Act provides that an electronic signature cannot be rejected simply because it is electronic. 5 ILCS 175/5-110. Second, electronic signatures cannot be denied admissibility into evidentiary legal proceedings simply because the signature are electronic or because the signatures are not "original." 5 ILCS 175/5-130. At the same time the Act provides wide protections for the use of electronic signatures, the Act does not require the use of electronic signatures. Parties are not required to "create, store, transmit, accept or otherwise use or communicate" electronic signatures. 5 ILCS 175/5-140. Parties are also allowed to create their own requirements regarding the use and acceptability of electronic signatures. Id.

Despite the breadth of the definition and the different uses of electronic signatures provided in the Act, there are limitations and exceptions as to when and how electronic signatures may be used. First, the authenticity of an electronic signature will not be assumed. "In assessing the evidential weight of an electronic record or electronic signature where its authenticity is at issue, the trier of fact may consider "[1] the manner in which it was generated, stored or communicated, [2] the reliability of the manner in which its integrity was maintained, [3] the manner in which its originator was identified or the electronic record was signed, and [4] any other relevant information or circumstances." 5 ILCS 175/5-130. In addition, while the Act provides that "[a]n electronic signature may be proved in any matter," the example of how an electronic signature may be proved discussed the use of a security procedure. 5 ILCS 175/5-120 ("An electronic signature may be proved in any manner, including by showing that a procedure existed by which a party must of necessity have executed a symbol or security procedure...."). A security procedure is a "methodology or procedure used for the purpose of (1) verifying that an electronic record is that of a specific person or (2) detecting error or alteration in the communication, content, or storage of an electronic record since a specific point in time" and includes "the use of algorithms or codes, identifying words or numbers, encryption, answer back or acknowledgment procedures, or similar security devices." 5 ILCS 175/5-105.

Second, several exceptions exist as to when electronic signatures may be used: (1) Electronic signatures may not be used when their use would be "clearly inconsistent with the manifest intent of the lawmaking body or repugnant to the context of the same rule of law[.]" 5 ILCS 175/5-120 (emphasis added). The "manifest intent" referred to in the Act requires more than a showing that a "signature" or that the document be "signed" is required. Id. (2) An electronic signature may be rejected when used for "the creation or execution of a will or trust, living will, or healthcare power of attorney[.]" Id. (3) An electronic signature may not suffice on "any record that serves as a unique and transferable instrument of rights and obligations[.]" Id. This includes negotiable instruments and "instruments of title wherein possession of the instrument is deemed to confer title."

The only time an electronic signature may suffice for a negotiable instrument or other conveyance under the third exception is when an electronic version of the record exists, and is "stored, and transferred in a manner that allows for the existence of only one unique, identifiable, and unalterable original" and "can be possessed by only one person, and which cannot be copied except in a form that is readily identifiable as a copy." Id. In other words, electronic signatures can be used only when the electronic document has the same attributes as a paper (or "wet") document - only one original exists and any other versions of the document are clearly mere copies of the original.

Third, the Illinois Administrative Code seems to imply that the only acceptable electronic signatures are those created using a secured procedure. Part 100 of the Illinois Administrative Code, Title 14, Subtitle A, Chapter 1, addresses the Illinois Electronic Commerce Security Act. Section 100.30 of this part is titled "Criteria for Acceptance of Electronic Signatures." The title is broad and appears to cover all forms of electronic signatures, but the text of the section discusses only qualified security procedures. The title and heading of a statute cannot be used to interpret a statute when the meaning of the text of the statute is plain, but the title and heading can be used "when they shed light on some ambiguous word or phrase." Brotherhood of RR Trainmen v Balt. & Ohio RR, 331 US 519 (US 1947). In this case, the administrative code explains in plain terms what is required of a "qualified security procedure," but the administrative code does not explain when such a procedure is necessary. The title, then, is able to shed light on the meaning of the statute because it provides context for the text of the administrative code. Because no other cases or sources exist that explain when a qualified security procedure is necessary, this code can cautiously be interpreted to mean that for an electronic signature to be acceptable, it must be in the form of a qualified security procedure or the signing party may forfeit their right to present the unsecured electronic signature as evidence.

