Opinion ID: 2007100
Heading Depth: 3
Heading Rank: 3

Heading: The Audio Tape Recording of the Parties' Conversation and Cancelled Signed Checks as a Basis for Satisfying the Statute of Frauds' Writing Requirement

Text: Sawyer also claims that the audio tape of Mills's voice and cancelled signed checks provide the basis for satisfying the Statute of Frauds' writing requirement under the federal Electronic Signatures in Global and National Commerce Act (E-SIGN) and Calloway v. Calloway, 707 S.W.2d 789 (Ky.App.1986). She first claims that the Statute of Frauds' writing requirement is preempted by 15 U.S.C. § 7001(a), which provides, Notwithstanding any statute, regulation, or other rule of law ... with respect to any transaction in or affecting interstate or foreign commerce (1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and (2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation. However, under 15 U.S.C. § 7001(a)(1), the oral agreement is not being denied legal effect, validity, or enforceability solely because it is in electronic form. (Emphasis added.) The oral agreement is being denied legal effect because it fails the writing requirement of the Statute of Frauds and under E-SIGN there is not an electronic signature. Therefore, contrary to Sawyer's assertions, the Statute of Frauds' writing requirement is not preempted by E-SIGN in this case. Under E-SIGN, `electronic' means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities. Id. § 7006(2). `[E]lectronic record' means a contract or other record created, generated, sent, communicated, received, or stored by electronic means. Id. § 7006(4). At issue in this case is the tape recording of the conversation between Sawyer and Mills. Under 15 U.S.C. § 7006(2)'s broad definition of electronic, the tape recording is electronic, and it is an electronic record because it was a record created and stored by electronic means under 15 U.S.C. § 7006(4). However, contrary to Sawyer's assertions, Mills's voice does not constitute an electronic signature merely because it was identifiable and was identified at trial as being his. An electronic signature under 15 U.S.C. § 7006(5) requires that an electronic sound, symbol, or process, attached to or logically associated with a contract or other record be executed or adopted by a person with the intent to sign the record. There must be intent to attach or logically associate the electronic signature to the agreement, that is, an intent to execute the contract. That was impossible here, because the medium on which the alleged agreement and electronic signature were recorded (the audio tape) was used surreptitiously. Mills did not know he was being recorded when he went to the Sawyers' art studio. Thus, Mills's identifiable voice on the tape, even if construed as an electronic signature, was procured without Mills's knowledge or intent, and would be tantamount to a forgery which cannot be used to demonstrate a valid contract. Cf. E.L. Strobin, Annotation, Procuring Signature by Fraud as Forgery, 11 A.L.R.3d 1074, § 5 (1967 & Supp.2009) ([W]here a genuine signature to an instrument is procured by some trick or device without intent on the part of the party signing to execute such an instrument, the attitude of the courts has been that the signature thereto will be treated in law as a forgery.). The statute contemplates more than a mere verbal assent recorded in secret; it requires the electronic equivalent of a signature, that is, an electronic sound, symbol, or process solemnizing the agreement and evidencing an intent to enter into it. That the recording was not intended to be a signature is further supported by the fact that the parties evidenced some intent to draft and sign a written contract to memorialize their understanding, which Mills refused to sign. Clearly then, Mills did not have any intent to execute or adopt the conversation that took place, and he did not sign the record memorializing it that was drafted by Sawyer's attorney. Sawyer's claim that E-SIGN provides a basis for satisfying the Statute of Frauds in this case fails. Sawyer next claims that Calloway, 707 S.W.2d 789, controls the outcome in this case because the tape recording cannot be barred by the Statute of Frauds. Calloway, which involved an oral statement recorded by a court reporter, is distinguishable for many reasons. In that case, the husband explicitly agreed to a settlement agreement under oath, and the court relied on an estoppel theory in light of the peculiar circumstances of [that] case, to hold that a settlement agreement entered into during a judicially sanctioned proceeding was sufficient to satisfy the Statute of Frauds. Id. at 792. The court noted, We cannot overlook the importance of stipulations between litigants and the promotion of expeditious and complete justice by their enforcement provided no harsh or unfair contract results. Id. In sum, Calloway involved a unique set of facts involving a stipulation under oath at a deposition where the court relied on an estoppel theory, not a surreptitiously recorded conversation as in this case. Therefore, Calloway is easily distinguished. Finally, Sawyer claims that Mills's voice, coupled with cancelled signed checks, is sufficient to satisfy the Statute of Frauds. The same rationale for why the recording cannot be a sufficient electronic signature applies here to bar the recording from being a memorandum of the parties' agreement. Given the secret nature of the recording and the expressed intent to draft a written document, the recording cannot have been intended by Mills as the repository of the parties' agreement. Cf. Ellis Canning Co. v. Bernstein, 348 F.Supp. 1212 (D.Colo.1972) (allowing audio recording to satisfy writing requirement but only where parties agreed that the recording would be the contract). As for the checks, in addition to the fact that the cancelled signed checks for monthly payments to Sawyer are inconsistent with her claim that the agreement could be completed within one year, Sawyer does not cite any law that signed checks satisfy the Statute of Frauds, and this Court is not persuaded that they do. Though some courts have held that checks can be used to demonstrate the existence of a contract, those checks almost invariably include references to the terms of the contract or a document that contains the terms. See, e.g., Walter E. Heller & Co. v. Video Innovations, Inc., 730 F.2d 50, 53 (2d Cir.1984) (delivery of signed rental checks which contained specific references to the written lease, would be sufficient to satisfy the Statute of Frauds); Clark v. Larkin, 172 Kan. 284, 239 P.2d 970 (1952) (notation of terms on check). In the one Kentucky case on the subject, the check in question referred to the property and the sale was confirmed in a letter a few days later. See Purtell v. Bell, 179 Ky. 356, 200 S.W. 644, 645 (1918) (Obviously the check, indorsement thereon, and letter together designate and identify the real estate, its location, and the terms of the contract.... (emphasis added)). In this case, the checks, rather than evincing an agreement involving a quid pro quo, are just as consistent with a gratuitous bonus of the sort paid to Mills's other employees. Sawyer is basically claiming that two halves make a whole, but in this case neither side makes a half, and thus together they do not make a whole writing sufficient to satisfy the Statute of Frauds.