Drafted by the


     and by it


      at its

JULY 23   30, 1999


  Copyright  1999

                                1/20/00              UNIFORM ELECTRONIC TRANSACTIONS ACT (1999)

 The Committee that acted for the National Conference of Commissioners on Uniform State Laws
 in preparing the Uniform Electronic Transactions Act (1999) was as follows:

 PATRICIA BRUMFIELD FRY, University of North Dakota, School of Law, P.O. Box 9003,
   Grand Forks, ND  58201, Chair
 STEPHEN Y. CHOW, 30th Floor, One Beacon St., Boston, MA  02108
 KENNETH W. ELLIOTT, City Place Building, 22nd Floor, 204 N. Robinson Avenue,
   Oklahoma City, OK  73102
 HENRY DEEB GABRIEL, JR., Loyola University, School of Law, 526 Pine Street, New
   LA  70118
 BION M. GREGORY, Office of Legislative Counsel, State Capitol, Suite 3021, Sacramento,
   CA  95814-4996
 JOSEPH P. MAZUREK, Office of the Attorney General, P.O. Box 201401, 215 N. Sanders,
   Helena, MT  59620
 PAMELA MEADE SARGENT, P.O. Box 846, Abingdon, VA 24212
 D. BENJAMIN BEARD, University of Idaho, College of Law, 6th and Rayburn, Moscow,
   ID  83844-2321, Reporter

          EX OFFICIO
 GENE N. LEBRUN, P.O. Box 8250, 9th Floor, 909 St. Joseph Street, Rapid City, SD 57709,
 HENRY M. KITTLESON, P.O. Box 32092, 92 Lake Wire Drive, Lakeland, FL 33802,
   Division Chair

 C. ROBERT BEATTIE, Plaza VII, 45 S. 7th Street, Suite 3400, Minneapolis, MN 55402-1609,
   Business Law Section
 AMELIA H. BOSS, Tmple University, School of Law, 1719 N. Broad Street, Philadelphia,
   PA  19122, Advisor
 THOMAS J. SMEDINGHOFF, 130 E. Randolph Drive, Suite 3500, Chicago, IL 60601,
   Science and Technology Section

 FRED H. MILLER, University of Oklahoma, College of Law, 300 Timberdell Road, Norman,
   OK  73019, Executive Director
 WILLIAM J. PIERCE, 1505 Roxbury Road, Ann Arbor, MI  48104, Executive Director

   Copies of this Act may be obtained from:

   211 E. Ontario Street, Suite 1300
    Chicago, Illinois 60611
         312/915-0195              UNIFORM ELECTRONIC TRANSACTIONS ACT (1999)


 SECTION 1.  SHORT TITLE. . . . . . . . . . . . . . . . . . 4

 SECTION 2.  DEFINITIONS. . . . . . . . . . . . . . . . . . 4

 SECTION 3.  SCOPE. . . . . . . . . . . . . . . . . . . . .13

 SECTION 4.  PROSPECTIVE APPLICATION. . . . . . . . . . . .20

 VARIATION BY AGREEMENT . . . . . . . . . . . . . .20




 ELECTRONIC SIGNATURE . . . . . . . . . . . . . . .31

 SECTION 10.  EFFECT OF CHANGE OR ERROR . . . . . . . . . .33



 SECTION 13.  ADMISSIBILITY IN EVIDENCE . . . . . . . . . .42

 SECTION 14.  AUTOMATED TRANSACTION . . . . . . . . . . . .42


 SECTION 16.  TRANSFERABLE RECORDS. . . . . . . . . . . . .48

   AGENCIES . . . . . . . . . . . . . . . . . . . .56

   GOVERNMENTAL AGENCIES. . . . . . . . . . . . . .56

 SECTION 19.  INTEROPERABILITY. . . . . . . . . . . . . . .58

 SECTION 20.  SEVERABILITY CLAUSE . . . . . . . . . . . . .61

 SECTION 21.  EFFECTIVE DATE. . . . . . . . . . . . . . . .61
                     UNIFORM ELECTRONIC TRANSACTIONS ACT (1999)


  With the advent of electronic means of communication and information
 transfer, business models and methods for doing business have evolved to take
 advantage of the speed, efficiencies, and cost benefits of electronic technologies.
 These developments have occurred in the face of existing legal barriers to the legal
 efficacy of records and documents which exist solely in electronic media.  Whether
 the legal requirement that information or an agreement or contract must be
 contained or set forth in a pen and paper writing derives from a statute of frauds
 affecting the enforceability of an agreement, or from a record retention statute that
 calls for keeping the paper record of a transaction, such legal requirements raise
 real barriers to the effective use of electronic media.

  One striking example of electronic barriers involves so called check
 retention statutes in every State.  A study conducted by the Federal Reserve Bank
 of Boston identified more than 2500 different state laws which require the retention
 of canceled checks by the issuers of those checks.  These requirements not only
 impose burdens on the issuers, but also effectively restrain the ability of banks
 handling the checks to automate the process.  Although check truncation is
 validated under the Uniform Commercial Code, if the bank's customer must store
 the canceled paper check, the bank will not be able to deal with the item through
 electronic transmission of the information.  By establishing the equivalence of an
 electronic record of the information, the Uniform Electronic Transactions Act
 (UETA) removes these barriers without affecting the underlying legal rules and

  It is important to understand that the purpose of the UETA is to remove
 barriers to electronic commerce by validating and effectuating electronic records
 and signatures.  It is NOT a general contracting statute   the substantive rules of
 contracts remain unaffected by UETA.  Nor is it a digital signature statute.  To the
 extent that a State has a Digital Signature Law, the UETA is designed to support
 and compliment that statute.

  A.  Scope of the Act and Procedural Approach.  The scope of this Act
 provides coverage which sets forth a clear framework for covered transactions, and
 also avoids unwarranted surprises for unsophisticated parties dealing in this
 relatively new media.  The clarity and certainty of the scope of the Act have been
 obtained while still providing a solid legal framework that allows for the continued
 development of innovative technology to facilitate electronic transactions.

  With regard to the general scope of the Act, the Act's coverage is inherently
 limited by the definition of "transaction."  The Act does not apply to all writings
 and signatures, but only to electronic records and signatures relating to a
 transaction, defined as those interactions between people relating to business,
 commercial and governmental affairs.  In general, there are few writing or signature
 requirements imposed by law on many of the "standard" transactions that had been
 considered for exclusion.  A good example relates to trusts, where the general rule
 on creation of a trust imposes no formal writing requirement.  Further, the writing
 requirements in other contexts derived from governmental filing issues.  For
 example, real estate transactions were considered potentially troublesome because
 of the need to file a deed or other instrument for protection against third parties.
 Since the efficacy of a real estate purchase contract, or even a deed, between the
 parties is not affected by any sort of filing, the question was raised why these
 transactions should not be validated by this Act if done via an electronic medium.
 No sound reason was found.  Filing requirements fall within Sections 17-19 on
 governmental records.  An exclusion of all real estate transactions would be
 particularly unwarranted in the event that a State chose to convert to an electronic
 recording system, as many have for Article 9 financing statement filings under the
 Uniform Commercial Code.

  The exclusion of specific Articles of the Uniform Commercial Code reflects
 the recognition that, particularly in the case of Articles 5, 8 and revised Article 9,
 electronic transactions were addressed in the specific contexts of those revision
 processes.  In the context of Articles 2 and 2A the UETA provides the vehicle for
 assuring that such transactions may be accomplished and effected via an electronic
 medium.  At such time as Articles 2 and 2A are revised the extent of coverage in
 those Articles/Acts may make application of this Act as a gap-filling law desirable.
 Similar considerations apply to the recently promulgated Uniform Computer
 Information Transactions Act ("UCITA").

  The need for certainty as to the scope and applicability of this Act is critical,
 and makes any sort of a broad, general exception based on notions of inconsistency
 with existing writing and signature requirements unwise at best.  The uncertainty
 inherent in leaving the applicability of the Act to judicial construction of this Act
 with other laws is unacceptable if electronic transactions are to be facilitated.

  Finally, recognition that the paradigm for the Act involves two willing
 parties conducting a transaction electronically, makes it necessary to expressly
 provide that some form of acquiescence or intent on the part of a person to conduct
 transactions electronically is necessary before the Act can be invoked.
 Accordingly, Section 5 specifically provides that the Act only applies between
 parties that have agreed to conduct transactions electronically.  In this context, the
 construction of the term agreement must be broad in order to assure that the Act
 applies whenever the circumstances show the parties intention to transact
 electronically, regardless of whether the intent rises to the level of a formal

  B.  Procedural Approach.  Another fundamental premise of the Act is that
 it be minimalist and procedural.  The general efficacy of existing law in an
 electronic context, so long as biases and barriers to the medium are removed,
 validates this approach.  The Act defers to existing substantive law.  Specific areas
 of deference to other law in this Act include: (1) the meaning and effect of "sign"
 under existing law, (2) the method and manner of displaying, transmitting and
 formatting information in Section 8, (3) rules of attribution in Section 9, and (4) the
 law of mistake in Section 10.

  The Act's treatment of records and signatures demonstrates best the
 minimalist approach that has been adopted.  Whether a record is attributed to a
 person is left to law outside this Act.  Whether an electronic signature has any
 effect is left to the surrounding circumstances and other law.  These provisions are
 salutary directives to assure that records and signatures will be treated in the same
 manner, under currently existing law, as written records and manual signatures.

  The deference of the Act to other substantive law does not negate the
 necessity of setting forth rules and standards for using electronic media.  The Act
 expressly validates electronic records, signatures and contracts.  It provides for the
 use of electronic records and information for retention purposes, providing certainty
 in an area with great potential in cost savings and efficiency.  The Act makes clear
 that the actions of machines ("electronic agents") programmed and used by people
 will bind the user of the machine, regardless of whether human review of a
 particular transaction has occurred.  It specifies the standards for sending and
 receipt of electronic records, and it allows for innovation in financial services
 through the implementation of transferable records.  In these ways the Act permits
 electronic transactions to be accomplished with certainty under existing substantive
 rules of law.
                         UNIFORM ELECTRONIC TRANSACTIONS ACT (1999)

   SECTION 1.  SHORT TITLE.  This [Act] may be cited as the Uniform
 Electronic Transactions Act.

   SECTION 2.  DEFINITIONS.  In this [Act]:
  (1)  "Agreement" means the bargain of the parties in fact, as found in their
 language or inferred from other circumstances and from rules, regulations, and
 procedures given the effect of agreements under laws otherwise applicable to a
 particular transaction.
  (2)  "Automated transaction" means a transaction conducted or performed,
 in whole or in part, by electronic means or electronic records, in which the acts or
 records of one or both parties are not reviewed by an individual in the ordinary
 course in forming a contract, performing under an existing contract, or fulfilling an
 obligation required by the transaction.
  (3)  "Computer program" means a set of statements or instructions to be
 used directly or indirectly in an information processing system in order to bring
 about a certain result.
  (4)  "Contract" means the total legal obligation resulting from the parties'
 agreement as affected by this [Act] and other applicable law.
  (5)  "Electronic" means relating to technology having electrical, digital,
 magnetic, wireless, optical, electromagnetic, or similar capabilities.
  (6)  "Electronic agent" means a computer program or an 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
  (7)  "Electronic record" means a record created, generated, sent,
 communicated, received, or stored by electronic means.
  (8)  "Electronic signature" means an electronic sound, symbol, or process
 attached to or logically associated with a record and executed or adopted by a
 person with the intent to sign the record.
  (9)  " Governmental agency" means an executive, legislative, or judicial
 agency, department, board, commission, authority, institution, or instrumentality of
 the federal government or of a State or of a county, municipality, or other political
 subdivision of a State.
  (10)  "Information" means data, text, images, sounds, codes, computer
 programs, software, databases, or the like.
  (11)  "Information processing system" means an electronic system for
 creating, generating, sending, receiving, storing, displaying, or processing
  (12)  "Person" means an individual, corporation, business trust, estate, trust,
 partnership, limited liability company, association, joint venture, governmental
 agency, public corporation, or any other legal or commercial entity.
  (13)  "Record" means information that is inscribed on a tangible medium or
 that is stored in an electronic or other medium and is retrievable in perceivable
  (14)  "Security procedure" means a procedure employed for the purpose of
 verifying that an electronic signature, record, or performance is that of a specific
 person or for detecting changes or errors in the information in an electronic record.
 The term includes a procedure that requires the use of algorithms or other codes,
 identifying words or numbers, encryption, or callback or other acknowledgment
  (15)  "State" means a State of the United States, the District of Columbia,
 Puerto Rico, the United States Virgin Islands, or any territory or insular possession
 subject to the jurisdiction of the United States.  The term includes an Indian tribe or
 band, or Alaskan native village, which is recognized by federal law or formally
 acknowledged by a State.
  (16)  "Transaction" means an action or set of actions occurring between two
 or more persons relating to the conduct of business, commercial, or governmental
 Sources:  UNICTRAL Model Law on Electronic Commerce; Uniform Commercial
 Code; Uniform Computer Information Transactions Act; Restatement 2d Contracts.