If this interpretation of the administrative code is correct, then, to be acceptable, every electronic signature must meet these criteria: (1) be unique to the signer; (2) objectively identify the signer; (3) be reliably created and able to be duplicated; and (4) become invalidated if the electronic record is altered. 14 Ill. Adm. Code 100.30.

Illinois Case Law

Few cases exist that provide any information on the Electronic Commerce Security Act or, in fact, that even reference the Electronic Commerce Security Act. However, two cases that are available provide some information on how the Act should be interpreted.

In Cloud Corp. v Hasbro, Inc., the seller increased the number of items in the buyer's order based on oral agreements and e-mails between the buyer and seller. 314 F3d 289 (7th Cir. 2002). The buyer refused to accept or pay for the additional items. Id. The court held that the buyer's statute of frauds argument failed because the use of an electronic signature on an e-mail message was acceptable, but still found for the buyer. Id. The court held that because the signature was made in 1996 - before the effective date of the Electronic Signatures in Global and National Commerce Act - the federal Act did not apply because the Act is not retroactive. Id. The court held: "The Electronic Signatures in Global and National Commerce Act, 15 USC § 7001, does not purport to be applicable to transactions that occurred before its effective date, and, not being procedural, it is presumed not to apply retroactively." Id.

In addition, the Cloud Corp. court explained that the allowance of electronic signatures is not a mere statutory creation. The court held: "Neither the common law nor the Uniform Commercial Code requires a hand-written signature." Id. The court reasoned that the purpose of the statute of frauds is to avoid conflict on issues concerning the terms of a contract based on what people saId. The goal is to avoid issues based on "say-so alone," the court said, and handwritten signatures are just one way to avoid these issues. Id. "That purpose does not require a handwritten signature, especially in a case in which there is other evidence, and not merely say-so evidence, of the existence of the contract ... besides the writings." Id. However, the court noted, "a [handwritten] signature is better evidence of identity than a typed one." Id.

In Johnson v Cherry, the court provided two ways in which attorneys may sign documents electronically. 422 F3d 540 (7th Cir. 2005). First, an attorney may type the name and then type "/s/" next to the name. Id. Second, an attorney may scan his or her handwritten signature and attach the scanned image of the signature to an electronic document. Id. "Either way, the attorney's signature is electronic in the sense that only an electronic version of the document is filed with the court." Id. In addition, the court found that "an attorney who files a document electronically automatically endorses his or her electronic signature." Id. However, it's not clear from the case whether these rules apply broadly to the Seventh Circuit or only to the Southern District of Illinois, where this case originated.

Letters of Agency: A Case Study of the Use of Electronic Signatures

The Illinois Commerce Commission addressed a request for online customer enrollment in its Feb. 20, 2003, decision. While this decision does not explain in a general sense what is required of electronic signatures, it does address what the Illinois Commerce Commission expects of an electronic signature. Because cases that provide detailed insight into what courts are looking for in an electronic signature do not yet exist, this decision provides limited insight that is not otherwise unavailable from the judiciary.

In order to switch electric service providers, customers must complete a Letter of Agency expressing their intent to switch. On Dec. 27, 2001, MidAmerica Energy Company, Nicor Energy, LLC, AES New Energy, Inc., and the National Energy Marketers Association filed a request to the Illinois Commerce Commission asking that its customers be allowed to file Letters of Agency on an Internet website, using an electronic signature.

The Commerce Commission found for the adoption of Internet enrollment and ordered that the rules proposed by the energy corporations be submitted to the Joint Committee on Administrative Rules. In the Appendix of the decision, the Commerce Committee included the Internet Enrollment Rules.

First, the Internet Enrollment Rules (the "Rules") defined "electronic signature" to be "an electronic sound, symbol, or process attached to or logically associated with a Letter of Agency (LOA) and executed by a person with the intent to sign the LOA."

Second, after a series of other definitions, the Rules provide the criteria for a valid electronic signature. The Rules require the signature to make clear who signed, the date of the signature and an element of uniqueness to the signer. The uniqueness is accomplished through the use of a secured procedure that may take the form of algorithms, codes, previously established words or numbers, or credit card verification. In addition, attaching the electronic signature to the LOA "must be a separate affirmative act."

