Mar 26, 2018 in Case Studies

Introduction

The Uniform Electronic Transactions Act constitutes of concisely twenty one sections. The Act is intentioned to be a procedural act that provides a legal framework that provides a means for electronic transactions. The Act compliments the legal gap that exists due to the conversion of paper records and transactions by most entities into electronic media. The intention of the Act is, however, not to lead to establishment of new substantive rules.

The Act establishes the recognition of legal signatures and records through the electronic means. It, thus, provides a breakthrough from the manual paper work to the electronic record. The Act provides recognition in regard to the electronic records. The Act also provides for the doctrine of attribution which binds the actions of an individual to the electronic signature and record of the individual transaction. This provides the security to the contracting parties in case of denial by one party.

In regard to the retention of records, the Act provides that electronic records are valid and can be used as an original document for validation of future reference. Electronic records are original documents and the law identifies them as such. Control is an essential aspect in regard to the transferable records. In the case of transferable records, the person having control is regarded as the holder and hence no aspect of possession is required for electronic records.

The various sections of the Act discuss the various issues and doctrines in regard to the use of electronic records and signatures. The paper outlines in concise form the issues arising in the use of electronic records and signatures under UETA.

Uniform Electronic Transactions Act

The advent of information transfer and communication through electronic means, businesses have evolved models to undertake their operations. Businesses take advantage of electronic and have developed models as well as methods of doing businesses inorder to take advantage of the electronic advancement. This is because of the benefits accrued to the use of electronic technologies that include speed, cost benefits, and efficiency. These developments have come to existence in the face of legal barriers that exist in regard to legal efficacy in respect of documents and records existing in electronic media. Transactions result in the emergence of agreements which at times may result to fraud. Any emergence of fraud will result in faulty enforcement of any agreement. There is, thus, the legal requirement that agreements and information should be contained. These legal requirements raise barriers in regard to effective application of electronic media. The establishment of the Uniform Electronic Transactions Act (UETA) removes these barriers with the legal requirements and rules remaining intact. This paper seeks to analyze the Uniform Electronic Transactions Act.

The Uniform Electronic Transactions Act was promulgated in 1999. This is seen as the initial effort to comprehensively prepare state law in regard to the era of electronic commerce. Many states across the world have adopted legislation regarding electronic commerce such as the use of digital signatures. However, Uniform Electronic Transactions Act indicates the first national engagement in providing national rules that govern electronic commerce transactions that should apply in all states. The rules under UETA are basically meant for electronic signatures and electronic records although in some other instances it may be applied in other forms of electronic commerce. UETA applies ion transactions where every party has agreed to conduct those transactions electronically. In this regard, agreement is an important inclusion in this legislation since nobody should be forced to conduct any form of electronic transactions. Parties agreeing to conduct their transactions electronically fall under UETA and its not a mandatory engagement since the parties may opt out of these regulations. Parties under engagement agree on the terms of engagement and this may vary or disclaim some of the provisions under UETA. Parties engaging in electronic transactions do not have to follow all the provisions under UETA. The rules under UETA, therefore, act as default rules since they apply where the terms of the agreement do not govern the electronic transactions (National Conference of Commissioners on Uniform State Laws, 1999).

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Electronic commerce implies people are engaging each other to do business through the electronic media. The internet is, thus, an important platform where this kind of business is undertaken. The way business grow is to a greater extent influenced by the development in media. The internet is, thus, the market place for these kind of transactions. The developments in this marketplace are unpredictable and hence not easy to predict how the law should be developed to serve this marketplace or any other market place that may emerge in the future. Electronic transactions are undertaken through communication of digitized information from an individual to another. This information can be passed and stored without the use of paper since the language of electronic transactions is basically paperless. Relying on paper work for electronic records and signatures may be an impediment to the success of electronic transactions. Laws are, therefore, essential in establishing an environment that is coherent to the emerging world of electronic use.

The Basic Purpose and Objective of UETA

UETA is not in any way attempting to create a system of new legal rules in regard to the marketplace that has become electronic. The basic purpose and objective of UETA is to ensure that the transactions in the electronic marketplace are efficient as is the case with the situation in paper work. The rule makes sure that transactions are enforceable just like manual signatures and paper transactions are enforceable. This is achievable without affecting the existing transaction rules. UETA serves to ensure that the manual signatures and the electronic signatures serve the same basic rule and will be awarded the same legal effect. This is evident in the basic rule found under section 7 of the UETA rule. This rule portends that a signature or record is not supposed to be denied legal enforceability or effect basically because it is in the form of electronic. The second basic fundamental rule implies that a contract cannot be denied legal basically because its formation involved the use of electronic record. The third law that is fundamental under UETA requires that any law that is necessitated through writing will be effected by the use of electronic record. The fourth most fundamental basic rule portends that any requirement of signature in the law should be met in the presence of electronic signature (McKay, Nimmer, & Towle, 2000).

