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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.

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