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The Uniform Electronic Transactions Act (UETA)

The Uniform Electronic Transactions Act (UETA)

The Uniform Electronic Transactions Act (UETA) was proposed by the National Conference of Commissioners on Uniform State Laws (NCCUSL) and since then 48 States and provinces have adopted it into their own laws. It supports the validity of electronic contracts as a viable medium of agreement and gives electronic records and signatures a legally binding status. The National Conference of Commissioners on Uniform State Laws has worked for the uniformity of state laws since 1892. It is a non-profit unincorporated association, comprised of state commissions on uniform laws from each state, the District of Columbia, the Commonwealth of Puerto Rico, and the U.S. Virgin Islands. A list of states that have accepted UETA can be found at The National Conference of State Legislatures and at the NCCUSL website. While four states have not adopted UETA, they do have laws recognizing electronic signatures GEORGIA ILLINOIS NEW YORK and WASHINGTON

In the paragraphs below, all words in italics are direct quotes from UETA.

The definitions are given in Section 2 namely:

(7) "Electronic record" means a record created, generated, sent, communicated, received, or stored by electronic means.

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

Another important aspect of this definition lies in the necessity that the electronic signature be linked or logically associated with the record. In the paper world, it is assumed that the symbol adopted by a party is attached to or located somewhere in the same paper that is intended to be authenticated, e.g., an allonge firmly attached to a promissory note, or the classic signature at the end of a long contract. These tangible manifestations do not exist in the electronic environment, and accordingly, this definition expressly provides that the symbol must in some way be linked to, or connected with, the electronic record being signed. This linkage is consistent with the regulations promulgated by the Food and Drug Administration. 21 CFR Part 11 (March 20, 1997).

Section 3 gives the scope of the Act

The Scope of this Act is inherently limited by the fact that it only applies to transactions related to business, commercial (including consumer) and governmental matters. Consequently, transactions with no relation to business, commercial or governmental transactions would not be subject to this Act. Unilaterally generated electronic records and signatures which are not part of a transaction also are not covered by this Act.

Section 4 states that the Act "...applies to any electronic record or electronic signature created, generated, sent, communicated, received, or stored"

Section 5(a) states that transactions are not required to be in electronic form and 5(b) states:

(b) This [Act] applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct.

UETA further comments "This section makes clear that this Act is intended to facilitate the use of electronic means, but does not require the use of electronic records and signatures."

Section 6 - The application and intended purpose of the Act is listed. Namely "to facilitate and promote commerce and governmental transactions by validating and authorizing the use of electronic records and electronic signatures;"

Section 7 gives legal recognition to electronic signatures, records and contracts

(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.

This section sets forth the fundamental premise of this Act: namely, that the medium in which a record, signature, or contract is created, presented or retained does not affect it's legal significance. Subsections (a) and (b) are designed to eliminate the single element of medium as a reason to deny effect or enforceability to a record, signature, or contract. The fact that the information is set forth in an electronic, as opposed to paper, record is irrelevant.

Section 8 provides that the information be available to all parties.

(a) ...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.
(c) If a sender inhibits the ability of a recipient to store or print an electronic record, the electronic record is not enforceable against the recipient.

Section 9 discusses the attribution and effect of electronic record and electronic signatures

(a) An electronic record or electronic signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.

(b) The effect of an electronic record or electronic signature attributed to a person under subsection (a) is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including the parties' agreement, if any, and otherwise as provided by law.

These are definitions of authentication and identification in direct connection to later repudiation of the signatory. These two concepts go hand in hand. The stronger your authentication methods are, the less risk you have regarding non-repudiation. It is best to authenticate the user yourself. After all it is your client or business partner you are signing the file with and you know if Steve is Steve, or if he is really someone else.

Misrepresentation is not exclusive to the electronic world, as a person could walk into your office and sign a document, claiming to be someone they are not. This requires businesses to establish authentication based on things they know. A business is really seeking a way to make the signature capturing process an extension of their current business process.

By issuing the appropriate licenses directly to your client, as opposed to using third party vendor verification, you are strengthening your case against repudiation. One assumes you know your client or business partner and therefore your authentication of their identity through a recognized email address, phone number and IP address is inherently more compelling than a third party vendor verification that you have never seen. This process will save you time and money over other options on the market when it is time to prove who signed what.

Section 10 defines the conditions if a change or error in an electronic record occurs in a transmission between parties to a transaction.

