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& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads | | JANUARY 8, 2001 PERSPECTIVE By Mike France Snares of the E-Signatures Act The new law makes it easier to seal deals online but offers no additional protection for those victimized by scamsters or for execs who enter contracts inadvertently
Well, the cheering may have been a bit premature. Yes, the Electronic Signatures in Global & National Commerce Act, as it's officially known, will certainly simplify e-commerce. But it's also likely to have some unintended consequences that could hurt careless consumers and executives. From a consumer standpoint, the big fear is fraud. Digital signatures, in essence, are unique, encrypted algorithms that identify a person. But it's possible to steal these algorithms -- just as it is to forge somebody's signature. RADICAL CHANGES. But it's not nearly as easy to prove that a criminal has fraudulently misused a digital signature as it is to show that an ink-and-paper signature has been forged. And that could be frustrating to victims. Though consumer groups lobbied for a provision to limit the liability of people victimized by fraudulent spending, the final version of the e-sign bill didn't contain any protection. "When we made attempts to increase consumer security, they were usually fought off by the industry," says Jamie Love, director of the Consumer Project on Technology in Washington, D.C. Still, it's not just consumers who have to be careful. The new law makes it possible for executives to make binding contracts with e-mail. The downside of that power is that businesspeople are going to have to be a lot more careful about what they say online. Consider a situation where a supplier offers in an e-mail to sell 1,000 widgets to a customer for $500,000, and the customer's purchaser replies, "O.K. Sounds great." Before the Electronic Signatures act, that wouldn't have constituted a binding contract, says Brook Boyd, an attorney at New York City law firm Meister Seelig & Fein. Now it does. "There are certain established ways of doing business that have been radically changed," Boyd says. Boyd believes there will be many situations where executives make e-contracts or consent to business terms inadvertently. But over time, he believes Congress will clarify the law. "Congress will start doing something if enough people get killed," Boyd says.  France covers Legal Affairs for Business Week in New York.  | | |
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