  1.  "Agreement."

  Whether the parties have reached an agreement is determined by their
 express language and all surrounding circumstances.  The Restatement 2d Contracts
  3 provides that, "An agreement is a manifestation of mutual assent on the part of
 two or more persons."  See also Restatement 2d Contracts, Section 2, Comment b.
 The Uniform Commercial Code specifically includes in the circumstances from
 which an agreement may be inferred "course of performance, course of dealing and
 usage of trade . . ." as defined in the UCC.  Although the definition of agreement in
 this Act does not make specific reference to usage of trade and other party conduct,
 this definition is not intended to affect the construction of the parties' agreement
 under the substantive law applicable to a particular transaction.  Where that law
 takes account of usage and conduct in informing the terms of the parties'
 agreement, the usage or conduct would be relevant as "other circumstances"
 included in the definition under this Act.

  Where the law applicable to a given transaction provides that system rules
 and the like constitute part of the agreement of the parties, such rules will have the
 same effect in determining the parties agreement under this Act.  For example,
 UCC Article 4 (Section 4-103(b)) provides that Federal Reserve regulations and
 operating circulars and clearinghouse rules have the effect of agreements.  Such
 agreements by law properly would be included in the definition of agreement in this

  The parties' agreement is relevant in determining whether the provisions of
 this Act have been varied by agreement.  In addition, the parties' agreement may
 establish the parameters of the parties' use of electronic records and signatures,
 security procedures and similar aspects of the transaction.  See Model Trading
 Partner Agreement, 45 Business Lawyer Supp. Issue (June 1990).  See Section 5(b)
 and Comments thereto.

  2.  "Automated Transaction."

  An automated transaction is a transaction performed or conducted by
 electronic means in which machines are used without human intervention to form
 contracts and perform obligations under existing contracts.  Such broad coverage is
 necessary because of the diversity of transactions to which this Act may apply.

  As with electronic agents, this definition addresses the circumstance where
 electronic records may result in action or performance by a party although no
 human review of the electronic records is anticipated.  Section 14 provides specific
 rules to assure that where one or both parties do not review the electronic records,
 the resulting agreement will be effective.

  The critical element in this definition is the lack of a human actor on one or
 both sides of a transaction.  For example, if one orders books from Bookseller.com
 through Bookseller's website, the transaction would be an automated transaction
 because Bookseller took and confirmed the order via its machine.  Similarly, if
 Automaker and supplier do business through Electronic Data Interchange,
 Automaker's computer, upon receiving information within certain pre-programmed
 parameters, will send an electronic order to supplier's computer.  If Supplier's
 computer confirms the order and processes the shipment because the order falls
 within pre-programmed parameters in Supplier's computer, this would be a fully
 automated transaction.  If, instead, the Supplier relies on a human employee to
 review, accept, and process the Buyer's order, then only the Automaker's side of
 the transaction would be automated.  In either case, the entire transaction falls
 within this definition.

  3.  "Computer program."  This definition refers to the functional and
 operating aspects of an electronic, digital system.  It relates to operating
 instructions used in an electronic system such as an electronic agent.  (See
 definition of "Electronic Agent.")

  4.  "Electronic."  The basic nature of most current technologies and the
 need for a recognized, single term warrants the use of "electronic" as the defined
 term.  The definition is intended to assure that the Act will be applied broadly as
 new technologies develop.  The term must be construed broadly in light of
 developing technologies in order to fulfill the purpose of this Act to validate
 commercial transactions regardless of the medium used by the parties.  Current
 legal requirements for "writings" can be satisfied by almost any tangible media,
 whether paper, other fibers, or even stone.  The purpose and applicability of this
 Act covers intangible media which are technologically capable of storing,
 transmitting and reproducing information in human perceivable form, but which
 lack the tangible aspect of paper, papyrus or stone.

  While not all technologies listed are technically "electronic" in nature (e.g.,
 optical fiber technology), the term "electronic" is the most descriptive term
 available to describe the majority of current technologies.  For example, the
 development of biological and chemical processes for communication and storage
 of data, while not specifically mentioned in the definition, are included within the
 technical definition because such processes operate on electromagnetic impulses.
 However, whether a particular technology may be characterized as technically
 "electronic," i.e., operates on electromagnetic impulses, should not be
 determinative of whether records and signatures created, used and stored by means
 of a particular technology are covered by this Act.  This Act is intended to apply to
 all records and signatures created, used and stored by any medium which permits
 the information to be retrieved in perceivable form.

  5.  "Electronic agent."  This definition establishes that an electronic agent
 is a machine.  As the term "electronic agent" has come to be recognized, it is
 limited to a tool function.  The effect on the party using the agent is addressed in
 the operative provisions of the Act (e.g., Section 14)

  An electronic agent, such as a computer program or other automated means
 employed by a person, is a tool of that person.  As a general rule, the employer of a
 tool is responsible for the results obtained by the use of that tool since the tool has
 no independent volition of its own.  However, an electronic agent, by definition, is
 capable within the parameters of its programming, of initiating, responding or
 interacting with other parties or their electronic agents once it has been activated by
 a party, without further attention of that party.

  While this Act proceeds on the paradigm that an electronic agent is capable
 of performing only within the technical strictures of its preset programming, it is
 conceivable that, within the useful life of this Act, electronic agents may be created
 with the ability to act autonomously, and not just automatically.  That is, through
 developments in artificial intelligence, a computer may be able to "learn through
 experience, modify the instructions in their own programs, and even devise new
 instructions."  Allen and Widdison, "Can Computers Make Contracts?" 9 Harv.
 J.L.&Tech 25 (Winter, 1996).  If such developments occur, courts may construe the
 definition of electronic agent accordingly, in order to recognize such new

  The examples involving Bookseller.com and Automaker in the Comment to
 the definition of Automated Transaction are equally applicable here.  Bookseller
 acts through an electronic agent in processing an order for books.  Automaker and
 the supplier each act through electronic agents in facilitating and effectuating the
 just-in-time inventory process through EDI.

  6.  "Electronic record."  An electronic record is a subset of the broader
 defined term "record."  It is any record created, used or stored in a medium other
 than paper (see definition of electronic).  The defined term is also used in this Act
 as a limiting definition in those provisions in which it is used.

  Information processing systems, computer equipment and programs,
 electronic data interchange, electronic mail, voice mail, facsimile, telex,
 telecopying, scanning, and similar technologies all qualify as electronic under this
 Act.  Accordingly information stored on a computer hard drive or floppy disc,
 facsimiles, voice mail messages, messages on a telephone answering machine,
 audio and video tape recordings, among other records, all would be electronic
 records under this Act.

  7.  "Electronic signature."

  The idea of a signature is broad and not specifically defined.  Whether any
 particular record is "signed" is a question of fact.  Proof of that fact must be made
 under other applicable law.  This Act simply assures that the signature may be
 accomplished through electronic means.  No specific technology need be used in
 order to create a valid signature.  One's voice on an answering machine may suffice
 if the requisite intention is present.  Similarly, including one's name as part of an
 electronic mail communication also may suffice, as may the firm name on a
 facsimile.  It also may be shown that the requisite intent was not present and
 accordingly the symbol, sound or process did not amount to a signature.  One may
 use a digital signature with the requisite intention, or one may use the private key
 solely as an access device with no intention to sign, or otherwise accomplish a
 legally binding act.  In any case the critical element is the intention to execute or
 adopt the sound or symbol or process for the purpose of signing the related record.

  The definition requires that the signer execute or adopt the sound, symbol,
 or process with the intent to sign the record.  The act of applying a sound, symbol
 or process to an electronic record could have differing meanings and effects.  The
 consequence of the act and the effect of the act as a signature are determined under
 other applicable law.  However, the essential attribute of a signature involves
 applying a sound, symbol or process with an intent to do a legally significant act.  It
 is that intention that is understood in the law as a part of the word "sign", without
 the need for a definition.

  This Act establishes, to the greatest extent possible, the equivalency of
 electronic signatures and manual signatures.  Therefore the term "signature" has
 been used to connote and convey that equivalency.  The purpose is to overcome
 unwarranted biases against electronic methods of signing and authenticating
 records.  The term "authentication," used in other laws, often has a narrower
 meaning and purpose than an electronic signature as used in this Act.  However, an
 authentication under any of those other laws constitutes an electronic signature
 under this Act.

  The precise effect of an electronic signature will be determined based on the
 surrounding circumstances under Section 9(b).

  This definition includes as an electronic signature the standard webpage
 click through process.  For example, when a person orders goods or services
 through a vendor's website, the person will be required to provide information as
 part of a process which will result in receipt of the goods or services.  When the
 customer ultimately gets to the last step and clicks "I agree," the person has adopted
 the process and has done so with the intent to associate the person with the record
 of that process.  The actual effect of the electronic signature will be determined
 from all the surrounding circumstances, however, the person adopted a process
 which the circumstances indicate s/he intended to have the effect of getting the
 goods/services and being bound to pay for them.  The adoption of the process
 carried the intent to do a legally significant act, the hallmark of a signature.

  Another important aspect of this definition lies in the necessity that the
 electronic signature be linked or logically associated with the record.  In the paper
 world, it is assumed that the symbol adopted by a party is attached to or located
 somewhere in the same paper that is intended to be authenticated, e.g., an allonge
 firmly attached to a promissory note, or the classic signature at the end of a long
 contract.  These tangible manifestations do not exist in the electronic environment,
 and accordingly, this definition expressly provides that the symbol must in some
 way be linked to, or connected with, the electronic record being signed.  This
 linkage is consistent with the regulations promulgated by the Food and Drug
 Administration. 21 CFR Part 11 (March 20, 1997).

  A digital signature using public key encryption technology would qualify as
 an electronic signature, as would the mere inclusion of one's name as a part of an
 e-mail message   so long as in each case the signer executed or adopted the symbol
 with the intent to sign.

  8.  "Governmental agency."  This definition is important in the context of
 optional Sections 17-19.

  9.  "Information processing system."  This definition is consistent with
 the UNCITRAL Model Law on Electronic Commerce.  The term includes
 computers and other information systems.  It is principally used in Section 15 in
 connection with the sending and receiving of information.  In that context, the key
 aspect is that the information enter a system from which a person can access it.

  10.  "Record."  This is a standard definition designed to embrace all means
 of communicating or storing information except human memory.  It includes any
 method for storing or communicating information, including "writings."  A record
 need not be indestructible or permanent, but the term does not include oral or other
 communications which are not stored or preserved by some means.  Information
 that has not been retained other than through human memory does not qualify as a
 record.  As in the case of the terms "writing" or "written," the term "record" does
 not establish the purposes, permitted uses or legal effect which a record may have
 under any particular provision of substantive law.  ABA Report on Use of the Term
 "Record," October 1, 1996.

  11.  "Security procedure."

  A security procedure may be applied to verify an electronic signature, verify
 the identity of the sender, or assure the informational integrity of an electronic
 record.  The definition does not identify any particular technology.  This permits
 the use of procedures which the parties select or which are established by law.  It
 permits the greatest flexibility among the parties and allows for future technological

  The definition in this Act is broad and is used to illustrate one way of
 establishing attribution or content integrity of an electronic record or signature.
 The use of a security procedure is not accorded operative legal effect, through the
 use of presumptions or otherwise, by this Act.  In this Act, the use of security
 procedures is simply one method for proving the source or content of an electronic
 record or signature.

