Uniform Electronic Transaction Act and Electronic Signature

Abstract
The world has evolved from what used to be a “paper world” to now everything being electronic. The vast majority of the population relies on electronic means to conduct their everyday business. We pay our bills online, make purchases online and sometimes even enter into contracts online. No longer do you need a person’s John Hancock to make a contract legally binding. We have transformed into a society where electronic signature (E-Sign) is just a binding as your wet ink signatures. E-Sign and the Uniform Electronic Transactions Act (UETA) are often compared to each other, but in all actuality they are different when it comes to the way consumers are actually treated. The basic purpose of UETA is to support the use of electronic commerce. The primary objective of this act is to establish the legal equivalence of electronic records and signatures with paper writings and manually signed signatures, which ultimately helps remove barriers to electronic commerce. Once difference between the two is that UETA is state and E-Sign is Federal. You can trace the creation of E-Sign back to UETA. Keep in mind that UETA only applies to Article 2 and 2A transactions and as of July 2006, only forty-six states to include the District of Columbia and the U.S. Virgin Islands have adopted UETA (White & Summers, 2010). Due to the fact that all of the states failed to adopt UETA, Congress felt the need to enacted E-Sign in 2000; which in some ways covers the same areas.

UETA is one of several United States Uniforms Acts that has been proposed by the National Conference of Commissioners on Uniform State Laws (NCCUSL).
The basic purpose of the UETA is to help align the differing state laws in areas such as, retention of paper records with a main focus on checks; and the validity of electronic signatures in other areas as well (Uniform Electronic Transactions Act). Before the adoption of UETA majority of banks were required to maintain actual paper copies of the checks they processed. UETA also helped remove those barriers to electronic commerce by validating and making electronic records and signature legally binding (White & Summers, 2010). When thinking about UETA it is important to remember that this act only applies to transactions related to business, commercial and governmental matters. . In order to resolve rising issues relating to the widespread use of the Internet for the sale of goods, as well as provide uniformity, NCCUSL publicize UETA in 1999 (White & Summers, 2010).
Before continuing it is imperative to define what an electronic contract is. An Electronic contract is defined as any kind of contract formed in the course of electronic commerce by the interaction of two or more individuals using electronic means. Sometimes there are issues that arise when dealing with electronic contracts. UETA tends to be able to solve most of the electronic contracting issues that arise. UETA recognizes e-mail communications that contain digital signatures proof enough to enforce a contract. The act applies only to transactions between parties who have all agreed to conduct transactions by electronic means only (White & Summers, 2010). UETA and E-Sign only applies to those transactions that fall under Article 2 and 2A, as well as certain areas of the pre-revision of 1-107 and 1-206 of the Uniform Commercial Code.
There are generally three areas where electronic contracting occurs: When two individuals acting as an agent or on their own behalf use digital data to make contracts. This includes emails, over the Internet or any other form of digital communications; it occurs when both parties use electronic agents. Sections 14 (1) of UETA acknowledges contracts “formed by the interactions of electronic agents of the parties even if no individual was aware of or reviewed the electronic agents actions or ending terms and agreements; under Section 14(2) of the UTEA a contract is also formed by the interaction of at least one electronic agents and an individual acting on their own behalf or another persons behalf (White & Summers, 2010). An example of this would be the purchasing of something over the Internet. When it comes time to checkout there is always a new window that pops up with an electronic form that you are required to fill out and input your credit card information. This would constitute forming an electronic contract as well. UETA is what validates and makes electronic signatures binding. It allows for records and electronic signatures to be treated in the same manner as a traditional “John Hancock” signature. One thing to remember is that UETA only covers electronic writings and signatures relating to transactions. It is also important to keep in mind that Section 2(5) defines “electronic” as relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities and 2(16) states a “transaction” means an action or set of actions occurring between two or more people relating to the conduct of business, commercial or governmental dealings (White & Summers, 2010). When you think of electronic signatures think of electronic symbols or processes attached to or associated with a record and executed by someone with the intent to sign the record. Electronic records are created, generated, sent, communicated, received or stored by some sort of electronic means (Chapter 12A. Uniform Electronic Transaction Act). Court systems now recognize electronic records, electronic signatures and electronic contracts as being legally binding. According to my research, a record, signature, or contract cannot be denied legal enforceability solely on the basis that it is in electronic form. If by law, a record is to be in writing and accompanied by an signature, an electronic record and signature would suffice (Chapter 12A. Uniform Electronic Transaction Act). In June 2000, Congress passed what is known as E-Sign. You can trace the origin of E-Sign can be traced back to UETA E-Sign authorized the substitution of electronic notices for paper notices, which includes most consumer notices (Consumers Union). Under E-Sign there are important protections to ensure consumers are able to receive, keep and use the electronic notices provided to them. When you compare UETA and E-Sign you learn that they are similar, but yet different. When dealing with consumer transactions, E-Sign requires a specific and electronic consent process before an electronic notice may replace a legally required written notice. When you look at UETA, it only requires that both parties agree to conduct transactions by electronic means without any specification on how the agreement is to ever be proven if it comes to that (Consumers Union). According to research UETA is considered worse than UETA, except for the fact that UETA requires agreements for electronic notices to be sent in accordance with the contract. You also have to keep in mind that state agencies are allowed to enforce additional requirements to the retention of records. If you are looking for consumer protection, you will only find it with E-Sign. E-Sign affords states the opportunity to add additional consumer protections. Surprisingly, E-Sign gives the option of replacing portions E-Sign with portions of UETA. Keep in mind when states choose do this they must ensure they are not remove any of the portion pertaining to any of the consumer protection areas. In addition, there are various reasons on why UETA is considered bad for consumers. UETA allows for us as consumers to now receive agreements that were originally in paper format electronically. Now how many times do we get what we think are junk emails and not open them? I am sure that this happens majority of the time. Well with UETA is not a requirement for them to actually be open and read. Lastly, you have to take into account the assurance that the email was actually ever received. Congress felt the need to intervene here, because they felt under certain circumstances where state law required actual paper notices should not be allowed to be replaced by electronic means. Based off their assessment, the following are excluded from being converted into electronic means: utility turn off and shut off; default, acceleration, repossession, foreclosure, or eviction, or right to cure under rental agreement or a mortgage on principle residence; cancellation or termination of health insurance or benefits and life insurance benefits; and lastly product recall or material failure of a product that risk endangering health and safety. (Consumers Union). When dealing with UETA and E-Sign, you need to keep in mind that there are greater expenses unlike with receiving notices through the traditional mail services. In addition to this, neither of the two recognizes that there is a level of uncertainty when it comes to email. To counter this, E-Sign takes three important steps. The first step is that E-Sign requires that the initial consent be given electronically. This provides assurance that the consumer possesses the ability and understanding to send emails. Secondly, E-Sign recognized that there are those consumer notices that are important enough to remain on paper. Lastly, E-Sign allows for additional state law provisions to address the delivery issues with electronic notices. One major issue that must be taken into consideration with UETA is that it does not take into account that there is the possibility that the electronic records can be physically altered. To counter this issue, electronic records are required to be in “read only” format. When dealing with E-Sign, courts are legally able to deny enforcement if the record is not properly retained. On the other hand, UETA only requires that the record be capable of retention, but does not require that the record be maintained in a certain format for future reference if issues arise. As stated earlier, only forty-six states to include the District of Columbia and the U.S. Virgin Islands have adopted UETA. For those states that have already adopted UETA, it is recommended that those states either enact a new law establishing consumer protections or create a section in UETA the specifically establishes consumer protections or point to E-Sign for protection. E-Sign recommends that states pass two state statues, which are UETA and another state law that dictates procedures and requirements for the use and acceptance of electronic records and signatures (Consumers Union). It is essential that the new law be consistent with E-Sign, provides specific instructions for requirements needed in order to deal with the use and acceptance, not favor one technology over another and lastly, must make a reference to UETA if adopted after E-Sign. NCCUSL commissioners are requesting that states adopt UETA. States have the option of choosing between five alternatives. Option one is that states enact UETA along with a companion law that is allowed under UETA. This is considered the best route because it allows for states to be able to appropriately address issues that are not included as a part of E-Sign. In addition, states are afforded the opportunity to create their own policies with regards to the method of how their records are retained. Option two is for states to enact those provisions that were recommended as a companion to E-Sign, but not enact UETA. This option pretty much guarantees the same consumer protections as Option one. Option three is UETA with “No Displacement” Statement. NCCUSL is continuously seeking the enactment of UETA by all states. There is a minimum requirement that it includes language stating that there is not intention to modify, limit, or supersede the requirements of 101 (c), (d), (e) or allow the authorization of electronic delivery of any notices discussed in 103 (b) of the Electronic Signatures in Global and National Commerce Act. The reasoning behind this language is just in case litigation arises concerning whether or not a future enacted UETA was intended to displace E-Sign and its consumer protections. Option four is no UETA at all. States may choose not to enact UETA, but utilize E-Sign to authorize electronic notices, along with providing consumer protections. This option gives consumers protection of the federal consent and its related requirements. In addition, it allows for better rules for document integrity and retention. On the negative side, consumers are left vulnerable to the decreasing of their consumer protection rights. Option five is UETA alone. This option is not a recommended choice, mainly because the courts might decide that UETA displaces all of E-Sign to include consumer protections. Options one, two and three are the recommended choices and are in that exact same order of preference. It is imperative to keep in mind that that UETA and E-sign differ in many ways to include consumer protections. Here are a few: 1. Must consent be electronic? Consent is required to be given electronic with E-Sign; unlike with UETA consent can be given on paper for future electronic communications. 2. Are pre-consent disclosures required-With UETA they are not required? E-Sign requires disclosures and they must include any type of hardware and software needed, how to request paper copies and any cost associated, and lastly how to withdraw your consent. 3. Can a phone call recording replace a written notice? E-Sign does not allow this for consumer transactions, but on the other hand UETA allows a tape recording of a voice conversation as an electronic record.

