ESIGN & UETA - A Closer Look

The following comments are excerpts from a presentation made by R. David Whitaker, Esq.

There has been some confusion regarding the difference and interaction between the Federal ESIGN Act (Electronic Signatures in Global and National Commerce Act) and UETA (Uniform Electronic Transactions Act) as adopted by many states. Mr. Whitaker notes some of the consistencies and conflicts in addition to commenting on the Federal preemption issue.

The Federal ESIGN Act

Like the UETA?

• Adopts UETA definitions of
• Electronic
• Electronic Agent (non-material language variation)
• Electronic Record
• Electronic Signature (non-material language variation)
• Information
• Person
• Record
• Transaction (with additional language)
• Adopts (in restated form) the three pillars of the UETA
• Adopts "Opt-in" rule
• Adopts preservation of formatting requirements
• Adopts record & check retention rules (with added specificity)
• Adopts the rule permitting electronic originals
• Adopts the special retention and accessibility rules for records required for later reference (in modified form)
• Adopts the rules on notarization
• Adopts the rules for electronic agents (in modified form)
• Adopts the exceptions for
• Wills, codicils and testamentary trusts
• Articles 3 through 9 of the UCC
• Grants regulators authority to determine when and if government documents will be filed electronically, and to specify formats and other requirements
• Grants regulators authority to establish record retention requirements for records required to be available for government inspection, review or audit

Makes explicit (implicit in UETA)?

• Preservation of substantive legal rights and obligations
• Preservation of content and timing of consumer disclosures
• Preservation of any rule concerning the proximity or physical location of any warning, notice or disclosure
• Application to insurance laws
• Authority of regulators to establish interpretive rules within substantive jurisdiction

The Federal ESIGN Act

• Unlike the UETA?
• Excludes recordings of oral communications from definition of electronic record for purposes of consumer notices and disclosures
• Adds additional exclusions and exemptions from the statute
• Legal rules governing adoption, divorce, and other matters of family law
• Court documents requiring execution in connection with court proceedings
• Notice of utility termination, default or foreclosure under mortgage or lease, termination of health or life insurance, and product recalls and safety notices
• Notices that accompany transportation or handling of hazardous materials, pesticides, and other toxic materials
• Expressly limits regulatory authority to impede or obstruct effective use of the statute
• Limits Transferable Records to promissory notes secured by an interest in real property
• No variation by agreement
• Omits default rules for
• Establishing when electronic record is sent or received
• Liability for transmission errors
• Evidence rule

Federal Preemption - a closer look

• Statute's application is "limited" to commercial (including consumer) and business transactions in or affecting interstate or foreign commerce
• Limitation is based on breadth of Interstate Commerce Clause in Constitution
• Any interstate nexus should be sufficient
• Use of interstate communications (telephone, internet, cellular phone systems)
• Involvement of federally insured or regulated institution
• Use of products created, sold, leased or licensed by out-of-state vendors

State may supercede requirements of ESIGN with

• Adoption of the Official Text of the UETA (before or after ESIGN enactment)
• Adoption of another statute, or any regulation (under UETA, ESIGN or otherwise), that is
• Consistent with ESIGN Act Titles I and II
• Does not favor a specific technology (except for rules governing procurement)
• If enacted after ESIGN, make specific reference to ESIGN Act

Four potential interpretations of exception for states enacting UETA

• Official Text or nothing - any non-uniform amendments invalidate entire statute
• Official Text survives - any non-uniform amendment is invalid
• Official Text survives if consistent - Entire statute must be evaluated for consistency with ESIGN
• Official text plus consistent provisions - Provisions from UETA Official Text survive, plus non-uniform amendments okay if consistent with ESIGN

• State can establish rules governing filing of records without regard to ESIGN
• ESIGN Consumer consent requirements and retention and access rules only apply to transactions if underlying statute or rule of law requires a writing

Example of State Law -- The Kentucky UETA

• Excludes from the UETA any "law governing the conveyance of any interest in real property"
• Defaults to ESIGN
• Nothing in ESIGN prevents state from adopting statute with consistent rules, but narrower scope than ESIGN
• But?that means that ESIGN covers all transactions in interstate commerce excluded from state law
• Excludes any "law governing the creation or transfer of any negotiable instrument or any instrument establishing title or an interest in title."
• Doesn't impact transferable record provisions in UETA
• Kentucky preserves permissive UETA consumer consent rules

Other State Law Examples

• North Carolina addition of non-uniform ESIGN Consent to the UETA
• New York non-uniform statute with restrictive definition of signature
• West Virginia requirement of notice to obligor before obligation to new transferee on electronic note becomes enforceable

? Goodwin Procter 2001

Mr. Whitaker is of counsel in the Washington D.C. office of GoodwinProcter LLP and is a member of its Financial Services Practice. He specializes in electronic commerce issues and financial services law and has extensiveexperience with practical application of laws governing electronic banking, letters of credit, payment systems and commercial and consumer financing.

First published on BankersOnline.com 2/25/02