  A security procedure may be technologically very sophisticated, such as an
 asymetric cryptographic system.  At the other extreme the security procedure may
 be as simple as a telephone call to confirm the identity of the sender through
 another channel of communication.  It may include the use of a mother's maiden
 name or a personal identification number (PIN).  Each of these examples is a
 method for confirming the identity of a person or accuracy of a message.

  12.  "Transaction."  The definition has been limited to actions between
 people taken in the context of business, commercial or governmental activities.
 The term includes all interactions between people for business, commercial,
 including specifically consumer, or governmental purposes.  However, the term
 does not include unilateral or non-transactional actions.  As such it provides a
 structural limitation on the scope of the Act as stated in the next section.

  It is essential that the term commerce and business be understood and
 construed broadly to include commercial and business transactions involving
 individuals who may qualify as "consumers" under other applicable law.  If Alice
 and Bob agree to the sale of Alice's car to Bob for $2000 using an internet auction
 site, that transaction is fully covered by this Act.  Even if Alice and Bob each
 qualify as typical "consumers" under other applicable law, their interaction is a
 transaction in commerce.  Accordingly their actions would be related to commercial
 affairs, and fully qualify as a transaction governed by this Act.

  Other transaction types include:

  1.  A single purchase by an individual from a retail merchant, which may be
 accomplished by an order from a printed catalog sent by facsimile, or by exchange
 of electronic mail.

  2.  Recurring orders on a weekly or monthly basis between large companies
 which have entered into a master trading partner agreement to govern the methods
 and manner of their transaction parameters.

  3.  A purchase by an individual from an online internet retail vendor.  Such
 an arrangement may develop into an ongoing series of individual purchases, with
 security procedures and the like, as a part of doing ongoing business.

  4.  The closing of a business purchase transaction via facsimile transmission
 of documents or even electronic mail.  In such a transaction, all parties may
 participate through electronic conferencing technologies.  At the appointed time all
 electronic records are executed electronically and transmitted to the other party.  In
 such a case, the electronic records and electronic signatures are validated under this
 Act, obviating the need for " in person" closings.

  A transaction must include interaction between two or more persons.
 Consequently, to the extent that the execution of a will, trust, or a health care power
 of attorney or similar health care designation does not involve another person and is
 a unilateral act, it would not be covered by this Act because not occurring as a part
 of a transaction as defined in this Act.  However, this Act does apply to all
 electronic records and signatures related to a transaction, and so does cover, for
 example, internal auditing and accounting records related to a transaction.

  (a)  Except as otherwise provided in subsection (b), this [Act] applies to
 electronic records and electronic signatures relating to a transaction.
  (b)  This [Act] does not apply to a transaction to the extent it is governed
(1) a law governing the creation and execution of wills, codicils, or
 testamentary trusts;
(2) [The Uniform Commercial Code other than Sections 1-107 and
 1-206, Article 2, and Article 2A];
(3) [the Uniform Computer Information Transactions Act]; and
(4) [other laws, if any, identified by State].
  (c)  This [Act] applies to an electronic record or electronic signature
 otherwise excluded from the application of this [Act] under subsection (b) to the
 extent it is governed by a law other than those specified in subsection (b).
  (d)  A transaction subject to this [Act] is also subject to other applicable
 substantive law.
 See Legislative Note below   Following Comments.
  1.  The scope of this Act is inherently limited by the fact that it only applies
 to transactions related to business, commercial (including consumer) and
 governmental matters.  Consequently, transactions with no relation to business,
 commercial or governmental transactions would not be subject to this Act.
 Unilaterally generated electronic records and signatures which are not part of a
 transaction also are not covered by this Act.  See Section 2, Comment 12.

  2.  This Act affects the medium in which information, records and
 signatures may be presented and retained under current legal requirements.  While
 this Act covers all electronic records and signatures which are used in a business,
 commercial (including consumer) or governmental transaction, the operative
 provisions of the Act relate to requirements for writings and signatures under other
 laws.  Accordingly, the exclusions in subsection (b) focus on those legal rules
 imposing certain writing and signature requirements which will not be affected by
 this Act.

  3.  The exclusions listed in subsection (b) provide clarity and certainty
 regarding the laws which are and are not affected by this Act.  This section provides
 that transactions subject to specific laws are unaffected by this Act and leaves the
 balance subject to this Act.

  4.  Paragraph (1) excludes wills, codicils and testamentary trusts.  This
 exclusion is largely salutary given the unilateral context in which such records are
 generally created and the unlikely use of such records in a transaction as defined in
 this Act (i.e., actions taken by two or more persons in the context of business,
 commercial or governmental affairs).  Paragraph (2) excludes all of the Uniform
 Commercial Code other than UCC Sections 1-107 and 1-206, and Articles 2 and
 2A.  This Act does not apply to the excluded UCC articles, whether in "current" or
 "revised" form.  The Act does apply to UCC Articles 2 and 2A and to UCC
 Sections 1-107 and 1-206.

  5.  Articles 3, 4 and 4A of the UCC impact payment systems and have
 specifically been removed from the coverage of this Act.  The check collection and
 electronic fund transfer systems governed by Articles 3, 4 and 4A involve systems
 and relationships involving numerous parties beyond the parties to the underlying
 contract.  The impact of validating electronic media in such systems involves
 considerations beyond the scope of this Act.  Articles 5, 8 and 9 have been
 excluded because the revision process relating to those Articles included significant
 consideration of electronic practices.  Paragraph 4 provides for exclusion from this
 Act of the Uniform Computer Information Transactions Act (UCITA) because the
 drafting process of that Act also included significant consideration of electronic
 contracting provisions.

  6.  The very limited application of this Act to Transferable Records in
 Section 16 does not affect payment systems, and the section is designed to apply to
 a transaction only through express agreement of the parties.  The exclusion of
 Articles 3 and 4 will not affect the Act's coverage of Transferable Records.  Section
 16 is designed to allow for the development of systems which will provide
 "control" as defined in Section 16.  Such control is necessary as a substitute for the
 idea of possession which undergirds negotiable instrument law.  The technology
 has yet to be developed which will allow for the possession of a unique electronic
 token embodying the rights associated with a negotiable promissory note.  Section
 16's concept of control is intended as a substitute for possession.

  The provisions in Section 16 operate as free standing rules, establishing the
 rights of parties using Transferable Records under this Act.  The references in
 Section 16 to UCC Sections 3-302, 7-501, and 9-308 (R9-330(d)) are designed to
 incorporate the substance of those provisions into this Act for the limited purposes
 noted in Section 16(c).  Accordingly, an electronic record which is also a
 Transferable Record, would not be used for purposes of a transaction governed by
 Articles 3, 4, or 9, but would be an electronic record used for purposes of a
 transaction governed by Section 16.  However, it is important to remember that
 those UCC Articles will still apply to the transferable record in their own right.
 Accordingly any other substantive requirements, e.g., method and manner of
 perfection under Article 9, must be complied with under those other laws.  See
 Comments to Section 16.

  7.  This Act does apply, in toto, to transactions under unrevised Articles 2
 and 2A.  There is every reason to validate electronic contracting in these situations.
 Sale and lease transactions do not implicate broad systems beyond the parties to the
 underlying transaction, such as are present in check collection and electronic funds
 transfers.  Further sales and leases generally do not have as far reaching effect on
 the rights of third parties beyond the contracting parties, such as exists in the
 secured transactions system.  Finally, it is in the area of sales, licenses and leases
 that electronic commerce is occurring to its greatest extent today.  To exclude these
 transactions would largely gut the purpose of this Act.

  In the event that Articles 2 and 2A are revised and adopted in the future,
 UETA will only apply to the extent provided in those Acts.

  8.  An electronic record/signature may be used for purposes of more than
 one legal requirement, or may be covered by more than one law.  Consequently, it
 is important to make clear, despite any apparent redundancy, in subsection (c) that
 an electronic record used for purposes of a law which is not affected by this Act
 under subsection (b) may nonetheless be used and validated for purposes of other
 laws not excluded by subsection (b).  For example, this Act does not apply to an
 electronic record of a check when used for purposes of a transaction governed by
 Article 4 of the Uniform Commercial Code, i.e., the Act does not validate so-called
 electronic checks.  However, for purposes of check retention statutes, the same
 electronic record of the check is covered by this Act, so that retention of an
 electronic image/record of a check will satisfy such retention statutes, so long as the
 requirements of Section 12 are fulfilled.

  In another context, subsection (c) would operate to allow this Act to apply
 to what would appear to be an excluded transaction under subsection (b).  For
 example, Article 9 of the Uniform Commercial Code applies generally to any
 transaction that creates a security interest in personal property.  However, Article 9
 excludes landlord's liens.  Accordingly, although this Act excludes from its
 application transactions subject to Article 9, this Act would apply to the creation of
 a landlord lien if the law otherwise applicable to landlord's liens did not provide
 otherwise, because the landlord's lien transaction is excluded from Article 9.

  9.  Additional exclusions under subparagraph (b)(4) should be limited to
 laws which govern electronic records and signatures which may be used in
 transactions as defined in Section 2(16).  Records used unilaterally, or which do not
 relate to business, commercial (including consumer), or governmental affairs are
 not governed by this Act in any event, and exclusion of laws relating to such
 records may create unintended inferences about whether other records and
 signatures are covered by this Act.

  It is also important that additional exclusions, if any, be incorporated under
 subsection (b)(4).  As noted in Comment 8 above, an electronic record used in a
 transaction excluded under subsection (b), e.g., a check used to pay one's taxes,
 will nonetheless be validated for purposes of other, non-excluded laws under
 subsection (c), e.g., the check when used as proof of payment.  It is critical that
 additional exclusions, if any, be incorporated into subsection (b) so that the salutary
 effect of subsection (c) apply to validate those records in other, non-excluded
 transactions.  While a legislature may determine that a particular notice, such as a
 utility shutoff notice, be provided to a person in writing on paper, it is difficult to
 see why the utility should not be entitled to use electronic media for storage and
 evidentiary purposes.  Legislative Note Regarding Possible Additional Exclusions
 under Section 3(b)(4).

  The following discussion is derived from the Report dated September 21,
 1998 of The Task Force on State Law Exclusions (the "Task Force") presented to
 the Drafting Committee.  After consideration of the Report, the Drafting Committee
 determined that exclusions other than those specified in the Act were not warranted.
 In addition, other inherent limitations on the applicability of the Act (the definition
 of transaction, the requirement that the parties acquiesce in the use of an electronic
 format) also militate against additional exclusions.  Nonetheless, the Drafting
 Committee recognized that some legislatures may wish to exclude additional
 transactions from the Act, and determined that guidance in some major areas would
 be helpful to those legislatures considering additional areas for exclusion.

  Because of the overwhelming number of references in state law to writings
 and signatures, the following list of possible transactions is not exhaustive.
 However, they do represent those areas most commonly raised during the course of
 the drafting process as areas that might be inappropriate for an electronic medium.
 It is important to keep in mind however, that the Drafting Committee determined
 that exclusion of these additional areas was not warranted.

  1.  Trusts (other than testamentary trusts).  Trusts can be used for both
 business and personal purposes.  By virtue of the definition of transaction, trusts
 used outside the area of business and commerce would not be governed by this Act.
 With respect to business or commercial trusts, the laws governing their formation
 contain few or no requirements for paper or signatures.  Indeed, in most
 jurisdictions trusts of any kind may be created orally.  Consequently, the Drafting
 Committee believed that the Act should apply to any transaction where the law
 leaves to the parties the decision of whether to use a writing.  Thus, in the absence
 of legal requirements for writings, there is no sound reason to exclude laws
 governing trusts from the application of this Act.

  2.  Powers of Attorney.  A power of attorney is simply a formalized type of
 agency agreement.  In general, no formal requirements for paper or execution were
 found to be applicable to the validity of powers of attorney.

  Special health powers of attorney have been established by statute in some
 States.  These powers may have special requirements under state law regarding
 execution, acknowledgment and possibly notarization.  In the normal case such
 powers will not arise in a transactional context and so would not be covered by this
 Act.  However, even if such a record were to arise in a transactional context, this
 Act operates simply to remove the barrier to the use of an electronic medium, and
 preserves other requirements of applicable substantive law, avoiding any necessity
 to exclude such laws from the operation of this Act.  Especially in light of the
 provisions of Sections 8 and 11, the substantive requirements under such laws will
 be preserved and may be satisfied in an electronic format.

