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Shedding light on the quiet revolution that led to the way we do business today

Tuesday, July 28 2009

What happened to signing on the dotted line?

By Ben Beard

In the Electronic Age – which rapidly became the Micro Electronic Age and then the Nano Electronic Age – revolutionary paradigm shifts have become like that parlor trick where somebody whips the tablecloth out from under the place settings, hardly rattling the silver.

From a consumer standpoint, that is about how silently and swiftly we’ve made the global move from conducting business on paper to simply doing it online. If you weren’t standing in the dining room, you probably missed the trick.

I have been afforded a dining-room view, and though businesses have led the revolution, the revolution has been sustained by The Uniform Electronic Transactions Act (UETA). The UETA served as the principal model for the federal E-Sign legislation adopted in 2000. The law is further expanding through the United Nations Convention on the Use of Electronic Communications in Electronic Contracts (2005). As the Reporter for the Uniform Law Conference Committee to Implement the United Nations E-Commerce Convention I serve as principal drafter for a Uniform Law Conference Committee preparing recommendations to Congress regarding the best method to implement the E-Commerce Convention in the United States. The purpose of each of these laws (UETA, E-Sign, and the Convention) is to eliminate barriers to legal enforcement of documents and agreements solely on the ground that they are done through electronic media.

Although UETA and E-Sign are United States law, they are based on the Model Law of Electronic Commerce promulgated by the United Nations in 1996. The Model Law has served as the basis for legislation throughout Europe, the European Union, Australia, New Zealand, Japan, Singapore and other major U.S. trading partners. The United Nations Convention provides an avenue for lesser developed countries to implement legal reforms validating electronic documents and electronic signatures in ways that are consistent with the Model Law.

The Uniform Law Conference began drafting the UETA in 1997, shortly after the Model Law was adopted by the U.N. It was fast tracked in recognition of the need for adoption of legislation that would validate business practices that employed electronic media to conduct business, notwithstanding legal risks regarding the enforceability of those transactions. Because UETA and E-Sign validate electronic transactions, businesses and consumers can conduct transactions through email and over the internet with confidence that their obligations will be enforceable.

The UETA has been adopted into law in forty seven States, the District of Columbia, Puerto Rico and the U.S. Virgin Islands (It was adopted in Idaho in 2000). The three states that have not adopted UETA have similar laws recognizing electronic records and electronic signatures. E-Sign was adopted by Congress and signed into law June 1, 2000. Together UETA and E-Sign have facilitated the way we do business by validating the use of electronic records and electronic signatures. Essentially, UETA and E-Sign give legally binding status to electronic notices, documents, and agreements and to the electronic signatures that accompany them: click “I agree” and you’ve just “signed” a binding agreement to pay for that book from Amazon, those sneakers from Zappos or that wicked cool Donald Duck lunchbox from eBay.

The UETA, E-Sign, and amendments to a number of federal and state record retention laws now allow businesses and individuals to retain many important documents in electronic format rather than physical paper. Many people continue to retain paper copies because they do not feel comfortable relying solely on electronic media. But this is changing as more and more people understand how to manage better electronic files and back-ups.

The vast majority of transactions conducted online by people in the United States will continue to be governed by the UETA and E-Sign. However, implementation of the U.N. Convention will facilitate business to business transactions where businesses are located in different countries that do not already have domestic legislation validating electronic transactions.

As time goes on, new technological developments may necessitate further legislation to address troubling aspects of business transactions aside from the efficacy of the transaction documents and communications used in the deal. However, the beauty of the UETA and E-Sign is their simplicity and breadth in validating all records and signatures accomplished through electronic media. They remove barriers to doing business based solely on the medium used. As a result, legislatures and courts can focus on other issues raised by technological developments, such as privacy, intellectual property rights, and important aspects of security, without worrying about the legal efficacy of basic agreements done electronically.

Those who are just now getting comfortable operating in Cyberspace but are still carrying baggage from the Paper Paradigm might enter into an agreement or some obligation on line and think that since “it isn’t in writing” it’s not legally binding. They would be wrong. Both the consumer and the seller are bound by the terms of the deal that appeared as part of the transaction. Neither buyers nor sellers can pull the tablecloth out from under the agreement and get away.

D. Benjamin Beard is a Professor of Law at the University of Idaho. He served as Reporter for the UETA and currently serves as Reporter for the Uniform Law Conference Committee to Implement the United Nations E-Commerce Convention. In these projects the Reporter, following the input and comments of the Committee, is the principal draftsperson of the legislation, commentary, and other documents being consider for adoption by the committee preparing the legislation.

Beard holds a B.A., Magna Cum Laude, from the University of Cincinnati and graduated first in his class from Case Western Reserve University School of Law. While there, he was inducted into the Order of Coif. He practiced commercial and corporate law for five years with the Cleveland firm of Calfee, Halter & Griswold and joined the University of Idaho faculty in 1987. His teaching and research is primarily in commercial and property law, with focus on electronic commerce issues. He is an active member of the American Bar Association and an elected member of the American Law Institute. He holds multiple awards for faculty excellence, including the Peter E. Heiser Teaching Award. He served as Associate Dean for the College from 2000-2006.

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