Article 2613 of comp.society.privacy: Path: news.CSOS.ORST.EDU!flop.ENGR.ORST.EDU!reuter.cse.ogi.edu!uwm.edu!computer-privacy-request From: "Risks Forum Digest" Newsgroups: comp.society.privacy Subject: Signatures in Electronic Commerce (l Date: 9 Jul 1994 17:50:40 GMT Organization: Computer Privacy Digest Lines: 246 Sender: comp-privacy@uwm.edu Approved: comp-privacy@uwm.edu Message-ID: NNTP-Posting-Host: 129.89.2.6 X-Original-Submission-Date: 08 Jul 1994 11:13:14 -0500 (CDT) X-Submissions-To: comp-privacy@uwm.edu X-Administrivia-To: comp-privacy-request@uwm.edu X-Computer-Privacy-Digest: Volume 5, Issue 003, Message 14 of 14 Originator: levine@blatz.cs.uwm.edu from Risks-Forum Digest Thursday 7 July 1994 (16:21) Forum on Risks to the Public in Computers and Related Systems ACM Committee on Computers and Public Policy, Peter G. Neumann, moderator From: "Mich Kabay [NCSA Sys_Op]" <75300.3232@compuserve.com> Date: 05 Jul 94 23:26:34 EDT Subject: Signatures in electronic commerce [Ben Wright, an attorney teaching the online seminar on The Law of Electronic Commerce in the NCSAFORUM of CompuServe, has granted permission to post the following article on signatures. I recommend that it be posted in RISKS because it addresses assumptions about the need for non-repudiation of contracts--an area which has been fuzzy for many of us. I hope it will be as useful for others as it has been for me. --MK] <> THE VERDICT ON PLAINTEXT SIGNATURES: THEY'RE LEGAL Summary: Contrary to conventional wisdom, commercial law generally does not require that a signature be "secure" to be legally effective. That is good news for e-mail, and electronic commerce in general. By Benjamin Wright According to the digital cognoscenti, the only legally effective way to sign an e-mail message is to run it through a cryptographic algorithm (such as that for DES or RSA), compute a mathematically unique authentication code,<1> and append it to the message. But if that's true, it will be many years before real (legal) electronic commerce comes to e-mail users because very few people authenticate their e-mail with cryptography. But fortunately, that reading of the law is not true. Many business e-mail users already practice electronic commerce. What's more, the law should generally recognize and enforce it. Forming Contracts In commerce the central transaction is the contract. Classically speaking, a contract is born any time an offer (e-mail from Joe Nightclub owner: "Will you make me three custom discs for $1000 and deliver next week?") meets acceptance (e-mail from Artist: "Yes!"). Once a contract is formed, the law gives one party a remedy if the other backs out. The orthodox view is that a simple, wholly plaintext e-mail contract cannot be enforced because it is not signed in a secure way and it will be impossible to prove in court. This excerpt from a popular magazine exemplifies the orthodoxy: [C]onsider an attempt to create an enforceable contract by exchanging an E-mail offer and acceptance. In the real world, exchanging letters of offer and acceptance does create an enforceable contract (assuming something of value is also eventually exchanged). Unfortunately, without authentication techniques (e.g., digital signatures), E-mail agreements are probably unenforceable in court. Under legal rules governing evidence and contracts, it's hard to prove the existence of a contract based on E-mail; fabricating an E-mail message is just too easy.<2> With all professional respect to the author of this passage, I disagree. The orthodoxy is wrong. Many types of contracts do have to be signed, says a law called the Statute of Frauds (which dates back to Seventeenth Century England),<3> but that law is admirably liberal in its use of the term _signed_. One signs a document when he adopts a symbol (any symbol) on the document as his signature. A signature need not be in ink; it need not be an autograph; and it need not be the least bit secure against forgery. Remember the illiterate geezer in the western movies who couldn't write his name? He just marked an X on the document. The law recognizes that X as his signature. A signature can be the ASCII characters "Joe Nightclub" appearing in plaintext in the From line of an e-mail message. "Joe Nightclub" need not even be the sender's real name. What is important is not the nature of the symbol Joe uses to identify himself, but rather the intent behind the symbol. If Joe intends the characters to be a token of his responsibility, then they are his signature. When Joe sends e-mail offering to buy discs, he intends the characters in the From line to show he is responsible for the message and the consequences that flow from it. If that's not his intent, what is it? Along with Canada, Australia and many other countries, the United States inherits the common law tradition of ancient England -- a set of living, breathing principles that are more limber than you might think. The common law, being the law of the leading industrial civilization over the past several centuries, has ample experience negotiating waves of new technology -- handwriting, printing press, typewriter, telegraph, telephone, telex, fax -- and it is today suffering no particular problems digesting e-mail as a medium for transacting commerce. Given how many thousands of courts and judges there are, it is possible that the odd one will disagree with my reading of the law. If this worries you (and those conducting more valuable transactions might be worried), you can minimize the risk by insisting that the e-mail sender include a statement that his name in the e-mail is his signature. This makes it very difficult for him later to claim in court that his name, written in plaintext, is not his signature. Proving It "But wait!" cry the advocates of cryptographic authentication. You can't prove that e-mail came from Joe Nightclub. Anyone could have sent it. The Artist herself could have fabricated it. True. You can write e-mail and make it appear to come from someone else. You can easily send e-mail from an address opened under a false name. But just as you can send fake e-mail, so you can send fake letters, telegrams, telexes, and faxes. Nonetheless, regardless of the medium through which a business message is carried, the origin and genuineness of the message can usually be proven in court. Rarely are they proven from