Electronic Disclosures and Contracts - Part 2 - Understanding UETA

by Mary Beth Guard, BOL Guru
Guru Bio

The Uniform Electronic Transactions Act (UETA) has been adopted in a majority of states. If a state adopts the official text of UETA, it may modify, limit or supersede the federal ESIGN law. This article describes the provisions of UETA and how it differs from ESIGN.

UETA Basics:
(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.

UETA Specifics

Applies to any electronic record or electronic signature created, generated, sent, communicated, received, or stored on or after a particular date designated in the state statute.
Is permissive - not mandatory. 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.
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.
Provides that a party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. The right granted by this subsection may not be waived by agreement.
The effect of any of its provisions may be varied by agreement.
Permits parties to agree for future electronic notices to be given only on paper;
Similar to ESIGN, but does not have the same consumer protections (the consent handshake, disclosures, etc.);
ESIGN provides much greater consumer protections than UETA;
Does not displace timing and content requirements from other laws;
Does not specify how the agreement to conduct transactions via electronic means is to be proven/documented;
Whether there is an agreement or not is determined from the context and circumstances;
Allows a tape recording of a voice conversation (such as a person might have with a telemarketer) to qualify as an electronic record that can replace a notice required by law to be in writing. [As to consumer consent forms, ESIGN expressly prohibits this type of oral communication from being substituted for a writing.]
Does not have the same exceptions for insurance benefit terminations, etc. that ESIGN has, but does include certain other exceptions.
Does not require a showing that the consumer can access the notices/disclosures in the electronic form provided;
Does not impose specific hardware and software requirements for the consumer;
Does not fully address the inherent differences that may exist between paper documents and electronic records;

What UETA says about its interplay with other laws:
Provision of Information in Writing; Presentation of Records

(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, the 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.

(b) If a law other than this chapter requires a record (i) to be posted or displayed in a certain manner, (ii) to be sent, communicated, or transmitted by a specified method, or (iii) to contain information that is formatted in a certain manner, the following rules apply:

(1) the record must be posted or displayed in the manner specified in the other law;

(2) except as otherwise provided in Subsection (d)(2), the record must be sent, communicated, or transmitted by the method specified in the other law; and

(3) the record must contain the information formatted in the manner specified in the other law.

(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.

(d) The requirements of this section may not be varied by agreement, but:

(1) to the extent a law other than this chapter requires information to be provided, sent, or delivered in writing but permits that requirement to be varied by agreement, the requirement under Subsection (a) that the information be in the form of an electronic record capable of retention may also be varied by agreement; and

(2) a requirement under a law other than this chapter to send, communicate, or transmit a record by first >
Attribution and Effect of Electronic Signature Under UETA:

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.
The effect of an electronic record or electronic signature attributed to a person under this part 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.

Effect of Change or Error
If a change or error in an electronic record occurs in a transmission between parties to a transaction, here are the rules that apply. [NOTE: These may not be varied by agreement of the parties!]

If the parties have agreed to use a security procedure to detect changes or errors and one party has conformed to the procedure, but the other party has not, and the nonconforming party would have detected the change or error had that party also conformed, the conforming party may avoid the effect of the changed or erroneous electronic record.
In an automated transaction involving an individual, the individual may avoid the effect of an electronic record that resulted from an error made by the individual in dealing with the electronic agent of another person if the electronic agent did not provide an opportunity for the prevention or correction of the error and, at the time the individual learns of the error, the individual:

promptly notifies the other person of the error and that the individual did not intend to be bound by the electronic record received by the other person;
takes reasonable steps, including steps that conform to the other person's reasonable instructions, to return to the other person or, if instructed by the other person, to destroy the consideration received, if any, as a result of the erroneous electronic record; and
has not used or received any benefit or value from the consideration, if any, received from the other person.

Record Retention for Electronic Records

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:

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
remains accessible for later reference.

A requirement to retain a record in accordance with the part described above does not apply to any information the sole purpose of which is to enable the record to be sent, communicated, or received.

The requirement can be met by using the services of another person [to retain the record] if the requirements described above are satisfied.

If a law requires a record to be presented or retained in its original form, or provides consequences if the record is not presented or retained in its original form, that law is satisfied by an electronic record retained in accordance with the provisions described above.

If a law requires retention of a check, that requirement is satisfied by retention of an electronic record of the information on the front and back of the check in accordance with the standards described above.

A record retained as an electronic record in accordance with these provisions satisfies a law requiring a person to retain a record for evidentiary, audit, or like purposes, unless a law enacted after the state adopts UETA, specifically prohibits the use of an electronic record for the specified purpose.

A governmental agency may specify additional requirements for the retention of records subject to that agency's jurisdiction.

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

Miscellaneous Provisions
Automated Transaction
In an automated transaction, here are the rules that apply:

A 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.
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.
The terms of the contract are determined by the substantive law applicable to it.

Time and Place of Sending and Receipt
Unless otherwise agreed between the sender and the recipient, an electronic record is sent when it:

is addressed properly or otherwise directed properly to an information processing system that the recipient has designated or uses for the purpose of receiving electronic records or information of the type sent and from which the recipient is able to retrieve the electronic record;
is in a form capable of being processed by that system; and
enters an information processing system outside the control of the sender or of a person that sent the electronic record on behalf of the sender or enters a region of the information processing system designated or used by the recipient which is under the control of the recipient.

Unless otherwise agreed between the sender and the recipient, an electronic record is received when:

it enters an information processing system that the recipient has designated or uses for the purpose of receiving electronic records or information of the type sent and from which the recipient is able to retrieve the electronic record; and
it is in a form capable of being processed by that system.

Unless otherwise expressly provided in the electronic record or agreed between the sender and the recipient, an electronic record is deemed to be sent from the sender's place of business and to be received at the recipient's place of business. For purposes of this subsection, the following rules apply:

if the sender or the recipient has more than one place of business, the place of business of that person is the place having the closest relationship to the underlying transaction; and
if the sender or the recipient does not have a place of business, the place of business is the sender's or the recipient's residence, as the case may be.

Receipt of an electronic acknowledgment from an information processing system establishes that a record was received but, by itself, does not establish that the content sent corresponds to the content received.

If a person is aware that an electronic record purportedly sent or purportedly received was not actually sent or received, the legal effect of the sending or receipt is determined by other applicable law.

Contrast electronic transactions vs. paper transactions

Differences in safeguards
Challenges: security, guarding against errors, receipt issues, technology failures

Full text of ESIGN can be accessed online at: http://www.bankersonline.com/compliance/esignact.pdf

The full text of the model version of UETA, along with the Official Comments, can be accessed online at: http://www.law.upenn.edu/bll/ulc/fnact99/1990s/ueta99.htm

First published on BankersOnline.com 9/23/02