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The Electronic Signatures in Global and National Commerce Act

July 2000

As electronic commerce increases in popularity and practical utility, there is an increased need for certainty that electronic signatures, contracts and records are as legally effective as are traditional means of transacting business. Congress recognized that need and, on June 8, 2000, Conference Committee members signed off on legislation to facilitate the use of electronic records and signatures in interstate or foreign commerce. Since then, both the House of Representatives and the Senate have overwhelmingly approved the legislation, known as "The Electronic Signatures in Global and National Commerce Act" (the "Act"). On June 30, the Bill (S. 761) was signed by President Clinton; the new law becomes effective October 1, 2000.

Generally, the Act states that the validity and legal effect of an electronic signature, contract or record related to a transaction affecting interstate or foreign commerce may not be denied solely because it is in electronic form. The Act does not affect any legal rights or obligations other than a requirement that contracts be written or signed in nonelectronic form, and no party (other than governmental agencies) is obligated to agree to accept or use electronic records or signatures.

The stated policy goal of the Act is to reduce or eliminate impediments to electronic commerce. Vague by design, the Act allows for broad development by avoiding any reference to specific technologies or technological specifications for facilitating electronic transactions, and specifically prohibits such references in both federal and state legislation. The Act's definition of "electronic signature" includes any electronic symbol, sound, or process attached to a contract or record and executed or adopted by a person with the intent to sign the record, but mandates no particular method or form. The term "record" is also broadly defined to mean information inscribed on a tangible medium or stored in an electronic medium, "retrievable in perceivable form."

Consent Provisions

The Act creates a mechanism for providing various consumer disclosures electronically. The mechanism, as discussed below, requires specific consent from the consumer. Business groups argued during deliberations on the legislation that a consent process with consumers would be too burdensome to be practicable. Consumer advocates feared that a raft of consumer protection laws governing paper-based disclosures and notices would be lost, and that consumers who lack high-tech access or ability would be put at risk or greatly disadvantaged. To quell these fears, the Act contains comprehensive consumer protection provisions. In order for electronic documents to satisfy disclosure requirements relating to a transaction, the consumer must affirmatively consent to their use. Prior to consenting, the consumer must be provided with a clear and conspicuous statement of the following information:

  • The consumer's right to have the record provided or made available on paper;
  • The consumer's right to withdraw consent to have the document provided in electronic form, and of any conditions, consequences or fees that may result from withdrawal of consent;
  • Information as to the precise scope of the consent;
  • A description of the procedure the consumer must use to withdraw consent or update contact information; and
  • Information as to how, after the consent, the consumer may request and obtain paper copies of electronic documents, and whether any fee will be charged for the copies.
In addition, the consumer must be provided with a statement of the hardware and software required to access and retain the electronic documents. In the event that the hardware or software requirements change, the party providing the electronic material may be required to provide the consumer with a statement to that effect and remind the consumer of his or her right to withdraw consent. The consumer must confirm his or her consent electronically in a manner that demonstrates the consumer's ability to access information in the electronic form that will be used.

If an existing law requires that receipt of disclosure documents be verified or acknowledged by the recipient, those documents may be provided electronically only if the method used provides verification or acknowledgment. Likewise, a law requiring notarization, verification, or other acknowledgment of a signature or record can be satisfied electronically if the electronic signature of the notary or authorized person, along with any required information, is attached or associated with the subject signature or record. Use of electronic agents in the formation, creation or delivery of a record will not render it invalid as long as the action of the agent is legally attributable to the person bound by the agent's action.

Failure to obtain consent properly will not in itself provide a basis for denial of a contract's enforceability. Likewise, withdrawal of consent will not affect the validity of electronic documents provided prior to the withdrawal. In order to prevent the undue burden and unnecessary expense that business and financial services groups feared, the Act gives federal agencies the power to exempt specified electronic materials from the consent requirements where those requirements present a substantial burden to electronic commerce. However, this power may be exercised only if doing so will not increase the risk of harm to consumers.

