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Uniform Electronic Transactions Act: Proposed amendments to
protect consumers
I. Amendments made to UETA in the pending California UETA bill,
SB
820
1. Proposed Amendment: UETA section 2(8), modify:
Change "record" to "electronic record" so that the definition
would read:
(8) "Electronic signature" means an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record.
Source: California SB 820, section 1633.2(h)
Reason: Without the word "electronic" in the definition,
UETA would give legal recognition to an electronic signature which is
logically associated with a paper document. Part of the solemnity and
notice functions of a signature will be lost if an electronic
signature can be used to agree to a paper record. Allowing electronic
"signature" to paper records also could open new vistas for scam
artists. A scam artist might assert the existence of an electronic
signature to a paper record that lacks the consumer's actual
signature.
2. Proposed Amendment: UETA Section 3, use this text for
(b)(4):
(b)(4) This title does not apply to any specific transaction described in [here describe state laws addressing]:
Statutes requiring notice after default, including notices related to disposition, eviction, repossession, foreclosure, balloon payments, and utility shutoff;
Special regulatory statutes, including payday loans, tenant screening services, waiver of protections of the state's home solicitation act based on a signed personal statement of emergency, credit service organizations, and insurance replacement notices; and
Notices where nonresponse creates a legal obligation or conclusive presumption, or the notice has a serious and immediate effect, including insurance denials or cancellations and health care denials.
Source: California SB 820, section 1633.3(c)
Reason: Electronic notice and signature doesn't always
fully serve the notice function of written notice and signature. The
types of statutes called out are ones in which paper notice and a
real signature serve a special notice function, or where the risk of
non-delivery (perhaps due to inconsistent email delivery or a wrong
address) is not to be tolerated.
3. Proposed Amendment: UETA Section 3, add a new (b)(5):
(b)(5) A law that requires that specifically identifiable text or disclosures in a record or a portion of a record be separately signed, including initialed, from the record.
Source: California SB 820, section 1633.3(b)(5)
Reason: Separate signature and separate initialing
requirements are often used in state consumer laws to draw attention
to contractual provisions with a special impact on the customer. Each
of these requirements must be individually considered in order to
determine whether and how their statutory purposes would best be
served in the electronic world. Exempting these statutes from UETA
would be the best way to ensure that state legislatures examine these
statutes one by one to determine whether and how electronic rules
should apply to them. If they are left in UETA, some of these
statutes may be weakened by UETA's broad substitution of electronic
signatures for ordinary signatures.
4. Proposed Amendment: UETA section 3(c), modify:
Eliminate "to the extent it is governed by a law other than those specified in subsection (b)" and substitute: "when used for a transaction subject to a law other than those specified in subsection (b)."
Source: California SB 820, section 1633.3(d)
Reason: This subsection sweeps exempt electronic records
and signatures back into UETA. The uniform language is too broad
because (c) would bring back into UETA every electronic record or
signature "to the extent it is governed by" a law other than those
listed for exemption in (b). Nearly every transaction which is
governed by a law specified in (b) will also be governed by other
law, such as general contract formation law. To sweep the electronic
record or signature back into UETA "to the extent that it is governed
by" another law could cause the back-door reassertion of UETA to
seriously undermine the exemption of transactions under specific
consumer statutes.
The language of the proposed amendment is narrower. It would sweep
a record back into UETA only when the record which is otherwise
excluded is used for "a transaction subject to" a law other than
those listed for exemption.
5. Proposed Amendment: UETA section 5(b), add after the
existing text:
Except for a separate and optional agreement the primary purpose of which is to authorize a transaction to be conducted by electronic means, an agreement to conduct a transaction electronically may not be contained in a standard form contract that is not an electronic record. An agreement in such a standard form contract may not be conditioned upon an agreement to conduct transactions electronically. An agreement to conduct a transaction electronically may not be inferred solely from the fact that a party has used electronic means to pay an account or register a purchase or warranty. This subdivision may not be varied by agreement.
Source: California SB 820, section 1633.5(b)
Reason: This is the most important amendment that should be
made in UETA. It does several important things. First, it simply says
that the consumer has to be communicating with the other party
electronically before an agreement to communicate electronically in
the future can be established. This is needed to prevent a
boilerplate alleged "agreement" that future notices will be sent by
email, which might even be used with consumers who lack email
accounts, never check those accounts or infrequently check them. A
written, rather than electronic, record of the agreement is allowable
only if it is separate, optional, and its primary purpose is to
authorize future electronic communication.
This change ensures that a seller can't enter into a paper
contract, list the customer's email address somewhere on the form,
and then try to enforce a requirement in the fine print that the
customer agrees to receive all further information about that paper
contract at the listed email address.
The theory behind UETA's broad authorization to replace paper
records and notices with electronic records and notices is that it
facilitates electronic commerce when both parties want to communicate
electronically. Unfortunately, the text of the UETA would permit a
drafter of a standard form contract to try to impose this choice
unilaterally on its customers. The imposition could even occur in a
paper document. This amendment is designed to ensure that an
agreement to communicate electronically is not found from mere
boilerplate in a paper communication.
