Commentary.Electronic communication

     The development and growth of electronic communication has prompted recent federal and state legislation (in addition to work at the international level) that sanctions use in many contexts of electronic communication in lieu of hard copy of a document, electronic signature in lieu of a written signature, and the action of electronic agents in lieu of the action of individuals.  This legislation trailed the development of commercial practices and trade protocols concerning the use of electronic communication in commerce.  Some of the legislation concerns the use of electronic communication in the formation of contracts and thus I introduce the legislation and attendant vocabulary here even though the legislation and vocabulary are also relevant in a variety of other contexts.  We will not study the applicable legislation in any detail, but you should attempt to gain some initial familiarity with it.  To that end, here is a brief introductory summary, with many details and exceptions omitted.        

     Congress enacted the Electronic Signatures in Global and National Commerce Act, colloquially known as "E-Sign," in 2000.  E-Sign introduces several important definitions with which you should become familiar, including definitions of electronic, record, electronic signature, and electronic record.  Note especially how "record" is broader than and inclusive of "writing."  You should become among the first generation of new lawyers to start incorporating the new vocabulary into your legal discourse.  E-Sign section 101(a) provides generally for the effectiveness of records in electronic form and the effectiveness of electronic signatures.  However, E-Sign does not dispense with the requirement of a written document or written signature in all contexts (e.g. wills, certain notices to consumers). 

     In 1999, not yet knowing whether a federal law governing electronic commerce would be enacted, the National Conference of Commissioners on Uniform State Laws (NCCUSL) promulgated the Uniform Electronic Transactions Act (UETA) and recommended its adoption in all states.  As of July 2003, 41 states, including California, have adopted that proposed legislation, although, as with the Uniform Commercial Code, some states have adopted non-uniform amendments to UETA.  UETA addresses many of the same issues addressed one year later by the federal legislation.  But the state and federal legislation are not identical and a lawyer must consider both when seeking the resolution of an issue addressed by each statute.  Moreover, as to some issues, the federal legislation (E-Sign) may pre-empt (i.e. displace) some parts of UETA.  Consideration of the pre-emption issues is beyond the scope of these materials. 

     In her article on E-Sign and UETA, Professor Jean Braucher argues that neither statute was necessary to facilitate business-to-business electronic commerce and that neither statute resolves important practical problems such as the authenticity or integrity of an electronic record.  She argues that these ostensible purposes for the statutes were simply a cover story for the principal purpose: "to eliminate legal risk for businesses as they switched from paper to electronic records for purposes of record retention, making disclosures, and giving notices[,]" including important consumer protection disclosures and notices.  She explores the risks to consumers of electronic disclosures and notices, the last minute addition to the federal legislation, but not to UETA, of some protection for consumers, and the question of whether E-Sign pre-empts UETA or other  state law with respect to those consumer protections.  Jean Braucher, Rent-Seeking and Risk-Fixing in the New Statutory Law of Electronic Commerce: Difficulties in Moving Consumer Protection Online, 2001 Wisc. L. Rev. 527 (2001).   

    Amendments to UCC Article 2, if and when adopted, add a third layer of statutory authority concerning electronic communication that the lawyer must take into account.  Section 101(a) of E-Sign applies to transactions governed by existing Article 2 (see E-Sign section 103(a)(3), which provides that section 101(a) does not apply to the Uniform Commercial Code other than . . . Article 2 . . . ).  Section 102(a)(2) of E-Sign, however, permits a state to modify, limit, or supersede section 101 of E-Sign by a statute that meets specified requirements.  Existing Article 2, drafted and adopted decades before the advent of electronic communication, does not modify, limit, or supersede section 101(a) of E-Sign.  But new section 2-108(4) of amended UCC Article 2 states the intention of UCC Article 2 to modify, limit, and supersede E-Sign, and other amendments to UCC Article 2 purport to meet the requirements specified in E-Sign for the displacement of E-Sign.  These amendments include substitution of the word "record" for "writing" throughout amended UCC Article 2 and the adoption of new language concerning contract formation in amended UCC 2-204, 2-211, 2-212, and 2-213.   In states that do not adopt amendments to UCC Article 2, E-Sign (or UETA to the extent that it pre-empts E-Sign) will apply to transactions subject to Article 2.  In states that do adopt amended UCC Article 2, E-Sign will not govern transactions subject to Article 2.