  3.  Real Estate Transactions.  It is important to distinguish between the
 efficacy of paper documents involving real estate between the parties, as opposed to
 their effect on third parties.  As between the parties it is unnecessary to maintain
 existing barriers to electronic contracting.  There are no unique characteristics to
 contracts relating to real property as opposed to other business and commercial
 (including consumer) contracts.  Consequently, the decision whether to use an
 electronic medium for their agreements should be a matter for the parties to
 determine.  Of course, to be effective against third parties state law generally
 requires filing with a governmental office.  Pending adoption of electronic filing
 systems by States, the need for a piece of paper to file to perfect rights against third
 parties, will be a consideration for the parties.  In the event notarization and
 acknowledgment are required under other laws, Section 11 provides a means for
 such actions to be accomplished electronically.

  With respect to the requirements of government filing, those are left to the
 individual States in the decision of whether to adopt and implement electronic
 filing systems.  (See optional Sections 17-19.)  However, government recording
 systems currently require paper deeds including notarized, manual signatures.
 Although California and Illinois are experimenting with electronic filing systems,
 until such systems become widespread, the parties likely will choose to use, at the
 least, a paper deed for filing purposes.  Nothing in this Act precludes the parties
 from selecting the medium best suited to the needs of the particular transaction.
 Parties may wish to consummate the transaction using electronic media in order to
 avoid expensive travel.  Yet the actual deed may be in paper form to assure
 compliance with existing recording systems and requirements.  The critical point is
 that nothing in this Act prevents the parties from selecting paper or electronic
 media for all or part of their transaction.

  4.  Consumer Protection Statutes.  Consumer protection provisions in
 state law often require that information be disclosed or provided to a consumer in
 writing.  Because this Act does apply to such transactions, the question of whether
 such laws should be specifically excluded was considered.  Exclusion of consumer
 transactions would eliminate a huge group of commercial transactions which
 benefit consumers by enabling the efficiency of the electronic medium.  Commerce
 over the internet is driven by consumer demands and concerns and must be

  At the same time, it is important to recognize the protective effects of many
 consumer statutes.  Consumer statutes often require that information be provided in
 writing, or may require that the consumer separately sign or initial a particular
 provision to evidence that the consumer's attention was brought to the provision.
 Subsection (1) requires electronic records to be retainable by a person whenever the
 law requires information to be delivered in writing.  The section imposes a
 significant burden on the sender of information.  The sender must assure that the
 information system of the recipient is compatible with, and capable of retaining the
 information sent by, the sender's system.  Furthermore, nothing in this Act permits
 the avoidance of legal requirements of separate signatures or initialing.  The Act
 simply permits the signature or initialing to be done electronically.

  Other consumer protection statutes require (expressly or implicitly) that
 certain information be presented in a certain manner or format.  Laws requiring
 information to be presented in particular fonts, formats or in similar fashion, as well
 as laws requiring conspicuous displays of information are preserved.  Section
 8(b)(3) specifically preserves the applicability of such requirements in an electronic
 environment.  In the case of legal requirements that information be presented or
 appear conspicuous, the determination of what is conspicuous will be left to other
 law.  Section 8 was included to specifically preserve the protective functions of
 such disclosure statutes, while at the same time allowing the use of electronic
 media if the substantive requirements of the other laws could be satisfied in the
 electronic medium.

  Formatting and separate signing requirements serve a critical purpose in
 much consumer protection legislation, to assure that information is not slipped past
 the unsuspecting consumer.  Not only does this Act not disturb those requirements,
 it preserves those requirements.  In addition, other bodies of substantive law
 continue to operate to allow the courts to police any such bad conduct or
 overreaching, e.g., unconscionability, fraud, duress, mistake and the like.  These
 bodies of law remain applicable regardless of the medium in which a record

  The requirement that both parties agree to conduct a transaction
 electronically also prevents the imposition of an electronic medium on unwilling
 parties See Section 5(b).  In addition, where the law requires inclusion of specific
 terms or language, those requirements are preserved broadly by Section 5(e).

  Requirements that information be sent to, or received by, someone have
 been preserved in Section 15.  As in the paper world, obligations to send do not
 impose any duties on the sender to assure receipt, other than reasonable methods of
 dispatch.  In those cases where receipt is required legally, Sections 5, 8, and 15
 impose the burden on the sender to assure delivery to the recipient if satisfaction of
 the legal requirement is to be fulfilled.

  The preservation of existing safeguards, together with the ability to opt out
 of the electronic medium entirely, demonstrate the lack of any need generally to
 exclude consumer protection laws from the operation of this Act.  Legislatures may
 wish to focus any review on those statutes which provide for post-contract
 formation and post-breach notices to be in paper.  However, any such consideration
 must also balance the needed protections against the potential burdens which may
 be imposed.  Consumers and others will not be well served by restrictions which
 preclude the employment of electronic technologies sought and desired by

   SECTION 4.  PROSPECTIVE APPLICATION.  This [Act] applies to
 anyelectronic record or electronic signature created, generated, sent, communicated,
 received, or stored on or after the effective date of this [Act].
  This section makes clear that the Act only applies to validate electronic
 records and signatures which arise subsequent to the effective date of the Act.
 Whether electronic records and electronic signatures arising before the effective
 date of this Act are valid is left to other law.

  (a)  This [Act] does not require a record or signature to be created,
 generated, sent, communicated, received, stored, or otherwise processed or used by
 electronic means or in electronic form.
  (b)  This [Act] applies only to transactions between parties each of which
 has agreed to conduct transactions by electronic means.  Whether the parties agree
 to conduct a transaction by electronic means is determined from the context and
 surrounding circumstances, including the parties' conduct.
  (c)  A party that agrees to conduct a transaction by electronic means may
 refuse to conduct other transactions by electronic means.  The right granted by this
 subsection may not be waived by agreement.
  (d)  Except as otherwise provided in this [Act], the effect of any of its
 provisions may be varied by agreement.  The presence in certain provisions of this
 [Act] of the words "unless otherwise agreed", or words of similar import, does not
 imply that the effect of other provisions may not be varied by agreement.
  (e)  Whether an electronic record or electronic signature has legal
 consequences is determined by this [Act] and other applicable law.
  This section limits the applicability of this Act to transactions which parties
 have agreed to conduct electronically.  Broad interpretation of the term agreement
 is necessary to assure that this Act has the widest possible application consistent
 with its purpose of removing barriers to electronic commerce.

  1.  This section makes clear that this Act is intended to facilitate the use of
 electronic means, but does not require the use of electronic records and signatures.
 This fundamental principle is set forth in subsection (a) and elaborated by
 subsections (b) and (c), which require an intention to conduct transactions
 electronically and preserve the right of a party to refuse to use electronics in any
 subsequent transaction.

  2.  The paradigm of this Act is two willing parties doing transactions
 electronically.  It is therefore appropriate that the Act is voluntary and preserves the
 greatest possible party autonomy to refuse electronic transactions.  The requirement
 that party agreement be found from all the surrounding circumstances is a
 limitation on the scope of this Act.

  3.  If this Act is to serve to facilitate electronic transactions, it must be
 applicable under circumstances not rising to a full fledged contract to use
 electronics.  While absolute certainty can be accomplished by obtaining an explicit
 contract before relying on electronic transactions, such an explicit contract should
 not be necessary before one may feel safe in conducting transactions electronically.
 Indeed, such a requirement would itself be an unreasonable barrier to electronic
 commerce, at odds with the fundamental purpose of this Act.  Accordingly, the
 requisite agreement, express or implied, must be determined from all available
 circumstances and evidence.

  4.  Subsection (b) provides that the Act applies to transactions in which the
 parties have agreed to conduct the transaction electronically.  In this context it is
 essential that the parties' actions and words be broadly construed in determining
 whether the requisite agreement exists.  Accordingly, the Act expressly provides
 that the party's agreement is to be found from all circumstances, including the
 parties' conduct.  The critical element is the intent of a party to conduct a
 transaction electronically.  Once that intent is established, this Act applies.  See
 Restatement 2d Contracts, Sections 2, 3, and 19.

  Examples of circumstances from which it may be found that parties have
 reached an agreement to conduct transactions electronically include the following:

A.  Automaker and supplier enter into a Trading Partner Agreement setting
   forth the terms, conditions and methods for the conduct of business between
   them electronically.

B.  Joe gives out his business card with his business e-mail address.  It may
   be reasonable, under the circumstances, for a recipient of the card to infer that
   Joe has agreed to communicate electronically for business purposes.  However,
   in the absence of additional facts, it would not necessarily be reasonable to infer
   Joe's agreement to communicate electronically for purposes outside the scope
   of the business indicated by use of the business card.

C.  Sally may have several e-mail addresses   home, main office, office of a
   non-profit organization on whose board Sally sits.  In each case, it may be
   reasonable to infer that Sally is willing to communicate electronically with
   respect to business related to the business/purpose associated with the
   respective e-mail addresses.  However, depending on the circumstances, it may
   not be reasonable to communicate with Sally for purposes other than those
   related to the purpose for which she maintained a particular e-mail account.

D.  Among the circumstances to be considered in finding an agreement
   would be the time when the assent occurred relative to the timing of the use of
   electronic communications.  If one orders books from an on-line vendor, such
   as Bookseller.com, the intention to conduct that transaction and to receive any
   correspondence related to the transaction electronically can be inferred from the
   conduct.  Accordingly, as to information related to that transaction it is
   reasonable for Bookseller to deal with the individual electronically.

 The examples noted above are intended to focus the inquiry on the party's
 agreement to conduct a transaction electronically.  Similarly, if two people are at a
 meeting and one tells the other to send an e-mail to confirm a transaction   the
 requisite agreement under subsection (b) would exist.  In each case, the use of a
 business card, statement at a meeting, or other evidence of willingness to conduct a
 transaction electronically must be viewed in light of all the surrounding
 circumstances with a view toward broad validation of electronic transactions.

  5.  Just as circumstances may indicate the existence of agreement, express
 or implied from surrounding circumstances, circumstances may also demonstrate
 the absence of true agreement.  For example:

A.  If Automaker, Inc. were to issue a recall of automobiles via its Internet
   website, it would not be able to rely on this Act to validate that notice in the
   case of a person who never logged on to the website, or indeed, had no ability
   to do so, notwithstanding a clause in a paper purchase contract by which the
   buyer agreed to receive such notices in such a manner.

B.  Buyer executes a standard form contract in which an agreement to
   receive all notices electronically in set forth on page 3 in the midst of other fine
   print.  Buyer has never communicated with Seller electronically, and has not
   provided any other information in the contract to suggest a willingness to deal
   electronically.  Not only is it unlikely that any but the most formalistic of
   agreements may be found, but nothing in this Act prevents courts from policing
   such form contracts under common law doctrines relating to contract formation,
   unconscionability and the like.

  6.  Subsection (c) has been added to make clear the ability of a party to
 refuse to conduct a transaction electronically, even if the person has conducted
 transactions electronically in the past.  The effectiveness of a party's refusal to
 conduct a transaction electronically will be determined under other applicable law
 in light of all surrounding circumstances.  Such circumstances must include an
 assessment of the transaction involved.

  A party's right to decline to act electronically under a specific contract, on
 the ground that each action under that contract amounts to a separate "transaction,"
 must be considered in light of the purpose of the contract and the action to be taken
 electronically.  For example, under a contract for the purchase of goods, the giving
 and receipt of notices electronically, as provided in the contract, should not be
 viewed as discreet transactions.  Rather such notices amount to separate actions
 which are part of the "transaction" of purchase evidenced by the contract.
 Allowing one party to require a change of medium in the middle of the transaction
 evidenced by that contract is not the purpose of this subsection.  Rather this
 subsection is intended to preserve the party's right to conduct the next purchase in a
 non-electronic medium.

  7.  Subsection (e) is an essential provision in the overall scheme of this Act.
 While this Act validates and effectuates electronic records and electronic
 signatures, the legal effect of such records and signatures is left to existing
 substantive law outside this Act except in very narrow circumstances.  See, e.g.,
 Section 16.  Even when this Act operates to validate records and signatures in an
 electronic medium, it expressly preserves the substantive rules of other law
 applicable to such records.  See, e.g., Section 11.

