Conducting Business and Consumer Transactions Electronically While Coping with COVID-19

April 1, 2020

By: John Blyth

With many people working from home during the COVID-19 pandemic, paperless communications, transmissions, records, and transactions are the new reality for many businesses and their employees.  But, are these business transactions conducted electronically and that exist solely in digital media legally enforceable?


Electronic transactions are nothing new.  Many of us routinely transact digitally as a matter of course without giving it a second thought.  How many times have we swiped a debit or credit card to pay for groceries or clicked “Buy Now” in our Amazon app to purchase a product with next day delivery.  These are both examples of digital transactions conducted seamlessly every day, often without any paper trail.  Working behind the scenes is legislation adopted by Congress and in every state designed to facilitate electronic transactions and ensure their legal validity and enforceability when the parties follow prescribed statutory requirements.


Legal Recognition of Electronic Records, Electronic Signatures, and Electronic Contracts


At the federal level, there is the Electronic Signatures in Global and National Commerce Act, enacted in 2000, known as the “E-Sign Act.” In Iowa, we have the Uniform Electronic Transactions Act (Iowa Code Chapter 554D, Subchapter 1), the “Iowa E-Transaction Act”.  Neither the E-Sign Act nor the Iowa – UETA requires parties to engage in transactions electronically.  Nor does either Act supplant the separate legal requirements necessary for enforceability of contracts generally, such as adequate consideration or reliance, offer and acceptance, and legality of subject matter.  Rather, these Acts operate together to place electronic records and documents and electronic signatures on an equal legal footing with paper records and documents and so-called “wet” or “execution original” signatures if and when the statutorily prescribed requirements are met. 




Both Acts provide that a record or signature shall not be denied legal effect or enforceability solely because it is in electronic form and that a contract shall not be denied legal effect or enforceability solely because an electronic record was used in its formation. 


  • Transactions. The Iowa E-Transaction Act applies to an “electronic record” and “electronic signature” relating to a “transaction”.  “Transaction” is defined as an interaction between two or more persons relating to the conduct of business, commercial, or governmental affairs.  An “electronic record” includes information stored in an electronic or other medium and retrievable in perceivable form and that is created, generated, sent, communicated, received, or stored by electronic means.  An “electronic signature” is an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.


With regard to electronic records, the Iowa E-Transaction Act provides that if a law requires a record to be in writing, an electronic record satisfies that law.  Also, if a law requires a signature, the Iowa E-Transaction Act provides that an electronic signature satisfies that law.


  • Exceptions. The Iowa E-Transaction Act does not apply to a transaction to the extent it is subject to a law governing the creation or execution of will, codicils or testamentary trusts.  With only a few exceptions, it also does not apply to transactions governed by Article 1 (general provisions) or other Articles of the Iowa Uniform Commercial Code, Iowa Code Chapter 554, including transactions subject to Article 3 (negotiable instruments), Article 4 (bank deposits and collections), or Article 12 (funds transfers) involving payment systems or to Article 5 (letters of credit), Article 7 (warehouse receipts, bills of lading, and other documents of title), Article 8 (investment securities), Article 9 (secured transactions), or Article 13 (leases) that already include significant electronic practices.  The Iowa E-Transaction Act does apply to a transaction that is subject to Article 2 (sale of goods), Article 13 (leases) and Section 554.1306 (relating to authenticated waiver of renunciation of claim or right after breach).




A party to any contract must be able to demonstrate that the general requirements for contract enforceability have been met. These requirements include an offer and acceptance, exchange of consideration (value or a promise), legal capacity of all parties, lawful subject matter, clear, consistent, and understandable terms, and the absence of undue influence, duress, and mistake.  A written paper record of the contract signed by both parties can be used to establish the essential elements of contract enforceability and confirm the parties’ intent to be bound by the terms of the transaction and also memorialize the terms of their agreement.  The Iowa E-Transaction Act establishes requirements that must be met when the parties to a contract choose to use an electronic, rather than paper, record to establish these essential elements, confirm their intent to be bound and memorialize the terms of their agreement.


The principal Iowa E-Transaction Act requirements include:


  • Consent. All parties to the contract must have consented to conduct their transaction by electronic means as determined from the context and surrounding circumstances of the transaction, including the parties’ conduct.  A party’s consent to transact electronically may be withdrawn prospectively.


  • Electronic Signature. The electronic signature of a party must be logically associated with the electronic record by attribution to an act of that party indicating that party’s intent to adopt that signature as determined from the context and surrounding circumstances at the time the electronic record or electronic signature was created, executed, or adopted. 