Although the preference of NCCUSL is that states enact UETA along with some sort of companion law mainly because this method would allow for each state to address issues not found in E-Sign in what ever manner they deem fit; as well as allowing them the opportunity to establish their own way ahead on retention policies of electronic records. As consumers we want to ensure that we are engaging in safe and secure online transactions. We want the consumer protections that we are given with paper records with electronic records. States that choose now to enact UETA after the enactment of E-Sign need to ensure that there is clarification as to the consumer’s rights as they pertain to E-Sign. It is key that states establish and maintain the legal equivalence of electronic records and signatures with paper writings and manually signed signatures and ensure the removal of any barriers when it comes to any aspect of electronic commerce.

Bibliography
(n.d.). Retrieved January 20, 2012, from Chapter 12A. Uniform Electronic Transaction Act: http://delcode.delaware.gov/title6/c012a/

Consumers Union. (n.d.). Retrieved January 20, 2011, from E-Sign and UETA: What Should States Do Now: http://www.consumersunion.org/finance/e_sign.htm

Uniform Electronic Transactions Act. (n.d.). Retrieved January 20, 2012, from Wikipedia: http://en.wikipedia.org/wiki/Uniform_Electronic_Transactions_Act

White, J. J., & Summers, R. S. (2010). Uniform Commercial Code (6th Edition ed.). St. Paul, MN, 55123: West Publishing Co.