Draft Comments - This section is limited to changes and errors occurring in transmissions between parties - whether person-person (paragraph 1) or in an automated transaction involving an individual and a machine (paragraphs 1 and 2). The section focuses on the effect of changes and errors occurring when records are exchanged between parties. In cases where changes and errors occur in contexts other than transmission, the law of mistake is expressly made applicable to resolve the conflict.

File Integrity Hashes, like MD5, used on both the record can be used by all parties to the electronic record to verify that no changes or errors have occurred.

Section 11 This Section permits a notary public and other authorized officers to act electronically, effectively removing the stamp/seal requirements.

Section 12 states that the requirement of "retention of records" is satisfied by retaining an electronic record

(a) If a law requires that a record be retained, the requirement is satisfied by retaining an electronic record of the information in the record which:

(1) accurately reflects the information set forth in the record after it was first generated in its final form as an electronic record or otherwise; and
(2) remains accessible for later reference.

(c) A person may satisfy subsection (a) by using the services of another person if the requirements of that subsection are satisfied.

Section 13 In a proceeding, evidence of a record or signature may not be excluded solely because it is in electronic form.

Documents signed electronically would not be excluded as evidence soley due to their electronic form.

Section 14 discusses automated transactions.

(1) discussed situations where "...contract may be formed by the interaction of electronic agents of the parties, even if no individual was aware of or reviewed the electronic agents' actions or the resulting terms and agreements."

(2) applies to a contract that "may be formed by the interaction of an electronic agent and an individual".

(2) A contract may be formed by the interaction of an electronic agent and an individual, acting on the individual's own behalf or for another person, including by an interaction in which the individual performs actions that the individual is free to refuse to perform and which the individual knows or has reason to know will cause the electronic agent to complete the transaction or performance.

Comments - By clicking "I agree" A adopted a process with the intent to "sign," i.e., bind herself to a legal obligation, the resulting record of the transaction. If a "signed writing" were required under otherwise applicable law, this transaction would be enforceable.

Documents signed through an electronic signature system are legal contracts as stated in 14(2).

Section 15 defines the "Time and Place" aspects of electronic transmissions.

Comment 1. This section provides default rules regarding when and from where an electronic record is sent and when and where an electronic record is received. This section does not address the efficacy of the record that is sent or received. That is, whether a record is unintelligible or unusable by a recipient is a separate issue from whether that record was sent or received. The effectiveness of an illegible record, whether it binds any party, are questions left to other law.

By capturing the exact time the file was signed and the IP address of the parties involved, a company can be compliant with Section 15.

Section 16 outlines transferable records

(c) A system satisfies subsection (b), and a person is deemed to have control of a transferable record, if the transferable record is created, stored, and assigned in such a manner that:
(1) a single authoritative copy of the transferable record exists which is unique, identifiable, and, except as otherwise provided in paragraphs (4), (5), and (6), unalterable;

If a person establishes control, Section 16(d) provides that that person is the "holder" of the transferable record which is equivalent to a holder of an analogous paper negotiable instrument. More importantly, if the person acquired control in a manner which would make it a holder in due course of an equivalent paper record, the person acquires the rights of a HIDC.

File Integrity Hashes can be used to give the record a unique and identifiable mathematical hash. This allows the unique record to be transferred as defined by sec 16.

Section 17-19 have been bracketed as optional provisions to be considered for adoption by each State. Among the barriers to electronic commerce are barriers which exist in the use of electronic media by State governmental agencies - whether among themselves or in external dealing with the private sector.

Section 17 authorizes state agencies to use electronic records and electronic signatures generally for intra-governmental purposes, and to convert written records and manual signatures to electronic records and electronic signatures. By its terms the section gives enacting legislatures the option to leave the decision to use electronic records or convert written records and signatures to the governmental agency or assign that duty to a designated state officer. It also authorizes the destruction of written records after conversion to electronic form.

Section 18 broadly authorizes state agencies to send and receive electronic records and signatures in dealing with non-governmental persons. Again, the provision is permissive and not obligatory (see subsection (c)). However, it does provide specifically that with respect to electronic records used for evidentiary purposes, Section 12 will apply unless a particular agency expressly opts out.

Section 19 is the most important section of the three. It requires governmental agencies or state officers to take account of consistency in applications and interoperability to the extent practicable when promulgating standards. This section is critical in addressing the concern that inconsistent applications may promote barriers greater than currently exist. Without such direction the myriad systems that could develop independently would be new barriers to electronic commerce, not a removal of barriers. The key to interoperability is flexibility and adaptability. The requirement of a single system may be as big a barrier as the proliferation of many disparate systems.