The amendment also would clarify that the conduct of communicating
electronically just to register or open an account is not enough to
create an agreement to communicate electronically. This part of the
amendment is needed because UETA permits an agreement to communicate
electronically to be inferred from conduct.
6. Proposed Amendment: UETA section 5(c), add after the first
sentence:
If a seller sells goods or services by both electronic and nonelectronic means and a buyer purchases the goods or services by conducting the transaction electronically, the buyer may refuse to conduct further transactions regarding the goods or services electronically.
The final sentence, "This subdivision may not be varied by
agreement" would remain.
Source: California SB 820, section 1633.5(c)
Reason: If email communication isn't working for the
customer, he or she should be able to opt back to paper. The
amendment would create a limited right. The right would only exist if
the seller uses both paper and electronic communications with its
customers.
7. Proposed Amendment: UETA section 11, modify:
Delete acknowledgement and verification. This would restrict the
section to electronic notarization and sworn statements. It would be
better policy to restrict it solely to electronic notarization.
As amended, the section would read:
If a law requires that a signature be notarized the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable law, is attached to a logically associated with the signature or record.
In a transaction, if a law requires that a statement be signed under penalty of perjury, the requirement is satisfied with respect to an electronic signature, if an electronic record includes, in addition to the electronic signature, all of the information as to which the declaration pertains together with a declaration under penalty of perjury by the person who submits the electronic signature that the information is true and correct.
Source: California SB 820, section 1633.11
Reason: Without this amendment, this section of UETA would
permit not only electronic notarization but also electronic
acknowledgement, verification, and sworn statements. Whether or not
electronic notarization can provide adequate protection for
consumers, the existing legal standards for acknowledgement,
verification, and making statements under oath do not require the
participation of a notary. There is no third party in those processes
to verify the identity of the person.
It is probably bad public policy to say, as UETA does, that
acknowledgement, verification and sworn statements can always be
satisfied by an electronic signature which is attached to or
logically associated with the information required by other
applicable law. The ease of impersonation in the electronic
environment makes its likely that, if permitted at all, electronic
acknowledgement, verification and sworn statements should require
additional identification requirements beyond those found in current
law for the same activities done on paper. The California amendment
leaves the problem for electronically sworn statements, but avoids
creating this problem for verifications and acknowledgements.
8. Proposed Amendment: UETA section 12(a)(1), modify:
Change "after" to "at the time"
Source: California SB 820, section 1633.12(a)
Reason: This section permits a statutory requirement to
retain a document to be satisfied by an electronic record-including
an electronic record which was created from a paper original. The
change would ensure that the electronic record satisfies the statute
only if it accurately reflects the information set forth in the
original record at the time the original record was generated.
9. Proposed Amendment: UETA section 15(a) and (b), amend:
Amend the first line of UETA section 15(a) and (b) to read:
(a) Unless the sender and the recipient agree to a different method of sending that is reasonable under the circumstances,….
and
(b) Unless the sender and the recipient agree to a different method of receiving that is reasonable under the circumstances,….
Source: California SB 820, section 1633.15a) and (b)
Reason: The broad authorization in UETA subsections 15(a)
and (b) to vary the definitions of "sent" and "received" by agreement
creates the possibility that a form contract could define something
to have been both "sent" and "received" when in fact it has only been
posted to the seller's web site and not sent in any fashion. While
there are circumstances where placing the burden on the customer to
check a web site for information about an order might be
reasonable-particularly for smaller dollar orders-there are other
circumstances where the power to redefine "sent" and "received" could
be used to abuse the customer. This addition would place a
reasonableness test on redefinitions of "sent" and "received."
10. Proposed Amendment: After UETA section 15, add a new
section:
If a law other than this title requires that a notice of the right to cancel be provided or sent, an electronic record may not substitute for a writing under that other law unless, in addition to satisfying the requirements of that other law and this title, the notice of cancellation may be returned by electronic means. This section may not be varied by agreement.
Source: California SB 820, section 1633.16
Reason: This amendment would prevent emailing a notice of
cancellation that the consumer must download, print, and return by
mail. This is needed to prevent confusion and deception. If a
consumer receives a notice of right to cancel by email, he or she
will think that the notice of cancellation can be responded to by
email.
II. Additional proposed amendments that would improve UETA
1. Proposed Amendment: UETA section 2(7), add:
Electronic record does not include a telephone call or a record of a telephone call.
Reason: The definition of an electronic record is so broad
that a tape recording of a phone call would qualify. This is not the
kind of record that should be able to fulfill a statutory requirement
for a written record.
2. Proposed Amendment: UETA section 5, add a new subsection
(f):
(f) A consumer who makes an agreement to conduct a transaction electronically with a commercial party is entitled to a copy, on request and at no charge, of a written copy of the original contract, notice, or other document communicated to the consumer electronically.
Reason: The consumer is likely to request a written copy
only if he or she can no longer access the electronic version, or if
a dispute has arisen about the contents of the material first
communicated electronically. The consumer may need a copy of the
contract to determine his or her rights and obligations, yet a
computer upgrade or other event may render the electronic copy
unavailable.
