Counterparts Clause: Why Your Contracts Need an Electronic Signature Update
Counterparts: A Need to Revisit Old Boilerplate
Many commercial contracts include a section that allows two or more parties to sign on separate pages, usually under the heading “Counterparts.” A counterparts section generally serves two purposes. First, it permits the parties to sign on separate pages, and when done properly, the two signatures form a single legally binding document. This ability to execute an agreement separately provides significant flexibility, especially when the parties are not in the same location. Second, the section should anticipate delivery methods other than by hand or mail (e.g., electronically). Since the advent of fax machines and email, counterpart boilerplate language has typically allowed the parties to exchange signature pages electronically. In corporate documents such as written consents and board resolutions, a knowledgeable corporate secretary often includes a provision allowing the consent or resolution to be executed in counterparts and delivered electronically.
Legal Frameworks Supporting Electronic Signatures
Since the Uniform Law Commission adopted the Uniform Electronic Transactions Act (“UETA”) in 1999, parties have gained another option for executing documents: attaching an electronic signature. Forty-nine states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands have adopted versions of the UETA. New York, while not adopting the UETA, enacted the Electronic Signatures and Records Act (“ESRA”), which makes electronic signatures legally binding in that state. Although the UETA and ESRA vary slightly, their essential function is the same—they make symbols or electronic signatures legally binding on a party.
Surprisingly, many model forms of agreements still lack a counterparts section that explicitly recognizes electronic signatures. For example, a typical counterparts clause might provide:
“This Agreement may be executed in one or more counterparts, each of which will be deemed an original, and all of which, when taken together, will constitute one and the same agreement or document. The delivery of copies of this Agreement or other documents required under this Agreement, including executed signature pages, by facsimile or other electronic transmission will constitute effective delivery for all purposes.”
The Problem with Outdated Boilerplate Language
While this boilerplate language anticipates some electronic transmission and the use of separate signature pages, it does not fully take advantage of the UETA. A counterparty could argue that the clause allows for electronic transmission of signature pages but not electronic signing via a service such as DocuSign. Also, because an electronic signature may not appear in a person’s actual handwriting, a properly drafted counterpart provision should explicitly address electronic signatures. A modern counterparts clause should also refer both to execution and delivery by electronic means, including through platforms such as DocuSign. An updated version might read:
“This Agreement may be executed in one or more counterparts, each of which will be deemed an original, and all of which, when taken together, will constitute one and the same agreement or document. Counterparts may be executed and delivered via facsimile, email (including PDF), by electronic means (such as DocuSign or equivalent), or by any electronic symbol or signature complying with the U.S. federal ESIGN Act of 2000, the [state] Uniform Electronic Transactions Act, the Electronic Signatures and Records Act, or other applicable law. Any counterpart executed and delivered in this manner will be valid, effective, and binding for all purposes.”
Important Exceptions to Electronic Signing
One final point: certain contracts cannot be signed electronically. While the list varies by state, typical exceptions include wills, codicils, testamentary trusts, and, in some cases, negotiable instruments. The UETA also may not apply to transactions governed by the Uniform Commercial Code, other than Sections 1.107 and 1.206 and Chapters 2 and 2A, or the Uniform Computer Information Transactions Act.
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This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
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