  For example, beyond validation of records, signatures and contracts based
 on the medium used, Section 7 (a) and (b) should not be interpreted as establishing
 the legal effectiveness of any given record, signature or contract.  Where a rule of
 law requires that the record contain minimum substantive content, the legal effect
 of such a record will depend on whether the record meets the substantive
 requirements of other applicable law.

  Section 8 expressly preserves a number of legal requirements in currently
 existing law relating to the presentation of information in writing.  Although this
 Act now would allow such information to be presented in an electronic record,
 Section 8 provides that the other substantive requirements of law must be satisfied
 in the electronic medium as well.

 be construed and applied:
  (1) to facilitate electronic transactions consistent with other applicable law;
  (2) to be consistent with reasonable practices concerning electronic
 transactions and with the continued expansion of those practices; and
  (3) to effectuate its general purpose to make uniform the law with respect to
 the subject of this [Act] among States enacting it.
  1.  The purposes and policies of this Act are

  (a) to facilitate and promote commerce and governmental transactions by
 validating and authorizing the use of electronic records and electronic signatures;

  (b) to eliminate barriers to electronic commerce and governmental
 transactions resulting from uncertainties relating to writing and signature

  (c) to simplify, clarify and modernize the law governing commerce and
 governmental transactions through the use of electronic means;

  (d) to permit the continued expansion of commercial and governmental
 electronic practices through custom, usage and agreement of the parties;

  (e) to promote uniformity of the law among the States (and worldwide)
 relating to the use of electronic and similar technological means of effecting and
 performing commercial and governmental transactions;

  (f) to promote public confidence in the validity, integrity and reliability of
 electronic commerce and governmental transactions; and

  (g) to promote the development of the legal and business infrastructure
 necessary to implement electronic commerce and governmental transactions.

  2.  This Act has been drafted to permit flexible application consistent with
 its purpose to validate electronic transactions.  The provisions of this Act validating
 and effectuating the employ of electronic media allow the courts to apply them to
 new and unforeseen technologies and practices.  As time progresses, it is
 anticipated that what is new and unforeseen today will be commonplace tomorrow.
 Accordingly, this legislation is intended to set a framework for the validation of
 media which may be developed in the future and which demonstrate the same
 qualities as the electronic media contemplated and validated under this Act.

  (a)  A record or signature may not be denied legal effect or enforceability
 solely because it is in electronic form.
  (b)  A contract may not be denied legal effect or enforceability solely
 because an electronic record was used in its formation.
  (c)  If a law requires a record to be in writing, an electronic record satisfies
 the law.
  (d)  If a law requires a signature, an electronic signature satisfies the law.
 Source:  UNCITRAL Model Law on Electronic Commerce, Articles 5, 6, and 7.

  1.  This section sets forth the fundamental premise of this Act: namely, that
 the medium in which a record, signature, or contract is created, presented or
 retained does not affect it's legal significance.  Subsections (a) and (b) are designed
 to eliminate the single element of medium as a reason to deny effect or
 enforceability to a record, signature, or contract.  The fact that the information is set
 forth in an electronic, as opposed to paper, record is irrelevant.

  2.  Under Restatement 2d Contracts Section 8, a contract may have legal
 effect and yet be unenforceable.  Indeed, one circumstance where a record or
 contract may have effect but be unenforceable is in the context of the Statute of
 Frauds.  Though a contract may be unenforceable, the records may have collateral
 effects, as in the case of a buyer that insures goods purchased under a contract
 unenforceable under the Statute of Frauds.  The insurance company may not deny a
 claim on the ground that the buyer is not the owner, though the buyer may have no
 direct remedy against seller for failure to deliver.  See Restatement 2d Contracts,
 Section 8, Illustration 4.

  While this section would validate an electronic record for purposes of a
 statute of frauds, if an agreement to conduct the transaction electronically cannot
 reasonably be found (See Section 5(b)) then a necessary predicate to the
 applicability of this Act would be absent and this Act would not validate the
 electronic record.  Whether the electronic record might be valid under other law is
 not addressed by this Act.

  3.  Subsections (c) and (d) provide the positive assertion that electronic
 records and signatures satisfy legal requirements for writings and signatures.  The
 provisions are limited to requirements in laws that a record be in writing or be
 signed.  This section does not address requirements imposed by other law in
 addition to requirements for writings and signatures  See, e.g., Section 8.

  Subsections (c) and (d) are particularized applications of subsection (a).
 The purpose is to validate and effectuate electronic records and signatures as the
 equivalent of writings, subject to all of the rules applicable to the efficacy of a
 writing, except as such other rules are modified by the more specific provisions of
 this Act.

Illustration 1:  A sends the following e-mail to B: "I hereby offer to buy
   widgets from you, delivery next Tuesday. /s/ A."  B responds with the
   following e-mail:  "I accept your offer to buy widgets for delivery next
   Tuesday. /s/ B."  The e-mails may not be denied effect solely because they are
   electronic.  In addition, the e-mails do qualify as records under the Statute of
   Frauds.  However, because there is no quantity stated in either record, the
   parties' agreement would be unenforceable under existing UCC Section

Illustration 2:  A sends the following e-mail to B: "I hereby offer to buy
   100 widgets for $1000, delivery next Tuesday. /s/ A."  B responds with the
   following e-mail: "I accept your offer to purchase 100 widgets for $1000,
   delivery next Tuesday. /s/ B."  In this case the analysis is the same as in
   Illustration 1 except that here the records otherwise satisfy the requirements of
   UCC Section 2-201(1).  The transaction may not be denied legal effect solely
   because there is not a pen and ink "writing" or "signature".

  4.  Section 8 addresses additional requirements imposed by other law which
 may affect the legal effect or enforceability of an electronic record in a particular
 case.  For example, in Section 8(a) the legal requirement addressed is the provision
 of information in writing.  The section then sets forth the standards to be applied in
 determining whether the provision of information by an electronic record is the
 equivalent of the provision of information in writing.  The requirements in Section
 8 are in addition to the bare validation that occurs under this section.

  5.  Under the substantive law applicable to a particular transaction within
 this Act, the legal effect of an electronic record may be separate from the issue of
 whether the record contains a signature.  For example, where notice must be given
 as part of a contractual obligation, the effectiveness of the notice will turn on
 whether the party provided the notice regardless of whether the notice was signed
 (See Section 15).  An electronic record attributed to a party under Section 9 and
 complying with the requirements of Section 15 would suffice in that case,
 notwithstanding that it may not contain an electronic signature.

  (a)  If parties have agreed to conduct a transaction by electronic means and a
 law requires a person to provide, send, or deliver information in writing to another
 person, the requirement is satisfied if the information is provided, sent, or
 delivered, as the case may be, in an electronic record capable of retention by the
 recipient at the time of receipt.  An electronic record is not capable of retention by
 the recipient if the sender or its information processing system inhibits the ability of
 the recipient to print or store the electronic record.
  (b)  If a law other than this [Act] requires a record (i) to be posted or
 displayed in a certain manner, (ii) to be sent, communicated, or transmitted by a
 specified method, or (iii) to contain information that is formatted in a certain
 manner, the following rules apply:
(1)  The record must be posted or displayed in the manner specified in
 the other law.
(2)  Except as otherwise provided in subsection (d)(2), the record must
 be sent, communicated, or transmitted by the method specified in the other law.
(3)  The record must contain the information formatted in the manner
 specified in the other law.
  (c)  If a sender inhibits the ability of a recipient to store or print an
 electronic record, the electronic record is not enforceable against the recipient.
  (d)  The requirements of this section may not be varied by agreement, but:
(1) to the extent a law other than this [Act] requires information to be
 provided, sent, or delivered in writing but permits that requirement to be varied by
 agreement, the requirement under subsection (a) that the information be in the form
 of an electronic record capable of retention may also be varied by agreement; and
(2) a requirement under a law other than this [Act] to send,
 communicate, or transmit a record by [first-class mail, postage prepaid] [regular
 United States mail], may be varied by agreement to the extent permitted by the
 other law.
 Source:  Canadian   Uniform Electronic Commerce Act

  1.  This section is a savings provision, designed to assure, consistent with
 the fundamental purpose of this Act, that otherwise applicable substantive law will
 not be overridden by this Act.  The section makes clear that while the pen and ink
 provisions of such other law may be satisfied electronically, nothing in this Act
 vitiates the other requirements of such laws.  The section addresses a number of
 issues related to disclosures and notice provisions in other laws.

  2.  This section is independent of the prior section.  Section 7 refers to legal
 requirements for a writing.  This section refers to legal requirements for the
 provision of information in writing or relating to the method or manner of
 presentation or delivery of information.  The section addresses more specific legal
 requirements of other laws, provides standards for satisfying the more particular
 legal requirements, and defers to other law for satisfaction of requirements under
 those laws.

  3.  Under subsection (a), to meet a requirement of other law that information
 be provided in writing, the recipient of an electronic record of the information must
 be able to get to the electronic record and read it, and must have the ability to get
 back to the information in some way at a later date.  Accordingly, the section
 requires that the electronic record be capable of retention for later review.

  The section specifically provides that any inhibition on retention imposed
 by the sender or the sender's system will preclude satisfaction of this section.  Use
 of technological means now existing or later developed which prevents the
 recipient from retaining a copy the information would result in a determination that
 information has not been provided under subsection (a).  The policies underlying
 laws requiring the provision of information in writing warrant the imposition of an
 additional burden on the sender to make the information available in a manner
 which will permit subsequent reference.  A difficulty does exist for senders of
 information because of the disparate systems of their recipients and the capabilities
 of those systems.  However, in order to satisfy the legal requirement of other law to
 make information available, the sender must assure that the recipient receives and
 can retain the information.  However, it is left for the courts to determine whether
 the sender has complied with this subsection if evidence demonstrates that it is
 something peculiar the recipient's system which precludes subsequent reference to
 the information.

  4.  Subsection (b) is a savings provision for laws which provide for the
 means of delivering or displaying information and which are not affected by the
 Act.  For example, if a law requires delivery of notice by first class US mail, that
 means of delivery would not be affected by this Act.  The information to be
 delivered may be provided on a disc, i.e., in electronic form, but the particular
 means of delivery must still be via the US postal service.  Display, delivery and
 formatting requirements will continue to be applicable to electronic records and
 signatures.  If those legal requirements can be satisfied in an electronic medium,
 e.g., the information can be presented in the equivalent of 20 point bold type as
 required by other law, this Act will validate the use of the medium, leaving to the
 other applicable law the question of whether the particular electronic record meets
 the other legal requirements.  If a law requires that particular records be delivered
 together, or attached to other records, this Act does not preclude the delivery of the
 records together in an electronic communication, so long as the records are
 connected or associated with each other in a way determined to satisfy the other

  5.  Subsection (c) provides incentives for senders of information to use
 systems which will not inhibit the other party from retaining the information.
 However, there are circumstances where a party providing certain information may
 wish to inhibit retention in order to protect intellectual property rights or prevent
 the other party from retaining confidential information about the sender.  In such
 cases inhibition is understandable, but if the sender wishes to enforce the record in
 which the information is contained, the sender may not inhibit its retention by the
 recipient.  Unlike subsection (a), subsection (c) applies in all transactions and
 simply provides for unenforceability against the recipient.  Subsection (a) applies
 only where another law imposes the writing requirement, and subsection (a)
 imposes a broader responsibility on the sender to assure retention capability by the

  6.  The protective purposes of this section justify the non-waivability
 provided by subsection (d).  However, since the requirements for sending and
 formatting and the like are imposed by other law, to the extent other law permits
 waiver of such protections, there is no justification for imposing a more severe
 burden in an electronic environment.

  (a)  An electronic record or electronic signature is attributable to a person if
 it was the act of the person.  The act of the person may be shown in any manner,
 including a showing of the efficacy of any security procedure applied to determine
 the person to which the electronic record or electronic signature was attributable.
  (b)  The effect of an electronic record or electronic signature attributed to a
 person under subsection (a) is determined from the context and surrounding
 circumstances at the time of its creation, execution, or adoption, including the
 parties' agreement, if any, and otherwise as provided by law.
  1.  Under subsection (a), so long as the electronic record or electronic
 signature resulted from a person's action it will be attributed to that person   the
 legal effect of that attribution is addressed in subsection (b).  This section does not
 alter existing rules of law regarding attribution.  The section assures that such rules
 will be applied in the electronic environment.  A person's actions include actions
 taken by human agents of the person, as well as actions taken by an electronic
 agent, i.e., the tool, of the person.  Although the rule may appear to state the
 obvious, it assures that the record or signature is not ascribed to a machine, as
 opposed to the person operating or programing the machine.

