BILL ANALYSIS
UNIFORM
ELECTRONIC TRANSACTIONS ACT
The Uniform Electronic Transactions Act (UETA) establishes the equivalence of electronic commercial records to pen and paper writings. UETA removes the barriers to electronic commerce by validating and effectuating electronic records and signatures. The Act does not affect the substantive rules of contracts, and is not a digital signature statue, but rather supports and compliments state digital signature laws. The Act applies only to electronic records and signatures relating to transactions in a business, commercial, or governmental affairs context. Filing requirements for governmental records are also covered.
SECTION 1: Short Title
This [Act] may be cited as the Uniform Electronic Transactions Act.
SECTION 2: Definitions
SECTION 3: Scope
This section defines the scope of the Act. The scope is limited to transactions between two or more persons related to business, commercial (including consumer), and governmental matters. Transactions related to other matters and unilaterally generated electronic signatures and records that are not part of a transaction are not covered. Legal rules imposing signature and writing requirements not covered include:
· Law governing wills, codicils, or testamentary trusts;
· The Uniform Commercial Code other than sections requiring written waivers to discharge breaches or contracts for the sale of goods greater than $500 to be in writing and signed to be enforceable, and Articles 2 (sale of goods) and 2A (leases); and
· The Uniform Computer Information Transactions Act (UCITA) as well as other laws identified by the state.
This means that the Act does validate electronic contracting in situations involving the sale of goods, licenses, and leases - where electronic commerce is occurring to the greatest extent today - but does not apply to unilateral transactions, payment systems, check collection, and electronic funds transfer systems.
This also means that, unless specifically excluded by the state, the Act covers writing and signature requirements found in laws governing powers of attorney, real estate transactions, and consumer protection statutes. For consumer protection statutes, it is important to note that, although the Act would allow information to be provided and signed electronically, other protective aspects of the laws such as prescribed disclosure formats or requirements for signing in multiple places still apply.
SECTION 4: Prospective Application
Section 4 simply makes it clear that the Act applies only to validate electronic records and signatures which arise subsequent to the effective date of the Act.
SECTION 5: Use of Electronic
Records and Electronic Signatures; Variation by Agreement
This section notes that electronic records and signatures are not required, that the Act applies only to transactions between parties that have agreed to conduct them by electronic means, and that the Act’s provisions can be varied by agreement. Therefore, the Act is voluntary and preserves the greatest possible party autonomy. In order for the Act to fulfill its objective of facilitating electronic transactions, the necessary agreement to conduct transactions electronically, while best established by explicit agreement in advance, can be inferred from the circumstances, including the conduct of the parties. The key factor required for such an inference is the intent of the parties.
SECTION 6: Construction and Application
Section 6 states that the Act must be construed and applied to facilitate electronic transactions consistent with other applicable law, to be consistent with reasonable practices concerning electronic transactions and continued expansion of those practices, and to effectuate its general purpose of making uniform the law with respect to this subject among the states enacting it.
SECTION 7: Legal Recognition of Electronic Records, Electronic Signatures, and Electronic Contracts
This section eliminates the single element of medium as a basis for denying legal effect or enforceability of a record. As a result, a record or signature may not be denied legal effect or enforceability simply because it is in electronic form. This premise is the fundamental purpose for creating the UETA. While this section validates an electronic record for purposes of satisfying the Statute of Frauds, it will nonetheless be unenforceable unless the parties otherwise agree to conduct the transaction electronically. The comments make clear that there will be instances where a contract is unenforceable, due to reasons such as a failure to satisfy the Statute of Frauds, but the contract may nonetheless have legal effect as defined by applicable or other contractual relationships. For instance, in the context of shipping relationship a buyer and seller may enter into a contract that is unenforceable due to a failure to satisfy the Statute of Frauds. However, the insurance company would nonetheless be prohibited from denying the claim on the ground that the buyer is not the owner. Provide other examples.
