Maryland has become one of the first states to grant electronic contracts the same status as pen and paper contracts with handwritten signatures.

Senate Bill 3 in the 2000 Maryland General Assembly Session, providing that a signature or record may not be denied legal affect or enforceability solely because it is in electronic form, received little attention on its June 1, 2000 effective date. However, with Congress’ June 16th enactment of the Electronic Signatures and Global and National Commerce Act, e-signatures are now among the hottest topics in cyberspace.

The new Maryland law defines an electronic signature as “an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record.”

An electronic record is defined as “a record created, generated, sent, communicated, received or restored by electronic means.”

The law applies to transactions when both parties have agreed to conduct transactions by electronic means. But the law is clear, an agreement to conduct a transaction electronically may not be inferred solely from the fact that the party has used electronic means to pay an account or register a purchase warranty.

If the general law requires a signature or record to be notarized, acknowledged, verified, or made under oath, the new statute recognizes the electronic signature of a person authorized to perform those acts for electronic signatures (i.e., e-notary seals are recognized).

A general law requiring that a record be retained is satisfied by retaining an electronic record that accurately reflects the information in the record and remains accessible for later reference. The record retention in this matter would satisfy a law requiring a record to be presented or retained in its original form.

The bill excludes transactions covered by parts of the Maryland Uniform Commercial Code; laws governing the execution of wills; and laws or regulations governing notice concerning the cancellation of utility services, rental and mortgage agreements for a primary residence, or the cancellation of health or life insurance.

The new statute is significant in that electronic commerce, including real estate transactions on the Web, had been hampered by earlier laws that required a writing, a signature, and a written record in order to enforce many commercial transactions. That is, transfers in interests in real property, sales of goods exceeding $500.00, leases of goods exceeding $1,000.00, and contracts that cannot be performed within one year, are all examples of contracts that, prior to the enactment of this new statute, required a writing, a signature and written record. These transaction may now take place with an e-signature on the Web.

Several states, including California, Florida, Illinois, Massachusetts, and Washington have enacted laws regulating the use of electronic signatures. The Uniform Electronics Transactions Act (UETA), upon which the bill was based, became available to states as a model statute in 1999 to govern the enforceability of electronic contracts and signatures. Congress, within days of the effective date of the Maryland statute, enacted legislation that establishes a nationwide minimum standard for electronic signatures and electronic records for states that have not adopted the UETA. The Maryland statute will, as an adoption of the UETA, supersede the application of the federal statute within Maryland and will ensure greater certainty in intrastate transactions.

This new statute will address the concerns of many businesses and consumers who were wary of conducting extensive business electronically over the Internet because of a lack of predictable legal environment governing transactions.

A number of companies are pioneering digital signature technology and within a matter of months it is anticipated that residential real estate settlements, including delivery of a deed and mortgages, will be conducted entirely electronically. This move to uniform standards for electronic residential real estate transactions is being largely driven by the secondary mortgage market.

It can be anticipated that e-signatures and electronic transactions will dominate the real estate industry within a matter of years.