Would an email-based Non-Disclosure Agreement be binding?

[fuzzybabybunny]

Just wondering if emailing an NDA would be binding.

Is it enough to just send an email such as this:

I can give you my (secret), but before I go further you must agree not to disseminate this information to anyone else.

Copy and paste the following in your reply email:

[his name] agrees to the following:

Acknowledgment of Confidentiality. [his name] acknowledges that they may be exposed to confidential and proprietary information of Fuzzy.

Confidential Information does not include (i) information already known by [his name] , (ii) information in the public domain through no wrongful act of [his name] , or (iii) information received by [his name] from a third party who was free to disclose it.

Covenant Not to Disclose. [his name] agrees not to disclose any Confidential Information to any person or entity except as Fuzzy approves. [his name] agrees to use at least the same degree of care in safeguarding the Confidential Information as they use in safeguarding their own confidential information.

Retention of Rights. Fuzzy retains all rights to the material sent.

Term of Agreement. This agreement shall never expire.

ACCEPTED BY: _______________________________

Title: _____________________

Date: _____________________

For Victor Lin Photography, LLC :

AUTHORIZED BY: Fuzzy

Title: Owner

Date:

This got me curious because even though there isn't any paper and ink and signatures involved, could the fact that this was agreed and "signed" within each party's private, password protected email accounts be binding? Would such a digital signature be binding?

 

[ElFenix]

in texas it would be. dunno about california. i assume so, but then i have no experience with the law there.

best practice is to have a paper copy.

 

[Blackjack200]

Yes, email is binding, state doesn't matter. But my advice would be to have the counterparty print it out, sign it, scan it, and send it back. It's just more impactfull that way.

 

[AreaCode707]

Disclaimer: I am not a lawyer. I do, however, work full time with contracts management systems and processes and have been advised by lawyers on this topic.

Yes, the electronic commitment is binding. However, the typical problem with email contracts is the inability to prove that the person who sent it was the actual person committing to the contract. For instance, a VP could claim their assistant sent the email and therefore the contract was void because the assistant didn't have the right to commit the company. In high-stakes lawsuits this can be a very strong argument against the validity of the agreements.

Companies like DocuSign exist for this exact reason. The intent is to ensure that the signing person authenticates very strongly that they are who they say they are.

It's not that difficult to create a copy to be printed, signed, scanned and emailed back to you. Do that and keep it on hand. It costs you nothing. Copies of wet signatures are as good as original wet signatures.

[edit] Docusign seems to have a free signature process available online. It'd be worth using if you want to do electronic signature. They have a pretty good collection of legal precedent where their signatures have held up in court.
http://www.docusign.com/

 

[Safeway]

Email is generally binding, but print/fax is always preferred.

 

[RKS]

/signature/

 

[grrl]

Your name is Fuzzy?

 

[chorb]

I had to sign some unilateral NDAs the other day; both parties had to print/sign/scan the document. (California).

 

[Blackjack200]

Yes, the electronic commitment is binding. However, the typical problem with email contracts is the inability to prove that the person who sent it was the actual person committing to the contract. For instance, a VP could claim their assistant sent the email and therefore the contract was void because the assistant didn't have the right to commit the company. In high-stakes lawsuits this can be a very strong argument against the validity of the agreements.

That's pretty surprising to me. I mean, I know that secrataries can send email through their boss's account, but I'm surprised that a corporate officer can get up on the stand and claim that his secratary, who spends most of her day filing and answering the phone, suddenly decided at 2:30 on Tuesday afternoon that it was a good idea to negotiate a distribution agreement with a third party vendor. Out of curiousity, have your lawyers told you that this is a common tactic to avoid commitments memorialized in emial?

 

[AreaCode707]

That's pretty surprising to me. I mean, I know that secrataries can send email through their boss's account, but I'm surprised that a corporate officer can get up on the stand and claim that his secratary, who spends most of her day filing and answering the phone, suddenly decided at 2:30 on Tuesday afternoon that it was a good idea to negotiate a distribution agreement with a third party vendor. Out of curiousity, have your lawyers told you that this is a common tactic to avoid commitments memorialized in emial?

The input I've received has been less first-party experience and more case law. It has come up in court before and has been a successful argument. I don't know how common it is but the precedent is there.

 

[Double Trouble]

That's pretty surprising to me. I mean, I know that secrataries can send email through their boss's account, but I'm surprised that a corporate officer can get up on the stand and claim that his secratary, who spends most of her day filing and answering the phone, suddenly decided at 2:30 on Tuesday afternoon that it was a good idea to negotiate a distribution agreement with a third party vendor. Out of curiousity, have your lawyers told you that this is a common tactic to avoid commitments memorialized in emial?

Essentially, yes. It's not that you need to argue why the secretary might have taken such a step, the issue is that in order to have a contract, both parties have to agree. You have no real way to prove that one party actually agreed, you just have an email. There's no way to prove where that email actually came from and who agreed to it. For example, how do you know for sure that someone didn't have the password for that person and "agreed" for him?

Unless you truly have a secure closed loop email system where you can actually prove who sent the email and from where, an email by itself doesn't do much. We use Lotus Notes with an RSA token at work for executive emails of such nature, and the internal/external auditors have told us they are OK with using emails as "proof" in that scenario for internal emails because you can actually prove that the sender was the right person.

 

[Blackjack200]

The input I've received has been less first-party experience and more case law. It has come up in court before and has been a successful argument. I don't know how common it is but the precedent is there.

