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Vol. 74, No. 7, July 2001
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Electronic Commerce Under the Federal
E-sign Legislation
Title
I of the federal E-sign legislation fosters the continued expansion of electronic
commerce by encouraging uniform regulation of electronic transactions, maintaining
the effectiveness of certain consumer protection laws, and providing legal
certainty for businesses that use electronic methods of doing business.
Title I affects Internet transactions and contracts that may be formed through
the use of email, voicemail, and other electronic technologies.
 by
Robert J. Marchant
Electronic commerce is expanding rapidly. An increasing number of consumers
are shopping electronically, as evidenced by the record 4 million new
customers Amazon.com added during the fourth quarter of 2000.1
It is predicted that electronic commerce will account for 5 percent of
retail sales during 2001-02 and 15 percent by 2005.2
In addition, an increasing number of businesses are engaging in electronic
transactions with one another. If business-to-business electronic commerce
continues to grow as expected, it will account for almost one-fourth of
all business-to-business commerce by 2003.3
This growth in business-to-business electronic commerce is expected to
be fueled in large part by small businesses, 85 percent of which are predicted
to be conducting business over the Internet by 2002.4
Status
of UETA in Wisconsin:
The Uniform Electronic Transactions Act has already been adopted
by 32 states but has yet to see significant activity in Wisconsin.
UETA was included in the biennial state budget bill, Senate Bill
55 and Assembly Bill 144, as originally introduced. It continues
to be a subject of discussion in the Legislature.
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Against this backdrop, Congress enacted the Electronic Signatures in
Global and National Commerce Act (E-sign) which, with certain exceptions,
took effect in Wisconsin on Oct. 1, 2000.5
Title I of E-sign was designed to foster the continued expansion of electronic
commerce.6
Title I encourages uniform regulation of electronic transactions, maintains
the effectiveness of certain consumer protection laws, and provides legal
certainty for businesses that use electronic methods of doing business.
Title I affects not only Internet transactions but also contracts that
may be formed through the use of email, voicemail, and other electronic
technologies. This article highlights the primary aspects of Title I and
discusses the peculiar relationship between Title I and a bill relating
to electronic commerce that currently is pending in the Wisconsin Legislature.
Enforceability of Electronic
Transactions
The most important aspect of Title I is the certainty that it provides
with regard to the enforceability of electronic contracts and signatures.
Each Internet transaction is typically based upon computer-generated electronic
documents that evidence each party's promise to do business - that is,
a contract. Similarly, a transaction may be evidenced by an exchange of
emails. In such transactions, the box "clicked" by the person assenting
to an order over the Internet or the attached name of the person sending
an email may be generally understood to be the person's electronic signature.
Title I provides that these documents and signatures may not be denied
legal effect solely because they are in an electronic form.7
Title I also protects the enforceability of a contract that is not in
electronic form, but that is formed through the use of electronic signatures
or documents.8
Due to the broad way that E-sign defines the terms "electronic record,"
"electronic signature," and "record," Title I also validates certain transactions
that are evidenced by voicemail recordings.9
This effect may have unintended consequences for businesses and consumers.
A voicemail communication that, under prior law, would have been at best
an oral, implied contract may be elevated under Title I to the status
of a written agreement. Thus, a person may use a voicemail to satisfy
the statute of frauds or to modify an existing contract that is required
to be in writing.10
Businesses and consumers should be aware of this potential effect and
should exercise care when leaving any voicemail message that may be understood
as an offer to contract, an acceptance of such an offer, or a modification
of an existing contract.
Consent to Deal Electronically
Generally, Title I "does not ... require any person to agree to use or
accept electronic records or electronic signatures."11
This language likely is intended to permit a party to a transaction to
refuse to deal electronically. For example, a party might rely upon this
language to demand that acceptance of the party's offer be communicated
on paper.
However, as noted above, Title I specifies that a document relating
to a transaction may not be denied legal effect solely because it is in
an electronic form.12
This conflicting language may permit the accepting party in this example
to argue, and a court to hold, that an electronic acceptance must be honored.
A party that wishes to deal only in paper may want to take steps to avoid
this potential result. For example, the party might include in its offer
a statement that any response to the offer must be communicated on paper
and that, if the party refuses to honor a response made in violation of
this condition, that refusal is due to a violation of this condition and
not solely because the response is in an electronic form.
Consumer Transactions
Title I contains additional requirements that apply specifically to transactions
in which at least one of the parties is a consumer. Generally, a consumer
is an individual who obtains products or services that are used primarily
for personal, family, or household purposes.13
While Title I has no effect on the content or timing of any document or
disclosure required to be provided to a consumer, Title I does regulate
the method by which the document or disclosure may be provided.14
For example, Title I prohibits a business from using voicemail to provide
a required document or disclosure to a consumer, unless the use of voicemail
is permitted under other applicable law.15
In addition, Title I prohibits a business from providing a required document
or disclosure to a consumer electronically unless the consumer consents.
This consent must be given after the consumer is informed of certain rights
and of the technical requirements necessary to access and retain the electronic
disclosures.16
In addition, this consent must be given or confirmed electronically in
a manner that reasonably demonstrates that the consumer can access the
information that is required to be provided.17
For Internet transactions, these consumer requirements should be relatively
easy to comply with through the use of a preprogrammed "click through"
procedure, which permits a consumer to enter into a transaction only after
acknowledging his or her consent and receipt of all required information.
A business using this procedure also might obtain a consumer's consent
to receive disclosures of information through the business's Web site,
rather than through a direct mailing. The consumer requirements of Title
I are more problematic, though, in the context of less regularized consumer
transactions, like those evidenced by an exchange of emails. Any business
that engages in this type of consumer transaction may want to generate
standard electronic forms, for use as email attachments, to satisfy these
requirements.
It also is important to note that the consumer requirements in Title
I apply regardless of the amount or value of a particular transaction.
Thus, they are broader in scope than other consumer requirements under
Wisconsin and federal law, which typically apply only to a transaction
of $25,000 or less.18
Page
2: Retention of Contracts and Documents
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