  • Written Records and Record Retention. If the record of a contract must be in writing, an electronic record satisfies that requirement.  If a party must provide information relating to the transaction in writing to another person, that requirement is satisfied if the information is provided in an electronic record that is capable of retention by the recipient at the time of receipt.  For this purpose, an electronic record is not capable of retention by the recipient if the sender or the sender’s information processing system inhibits the ability of the recipient to print or store the electronic record.


Tips for Conducting Electronic Transactions Successfully


The E-Sign Act and the Iowa E-Transaction Act provide a legal foundation necessary for contracting parties to safely take advantage of the efficiencies, cost savings, and speed of electronic and digital technologies.  It is essential that the technology used be able to record both the identity of each party who signed the contract electronically and each party’s intention to be bound by the terms and conditions of the contract, as well as their consent to conduct the transaction electronically.  Some examples include:


  • Email. Email can be tricky.  Email exchanges between parties can create an agreement to terms and conditions set out in the email.  The emails exchanged should include an electronic signature of the sending party and a clear expression by the sending party of that party’s (a) consent to conduct the transaction electronically by email and (b) agreement to the terms and conditions set out in the email.  The sending party’s email also should confirm to the recipient that the agreement will be binding when the email recipient replies in an email that includes the recipient’s electronic signature confirming the recipient’s consent to conduct the transaction electronically by email and the recipient’s agreement to be bound by those same terms and conditions.  A word of caution with email, though.  If the sender of an email does not intend to conduct any transaction electronically, it is always a good idea for the sender to state in the email that the sender does not intend to conduct any transaction electronically to avoid an inadvertent or unintended contract.


  • Scanned Records. Scan a paper record of the contract that includes a handwritten signature page to create a Tagged Image File Format (“TIFF”) or Portable Document Format (“PDF”) electronic record.  Then, attach that scanned electronic record to an email sent to the counterparties that includes a statement that the sender consents to conduct the transaction electronically and requests that each counterparty reply to the email and likewise state the counterparty’s consent to conduct the transaction electronically and attach to the reply email a scanned copy of the paper record of the same contract that includes the counterparty’s handwritten signature page.  The paper record of the contract that is to be scanned and attached to the emails exchanged between the parties should itself include a provision stating that the parties’ contract can be executed or authenticated by a party's electronic signature in separate counterparts and that a party’s executed or authenticated signature page may be sent, delivered, or exchanged not only by email, but also by facsimile, text message or other electronic transmission, as either a TIFF or PDF electronic record.


  • Electronic Signatures. The electronic record of a contract must include the contracting parties’ electronic signatures.  Examples of electronic signatures include:


    • Voicemail confirmation to the counterparty
    • Typed name at the end of an email or text message
    • Letterhead on a fax
    • Digital signature using public key encryption technology
    • Online user clicking a button to verify that the user agrees with the terms of a contract
    • Scanned copy of a party’s hand-written signature
    • Typed name in the signature block of the contractual record


  • Record Retention.  Retain an electronic record of the contract to memorialize the contract terms agreed to at the time it was signed electronically.


  • Counterparty Identity. Electronic transactions rarely involve face-to-face meetings between the parties.  For this reason, unless you are using a third-party e-signature system, such as DocuSign or Adobe Sign, that includes rigorous mechanisms for assuring that the person who completes the electronic signature process is actually the intended counterparty to your contract, or are able to confirm the counterparty’s identity by a telephone call or other channel of communication or through a trusted third party, such as the counterparty’s attorney, you best not contract electronically with a party.


  • Exclusively On-Line Contracts. So-called “Click-Wrap Agreements”, generally, an online transaction in which a company posts the terms of agreement for the purchase of products or services being offered by the company and a customer indicates acceptance of the contract terms of purchase by clicking a box or button that states “I Agree”, can be legally enforceable.  However, because click-wrap agreements are most often contracts of adhesion (i.e., non-negotiable take it or leave it terms) courts will scrutinize the online click-wrap agreement process closely to make sure the overall process is reasonable and that the applicable electronic transaction legal requirements are satisfied.  Companies should make sure their online process will satisfy the emerging click-wrap agreement standards for enforceability before launching an online click-wrap agreement process.


This discussion of electronic transactions and contracts is intended as general guidance and for reference purposes only.  It is not intended as legal advice to be relied upon or applied to any particular factual circumstances.  If you have any questions concerning electronic contracts or their enforceability or need specific guidance on how to effectively document your contracts electronically or launch an online click-wrap agreement process, please contact your Nyemaster Goode attorney.