September, 2000

Electronic Signatures In Global And National Commerce Act

Executive Summary

The recently enacted Electronic Signatures in Global and National Commerce Act gives legal validity to electronic signatures and electronic contracts both within the United States as well as globally. Although various states have adopted their own laws governing electronic commerce, the Act provides a nationwide standard for the acceptance of electronic signatures, electronic contracts and electronic records.

The Act provides consumers the choice of using either electronic means or conventional signatures and contracts to seal commercial transactions. Furthermore, the Act provides several measures to protect consumers, including consent and technology provisions, requirements for storing and providing access to records, and restrictions on certain electronic documents.

Validity of Electronic Contracts and Signatures

An electronic version of a contract that is required to be in writing is sufficient if the contract contains an electronic signature, the electronic document contains the information in the contract or other record, and it is accessible to all relevant parties in a form that may be accurately reproduced at a later date by printing, electronically transmitting, or by other means. The Act defines the term "electronic signature" as "an electronic symbol, or process, attached to or logically associated with a contract or other record, and executed or adopted by a person with the intent to sign the record." "Electronic" also is broadly defined as "relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic or similar capabilities." Under the Act, an electronic contract having an electronic signature will be as binding as a paper contract with an original signature.

Consumer Consent

The Act provides special protection for consumer transactions (i.e., transactions where an individual purchases goods or services for personal, family or household use.) If a consumer protection law requires certain information be made available to a consumer in writing, the merchant may make that information available by electronic means if the consumer gives affirmative informed consent to receive that information electronically. For consumer consent to be valid, the consumer must be given the information on how to retain the electronic record and must be provided with "clear conspicuous" statements that:

• inform the consumer of any right to have the record provided in non-electronic form, the right to withdraw the consent, and any condition, consequence, or fee for withdrawing consent;
• inform the consumer whether the consent applies only to the particular transaction or to categories of records or transactions;
• describe procedures that the consumer must use to withdraw consent or change the consumer's electronic contact information; and
• inform the consumer how to request a paper copy of the record, and whether there is a paper copy.

Limitation of the Act's Coverage

The Act does not apply to:

• Wills, codicils, or testamentary trusts;
• Contracts or other records regarding family law issues such as adoption or divorce;
• Contracts or other records governed by the Uniform Commercial Code, except for § 1-107 (waiver of claims after breach), § 1-206 (statute of frauds for personal property), Article 2 (sales), Article 2A (leases);
• Official court documents such as orders, notices, pleadings, or briefs;
• Utility cancellation notices;
• Default, acceleration, repossession, or similar notices for a person's primary residence;
• Termination notices for health or life insurance;
• Product safety recall notices; or
• Documents required for the shipping or handling of hazardous materials.

State Preemption

The Act expressly preempts state laws that are inconsistent with the Act. State laws in this area enacted subsequent to the Act must make reference to the federal law. However, a state statute, regulation or other rule of law may be relied upon instead of this Act if such statute, regulation, or rule either enacts or adopts the Uniform Electronic Transactions Act (UETA), if its procedures are consistent with the Act, or if it carries legal standards for communicating through electronic means that are stricter than those contained in the Act.

Following the Act's October 1, 2000 effective date, the Act will function as a temporary measure to provide uniform rules until states have time to consider and adopt the more specific UETA. In the meantime, the Act facilitates the evolution of commercial transactions by legitimizing electronic documents and signatures, while providing meaningful protection to consumers.

Please feel free to contact us if you have any questions regarding the Electronic Signatures Act or if we can assist you in establishing corporate procedures designed to assure compliance with the Act.