Client Alerts
April 27, 2007

Do contract notices, sent by email, hold water?

Stites & Harbison, PLLC, April 27, 2007

by Stites & Harbison, PLLC

Notice is an important concept in construction. Many construction contracts permit or require all notices to be in writing with some specified means of delivery, such as U.S. Mail, fax or FedEx.

In recent years, more and more project communications are occurring via email, instant message or some other electronic means. Can such electronic communications serve as "notice" in lieu of a communication in writing? Under the Uniform Electronic Transaction Act, the answer is yes.

The Uniform Electronic Transaction Act (UETA) is a uniform law that is designed to facilitate the conduct of business transactions electronically and to make electronic records and signatures as equally binding as paper and manually signed signatures.

As of 2005, 46 states, along with the District of Columbia and the U.S. Virgin Islands, have enacted the UETA. Only Georgia, Illinois, New York and the state of Washington have not enacted it.

The UETA provides that where parties have agreed to conduct transactions by electronic means, electronic signatures or electronic notifications are as equally binding as paper. This means that in an UETA-governed transaction, a notice that is emailed and signed electronically is equally as valid and binding as one that is set out on paper and mailed.

The key concept in determining whether the UETA applies is "agreement" since it only applies to those transactions where the parties have "agreed" to conduct transactions by electronic means. While such an agreement may be contained in the contract itself, Section 5 of the UETA also provides that parties may implicitly agree to conduct transactions electronically from their own conduct and course of dealing on a project.

So if it can be shown that parties to a contract have customarily communicated with each other via email or other electronic means, the UETA will likely permit and enforce electronic notices even where the contract contains no specific provisions addressing them.

In light of this, it is best to eliminate uncertainty and include contract provisions either permitting or precluding electronic notice prior to starting a project. This will allow the project participants to know ahead of time whether electronic notice is effective, and not argue about it later in court.

Whether electronic notice is specified or precluded, the UETA will provide the legal framework to assure that each party's choice is enforced.

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