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Move Over John Hancock.

As technology advances at hyperspeed, businesses are finding endless ways to streamline. Last June, President Clinton signed into law the Electronic Signatures in Global and National Commerce Act, which puts electronic signatures of contracts and other legal documents on the same footing as "wet ink" signatures.

In California, businesses have been subject to, and governed by, the California Electronic Transactions Act since late 1999.

The following is a primer on how to apply the California Electronic Transactions Act. Treatment of the following issues by the California Electronic Transactions Act and the federal E-Signatures Act is almost identical; however, you should consult counsel if your business presents unique issues.

What does the Electronic Transactions Act do? The Electronic Transactions Act provides that an electronic signature has the same valid, binding and legal effect as a handwritten signature. The Act also provides that an electronic document or record has the same valid, binding and legal effect as a paper contract.

What is an electronic signature? The Electronic Transactions Act defines an electronic signature as an electronic sound, symbol or process associated with an electronic record, which is adopted or used by a person with the intent to sign an electronic record. The tone generated on a telephone number pad or use of a personal identification number may be considered an electronic signature. Even typing your name at the end of an e-mail may be deemed an electronic signature. The common identifier of the electronic signature is the user's intent to use the electronic mark or designation to "sign" an electronic record.

What is an electronic record? Any record or document created, generated, sent, communicated, received or stored by electronic means.

Can I use electronic signatures or records in my business? Yes. Generally, the Electronic Transactions Act applies to business and commercial transactions. It specifically exempts the validity of electronic signatures in the creation of wills and other testamentary instruments and also exempts certain commercial transactions and certain other business, financial, health and safety, insurance, public utilities and vehicle-related transactions. If you have any questions about whether or not a particular transaction would be binding with an electronic signature, contact your legal counsel or reference the Electronic Transactions Act at http://www.calcpa.org/californiacpa/articles/200l/06.01.a.html.

Can I require all of my clients, customers or business associates to transact business using electronic signatures or records? No. The Electronic Transactions Act requires all parties to the electronic transaction to agree to conduct the transaction by electronic means. The parties' conduct may be sufficient to constitute a tacit agreement to conduct the transaction electronically. However, once a party agrees to conduct a transaction electronically, that party may rightfully and legally refuse to conduct further transactions by electronic means.

How can I make an e-transaction binding on the other party? You must obtain the other party's consent to conduct the transaction by electronic means. The safest and most unambiguous way to obtain an enforceable agreement is by entering into and obtaining a separate written agreement from the other party, to authorize transactions to be conducted electronically.

If you don't want an electronic message, record, document or signature transmitted by you to another party to be construed as or deemed binding, you should specifically say so in the electronic transmission.

How will this act affect my accounting practice? As it does for all other businesses, the Electronic Transactions Act provides countless opportunities for CPAs and their firms to interact electronically with their clients and third parties in a way that is legally binding. This includes using the Internet to correspond with clients; send confirmation notices, contracts or engagement letters; and exchange documents and records as well as provide business management and management consulting services.

The Electronic Signatures Act also may simplify record keeping, authentication and verification functions for accountants. Information required for financial statements and tax returns may be transmitted electronically, and the authentication and verification of this information may likewise be transmitted electronically from the client or third party to the CPA. Finally, the authenticating or verifying document or statement may be stored electronically along with electronically stored client files.

Move over John Hancock, e-signatures are here.

Lee Reicher, Esq., CPA, is a partner and Sharyn Alcaraz, Esq., is an associate in the business department at the law firm of Reish Luftman McDaniel & Reicher, in West Los Angeles. They can be reached through the firm's Web site at http://www.reish.com.
COPYRIGHT 2001 California Society of Certified Public Accountants
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Title Annotation:electronic transactions
Author:ALCARAZ, SHARYN G.
Publication:California CPA
Article Type:Brief Article
Geographic Code:1USA
Date:Jun 1, 2001
Words:741
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