On October 1, 2000, the Federal Electronic Signatures in Global and National Commerce Act (“E-Sign Act”) took effect. In addition, in the last few months several states enacted the Uniform Electronic Transaction Act (“UETA”) which also deals with electronic signatures. So, we begin the new millennium by making technology not only part of everyday culture, but also of our legal framework. Following is a summary of the key provisions of these new statutes for drafters and users of legal documents?
The Federal E-Sign Act
The E-Sign Act confirms that, with respect to transactions involving interstate and international commerce, documents cannot be denied effect simply because they are executed electronically. The following are key provisions of the E-Sign Act:
• An “electronic signature” is defined in the Act as “the electronic sound, symbol or process attached to or associated with the contract or other record and adopted with the intent to sign the record.” The definition is very broad and would cover any computer contract requiring the party to “click OK.” The “click” would be a signature under the E-Sign Act. So would the pressing of the “pound sign” in a telephonic contract (the telephone is also an electronic medium). The term “electronic” is defined in the Act as “technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.”
• Under the E-Sign Act no person is required to use electronic signatures. A person must consent to such use in order for the electronic signature to be effective.
• The Act does not apply to a contract or record to the extent that is governed by: 1. Laws relating to wills or testamentary trusts;
2. Laws governing “adoption, divorce, or other matters of family law;”
3. The Uniform Commercial Code, other than sections 1-107 (relating to waiver or renunciation of claim or right after breach) and 206 (relating to statute of frauds for kinds of personal property not otherwise covered), Article 2 (sale of goods) and Article 2A (leasing).
• The E-Sign Act contains a set of provisions for consumer transactions. Those provisions are geared towards providing sufficient disclosures of the electronic signature consequences to the consumer. Under those provisions, if a law requires a consumer contract to be in writing, such contract can be in electronic form if (1) the consumer has consented and has not withdrawn the consent; and (2) certain disclosures have been made to the consumer as required by the Act.
• Congress has provided for limited preemption of the Act. Under that provision, a state law will supersede the E-Sign Act, if that state law is the enactment of the UETA (without deviation from the text recommended by the commissioners on Uniform State Laws).
The Uniform Electronic Transaction Act
Before the E-sign Act took effect, several states had enacted their version of the UETA. The UETA had been recommended to the states by the National Conference of Commissioners on Uniform State Laws. Pennsylvania enacted UETA in March 2000 and Delaware in July 2000. New Jersey has legislation pending. The most significant provisions of UETA are the following:
• UETA has some of the same exceptions as the E-Sign Act. It does not apply to the following: (1) wills, codicils or testamentary trusts, (2) UCC provisions, except for sections 107 and 206, Article 2 and Article 2A. The Delaware version of the law, however, also does not apply to (1) the Uniform Computer Information Transactions Act; and (2) the General Corporation Law of the State of Delaware, the Delaware Professional Service Corporation Act, the Delaware Revised Uniform Partnership Act, the Delaware Revised Uniform Limited Partnership Act, the Delaware Limited Liability Company Act, the Delaware Uniform Partnership Law, and the Delaware Business Trust Act.
• The Act applies only to transactions between parties that have agreed to conduct transactions through electronic means. Like in the E-Sign Act, a person cannot be required to sign a contract by way of electronic means. There is no continuing obligation to use electronic signatures. So, parties who agree to conduct one transaction through electronic means may refuse to conduct other transactions through the same means.
• Under UETA, a record or signature or a contract or other legal document may not be denied legal effect or enforceability solely because it is in electronic form. If the law requires that the record be in writing, an electronic record will satisfy the law; or if a law requires a signature, an electronic signature satisfies the law.
• UETA provides specifically for notarization through electronic means. A document may be notarized, acknowledged, verified or made under oath, by the electronic signature of the person authorized to perform those activities.
• If the law requires that a record be retained, the requirement is satisfied if the record meets the following conditions (governmental institutions responsible for specific records may specify additional requirements):
1. Accurately reflects the information in the “final form as an electronic record.”
2. Remains accessible for later reference.
• UETA also includes a set of attribution rules. Those rules will serve as a guide to deciding to which person the signature will be “attributed.” The E-Sign Act on the other hand provides no set of rules relating to attribution. Therefore, one may argue, it leaves open the possibility for abuse of the system.
• Finally, the Act contains provisions relating to consumer contracts. It is evident from the UETA provisions, as well as from reading the E-Sign Act, that consumer protection in this electronic age may become a major issue. Therefore, companies targeting consumers (e.g. by using B2C web sites) must reevaluate their policies and make sure that they comply with the E-Sign Act as well as with the version of UETA as passed by all states. And as companies go global, one must be mindful of the electronic transaction laws that are being enacted around the world.