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New Laws of e-Commerce: UETA

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This is a first in a series of updates for the new millennium.  There are going into debate in the legislatures of the 50 United States new laws that are designed to meet the growing challenges.

UETA In effect in California.  What is the Uniform Electronic Transactions Act?  A uniform law is not a "federal" law in the sense that it applies to the USA as a whole. Uniform laws are enacted by each of the 50 states and are supposed to be almost identical for each state enacting the basic draft of the law. 

California enacted UETA and it took effect January 1, 2000.   Basically this law allows for the transaction of e-business and specifies how signatures are recognized over the Internet.  Traditionally if a document had to be   signed to be effective it had to be pen on paper or the agreement was not enforceable.  Preferably blue ink so that the document was not a "copy" with a forged signature.

CLICK AGREEMENTS: UETA allows what has been practiced as Internet "lore."  This means that when one clicks an "I Accept" or an "OK" or "I Agree" at the place asking for the click in a document, this click is allowed to mean that three person has actually signed the agreement just as if they had penned it and sent it back to the offeror.

DEFINTIONS: But what is required to make the "e-signature" valid?  A few definitions are necessary to understand this:

"Electronic signature" means an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.

"Digital signature," for the purposes of this section, means an electronic identifier, created by a computer, that is intended by the party using it to have the same force and effect as the use of a manual signature. The use of a digital signature shall have the same force or effect as a manual signature if it embodies all of the following attributes:(1) It is unique to the person using it.(2) It is capable of verification.(3) It is under the sole control of the person using it.(4) It is linked to data in a manner that if the data is changed, the digital signature is invalidated. Therefore, subject to court interpretation of this brand new law, an e-signature needs to be connected to the transaction e-"documents" just as if on paper.  If it is not, and if the record of the transaction is not kept, the resulting agreement would not be valid and could not be proved.

"Electronic" means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

"Electronic record" means a record created, generated, sent, communicated, received, or stored electronically.

"Electronic agent" means a computer program or an electronic or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part, without review by an individual.

Now that is understood, the basics:

When does this apply?  Civil Code Sec. 1633.3. Application of title provides:" (a) Except as otherwise provided in subdivisions (b) and (c), this title applies to electronic records and electronic signatures relating to a transaction.(b) This title does not apply to transactions subject to..."  There is a long list of types of transactions that are NOT valid if electronic.  These deal mainly with notices regarding real property, vehicles health and many other transactions that if left to e-mail could end up in fraud to the consumer.  

Next, Sec1633.4. provides that the new law "applies to any electronic record or electronic signature created, generated, sent, communicated, received, or stored on or after January 1, 2000."  E-signatures alone (without paper backup) may not be valid if "signed" before this date.

Record or signature requirement; agreement to transact electronically:  Section 1633.5. provides two requirements and a non-requirement. Part (a) states that the new law, "does not require a record or signature to be created, generated, sent, communicated, received, stored, or otherwise processed or used by electronic means or in electronic form."  This means that if the record is in paper form it is as valid an e-signature as if in electronic form.

Part (b) provides the CRUX of validity: if the parties to an e-transaction "each of which has agreed to conduct the transaction by electronic means,"   then the Act applies to make it valid.  "Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct."  for example if a person is online and goes to an online business, click "I Accept" they are, from these circumstances, making an electronic agreement (contract).

NOTE that this part also provides that if there is an "an agreement to conduct a transaction by electronic means may not be contained in a standard form contract that is not an electronic record."  Though this language is a bit cryptic, it is believed to be intended to mean that if there is a standard from paper agreement, it may not validly contain an agreement to conduct business by e-means. 

Therefore, if an e-transaction is to be valid and enforceable the agreement to do business by e-means must be shown by: (1) the surrounding circumstances of the transaction, (2) by a separate agreement whether on paper or in e-format (not in a standard contract however), (3) a form contract the sole purpose of which is to approve or OK that the agreement is to be conducted by electronic means.

Then what if the person does not want to make all transaction by e-means? Section 1633.5 (c) provides, "A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. If a seller sells goods or services by both electronic and nonelectronic means and a buyer purchases the goods or services by conducting the transaction by electronic means, the buyer may refuse to conduct further transactions regarding the goods or services by electronic means." 
NOTE and CAUTION that this part also states, "This subdivision may not be varied by agreement."  Of course, if the only format of business is e-business then the person would have to stop signing and would be unable to do further business with that company.  You may not thus not tell the user that they need to agree to conduct all transactions by e-means.

If an agreement is "signed" by an e-signature it is valid IF certain requirements are met.  First is that IF there needs to be an electronic record of the signature, this can be on disk, server or eventually printed on paper.  The e-record is needed to prove that at the moment the accepting party clicked on "I Accept" he/she actually sent data to the offeror and the offeror, under the circumstances of the transaction, took the click as a signature.  From then on the parties are bound by the acceptance of the agreement just as if it were on paper.  

Requirement to provide, send, or deliver information in writing: Section  1633.8. electronic satisfaction:  (a) If parties have agreed to conduct a transaction by electronic means and a law requires a person to provide, send, or deliver information in writing to another person, that requirement is satisfied if the information is provided, sent, or delivered, as the case may be, in an electronic record capable of retention by the recipient at the time of receipt. An electronic record is not capable of retention by the recipient if the sender or its information processing system inhibits the ability of the recipient to print or store the electronic record.

"Section 1633.7. Legal effect or enforceability of electronic record, signature, or contract:  (a) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.(b) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.(c) If a law requires a record to be in writing, an electronic record satisfies the law.(d) If a law requires a signature, an electronic signature satisfies the law."