Summer 2006-07 Electronic Transactions Act pending governor's signature

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Number 64
Summer 2006

Electronic Transactions Act pending governor's signature

Both the Puerto Rico Senate and the House of Representatives have passed Senate Bill 651, which adopts the 1999 version of the Uniform Electronic Transactions Act. At press time the approved bill was pending the governor's signature to become law.

In general

Most notably, this legislation reduces uncertainty associated with the enforceability of electronic contracts and signatures. The fundamental factor of this bill is that contracts executed electronically or online, such as through e-mail or by clicking the common I Agree "button," may not be denied legal effect or enforceability solely because they are in electronic form, or were fashioned electronically.

The bill adopts the version of the Uniform Electronic Transactions Act approved by the National Conference of Commissioners on Uniform State Laws in July, 1999, with very minor variations. Consequently, to understand the bill it is first necessary to clearly understand UETA. All of the provisions of UETA mentioned below have been adopted by the bill, except as otherwise provided.

UETA

In 1999 the NCCUSL recommended the UETA for enactment in all states. UETA was designed as model legislation to complement existing digital signature laws at the state level, while at the same time provide a clear framework for validating and effectuating electronic records and signatures in e-commerce.

Under UETA, records created, generated, sent, communicated, received or stored by electronic means can be the legal equivalent of paper documents. Furthermore, electronic signatures can be the legal equivalent of physical signatures. The use of specific technology to create a valid signature is not necessary; the signer's intent at execution is what governs.

Scope

The application of UETA has a generally broad scope, but does not apply to transactions governed by laws dealing with the creation and execution of wills, codicils, or testamentary trusts.

The scope of the Puerto Rico bill excludes a larger number of transactions from its application, among these:

transactions governed by inheritance laws,

transactions regarding family law,

documents required to be executed in connection with court proceedings,

cancellation of basic utility services,

notices of breach, acceleration, repossession, execution or eviction, or the right to cure a breach related to debts secured by the debtor's principal residence,

notice of cancellation of a medical or life insurance policy, or its benefits,

notice of recall of a product, or of material failure of a product.

Default rules

UETA is principally a set of default rules. Except where otherwise specified in UETA for certain policy considerations, the effect of any of its provisions may be varied by agreement of the parties. Here are the more significant rules to consider:

Attribution: an electronic signature is attributable to a person if it was the act of that person.

Change or error: if two parties agree to use a particular security procedure, and one party fails to conform to that procedure, the conforming party may avoid the effect of any changes or errors that occurred and could have been prevented had the other party also conformed. This section additionally provides a procedure for an individual to avoid any changes or errors resulting in an automated transaction with an electronic agent, if the electronic agent does not provide an opportunity for prevention or correction of the error.

Time and place of sending and receipt: an electronic record is sent when it enters a system outside the sender's control, and received when it enters a system designated by the recipient for the receipt of such records.

Application

In addition to the general application of UETA, the same provides several specific rules regarding its application in certain circumstances.

Notarization and acknowledgement: UETA § 11 allows satisfaction of any legal requirement for notarization, acknowledgment, verification, or oath by the use of an electronic signature, provided that the same be attached to, or logically associated with, the underlying signature or record in question. The Puerto Rico bill did not incorporate § 11.

Record retention: an electronic record will satisfy any law that requires a record to be retained, if the electronic record is accurate and remains accessible for later reference.

Admissibility in evidence: evidence of a record or signature may not be excluded from a legal proceeding solely because it is in electronic form.

Electronic agents: contracts may be fashioned through the use of "electronic agents." An electronic agent is defined as "a computer program or electronic or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part, without review or action by an individual."

Transferable records: the use of electronic negotiable instruments, referred to as "transferable records," is permitted. To create and maintain transferable records under the statute, a system must be implemented that would only allow a single (unique, identifiable and unalterable) authoritative copy of the transferable record. Any person seeking to enforce a transferable record must be in "control" of the same.

Government agencies: states have the option of adopting UETA §§ 17 to 19. These sections authorize government bodies to regulate the use of electronic signatures and records in transactions to which they are a party, and encourage them to adopt standards that promote consistency and interoperability. Puerto Rico did not adopt these sections either.

Electronic Signatures Act

The federal Electronic Signatures in Global and National Commerce Act (known as "E-Sign") became effective on October 1, 2000. E-Sign is similar to UETA in many ways, and was enacted to resolve the lack of uniformity among state laws, and ensure the enforceability of electronic signatures and contracts in interstate commerce, regardless whether individual states adopt UETA. States may opt-out by adopting the uniform version of UETA, or alternative procedures and requirements which are consistent with E-Sign.

The Puerto Rico Legislature decided to opt-out by adopting both the uniform version of UETA and the Electronic Signatures Act of Puerto Rico, which provides additional provisions consistent with E-Sign.


© 2006 Goldman Antonetti & Cordova, LLC