Electronic transactions involve undertaking of transactions through the use of electronic media and the information is passed through strangers in most of the cases. This makes electronic transactions faceless transactions effected by strangers. This poses risks and fear regarding the attribution of signatures by strangers. The validity of a signature by unknown person may not be fully trusted as there are chances that the signature may be faulty. To eliminate this fear and make electronic transactions trustworthy between the strangers. UETA has developed another rule supporting the validity of electronic records and signatures in carrying out transactions. This rule of attribution is found in section 9 of UETA. The rule states that a signature may be attributed to a person if the act is attributable to that person. This implies that, if a person engages in a transaction online and appends his signature he is legally bound by that transaction. The person cannot deny that the signature is not his since the transaction is attributable to him. In the environment of electronic transactions that is faceless, the difficulties in attribution and identification should be overcome. Section 9 provides the guidelines to this provision. Several criteria may be used to show the action of a person. This may be proved by showing the security procedure applied in undertaking a transaction. This will help in determining the identity of an individual to which the action is attributable. This modest rule is not concerned with the issue of intent but whether the actions of an individual are casually connected to the transmission or creation of an electronic signature or record. This explains the legal significance and consequence of an electronic signature and record. The validity as well as the effect of an electronic signature or record is based on the agreement between the parties if there existed any. This law does not apply in exclusion as it considers other substantive laws applicable within the context under which the electronic signature and record arose.

The digital signature is a method of encryption that uses specific technology. This technology is highly useful especially in the electronic marketplace environment that is faceless. Internet technology is widely used in carrying out these transactions. UETA facilitates the use of digital signatures as well as other security measures but it cannot be characterized as a digital statute. This is well evident in the provisions under section 9. Section 10 of the UETA rules provides rules in regard to changes in messages and errors. The law favors the party that conform to the procedures on security in the event of a dispute arising regarding the message content. The is no provision in UETA that requires the application of digital signatures or other security procedures. Individuals have the freedom to use the most recent digital signature technology or security procedures that are less sophisticated such as the use of pin numbers and passwords. What the parties to a contract use of assuring message integrity or for attribution may be applied in the event of dispute arising. The provision under UETA are procedural and not substantive. The law does not require that individuals use electronic transactions or use electronic signatures and records. The law has not also hindered the use of manual signatures and records. Basic rules of law continue to apply as they have been (Adams, Orlando, Sullivan, & Connecticut, 2010).

The Drafting of UETA

An important aspect concerning the drafting of UETA was pegged on the issue of error and changes in the electronic records. This arises during the process of transmitting records between the parties. Transactions may occur in automated media or in instances where the parties to a transaction adopt certain security procedures. These two situations require special rules to enhance their operations. In the event that the parties have agreed on the use of security procedures and only one party has conformed, the nonconforming party may have detected the error or change in case the party conformed. In this situation, the effect of error or change is avoidable by the party that has conformed. In the case of automated transaction, a person may avoid the consequence of an error in an electronic record made in dealing with an electronic agent of another individual if the agent never provided a chance for correction or prevention of error. The general law of error and mistake will apply. The individual should notify the other person on identifying the commission of error that it did not bound to affect the transaction.

The drafting of UETA took into consideration the viability of notarization as one of the legal requirements. There were some forces calling for abolishment of this provision by the committee on UETA chose to go this way. However, UETA provides that in case the signature requires to be notarized, that requirement can be made for an electronic signature if it includes all the notarization information required. This enables the notary public to perform electronically.

The concern in the formulation of UETA regards the issue of record retention. In the electronic context, UETA requires that if any law requires retention of records, then that requirement can be met by the retention of electronic record. This record contains information that accurately shows the information contained in the record that was initially formulated. The information retained should be accurate and should be accessible for use as reference in later stages. The assumption under UETA is that parties to an agreement may want to  convert manual writings into electronic records for the purposes of retention. UETA provides a provision in regard to this contingency. Upon conversion to electronic records, the written records may be destroyed. Third parties may be used in the retention of records which may be seen as a reasonable business decision. In this regard, UETA provides for this inclusion in its laws. Since the law anticipates the massive transition and transformation of paper records to electronic form, the law portends that if a document requires to be retained in its original form, then the electronic record is regarded as an original document. This meets the requirement for retention by UETA. The law validates electronic records to be originals in case the law requires that the originals be retained (National Conference of Commissioners on Uniform State Laws, Adams, & Brown, 1998).

In consistent with its policy regarding medium neutrality UETA provides that records retained as electronic records satisfies the law requiring persons should retain records for audit, evidentiality and other purposes unless any law enacted afterwards hinders electronic records to be used for a specific purpose. In this aspect, if any state law requires that certain documents should be kept in non electronic means, then specification should be made on those areas. If this specification is not made, UETA abolishes the requirement for document retention in non-electronic form. In consistence with medium neutrality policy, UETA provides that in any legal proceedings records kept in electronic form should not be abolished or dismissed as evidence for original records or signatures. The record should not also be discarded as original documents in their original form.