SECTION 8: Provision of Information in Writing;
Presentation of Records
Section 8 defines legal requirements for the provision of information in writing or relating to the method or manner of presentation or delivery of information. In this manner, this section differs from section 7, which defined the legal requirements for satisfying a writing requirement. This section provides specific incentives for senders to avoid using technology that will inhibit retention by the recipient: namely, if the record is not retainable by the recipient, it will not be enforceable. Section 8 also addresses specific requirements of other laws, provides standards for satisfying these requirements, and defers to the other laws as to whether these standards have been satisfied. Because of its protective purposes, the parties to an agreement cannot waive this section.
SECTION 9: Attribution and Effect of Electronic Record
and Electronic Signature
Section 9 ensures that existing rules of law regarding attribution will be applied in the electronic environment. Specifically, an electronic record or signature is attributable to a person, provided the record or signature resulted from the person’s action. A person’s “action” includes those acts taken by human agents, as well as electronic agents. As a result, the rule helps to ensure that actions taken by machines can still be ascribed to a person directing the machine.
The ability to show attribution will depend on the success of a party in establishing the requisite proof. The comments indicate that several forms of evidence can be used to establish attribution, including a party’s signature, the content of the record and security procedures. As under existing law, evidence of forgery or counterfeiting can be introduced to rebut evidence of attribution.
The comments specifically indicate that the rule applies to “click through” transactions. A click-through transaction involves a process that, if executed with intent to “sign,” will be an electronic signature.
SECTION 10: Effect of Change or Error
Section 10 deals with the effect of a change in a transmission caused by system error or an error by an individual sending an electronic transmission that results in an incorrect electronic record. In the first circumstance, the conforming party to a security procedure chosen by the two parties may avoid the effect of the change or error. In the second circumstance, the individual may avoid the effect of the change or error if the automated means of transacting does not allow for error prevention or correction and that individual promptly notifies the other party, takes reasonable steps to correct the situation and has not received any benefit. In other circumstances, existing substantive law, such as the law of mistake will still apply. This section provides incentive to parties (i) to pay attention to transactions and (ii) to create processes to minimize the probability of error and provide for automated correction mechanisms.
SECTION 11: Notarization and Acknowledgement
This Section permits a notary public and other authorized officers to act electronically, effectively removing the stamp/seal requirements. However, the section does not eliminate any of the other requirements of notarial laws, and consistent with the entire thrust of the Act, simply allows the signing and information to be accomplished in an electronic medium.
SECTION 12: Retention of Electronic Records; Originals
Section 12 deals with the serviceability of electronic records as retained records and originals. It assures that information stored electronically will remain effective for all audit, evidentiary, archival and similar purposes and is consistent with Federal Rules of Evidence 1001(3) and Uniform Rules of Evidence 1001(3) (1974). This section designates what kind of records can be retained electronically and the effect of the retained electronic record. A retained electronic record is deemed an original if it accurately reflects the final form of the information set forth in the record after it was first generated and if it remains accessible for later reference. Furthermore, the Section specifies a check may also be retained in electronic form by the retention of information contained on the front and back of the check in a form that satisfies the above standards for creating an original.
SECTION 13: Admissibility in Evidence
The electronic form of a record or signature may not be excluded or rejected if presented as evidence solely because it is in electronic form.
SECTION 14: Automated Transaction
This Section confirms that
machines functioning as electronic agents for parties to a transaction can form
enforceable contracts. It recognizes that completely automated electronic
transactions can give rise to a valid contract between the parties. By
programming the machine to transmit an electronic signature the party
demonstrates that it has the requisite intention to enter in to a contract and
that it consents to the terms of the contract.
SECTION 15: Time and Place
of Sending and Receipt
This Section provides
default rules regarding when and from where an electronic record is sent and
when and where an electronic record is received.
The rules for when a record
is sent and received are designed to follow which party or system is in control
of the record.