I guess I could see it being used in certain circumstances, I would just imagine that in most cases there would be a whole trail of emails with content suggesting that the corporate officer was the author.

Essentially, yes. It's not that you need to argue why the secretary might have taken such a step, the issue is that in order to have a contract, both parties have to agree. You have no real way to prove that one party actually agreed, you just have an email. There's no way to prove where that email actually came from and who agreed to it. For example, how do you know for sure that someone didn't have the password for that person and "agreed" for him?

Unless you truly have a secure closed loop email system where you can actually prove who sent the email and from where, an email by itself doesn't do much. We use Lotus Notes with an RSA token at work for executive emails of such nature, and the internal/external auditors have told us they are OK with using emails as "proof" in that scenario for internal emails because you can actually prove that the sender was the right person.

We do use email for lower level commitments, like event sponsorships, but that's probably because the counterparties we're dealing with have deep and long term ties to our firm. It wouldn't be worth it for them to back out of a $10,000 sponsorship commitment because of the damage it would cause to the broader relationship.

Wouldn't the same concerns arise when a corporate officer is using a stamp for his signature? I've seen signature blocks stamped with the CO's signature, and I would think that the company could claim, in a similar manner, that it wasn't the CO that stamped it.

 

[Reel]

I had to sign some unilateral NDAs the other day; both parties had to print/sign/scan the document. (California).

That is how one I got my company entered into recently was handled. Personally, I would think that is the best course of action.

 

[yllus]

I've wondered this as well and found out (from a lawyer) that in at least a couple of provinces in Canada, it is.

 

[Double Trouble]

I've wondered this as well and found out (from a lawyer) that in at least a couple of provinces in Canada, it is.

Any agreement, email / paper / oral / whatever is generally enforceable. They key is that you have to be able to prove that both parties entered into the agreement. That's what makes oral agreements so weak, it's hard to prove anything. The actual medium doesn't matter in terms of the agreement being enforceable, what matters is if you can prove that both parties entered into it.

 

[Double Trouble]

I guess I could see it being used in certain circumstances, I would just imagine that in most cases there would be a whole trail of emails with content suggesting that the corporate officer was the author.

Yeah, guess it depends on the circumstances, but as an outsider sending an email to someone as an agreement, you just don't know what proof you might have months/years later when a disagreement comes up and it ends up in court.

Wouldn't the same concerns arise when a corporate officer is using a stamp for his signature? I've seen signature blocks stamped with the CO's signature, and I would think that the company could claim, in a similar manner, that it wasn't the CO that stamped it.

The difference is that the signature stamp is intended to allow someone else to affix the officer's signature, so the company is essentially taking responsibility for that stamp being kept to only those who have authority to use it. Even then, for really large transactions, a signature itself is not even sufficient. We use things like [FONT=Verdana,Arial,Helvetica]the Securities Transfer Agents Medallion Program (STAMP)[/FONT] for larger transactions.

 

[silverpig]

Any agreement, email / paper / oral / whatever is generally enforceable. They key is that you have to be able to prove that both parties entered into the agreement. That's what makes oral agreements so weak, it's hard to prove anything. The actual medium doesn't matter in terms of the agreement being enforceable, what matters is if you can prove that both parties entered into it.

Yep, this is my understanding from the few law courses I've taken (all were on contracts though).

 

[Blackjack200]

Yeah, guess it depends on the circumstances, but as an outsider sending an email to someone as an agreement, you just don't know what proof you might have months/years later when a disagreement comes up and it ends up in court.

That's a good point. It would probably be a very bad idea to rely on an email for any long term commitments.

The difference is that the signature stamp is intended to allow someone else to affix the officer's signature, so the company is essentially taking responsibility for that stamp being kept to only those who have authority to use it. Even then, for really large transactions, a signature itself is not even sufficient. We use things like [FONT=Verdana,Arial,Helvetica]the Securities Transfer Agents Medallion Program (STAMP)[/FONT] for larger transactions.

That actually makes complete sense now that I think about it.

I've only been in one situation where the counter-party insisted on the Medallion, it was a bizarre case where the investment manager didn't re-invest a dividend for us, claiming that we had not explicitly requested the re-investment as required in our agreement. The assets (from the dividend) were sitting out of the market and the investment manager refused to reinvest them unless we provided them with a letter that they would be held harmless for the P&L of the market movement. We were desperate to get the assets back into the market and requested an as-of trade with the intention of forcing them to take us to arbitration to recover the market loss. But they insisted that we use the STAMP, and apparently that's backed by a surety bond, so the IM would have been able to collect from that. I think the P&L ended up costing us almost a million dollars.

 

[Modelworks]

I have never encountered a company that did NDA by email. Everyone I have done was sent fedex to me and then I returned it the same way. One even had to be signed and notarized.

It also appears to vary with the state.
http://www.ncsl.org/IssuesResearch/...onicTransactionsActs/tabid/13484/Default.aspx

 

[AlienCraft]

Three can keep a secret if two are dead.

 

[oynaz]

The input I've received has been less first-party experience and more case law. It has come up in court before and has been a successful argument. I don't know how common it is but the precedent is there.

Only in America...

 

[Modelworks]

Only in America...

The law is that they can't throw out a contract just because it was signed electronically. That doesn't mean it is automatically binding. They still have to prove that it was the parties involved who signed it. Just like how signatures on paper are sent to handwriting experts when contested, they can do the same with emails.