  In each of the following cases, both the electronic record and electronic
 signature would be attributable to a person under subsection (a):

A.  The person types his/her name as part of an e-mail purchase order;

B.  The person's employee, pursuant to authority, types the person's name
   as part of an e-mail purchase order;

C.  The person's computer, programmed to order goods upon receipt of
   inventory information within particular parameters, issues a purchase order
   which includes the person's name, or other identifying information, as part of
   the order.

 In each of the above cases, law other than this Act would ascribe both the signature
 and the action to the person if done in a paper medium.  Subsection (a) expressly
 provides that the same result will occur when an electronic medium is used.

  2.  Nothing in this section affects the use of a signature as a device for
 attributing a record to a person.  Indeed, a signature is often the primary method for
 attributing a record to a person.  In the foregoing examples, once the electronic
 signature is attributed to the person, the electronic record would also be attributed
 to the person, unless the person established fraud, forgery, or other invalidating
 cause.  However, a signature is not the only method for attribution.

  3.  The use of facsimile transmissions provides a number of examples of
 attribution using information other than a signature.  A facsimile may be attributed
 to a person because of the information printed across the top of the page that
 indicates the machine from which it was sent.  Similarly, the transmission may
 contain a letterhead which identifies the sender.  Some cases have held that the
 letterhead actually constituted a signature because it was a symbol adopted by the
 sender with intent to authenticate the facsimile.  However, the signature
 determination resulted from the necessary finding of intention in that case.  Other
 cases have found facsimile letterheads NOT to be signatures because the requisite
 intention was not present.  The critical point is that with or without a signature,
 information within the electronic record may well suffice to provide the facts
 resulting in attribution of an electronic record to a particular party.

  In the context of attribution of records, normally the content of the record
 will provide the necessary information for a finding of attribution.  It is also
 possible that an established course of dealing between parties may result in a
 finding of attribution  Just as with a paper record, evidence of forgery or
 counterfeiting may be introduced to rebut the evidence of attribution.

  4.  Certain information may be present in an electronic environment that
 does not appear to attribute but which clearly links a person to a particular record.
 Numerical codes, personal identification numbers, public and private key
 combinations all serve to establish the party to whom an electronic record should be
 attributed.  Of course security procedures will be another piece of evidence
 available to establish attribution.

  The inclusion of a specific reference to security procedures as a means of
 proving attribution is salutary because of the unique importance of security
 procedures in the electronic environment.  In certain processes, a technical and
 technological security procedure may be the best way to convince a trier of fact that
 a particular electronic record or signature was that of a particular person.  In certain
 circumstances, the use of a security procedure to establish that the record and
 related signature came from the person's business might be necessary to overcome
 a claim that a hacker intervened.  The reference to security procedures is not
 intended to suggest that other forms of proof of attribution should be accorded less
 persuasive effect.  It is also important to recall that the particular strength of a given
 procedure does not affect the procedure's status as a security procedure, but only
 affects the weight to be accorded the evidence of the security procedure as tending
 to establish attribution.

  5.  This section does apply in determining the effect of a "click-through"
 transaction.  A "click-through" transaction involves a process which, if executed
 with an intent to "sign," will be an electronic signature.  See definition of
 Electronic Signature.  In the context of an anonymous "click-through," issues of
 proof will be paramount.  This section will be relevant to establish that the resulting
 electronic record is attributable to a particular person upon the requisite proof,
 including security procedures which may track the source of the click-through.

  6.  Once it is established that a record or signature is attributable to a
 particular party, the effect of a record or signature must be determined in light of
 the context and surrounding circumstances, including the parties' agreement, if any.
 Also informing the effect of any attribution will be other legal requirements
 considered in light of the context.  Subsection (b) addresses the effect of the record
 or signature once attributed to a person.

   SECTION 10.  EFFECT OF CHANGE OR ERROR.  If a change or error in
 an electronic record occurs in a transmission between parties to a transaction, the
 following rules apply:
   (1)  If the parties have agreed to use a security procedure to detect changes
 or errors and one party has conformed to the procedure, but the other party has not,
 and the nonconforming party would have detected the change or error had that
 party also conformed, the conforming party may avoid the effect of the changed or
 erroneous electronic record.
  (2)  In an automated transaction involving an individual, the individual may
 avoid the effect of an electronic record that resulted from an error made by the
 individual in dealing with the electronic agent of another person if the electronic
 agent did not provide an opportunity for the prevention or correction of the error
 and, 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
(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; and
(C) has not used or received any benefit or value from the consideration,
 if any, received from the other person.
  (3)  If neither paragraph (1) nor paragraph (2) applies, the change or error
 has the effect provided by other law, including the law of mistake, and the parties'
 contract, if any.
  (4)  Paragraphs (2) and (3) may not be varied by agreement.
 Source:  Restatement 2d Contracts, Sections 152-155.

  1.  This section is limited to changes and errors occurring in transmissions
 between parties   whether person-person (paragraph 1) or in an automated
 transaction involving an individual and a machine (paragraphs 1 and 2).  The
 section focuses on the effect of changes and errors occurring when records are
 exchanged between parties.  In cases where changes and errors occur in contexts
 other than transmission, the law of mistake is expressly made applicable to resolve
 the conflict.

  The section covers both changes and errors.  For example, if Buyer sends a
 message to Seller ordering 100 widgets, but Buyer's information processing system
 changes the order to 1000 widgets, a "change" has occurred between what Buyer
 transmitted and what Seller received.  If on the other hand, Buyer typed in 1000
 intending to order only 100, but sent the message before noting the mistake, an
 error would have occurred which would also be covered by this section.

  2.  Paragraph (1) deals with any transmission where the parties have agreed
 to use a security procedure to detect changes and errors.  It operates against the
 non-conforming party, i.e., the party in the best position to have avoided the change
 or error, regardless of whether that person is the sender or recipient.  The source of
 the error/change is not indicated, and so both human and machine errors/changes
 would be covered.  With respect to errors or changes that would not be detected by
 the security procedure even if applied, the parties are left to the general law of
 mistake to resolve the dispute.

  3.  Paragraph (1) applies only in the situation where a security procedure
 would detect the error/change but one party fails to use the procedure and does not
 detect the error/change.  In such a case, consistent with the law of mistake
 generally, the record is made avoidable at the instance of the party who took all
 available steps to avoid the mistake.  See Restatement 2d Contracts Sections

  Making the erroneous record avoidable by the conforming party is
 consistent with Sections 153 and 154 of the Restatement 2d Contracts because the
 non-conforming party was in the best position to avoid the problem, and would
 bear the risk of mistake.  Such a case would constitute mistake by one party.  The
 mistaken party (the conforming party) would be entitled to avoid any resulting
 contract under Section 153 because s/he does not have the risk of mistake and the
 non-conforming party had reason to know of the mistake.

  4.  As with paragraph (1), paragraph (2), when applicable, allows the
 mistaken party to avoid the effect of the erroneous electronic record.  However, the
 subsection is limited to human error on the part of an individual when dealing with
 the electronic agent of the other party.  In a transaction between individuals there is
 a greater ability to correct the error before parties have acted on it.  However, when
 an individual makes an error while dealing with the electronic agent of the other
 party, it may not be possible to correct the error before the other party has shipped
 or taken other action in reliance on the erroneous record.

  Paragraph (2) applies only to errors made by individuals.  If the error results
 from the electronic agent, it would constitute a system error.  In such a case the
 effect of that error would be resolved under paragraph (1) if applicable, otherwise
 under paragraph (3) and the general law of mistake.

  5.  The party acting through the electronic agent/machine is given incentives
 by this section to build in safeguards which enable the individual to prevent the
 sending of an erroneous record, or correct the error once sent.  For example, the
 electronic agent may be programed to provide a "confirmation screen" to the
 individual setting forth all the information the individual initially approved.  This
 would provide the individual with the ability to prevent the erroneous record from
 ever being sent.  Similarly, the electronic agent might receive the record sent by the
 individual and then send back a confirmation which the individual must again
 accept before the transaction is completed.  This would allow for correction of an
 erroneous record.  In either case, the electronic agent would "provide an
 opportunity for prevention or correction of the error," and the subsection would not
 apply.  Rather, the affect of any error is governed by other law.

  6.  Paragraph (2) also places additional requirements on the mistaken
 individual before the paragraph may be invoked to avoid an erroneous electronic
 record.  The individual must take prompt action to advise the other party of the
 error and the fact that the individual did not intend the electronic record.  Whether
 the action is prompt must be determined from all the circumstances including the
 individual's ability to contact the other party.  The individual should advise the
 other party both of the error and of the lack of intention to be bound (i.e.,
 avoidance) by the electronic record received.  Since this provision allows avoidance
 by the mistaken party, that party should also be required to expressly note that it is
 seeking to avoid the electronic record, i.e., lacked the intention to be bound.

  Second, restitution is normally required in order to undo a mistaken
 transaction.  Accordingly, the individual must also return or destroy any
 consideration received, adhering to instructions from the other party in any case.
 This is to assure that the other party retains control over the consideration sent in

  Finally, and most importantly in regard to transactions involving
 intermediaries which may be harmed because transactions cannot be unwound, the
 individual cannot have received any benefit from the transaction.  This section
 prevents a party from unwinding a transaction after the delivery of value and
 consideration which cannot be returned or destroyed.  For example, if the
 consideration received is information, it may not be possible to avoid the benefit
 conferred.  While the information itself could be returned, mere access to the
 information, or the ability to redistribute the information would constitute a benefit
 precluding the mistaken party from unwinding the transaction.  It may also occur
 that the mistaken party receives consideration which changes in value between the
 time of receipt and the first opportunity to return.  In such a case restitution cannot
 be made adequately, and the transaction would not be avoidable.  In each of the
 foregoing cases, under subparagraph (2)(c), the individual would have received the
 benefit of the consideration and would NOT be able to avoid the erroneous
 electronic record under this section.

  7.  In all cases not covered by paragraphs (1) or (2), where error or change
 to a record occur, the parties contract, or other law, specifically including the law of
 mistake, applies to resolve any dispute.  In the event that the parties' contract and
 other law would achieve different results, the construction of the parties' contract is
 left to the other law.  If the error occurs in the context of record retention, Section
 12 will apply.  In that case the standard is one of accuracy and retrievability of the

  8.  Paragraph (4) makes the error correction provision in paragraph (2) and
 the application of the law of mistake in paragraph (3) non-variable.  Paragraph (2)
 provides incentives for parties using electronic agents to establish safeguards for
 individuals dealing with them.  It also avoids unjustified windfalls to the individual
 by erecting stringent requirements before the individual may exercise the right of
 avoidance under the paragraph.  Therefore, there is no reason to permit parties to
 avoid the paragraph by agreement.  Rather, parties should satisfy the paragraph's

 requires a signature or record to be notarized, acknowledged, verified, or made
 under oath, 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 or logically associated with the
 signature or record.
  This section permits a notary public and other authorized officers to act
 electronically, effectively removing the stamp/seal requirements.  However, the
 section does not eliminate any of the other requirements of notarial laws, and
 consistent with the entire thrust of this Act, simply allows the signing and
 information to be accomplished in an electronic medium.

  For example, Buyer wishes to send a notarized Real Estate Purchase
 Agreement to Seller via e-mail.  The notary must appear in the room with the
 Buyer, satisfy him/herself as to the identity of the Buyer, and swear to that
 identification.  All that activity must be reflected as part of the electronic Purchase
 Agreement and the notary's electronic signature must appear as a part of the
 electronic real estate purchase contract.

