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Enforcing Electronically Signed Construction Contracts

Enforcing Electronically Signed Construction Contracts

Contractors, subcontractors and suppliers understand that the usual course of construction requires a paper trail of documents beginning with plans, specifications, drawings, bids and proposals, and concluding with inspections, punch lists, final payment and warranties. Moreover, standard contract clauses and simple prudence require those in the construction industry to retain documents for years. The advantages of storing documents and conducting all related business electronically is obvious. But, are electronically signed contracts enforceable?

In 2000 Utah’s legislature passed the Uniform Electronic Transactions Act. The statute permits the use of electronic documents and signatures in a transaction if both parties agree. Electronic contracts and signatures “may not be denied legal effect or enforceability solely because…in electronic form.” Utah Code Ann. § 46-4-201(1), (2). If a law requires that a record be in writing, or that a signature be obtained, an electronic record or signature is acceptable. Id., at (3), (4). This is why you should call us, so you can have a Construction Contract Lawyer on your side. For example, in Anderson v. Bell, 2010 UT 47, the Utah Supreme Court held that electronic signatures on a petition to place an unaffiliated candidate’s name on the statewide ballot for governor satisfied the requirement under Utah’s Election Code for such a petition to be signed by 1,000 registered voters. Id., ¶ 26. In judicial proceedings, the law requires a party to use the original record of a transaction to prove the terms of the transaction. The Uniform Electronic Transactions Act addresses this requirement by stating that an electronic record can suffice as an “original” if it “accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise” and “remains accessible for later reference.” Utah Code Ann. § 46-4-301(1). “In a proceeding, evidence of a record may not be excluded solely because it is in electronic form.” Utah Code Ann. § 46-4-302.

To improve the chances that electronically signed contracts are enforceable, and can be admitted as evidence of the terms of the parties’ transaction, contractors should amend their form subcontracts.

Tips for Borrowers Negotiating a Loan

It’s a great relief for the borrower when the documents are signed and the money is wired. What happens after the loan has closed is critical to a successful loan.

  1. Post-closing matters. The lender may have a laundry list of items for the borrower to provide after the closing. It almost goes without saying, but it’s in the borrower’s interest to complete all post-closing matters as promptly as possible. The borrower will usually be paying for the attorney’s fees of the lenders. The longer post-closing items drag on, the higher the attorney’s fees will be. Getting the post-closing items done quickly will save the borrower money and get the borrower-lender relationship off to a good start.
  2. Prompt financial reporting. Many loan documents require ongoing reporting of financials, usually on a quarterly and annual basis. Borrowers that miss financial reporting deadlines (usually 45 days after each quarter and 60 days after the end of the year) put themselves at risk of getting a default notice from the bank. If the borrower won’t be able to get financials to the lender on time, they should give the lender notice before the due date.
  3. Keep the lender in the loop. There will be times when a borrower fails to reach a financial covenant set by the bank in the loan documents. Sales may be down, and unforeseen expenses may lower net earnings. In times of financial distress, it’s in the borrower’s interest to contact the bank early and give them notice. Most borrowers tend to wait until the last minute to report bad news to their lender, but this will only erode trust between them. The borrower should strive to be as open and transparent with the lender as possible. By doing so, the lender will be more flexible and accommodating if the borrower misses a financial covenant or a payment. Lenders will often go the extra mile to assist cooperative borrowers. Without such trust, the Lender may quickly seek to enforce its rights against the borrower when the borrower can least afford it.
  4. Keep your lawyer engaged. After the loan is closed, borrowers tend to drop their lawyer off the radar screen until an angry letter arrives from the lender. The better approach is to call your lawyer at the first indication of trouble. A good finance lawyer will be able to help a borrower frame a solution and formulate a proactive plan for dealing with its lender when difficulties arise.

Free Consultation with Contract Lawyer

If you are here, you probably have a contract matter you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States

Telephone: (801) 676-5506

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