3. Proposed Amendment: UETA section 5, add a new subsection
(g):
(g) An agreement to conduct a transaction electronically is subject to a requirement of good faith and fair dealing with respect to both the inducement to agree and the implementation of the agreement.
Reason: Such a general standard may be useful in
controlling one-sided agreements, as well as in controlling deceptive
practices. An example of such a practice that could occur under UETA
is: a salesperson brings a laptop into the consumer's home and signs
the consumer up electronically for a transaction that requires the
consumer to go on-line to get the contract terms or to receive the
benefits of the transaction even though the consumer doesn't have a
computer in his or her home.
4. Proposed Amendment: UETA section 5, add a new subsection
(h):
(h) This title does not apply to a transaction entered into for personal, family or household purposes that was solicited or negotiated by any voice communication by telephone.
Reason: Defining voice telephone activities to be
electronic records and electronic signatures would have unknown
effects. Telephone conversations can lead to contracts by
conduct-there is no need to convert oral communications into
signatures and records. Coverage of voice telephone communications
may also disturb the case law on where a contract is formed,
affecting a state's consumer protection policies. This issue was
raised by the California Attorney General's office in connection with
SB 820.
5. Proposed Amendment: Delete part of UETA section 10(2):
Delete from section 10(2) "the electronic agent did not provide an
opportunity for the prevention or correction of the error," so that
the subsection would read:
(2) In an automated transaction involving an individual, the individual may avoid the effect of an electronic record that resulted from an error on the part of the individual in dealing with the electronic agent of another person if, at the time the individual learns of the error, the individual:
(a) 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;
(b) 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.
(c) has not used or received any benefit or value from the consideration, if any, received from the other person.
Reason: Under the uniform language the error correction
defense evaporates whenever a confirmation screen was provided. This
makes it fairly meaningless. If the consumer can meet all the other
conditions such as returning the items ordered, why not give the
error correction defense?
6. Proposed Amendment: Add a new UETA section 15(d)(3):
(d)(3) Notwithstanding any other provision of this title, if an individual enters into a transaction for personal, family or household purposes that is created or documented by an electronic record, the transaction shall be deemed to have been made or to have occurred at the individual's residence. This subsection is not variable by agreement.
Reason: This section is needed to ensure that the contract
formation rules of the UETA do not cause the contract to have been
formed outside the state, thus perhaps calling into question the
application of the state's consumer law. The last sentence is
important because of the general provision in UETA that any of its
provisions may be varied by agreement unless they explicitly state
otherwise.
7. Proposed Amendment: Modify UETA subsections 15(a) and
(b):
Delete from 15(a) and (b) the authorization to reduce the
standards for what constitutes "sent" and "received" in a consumer
transaction.
This would be done by adding: "in a transaction not involving a
consumer" to the "unless otherwise agreed" language and by adding at
the end of (a) and (b): "This subsection may not be varied by
agreement." Subsections 15(a) and (b) would then read:
(a) Unless the sender and the recipient agree in a transaction not
involving a consumer to a different method of sending, an electronic
record is sent when the information is properly addressed or
otherwise properly directed to the recipient and either
(1) 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
(2) Enters a region of an information processing system that is under the control of the recipient. This subsection may not be varied by agreement in a transaction involving a consumer.
and
(b) Unless the sender and the recipient agree in a transaction not involving a consumer to a different method of receipt, an electronic record is received when the electronic record 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, in a form capable of being processed by that system, and from which the recipient is able to retrieve the electronic record. This subsection may not be varied by agreement in a transaction involving a consumer.
Reason: Without this change, the "unless otherwise agreed"
language allows a web seller to define something to have been
received when it was never even sent, but only posted to the website
of the seller. The California amendments add a partial
improvement-that the redefinition of sending and receiving has to be
"reasonable under the circumstances." This is a stronger restriction
on redefining sent and received in consumer transactions.
8. Proposed Amendment: UETA section 15, add a new (h):
(h) Not withstanding any other section of this Act, a record has not been received unless it is received by the intended recipient in a manner in which it can be opened and read by that recipient.
Reason: When regular mail arrives, it can be read unless it
is written in a foreign language. Whether email can be read depends
on a host of technical factors. UETA gives the sender no incentive to
try to configure the message so that it is likely to open in a
readable form for the recipient. The message is considered sent even
if it arrives in a form in which it can't be read.
For more information:
See consumersunion.org/finance/finance.htm under the category
"electronic signatures," or contact Gail Hillebrand at 415-431-6747
or at hillga@consumer.org.
The full text of UETA can be downloaded from:
http://www.law.upenn.edu/library/ulc/ulc_frame.htm.
This address will take you to the NCCUSL Drafts of Uniform and Model
Acts Official Site page. Click on the Final Acts link, then choose
Uniform Electronic Transactions Act from the final acts index.
The full text of the California's UETA bill, SB 820, is available
at: http://www.sen.ca.gov/htbin/testbin/ca-html?GOPHER_ROOT2:[BILL.CURRENT.SB.FROM0800.SB0820]CURRVER.TXT;1/bill/SB820
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Prepared by: |
Gail Hillebrand |