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There are specialized rules that govern the formation of contracts by automated transactions. The transactions may be undertaken through the interaction by electronic agents of given parties even there is no awareness of the actions or the agreements of the electronic agents. An individual who is the principal can also contract with an electronic agent. The Act provides that contracts may be formed by machines. This arises from the application and programming of the machine.

Determination of time and place in regard to receiving and sending of electronic records requires special rules. UETA provides default presumptions in regard to these issues. The rule, however, provides what constitutes receiving and sending of information and the Act gives space for other laws to determine the significance of receiving and sending the records.

The appropriateness and need for the transferable records doctrine is an aspect that has much significance under UETA. The proponent of transferable records argues that electronic documents and instruments allow for efficient transfer and access of records. This system also allows for easier storage of information. The opponents of transferable records argue that the doctrine creates infringement of the clear existing law of negotiable instruments. They also argue that the concept development will create substantive rights beyond UETA mandate and that it lacks a basis of control that is sufficient. This denies a clear distinguishment of the party with the rights in regard to the transferable records.

Control and Possession in Transferable Records

Control is an essential aspect of transferable records and unless otherwise stated the person having control over the transferable records is regarded as the holder. Possession is an important aspect in transferable records as is in the case of negotiable instruments. However, in electronic records possession is a meaningless term. In this regard, UETA creates the holder’s rights in the party that exercises control over the transferable records just in the same case the holder of a negotiable instrument. The requirement of delivery, endorsement and possession are not essential in the transferable records regarding electronic records. UETA does not outline technological standards required for the preservation and creation of transferable records. The parties to the contract have the mandate to develop the standards and computer records technology. UETA provides only the means required if the parties are to develop such standards. Thus, the Act offers minimum standards. In terms of coverage, the Act also covers electronic signatures and records by the government. The provisions regarding government records are regarded as opt-in provision. The government agency has the responsibility of determining the extent of creation and retention of electronic records. The agency has also the responsibility of what amount of government paper record will be converted into electronic records. The respective agencies also have the mandate and discretion to determine the extent of accepting and sending electronic records. The agency may also establish the and specify the system put in place for the sake of creating, sending, receiving, communicating, and storing of government records and also the kind of electronic signature required. In undertaking these roles, the government agency should encourage interoperability (Continuing Legal Education in Colorado, Colorado Bar Association, & Denver Bar Association, 2002).

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The scope of UETA provides coverage setting forth a clear framework in regard to covered transactions. This avoids surprises that are unwarranted for unsophisticated parties dealing in this media that is relatively new. The certainty and clarity of the scope have been achieved while it still embarks on providing a legal framework that is solid and that will allow the continued growth of the of innovative technology that provides facilitation of electronic transactions. The Acts coverage is seen to be inherently limited to the transaction’s definition. The Act does not apply in all signatures and writings but only to electronic signatures and records relating to a transaction. There are few signature or writing requirements that are imposed by law on most of of the standard transactions considered for exclusion. For instance, the law of trust does not require any form of formal writing.

The other fundamental premise of the law is that it should be procedural and minimalist. The law treatment of signatures and records demonstrates the minimalist approach employed. Regarding the attribution of a record to a person is left to other laws outside this Act. The issue of whether an electronic signature carries any effect is left on surrounding circumstances. These provisions provide an assertion that signatures and records will be treated similarly under existing law just as manual signatures and written records. The difference portrayed in the Act as compared to other substantive law is not an indication that there is no necessity of developing standards and rules governing use of electronic media. The Act validates the use electronic records, contracts, and signatures. The Act provides for electronic information and records use for the purposes of retention. The Act is clear that the machines actions programmed by individuals will bind the machine user regardless of whether there has been a review of of the occurrence of a particular transaction. The Act allows innovation in the field of financial services to provide for proper record implementation. The accomplishment of electronic transactions is achieved with certainty under substantive laws that are existing. The Act provides a space for the expansion of business transactions by offering protection framework to the various parties who engage each other to transact online.

Conclusion

In conclusion, UETA  handles several issues that affect the engagement of persons online to do business. There are provisions in UETA that requires special attention as they affect the validity and efficiency of transactions among the various agents. In this regard, it is crucial to take take a clear observation in analyzing the workability of UETA.

UETA clearly makes valid contracts that are formed by electronic agents. These are programs by the computer initiated by principals to undertake transactions in the form of electronic. These agents operate automatically with no immediate human supervision although they are not autonomous agents. These agents are the kind of tools that the parties use to in communication. In this regard, a person buying commodities through the internet will be assured that the agreement is valid.

UETA also provides provision under which the government agency will transact business through electronic records. Section 17 of the Act allows the government to create an agency or an officer to act as an authority to the creation of government records as well as their retention. Several issues regarding UETA have not been covered in this excerpt but the adoption of these rules is a boost to electronic commerce. Every state is supposed to adopt these rules to ensure proper regulations in the electronic commerce.

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