Third, the Rules provide the three requirements for proving the validity of an electronic signature: (1) The LOA must include the date of the signature and the unique information used to sign the LOA. (2) The party attempting to prove the validity of the LOA must show that the unique information and the date of the signing are embedded into the LOA and that the LOA has not been changed since that date. (3) The Rules provide detailed requirements for the use of Internet LOAs, such as prompting the customer to print a copy of the electronic transactions.

Alternative Forms of Signatures

In addition to handwritten and electronic signatures, "alternative forms of signatures are increasingly accepted." Knolls Condo. Ass'n v Czerwinski, 321 Ill App 3d 916, 748 NE2d 1259, 255 Ill Dec 189 (2nd D 2001). This includes stamped signatures, signatures typed into an e-mail message, and faxed signatures.


  • Stamped Signatures. In Knolls, the court allowed for the use of a stamped signature based on the rationale that the Electronic Commerce Security Act evidenced the acceptance of different forms of signatures. Id.

  • Typed Name on E-mail. In Cloud Corp., the court found that "[t]he sender's name on an e-mail satisfies the signature requirement of the statute of frauds." 314 F 3d at 296. Similarly, in In re Cafeteria Operators, a bankruptcy court found that e-mails satisfied the writing requirement of 7 CFR § 46.46(e)(1), which explains how parties may agree to payment arrangements different than those specified under the Perishable Agricultural Commodities Act. 299 BR 411 (BC ND Tex, 2003); 7 CFR § 46.46(e)(1) ("Parties who elect to use different times for payment must reduce their agreement to writing before entering into the transaction and maintain a copy of their agreement in their records, and the times of payment must be disclosed on invoices, accountings, and other documents relating to the transaction.") (emphasis added). In addition, in Roger Edwards, LLC v Fiddes & Son, Ltd., the court found that a Maine law requiring documents to be "in writing and signed by the party to be charged therewith, or by some person thereunto lawfully authorized," was satisfied by e-mail. 245 F Supp 2d 251 (D. Me. 2003); 33 Me. Rev. Stat. Ann. § 51 (2005).

    The only case not to allow for the acceptance of an electronic signature is a case in which the contract at issue also lacked a durational element, which the court perceived as necessary to the particular contract. Toghiyany v AmeriGas Propane, Inc., 309 F 3d 1088, 1091 (8th Cir. 2002). Courts have interpreted this case narrowly because of the issue of the missing durational element. Cloud Corp., 314 F 3d at 296.

  • Faxed Signatures. Faxed signatures present some of the same issues as an e-mail signature because they appear to be created by humans, but in fact are not. Wolfson, Joel Rothstein, Information Transactions on the Information Superhighway: It's not Just Software Law Anymore, 33 Gonzaga L Rev 417, 419 (November 1994). However, in the two cases that addressed this issue, courts have not objected to the use of a facsimile machine in making and signing a contract. In Nolt & Nolt, Inc. v Rio Grande, Inc., and in Abbey v Henzel, both cases about personal jurisdiction and long-arm statutes, the United States District Court for the Eastern District of Pennsylvania and the United States District Court for the Eastern District of Missouri, Eastern Division, respectively, addressed contracts that were signed and transmitted by fax, and neither court objected to the use of the fax machine. Nolt & Nolt, Inc. v Rio Grande, Inc., 738 F Supp 163; Abbey v Henzel, 731 F Supp 1431. According to Wolfson's article, faxed documents present the fewest problems of "innovative contract formation methods" because "[l]ike mailed or telegraphed contracts, there is a physical writing that contains the terms exchanged between the parties with a copy of signature." 33 Gonzaga L Rev 417, 419. In addition, he adds, "[w]hile there are cases that have noted that the contracts were formed by the exchange of faxes, there appears to be no case where the issue of the legality of a faxed contract has been disputed and decided." Id. Wolfson also adds that common trade practice and the hornbook definition of a signature as "anything intended by a party to bind it" allows for the acceptability of faxed signatures. Id.