  As another example, Buyer seeks to send Seller an affidavit averring defects
 in the products received.  A court clerk, authorized under state law to administer
 oaths, is present with Buyer in a room.  The Clerk administers the oath and includes
 the statement of the oath, together with any other requisite information, in the
 electronic record to be sent to the Seller.  Upon administering the oath and
 witnessing the application of Buyer's electronic signature to the electronic record,
 the Clerk also applies his electronic signature to the electronic record.  So long as
 all substantive requirements of other applicable law have been fulfilled and are
 reflected in the electronic record, the sworn electronic record of Buyer is as
 effective as if it had been transcribed on paper.

  (a)  If a law requires that a record be retained, the requirement is satisfied by
 retaining an electronic record of the information in the record which:
(1) accurately reflects the information set forth in the record after it was
 first generated in its final form as an electronic record or otherwise; and
(2) remains accessible for later reference.
  (b)  A requirement to retain a record in accordance with subsection (a) does
 not apply to any information the sole purpose of which is to enable the record to be
 sent, communicated, or received.
  (c)  A person may satisfy subsection (a) by using the services of another
 person if the requirements of that subsection are satisfied.
  (d)  If a law requires a record to be presented or retained in its original form,
 or provides consequences if the record is not presented or retained in its original
 form, that law is satisfied by an electronic record retained in accordance with
 subsection (a).
  (e)  If a law requires retention of a check, that requirement is satisfied by
 retention of an electronic record of the information on the front and back of the
 check in accordance with subsection (a).
  (f)  A record retained as an electronic record in accordance with subsection
 (a) satisfies a law requiring a person to retain a record for evidentiary, audit, or like
 purposes, unless a law enacted after the effective date of this [Act] specifically
 prohibits the use of an electronic record for the specified purpose.
  (g)  This section does not preclude a governmental agency of this State from
 specifying additional requirements for the retention of a record subject to the
 agency's jurisdiction.
 Source:  UNCITRAL Model Law On Electronic Commerce Articles 8 and 10.

  1.  This section deals with the serviceability of electronic records as retained
 records and originals.  So long as there exists reliable assurance that the electronic
 record accurately reproduces the information, this section continues the theme of
 establishing the functional equivalence of electronic and paper-based records.  This
 is consistent with Fed.R.Evid. 1001(3) and Unif.R.Evid. 1001(3) (1974).  This
 section assures that information stored electronically will remain effective for all
 audit, evidentiary, archival and similar purposes.

  2.  In an electronic medium, the concept of an original document is
 problematic.  For example, as one drafts a document on a computer the "original" is
 either on a disc or the hard drive to which the document has been initially saved.  If
 one periodically saves the draft, the fact is that at times a document may be first
 saved to disc then to hard drive, and at others vice versa.  In such a case the
 "original" may change from the information on the disc to the information on the
 hard drive.  Indeed, it may be argued that the "original" exists solely in RAM and,
 in a sense, the original is destroyed when a "copy" is saved to a disc or to the hard
 drive.  In any event, in the context of record retention, the concern focuses on the
 integrity of the information, and not with its "originality."

  3.  Subsection (a) requires accuracy and the ability to access at a later time.
 The requirement of accuracy is derived from the Uniform and Federal Rules of
 Evidence.  The requirement of continuing accessibility addresses the issue of
 technology obsolescence and the need to update and migrate information to
 developing systems.  It is not unlikely that within the span of 5-10 years (a period
 during which retention of much information is required) a corporation may evolve
 through one or more generations of technology.  More to the point, this technology
 may be incompatible with each other necessitating the reconversion of information
 from one system to the other.

  For example, certain operating systems from the early 1980's, e.g., memory
 typewriters, became obsolete with the development of personal computers.  The
 information originally stored on the memory typewriter would need to be converted
 to the personal computer system in a way meeting the standards for accuracy
 contemplated by this section.  It is also possible that the medium on which the
 information is stored is less stable.  For example, information stored on floppy
 discs is generally less stable, and subject to a greater threat of disintegration, that
 information stored on a computer hard drive.  In either case, the continuing
 accessibility issue must be satisfied to validate information stored by electronic
 means under this section.

  This section permits parties to convert original written records to electronic
 records for retention so long as the requirements of subsection (a) are satisfied.
 Accordingly, in the absence of specific requirements to retain written records,
 written records may be destroyed once saved as electronic records satisfying the
 requirements of this section.

  The subsection refers to the information contained in an electronic record,
 rather than relying on the term electronic record, as a matter of clarity that the
 critical aspect in retention is the information itself.  What information must be
 retained is determined by the purpose for which the information is needed.  If the
 addressing and pathway information regarding an e-mail is relevant, then that
 information should also be retained.  However if it is the substance of the e-mail
 that is relevant, only that information need be retained.  Of course, wise record
 retention would include all such information since what information will be
 relevant at a later time will not be known.

  4.  Subsections (b) and (c) simply make clear that certain ancillary
 information or the use of third parties, does not affect the serviceability of records
 and information retained electronically.  Again, the relevance of particular
 information will not be known until that information is required at a subsequent

  5.  Subsection (d) continues the theme of the Act as validating electronic
 records as originals where the law requires retention of an original.  The validation
 of electronic records and electronic information as originals is consistent with the
 Uniform Rules of Evidence.  See Uniform Rules of Evidence 1001(3), 1002, 1003
 and 1004.

  6.  Subsection (e) specifically addresses particular concerns regarding check
 retention statutes in many jurisdictions.  A Report compiled by the Federal Reserve
 Bank of Boston identifies hundreds of state laws which require the retention or
 production of original canceled checks.  Such requirements preclude banks and
 their customers from realizing the benefits and efficiencies related to truncation
 processes otherwise validated under current law.  The benefits to banks and their
 customers from electronic check retention are effectuated by this provision.

  7.  Subsections (f) and (g) generally address other record retention statutes.
 As with check retention, all businesses and individuals may realize significant
 savings from electronic record retention.  So long as the standards in Section 12 are
 satisfied, this section permits all parties to obtain those benefits.  As always the
 government may require records in any medium, however, these subsections
 require a governmental agency to specifically identify the types of records and
 requirements that will be imposed.

 evidence of a record or signature may not be excluded solely because it is in
 electronic form.
 Source:  UNCITRAL Model Law on Electronic Commerce Article 9.

  Like Section 7, this section prevents the nonrecognition of electronic
 records and signatures solely on the ground of the media in which information is

  Nothing in this section relieves a party from establishing the necessary
 foundation for the admission of an electronic record.  See Uniform Rules of
 Evidence 1001(3), 1002,1003 and 1004.

 transaction, the following rules apply:
  (1)  A contract may be formed by the interaction of electronic agents of the
 parties, even if no individual was aware of or reviewed the electronic agents'
 actions or the resulting terms and agreements.
  (2)  A contract may be formed by the interaction of an electronic agent and
 an individual, acting on the individual's own behalf or for another person, including
 by an interaction in which the individual performs actions that the individual is free
 to refuse to perform and which the individual knows or has reason to know will
 cause the electronic agent to complete the transaction or performance.
  (3)  The terms of the contract are determined by the substantive law
 applicable to it.
 Source:  UNICTRAL Model Law on Electronic Commerce Article 11.

  1.  This section confirms that contracts can be formed by machines
 functioning as electronic agents for parties to a transaction.  It negates any claim
 that lack of human intent, at the time of contract formation, prevents contract
 formation.  When machines are involved, the requisite intention flows from the
 programing and use of the machine.  As in other cases, these are salutary provisions
 consistent with the fundamental purpose of the Act to remove barriers to electronic
 transactions while leaving the substantive law, e.g., law of mistake, law of contract
 formation, unaffected to the greatest extent possible.

  2.  The process in paragraph (2) validates an anonymous click-through
 transaction.  It is possible that an anonymous click-through process may simply
 result in no recognizable legal relationship, e.g., A goes to a person's website and
 acquires access without in any way identifying herself, or otherwise indicating
 agreement or assent to any limitation or obligation, and the owner's site grants A
 access.  In such a case no legal relationship has been created.

  On the other hand it may be possible that A's actions indicate agreement to
 a particular term.  For example, A goes to a website and is confronted by an initial
 screen which advises her that the information at this site is proprietary, that A may
 use the information for her own personal purposes, but that, by clicking below, A
 agrees that any other use without the site owner's permission is prohibited.  If A
 clicks "agree" and downloads the information and then uses the information for
 other, prohibited purposes, should not A be bound by the click? It seems the answer
 properly should be, and would be, yes.

  If the owner can show that the only way A could have obtained the
 information was from his website, and that the process to access the subject
 information required that A must have clicked the "I agree" button after having the
 ability to see the conditions on use, A has performed actions which A was free to
 refuse, which A knew would cause the site to grant her access, i.e., "complete the
 transaction."  The terms of the resulting contract will be determined under general
 contract principles, but will include the limitation on A's use of the information, as
 a condition precedent to granting her access to the information.

  3.  In the transaction set forth in Comment 2, the record of the transaction
 also will include an electronic signature.  By clicking "I agree" A adopted a process
 with the intent to "sign," i.e., bind herself to a legal obligation, the resulting record
 of the transaction.  If a "signed writing" were required under otherwise applicable
 law, this transaction would be enforceable.  If a "signed writing" were not required,
 it may be sufficient to establish that the electronic record is attributable to A under
 Section 9.  Attribution may be shown in any manner reasonable including showing
 that, of necessity, A could only have gotten the information through the process at
 the website.

  (a)  Unless otherwise agreed between the sender and the recipient, an
 electronic record is sent when it:
(1) is addressed properly or otherwise directed properly to an
 information processing system that the recipient has designated or uses for the
 purpose of receiving electronic records or information of the type sent and from
 which the recipient is able to retrieve the electronic record;
(2) is in a form capable of being processed by that system; and
(3) 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 enters
 a region of the information processing system designated or used by the recipient
 which is under the control of the recipient.
  (b)  Unless otherwise agreed between a sender and the recipient, an
 electronic record is received when:
(1) it 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 and from which the recipient is able to retrieve the electronic record;
(2) it is in a form capable of being processed by that system.
  (c)  Subsection (b) applies even if the place the information processing
 system is located is different from the place the electronic record is deemed to be
 received under subsection (d).
  (d)  Unless otherwise expressly provided in the electronic record or agreed
 between the sender and the recipient, an electronic record is deemed to be sent from
 the sender's place of business and to be received at the recipient's place of
 business.  For purposes of this subsection, the following rules apply:
(1)  If the sender or recipient has more than one place of business, the
 place of business of that person is the place having the closest relationship to the
 underlying transaction.
(2)  If the sender or the recipient does not have a place of business, the
 place of business is the sender's or recipient's residence, as the case may be.
  (e)  An electronic record is received under subsection (b) even if no
 individual is aware of its receipt.
  (f)  Receipt of an electronic acknowledgment from an information
 processing system described in subsection (b) establishes that a record was received
 but, by itself, does not establish that the content sent corresponds to the content
  (g)  If a person is aware that an electronic record purportedly sent under
 subsection (a), or purportedly received under subsection (b), was not actually sent
 or received, the legal effect of the sending or receipt is determined by other
 applicable law.  Except to the extent permitted by the other law, the requirements of
 this subsection may not be varied by agreement.
 Source:  UNCITRAL Model Law on Electronic Commerce Article 15.

  1. This section provides default rules regarding when and from where an
 electronic record is sent and when and where an electronic record is received.  This
 section does not address the efficacy of the record that is sent or received.  That is,
 whether a record is unintelligible or unusable by a recipient is a separate issue from
 whether that record was sent or received.  The effectiveness of an illegible record,
 whether it binds any party, are questions left to other law.

  2.  Subsection (a) furnishes rules for determining when an electronic record
 is sent.  The effect of the sending and its import are determined by other law once it
 is determined that a sending has occurred.

  In order to have a proper sending, the subsection requires that information
 be properly addressed or otherwise directed to the recipient.  In order to send within
 the meaning of this section, there must be specific information which will direct the
 record to the intended recipient.  Although mass electronic sending is not
 precluded, a general broadcast message, sent to systems rather than individuals,
 would not suffice as a sending.

  The record will be considered sent once it leaves the control of the sender,
 or comes under the control of the recipient.  Records sent through e-mail or the
 internet will pass through many different server systems.  Accordingly, the critical
 element when more than one system is involved is the loss of control by the sender.

