Preceded by months of negotiation between the President and Congress, the final version of S.761 The Electronic Signatures in Global and National Commerce Act, was signed into law by the President on June 30, 2000, and will become effective on October 30, 2000. This federal law seeks to eliminate what many claim as the most significant vulnerability of electronic commerce: That the electronic communicate renders the transaction unenforceable as between the parties. Generally stated, the Act recognizes electronic signatures, verifications, acknowledgments, notarizations, and records as legal equivalents to written paper forms for all but a few purposes.
Electronic commerce has obviously been alive and well without the passage of this bill as evidenced by the protections and agreements contained in credit card contracts. The Act, however, paves the way for expanded use of electronic commerce beyond the retail transactions. The Act allows insurance companies, banks and others to enforce contracts entered into online, or though electronic means. The act also removes barriers that required the use of paper documents, which will eventually create a paperless transaction and perhaps in the future, the electronic recordation of an electronic real estate document in North Carolina.
The Act applies only to transactions in or affecting interstate commerce.i Transactions are defined to include dispositions of real property, personal property and services but not limited to these.ii A transaction affecting interstate commerce is not defined by the Act, but one would be safe to assume that most or many acts affect interstate commerce. This broad inclusion, however, does not mean that state laws are necessarily preempted.
The Act provides that State law " . . . may modify, limit, or supersede the provisions of section 101 with respect to state law only if such statute . . ." adopted by the state is an enactment of the Uniform Electronic Transactions Act (UETA).iii This state law, however, may not limit the scope of UETA inconsistently with the Act, or circumvent the Act through the imposition of non-electronic delivery methods of disclosures, documents and other items permitted under the Act.iv (The UETA is a uniform act similar in scope to the Federal Act, but designed to be adopted by the states.)
The Act specifically excepts preemption of probate law, family law, and parts of the Uniform Commercial Code.v Moreover, the Act will not apply to court orders and notices, or official court documents.vi State rules regarding regulation of records are not affected,vii thus keeping our recording requirements in place, while at the same time opening the door for change.
The Act does not require anyone other than the government to use or accept electronic signatures or records without their agreement.viii Moreover, the person or the consumer must affirmatively consent to the use of electronic records or signatures and have not withdrawn that consent.ix The Act also seeks to insure that the consumer is aware of the hardware and software requirements necessary to receive electronic records, requires confirmation of this fact, and requires that the consumer be informed when the requirements change, and after a change, reconfirm the consumer's consent.x This should prevent those uninformed or unequipped individuals from receiving undeliverable notices of termination, default and the like, which affect their rights and duties under contracts.
One important affect of the act will be the validity of paperless records. The Act allows a paperless electronic record; if the electronic record accurately reflects the information in the document and the electronic document remains accessible to persons entitled to it and can also be reproduced accurately.xi
The Electronic Signatures in Global Commerce Act does not mandate e-commerce, but it does serve as an enabling act, which opens interstate commerce to electronic transactions. The various states are now positioned to move in the same direction with respect to intrastate matters and they certainly will, albeit at their own pace. It does not take much imagination to predict that we are now well down the road to a paperless real estate closing.
William A. Foley III is a title attorney for Investors Title Insurance Company. He can be reached at firstname.lastname@example.org or 800-326-4842.
iSenate Bill 761, 106th Congress, 2nd Sess. (2000) § 101(a).
iiAct, § 106 (13).
iiiAct, § 102(a)(1)
ivAct, § 102(c)
vAct, § 103(a)
viAct, § 103 (b)
viiAct, § 104 (aa)
viiiAct, § 101(b)(2).
ixAct, § 101(c )(1)(A)
xAct, § 101(c)(1)
xiAct, § 101(d)(1)