Today's Technologies

In practice, electronic signatures take on a variety of forms. For example, some software companies require the buyers of their product to click an "I agree" link on their website next to where the web page lists the terms and conditions of the sale.4In addition, electronic signatures may be in the form of a touchtone keypad, a scanned image of a signature, a typed name on an e-mail, a crypographed message or any combination of these methods.5

Crypographed signatures are regarded as the most secure and reliable method of relaying a signature that today's technology has to offer, especially in larger transactions.6Public Key Infrastructure, or PKI, is one way of securing electronic signatures using cryptographed symbols and keys to create and identify secured signatures. A document signed using PKI technology acts like an original paper contract - the document shows a valid signature of the signer, the time the electronic document was signed, and any changes made to the signature or to the electronic document. The sender and the receiver each have a key. The receiver gets the document from the sender and encrypts the signature using a private key. The receiver gives the document back to the sender, and the sender uses a public key to de-encrypt the signature. The public key is readily available. The private key, on the other hand, is created on the receiver's desktop using PKI software and stays on the receiver's desktop.7The private key is never sent over the Internet for fear a thief may intercept the message and then use the private key to sign documents fraudulently.8The only exception is that when one-time private keys are issued, they may be sent over the Internet.9

The creation of a PKI network is cumbersome and expensive, and as a result only large corporations create their own PKI networks.10Other companies outsource their PKI needs to third party certificate authorities who create the signatures and who all the parties agree are trustworthy.11Some of the parties provide warranties on the secure signatures for the monetary loss incurred should the signatures be used fraudulently. Some of the more sophisticated PKI signatures use biometeric technology, which requires the use of fingerprint readers, retina scanners or saliva tests to verify a signer's identify.12Among the companies that provide secure PKI signatures are VeriSign (http://www.verisign.com), RSA Security (http://www.rsasecurity.com/), Entrust Authority (http://www.entrust.com/pki/) and UniCERT (http://www.betrusted.com/products/unicert/index.asp). Another example of PKI software is Zipform, which allows senders to load the electronic document that needs a signature into a server. The server sends an e-mail to the receiver to sign the document. Once the receiver signs the electronic document, the Zipform program sends an e-mail to the sender indicating the document's completion. The program automatically creates an electronic signature for each user when the user logs on to the server.13


In conclusion, while any "signature in electronic form attached to or logically associated with an electronic record" qualifies as an electronic signature, in order to be acceptable in a court preceding or at any other time problems arise, a signature must take on the features of an ordinary signature, such as not being easily forged or becoming invalid should the document be altered in any way. At the same time, other forms of signatures are increasingly accepted as statute of frauds requirements are read for their purpose, not for their plain meaning. "In writing" requirements have similarly been expanded to include electronic signatures because the intent of signatures is not to produce paper but to avoid issue based on "say-so alone."

  1. Thomas J. Smedinghoff & Ruth Hill Bro, Moving with Change: Electronic Signature Legislation as a Vehicle for Advancing E-commerce, 17 J. MARSHALL J. COMPUTER & INFO. L. 723, Spring 1999.
  2. 2005 NAR Profile of Home Buyers and Sellers, NATIONAL ASSOCIATION OF REALTORS, available at http://www.realtor.org/prodser.nsf/OpenProd?OpenForm&IN=186-45-0506 (click Highlights for details).
  3. Bill Brice, E-signatures in the Real World: There's More to it Than the Technology Enables and Law Allows, AMERICAN SOCIETY OF REAL ESTATE COUNSELORS, Summer 2001.
  4. Id.
  5. Id.; Making Contracts Online: Electronic Signatures, NOLO, 2006.
  6. Making Contracts Online: Electronic Signatures, NOLO, 2006.
  7. Nancy Weiner, Public Key Infrastructure (PKI) Market Trends, FAULKNER INFO. SERVICES, March 2003.
  8. Making Contracts Online: Electronic Signatures, NOLO, 2006.
  9. Nancy Weiner, Public Key Infrastructure (PKI) Market Trends, FAULKNER INFO. SERVICES, March 2003.
  10. Id.
  11. Id.; Brice, supra note 3.
  12. Weiner, supra note 9.
  13. John Mathers, The Dawn of Electronic Signatures, RISMEDIA/NATIONAL RELOCATION & REAL ESTATE MAGAZINE, September 2004, available at http://www.rismedia.com/index.php/article/articleview/7677/1/1.

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