Thus, an electronic record would be considered sent when the information is addressed to the recipient and 1) it enters a system outside the control of the sender, or 2) it enters the system that is under the control of the recipient. The rationale here is that the sender would be in control of the timing of sending of a record.
An electronic record would be considered received when it enters a system that the recipient uses for receiving electronic records or information of the type sent and from which the recipient is able to retrieve the record. This provision is designed so that recipients who have multiple e-mail addresses, for example, could designate which e-mail address could receive what record or information or transaction.
However, a provision in the
bill would establish that an electronic record of receipt of a transmittal
would not establish that the content sent corresponds to the contents received.
Other rules relate to the
designation of which location a record would be deemed sent from (sender's
business) and which it would be deemed sent to (recipient's business) and if
there were more than one business location for either sender or recipient, the
address to be used is the one with the closest relationship to the underlying
transaction.
Lastly, an electronic record
would be deemed effective when received even if no individual is aware of its
receipt.
SECTION 16: Transferable
Records
This section provides legal
support for the creation, transferability and enforceability of electronic note
and document equivalents, as against the issuer/obligor. Section 16 is limited
to electronic records which would qualify as negotiable promissory notes or
documents if they were in writing, but the issuer of the electronic record must
expressly agree that the electronic record is to be considered a transferable
record. A person having control of a transferable record is the holder of the
transferable record and has the same rights and defenses as a holder of an
equivalent record or writing.
Under this Section
acquisition of "control" over an electronic record serves as a
substitute for "possession" in the paper analog. As such, if
requested by a person against whom enforcement is sought, the person seeking to
enforce the transferable record must provide reasonable proof that the person
is in control of the transferable record. Section 16(b) allows control to be
found so long as "a system employed for evidencing the transfer of
interests in the transferable record reliably establishes as the person to
which the transferable record was issued or transferred." The key point is
that a system, whether involving third party registry or technological
safeguards, must be shown to reliably establish the identity of the
person entitled to payment.
Section 16(c) then sets
forth a safe harbor list of very strict requirements for such a system.
Generally, the transferable record must be unique, identifiable, and except as
specifically permitted, unalterable.
In addition any copy of the
authoritative copy must be readily identifiable as a copy and all revisions
must be readily identifiable as authorized or unauthorized.
SECTION 17: Creation and Retention of Electronic Records and Conversion of Written Records by Governmental Agencies
Section 17 is optional and recognizes that state governments act as commercial parties in areas of procurement and may agree to conduct transactions electronically with vendors and customers of government services. Section 17 authorizes intra-governmental uses of electronic media. This section authorizes state governmental agencies (or designated state officers) to determine whether and to what extent electronic records will be created and retained and whether to convert written to electronic records.
SECTION 18: Acceptance and Distribution of Electronic Records by Governmental Agencies
Section 18 is optional and states that except for electronic records used for evidentiary purposes, state governmental agencies (or designated state officers) shall determine whether and to shat extent to send and accept electronic records and signatures and to rely upon them. If electronic records and signatures are used, the agency may specify their format and the manner in which they are created, communicated, received and stored, and the system to be used; the manner in which electronic signatures are affixed to an electronic record; the control processes to ensure adequate, secure, and auditable electronic records; and any other requirements as reasonably necessary. This act does not require governmental agencies to use electronic records or signatures.
SECTION 19: Interoperability
Section 18 is optional and states that to avoid creating barriers, there is a need for States to adopt systems and rules that are compatible with the systems of other governmental agencies and the private sector. This section requires that the governmental agency (or designated officer) adopting standards under the prior section promote consistency and interoperability with other Texas agencies, other states, the federal government, or non-governmental persons. If appropriate, the adopted standards may specify differing levels of standards from which Texas governmental agencies may choose.
SECTION 20: Severability Clause
This section states that if any provision of this Act or its application to any person is held invalid, the invalidity does not affect other of its provisions.
SECTION 21: Effective Date
This section states the effective date of the Act as _________________.