Electronic Records Retention

The Act also allows for electronic retention of contracts or records, checks and other documents relating to a transaction. If a particular state or federal law requires retention of these records, that requirement will be met by electronic retention if two conditions are met: First, the electronic record must be an accurate reflection of the original. Second, the electronic record must remain accessible to anyone who is legally entitled to access it, and must be in a form that is capable of being reproduced by other means for later reference. Failure to meet these requirements may constitute grounds for denying the validity or enforceability of the records or contracts.


There are several enumerated categories of records and contracts that are outside the scope of the Act. Where a particular law requires that these records or contracts be in nonelectronic form, that law is unchanged by the Act. These categories include:

  • Wills, codicils, testamentary trusts, and related documents;
  • Documents related to adoption, divorce, and other matters of family law;
  • Certain provisions of the Uniform Commercial Code as adopted by the state, not including Sections 1-107 (Waiver or Renunciation of Claim or Right after Breach) and 1-206 (Statute of Frauds for Personal Property Not Otherwise Covered); and Articles 2 (Transactions in Goods) and 2A (Leases);
  • Court orders and official court documents;
  • Notices of cancellation of utility services and health or life insurance benefits;
  • Notices of default, acceleration, repossession, foreclosure or eviction, or the right to cure, under a rental agreement or credit agreements secured by a primary residence; and
  • Notice of product recall or dangerous failure.
State and Federal Law: Preemption and Exemption

In July 1999, the National Conference of Commissioners on Uniform State Laws approved the Uniform Electronic Transactions Act ("UETA"), which is intended to provide uniformity among state contract law with regard to electronic commerce. To date, approximately ten states have adopted UETA. To deal with possible conflicts, the Electronic Signatures in Global and National Commerce Act contains provisions for both exemption and preemption of state law.

State law may only modify, limit or supercede the Act's provisions if it meets certain conditions. For example, state law that constitutes enactment of UETA will remain intact, preempted only to the extent that the state has materially limited UETA's scope (such as California). States that have adopted or will adopt UETA are specifically prohibited from circumventing the Act by using a UETA provision allowing states to require that certain types of records be sent via mail or other (not necessarily electronic) means. Other state law will be exempt from preemption by the Act if it contains alternative procedures and requirements that are consistent with the Act and do not favor specific technologies or technological specifications. The Act also provides conditions under which Federal regulatory agencies may adopt regulations that interpret the Act and under which State regulations interpreting the Act can avoid preemption. These regulations must be consistent with the Act and cannot add to its requirements. Further, requirements imposed by the regulations must be substantially equivalent to requirements imposed on nonelectronic materials, and may not make the use and acceptance of electronic records unreasonably costly. As with state law, federal and state regulations may not favor specific technologies or specifications for using electronic records or signatures.

Federal and state regulatory agencies are also prohibited from reimposing any requirement that a record be in tangible or printed form. As an additional limitation, the Act mandates that the Securities Exchange Commission issue a specific regulation within 30 days of the enactment of the Act. This regulation will exempt from the Act's consent requirements any records that must be provided in order to allow information concerning a security offered by a registered investment company, or the issuer of the security, to be excluded from the Securities Act of 1933's definition of a prospectus.

Transferable Records

Electronic records that, if in writing, would be considered "notes" under the Uniform Commercial Code, which the issuer has expressly agreed are transferable records, and which relate to a loan secured by real property, are considered "transferable records" by the Act. Transferable records may be executed using an electronic signature.

A person has control of a transferable record if a system used for transfer reliably establishes that person as the person to whom the record was issued or transferred. The system will be deemed reliable and the person deemed to have control of the record if specific conditions are met. A person having control of a transferable record is the holder of the record under the Uniform Commercial Code and has the same rights as if the transferable record were in writing. The obligor on the transferable record has the same rights and defenses an equivalent obligor has under written records or documents

Effective Dates

The Electronic Signatures in Global and National Commerce Act becomes effective on October 1, 2000. The records retention provisions take effect on March 1, 2001; after that date, the specified records may be kept electronically. The provision in the Act that covers transferable records will be effective 90 days after the effective date of the Act.

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