the signature that happens to be attached to the message (or document), despite what you may think from watching _Perry Mason_. Much more often, origin and genuineness are determined in court from all the facts and circumstances that surround the message -- the full relationship of the people involved. We don't do business in vacuums. We do business based on relationships. When the Artist receives e-mail from Joe Nightclub, she wants to learn more before she parts with her precious discs. If she's never dealt with this customer before, she's going to check the guy out: call him on the phone, go meet him, ask for references, or ask for advance payment. Lest she be a fool, the Artist wants to collect evidence that this is a bona fide customer who is very likely to pay as promised. All the mundane facts and circumstances she collects can be, through testimony and otherwise, used in court to lend credence to Joe's e-mail. Sure, there will be disputed evidence. And under no circumstances are the judge and jury guaranteed to believe that any given message is genuine. But that is just the way commercial law works. Proving things in law is much more sloppy than proving things in science. Forgeries A supposed virtue of paper over e-mail as a legal medium is that it is hard to make inconspicuous changes to paper, whereas plaintext ASCII can easily be changed. Upon receipt of Joe's e-mail offering $1000, the Artist could change it to say the offer is for $2000. If she took this e-mail to court, there would be no way to tell from the face of the message whether it originally said $1000 or $2000. Yet paper suffers the same infirmity. If the Artist receives a letter from Joe offering $1000, she could rip it up and write a replacement, offering $2000, on a sheet of cheap, fake letterhead. She could then scribble something that purports to be Joe's handwritten signature. Later, a court could not tell from the face of the document whether Joe did or did not send it. Although Joe would repudiate it, sternly declaring that neither the letterhead nor the signature is his, the Artist would swear that this is indeed the letter she received. If this is not Joe's normal letterhead and signature, she'd contend, then Joe must have sought to deceive her, and the court, by sending an offer using unusual letterhead and signature. Although the Artist would be lying, the court would not know it just from inspecting the letter. Indeed, we can play the same authentication games with paper that we can with plaintext e-mail. When you receive a paper letter in the mail, bearing what looks to be an original autograph, you have no technical proof of its origin. Neither do you have technical proof of origin when you get a telegram or telex (unless you require it be authenticated with a cipher code, which is rarely done). So the reality is that routine business communications are, and have always been, risky. Still, business traders seem to have compensated for this risk. Cryptography's Role Don't misunderstand. I'm not denigrating cryptography as a means for ensuring the authenticity of messages or denying its rightful role in electronic commerce. Just as the engraved and magnetized paper used for currency is necessary for financial transactions in the world of paper, so cryptographic authentication is needed for electronic funds transfers. But just as we don't securely engrave and magnetize the pulp on which we write business letters and contracts, so we don't need to cryptographically authenticate most of our business e-mail. Sure, if you use e-mail for business you should keep complete records, and the more secure the records, the better. Consult your own lawyer. If you work for a large organization, records can be secured by placing them under the control of an independent department (e.g., internal audit).<4> But if you work solo, you can just establish a routine for making a log of business messages on your PC. Yes, someone could claim you falsified your log. But if you faithfully keep the log as a regular business practice, you can, if ever called to court, confidently vouch for the integrity of your records, and your story will more likely jibe with the ambient facts and circumstances. It is ironic that some of the most ardent champions of e-mail are so quick to assume that plaintext e-mail is somehow deficient. If, as they suggest, it is necessary to use fancy cryptographic methods to make e-mail legal, then they ask much more of digital media than we do of its predecessors. ========= NOTES: <1> The proponents of cryptography often refer to unique authentication codes as "message authentication codes" or "digital signatures." These are streams of scrambled numbers that, when unscrambled using the necessary cryptographic keys, give mathematically supportable evidence as to who created a message and whether the message has changed. See Larry Oyama, "Using Encryption and Authentication for Securing Data," EDI Forum, Special Edition on EDI Legal and Audit Issues (1992) p. 111. <2> Victor J. Cosentino, Virtual Legality, BYTE (March 1994) p. 278. <3> For example, the statute of frauds, as rendered in Section 2- 201 of the Uniform Commercial Code, says that a contract for the sale of goods worth $500 or more is generally not enforceable unless it is supported by a "writing" that is "signed." <4> See, Benjamin Wright, The Law of Electronic Commerce (Boston: Little, Brown and Company) Section 6.4. ============ Benjamin Wright (bwrigh01@reach.com) is a Dallas-based attorney and author of _The Law of Electronic Commerce: EDI, Fax and E-mail_. He is the instructor for a series of "virtual" seminars on the law of electronic commerce, sponsored by the National Computer Security Association (75300.2557@compuserve.com or (800) 488-4595). These seminars will be delivered via online computer conference. This article provides general information and is not legal advice for any specific situation. The formation of contracts is inherently risky, and this article does not advise which level of risk is appropriate for you. If you plan to conduct legal transactions, you should consult your own attorney. Copyright (c) 1994 by Benjamin Wright. All Rights Reserved. This article may be reprinted or redistributed as a whole, but only with the above information. <> Michel E. Kabay, Ph.D. / Dir Education / Natl Computer Security Assn