KBS Reference Desk: E-Signatures and Electronic Transactions

Q:        The District currently is in the review stages for several contracts and will be ready for signatures and finalization soon. Can the District use electronic means to finalize these contracts?

A:        Yes, the District may use electronic signatures, so long as both parties agree to conduct the transaction electronically and any electronic signatures can be verified as belonging to the purported signatory.

Chapter 322 of the Business and Commerce Code, which codifies the Uniform Electronic Transactions Act (“UETA”) in Texas, governs electronic transactions and authorizes both private parties and government entities to conduct transactions electronically, so long as both parties agree to do so. Additionally, many school districts have adopted language in Board Policy CQ (Local) that specifically identifies when a district may enter into electronic transactions (“e-transactions”). The first step for the District is to check its Board Policy CQ (Local) to determine whether the Board has adopted any rules or limitations regarding when and how the District may conduct e-transactions. Then, the District and the other party or parties to the transaction will need to agree in writing to e-transaction, in accordance with Business and Commerce Code Chapter 322. If the District has any additional requirements specifically related to e-transactions (such as in Board Policy CQ (Local)), it should include those requirements in the agreement to utilize e-transaction.

The agreement to enter into electronic transactions can be completed in several ways. The easiest is to include the agreement as a provision in the underlying contract. If the contract terms are already finalized, however, the agreement to e-transact can be in a separate writing and incorporated into the contract by reference, or could even be provided by an electronic click-box so long as acceptance of the click-box constitutes a verified electronic signature, as discussed below.

Signatures are essential to both the agreement to conduct the transaction electronically and the underlying contract itself. In many e-transactions, the parties will want to make use of electronic signatures, including signature through click-box agreement as mentioned above. Business and Commerce Code § 322.009 provides that electronic signatures may be used to the same degree as non-electronic signatures if it can be shown that the e-signature was the “act of the person.” To show that an e-signature was the “act of the person,” the school district must show the efficacy of any security procedure applied to determine the person to which the electronic signature was attributable. In other words, the district should ensure that whatever method is used to gain a signature throughout the course of the transaction, including click-box agreements and any agreement to conduct the transaction electronically, also provides evidence that the intended or purported signatory was the actual signatory.

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