  However, the structure of many message delivery systems is such that
 electronic records may actually never leave the control of the sender.  For example,
 within a university or corporate setting, e-mail sent within the system to another
 faculty member is technically not out of the sender's control since it never leaves
 the organization's server.  Accordingly, to qualify as a sending, the e-mail must
 arrive at a point where the recipient has control.  This section does not address the
 effect of an electronic record that is thereafter "pulled back," e.g., removed from a
 mailbox.  The analog in the paper world would be removing a letter from a person's
 mailbox.  As in the case of providing information electronically under Section 8,
 the recipient's ability to receive a message should be judged from the perspective of
 whether the sender has done any action which would preclude retrieval.  This is
 especially the case in regard to sending, since the sender must direct the record to a
 system designated or used by the recipient.

  3.  Subsection (b) provides simply that when a record enters the system
 which the recipient has designated or uses and to which it has access, in a form
 capable of being processed by that system, it is received.  Keying receipt to a
 system accessible by the recipient removes the potential for a recipient leaving
 messages with a server or other service in order to avoid receipt.  However, the
 section does not resolve the issue of how the sender proves the time of receipt.

  To assure that the recipient retains control of the place of receipt, subsection
 (b) requires that the system be specified or used by the recipient, and that the
 system be used or designated for the type of record being sent.  Many people have
 multiple e-mail addresses for different purposes.  Subsection (b) assures that
 recipients can designate the e-mail address or system to be used in a particular
 transaction.  For example, the recipient retains the ability to designate a home
 e-mail for personal matters, work e-mail for official business, or a separate
 organizational e-mail solely for the business purposes of that organization.  If A
 sends B a notice at his home which relates to business, it may not be deemed
 received if B designated his business address as the sole address for business
 purposes.  Whether actual knowledge upon seeing it at home would qualify as
 receipt is determined under the otherwise applicable substantive law.

  4.  Subsections (c) and (d) provide default rules for determining where a
 record will be considered to have been sent or received.  The focus is on the place
 of business of the recipient and not the physical location of the information
 processing system, which may bear absolutely no relation to the transaction
 between the parties.  It is not uncommon for users of electronic commerce to
 communicate from one State to another without knowing the location of
 information systems through which communication is operated.  In addition, the
 location of certain communication systems may change without either of the parties
 being aware of the change.  Accordingly, where the place of sending or receipt is an
 issue under other applicable law, e.g., conflict of laws issues, tax issues, the
 relevant location should be the location of the sender or recipient and not the
 location of the information processing system.

  Subsection (d) assures individual flexibility in designating the place from
 which a record will be considered sent or at which a record will be considered
 received.  Under subsection (d) a person may designate the place of sending or
 receipt unilaterally in an electronic record.  This ability, as with the ability to
 designate by agreement, may be limited by otherwise applicable law to places
 having a reasonable relationship to the transaction.

  5.  Subsection (e) makes clear that receipt is not dependent on a person
 having notice that the record is in the person's system.  Receipt occurs when the
 record reaches the designated system whether or not the recipient ever retrieves the
 record.  The paper analog is the recipient who never reads a mail notice.

  6.  Subsection (f) provides legal certainty regarding the effect of an
 electronic acknowledgment.  It only addresses the fact of receipt, not the quality of
 the content, nor whether the electronic record was read or "opened."

  7.  Subsection (g) limits the parties' ability to vary the method for sending
 and receipt provided in subsections (a) and (b), when there is a legal requirement
 for the sending or receipt.  As in other circumstances where legal requirements
 derive from other substantive law, to the extent that the other law permits variation
 by agreement, this Act does not impose any additional requirements, and provisions
 of this Act may be varied to the extent provided in the other law.

  (a)  In this section, "transferable record" means an electronic record that:
(1) would be a note under [Article 3 of the Uniform Commercial Code]
 or a document under [Article 7 of the Uniform Commercial Code] if the electronic
 record were in writing; and
(2) the issuer of the electronic record expressly has agreed is a
 transferable record.
  (b)  A person has control of a transferable record if a system employed for
 evidencing the transfer of interests in the transferable record reliably establishes
 that person as the person to which the transferable record was issued or transferred.
  (c)  A system satisfies subsection (b), and a person is deemed to have
 control of a transferable record, if the transferable record is created, stored, and
 assigned in such a manner that:
(1) a single authoritative copy of the transferable record exists which is
 unique, identifiable, and, except as otherwise provided in paragraphs (4), (5), and
 (6), unalterable;
(2) the authoritative copy identifies the person asserting control as:
   (A) the person to which the transferable record was issued; or
   (B) if the authoritative copy indicates that the transferable record has
 been transferred, the person to which the transferable record was most recently
(3) the authoritative copy is communicated to and maintained by the
 person asserting control or its designated custodian;
(4) copies or revisions that add or change an identified assignee of the
 authoritative copy can be made only with the consent of the person asserting
(5) each copy of the authoritative copy and any copy of a copy is readily
 identifiable as a copy that is not the authoritative copy; and
(6) any revision of the authoritative copy is readily identifiable as
 authorized or unauthorized.
  (d)  Except as otherwise agreed, a person having control of a transferable
 record is the holder, as defined in [Section 1-201(20) of the Uniform Commercial
 Code], of the transferable record and has the same rights and defenses as a holder of
 an equivalent record or writing under [the Uniform Commercial Code], including,
 if the applicable statutory requirements under [Section 3-302(a), 7-501, or 9-308 of
 the Uniform Commercial Code] are satisfied, the rights and defenses of a holder in
 due course, a holder to which a negotiable document of title has been duly
 negotiated, or a purchaser, respectively.  Delivery, possession, and indorsement are
 not required to obtain or exercise any of the rights under this subsection.
  (e)  Except as otherwise agreed, an obligor under a transferable record has
 the same rights and defenses as an equivalent obligor under equivalent records or
 writings under [the Uniform Commercial Code].
  (f)  If requested by a person against which enforcement is sought, the person
 seeking to enforce the transferable record shall provide reasonable proof that the
 person is in control of the transferable record.  Proof may include access to the
 authoritative copy of the transferable record and related business records sufficient
 to review the terms of the transferable record and to establish the identity of the
 person having control of the transferable record.
 Source:  Revised Article 9, Section 9-105.

  1.  Paper negotiable instruments and documents are unique in the fact that a
 tangible token   a piece of paper   actually embodies intangible rights and
 obligations.  The extreme difficulty of creating a unique electronic token which
 embodies the singular attributes of a paper negotiable document or instrument
 dictates that the rules relating to negotiable documents and instruments not be
 simply amended to allow the use of an electronic record for the requisite paper
 writing.  However, the desirability of establishing rules by which business parties
 might be able to acquire some of the benefits of negotiability in an electronic
 environment is recognized by the inclusion of this section on Transferable Records.

  This section provides legal support for the creation, transferability and
 enforceability of electronic note and document equivalents, as against the
 issuer/obligor.  The certainty created by the section provides the requisite incentive
 for industry to develop the systems and processes, which involve significant
 expenditures of time and resources, to enable the use of such electronic documents.

  The importance of facilitating the development of systems which will
 permit electronic equivalents is a function of cost, efficiency and safety for the
 records.  The storage cost and space needed for the billions of paper notes and
 documents is phenomenal.  Further, natural disasters can wreak havoc on the ability
 to meet legal requirements for retaining, retrieving and delivering paper
 instruments.  The development of electronic systems meeting the rigorous standards
 of this section will permit retention of copies which reflect the same integrity as the
 original.  As a result storage, transmission and other costs will be reduced, while
 security and the ability to satisfy legal requirements governing such paper records
 will be enhanced.

  Section 16 provides for the creation of an electronic record which may be
 controlled by the holder, who in turn may obtain the benefits of holder in due
 course and good faith purchaser status.  If the benefits and efficiencies of electronic
 media are to be realized in this industry it is essential to establish a means by which
 transactions involving paper promissory notes may be accomplished completely
 electronically.  Particularly as other aspects of such transactions are accomplished
 electronically, the drag on the transaction of requiring a paper note becomes
 evident.  In addition to alleviating the logistical problems of generating, storing and
 retrieving paper, the mailing and transmission costs associated with such
 transactions will also be reduced.

  2.  The definition of transferable record is limited in two significant ways.
 First, only the equivalent of paper promissory notes and paper documents of title
 can be created as transferable records.  Notes and Documents of Title do not impact
 the broad systems that relate to the broader payments mechanisms related, for
 example, to checks.  Impacting the check collection system by allowing for
 "electronic checks" has ramifications well beyond the ability of this Act to address.
 Accordingly, this Act excludes from its scope transactions governed by UCC
 Articles 3 and 4.  The limitation to promissory note equivalents in Section 16 is
 quite important in that regard because of the ability to deal with many enforcement
 issues by contract without affecting such systemic concerns.

  Second, not only is Section 16 limited to electronic records which would
 qualify as negotiable promissory notes or documents if they were in writing, but the
 issuer of the electronic record must expressly agree that the electronic record is to
 be considered a transferable record.  The definition of transferable record as "an
 electronic record that...the issuer of the electronic record expressly has agreed is a
 transferable record" indicates that the electronic record itself will likely set forth the
 issuer's agreement, though it may be argued that a contemporaneous electronic or
 written record might set forth the issuer's agreement.  However, conversion of a
 paper note issued as such would not be possible because the issuer would not be the
 issuer, in such a case, of an electronic record.  The purpose of such a restriction is
 to assure that transferable records can only be created at the time of issuance by the
 obligor.  The possibility that a paper note might be converted to an electronic
 record and then intentionally destroyed, and the effect of such action, was not
 intended to be covered by Section 16.

  The requirement that the obligor expressly agree in the electronic record to
 its treatment as a transferable record does not otherwise affect the characterization
 of a transferable record (i.e., does not affect what would be a paper note) because it
 is a statutory condition.  Further, it does not obligate the issuer to undertake to do
 any other act than the payment of the obligation evidenced by the transferable
 record.  Therefore, it does not make the transferable record "conditional" within the
 meaning of Section 3-104(a)(3) of the Uniform Commercial Code.

  3.  Under Section 16 acquisition of "control" over an electronic record
 serves as a substitute for "possession" in the paper analog.  More precisely,
 "control" under Section 16 serves as the substitute for delivery, indorsement and
 possession of a negotiable promissory note or negotiable document of title.  Section
 16(b) allows control to be found so long as "a system employed for evidencing the
 transfer of interests in the transferable record reliably establishes [the person
 claiming control] as the person to which the transferable record was issued or
 transferred."  The key point is that a system, whether involving third party registry
 or technological safeguards, must be shown to reliably establish the identity of the
 person entitled to payment.  Section 16(c) then sets forth a safe harbor list of very
 strict requirements for such a system.  The specific provisions listed in Section
 16(c) are derived from Section 105 of Revised Article 9 of the Uniform
 Commercial Code.  Generally, the transferable record must be unique, identifiable,
 and except as specifically permitted, unalterable.  That "authoritative copy" must (i)
 identify the person claiming control as the person to whom the record was issued or
 most recently transferred, (ii) be maintained by the person claiming control or its
 designee, and (iii) be unalterable except with the permission of the person claiming
 control.  In addition any copy of the authoritative copy must be readily identifiable
 as a copy and all revisions must be readily identifiable as authorized or

  The control requirements may be satisfied through the use of a trusted third
 party registry system.  Such systems are currently in place with regard to the
 transfer of securities entitlements under Article 8 of the Uniform Commercial
 Code, and in the transfer of cotton warehouse receipts under the program sponsored
 by the United States Department of Agriculture.  This Act would recognize the use
 of such a system so long as the standards of subsection (c) were satisfied.  In
 addition, a technological system which met such exacting standards would also be
 permitted under Section 16.

  For example, a borrower signs an electronic record which would be a
 promissory note or document if it were paper.  The borrower specifically agrees in
 the electronic record that it will qualify as a transferable record under this section.
 The lender implements a newly developed technological system which dates,
 encrypts, and stores all the electronic information in the transferable record in a
 manner which lender can demonstrate reliably establishes lender as the person to
 which the transferable record was issued.  In the alternative, the lender may contract
 with a third party to act as a registry for all such transferable records, retaining
 records establishing the party to whom the record was issued and all subsequent
 transfers of the record.  An example of this latter method for assuring control is the
 system established for the issuance and transfer of electronic cotton warehouse
 receipts under 7 C.F.R. section 735 et seq.

  Of greatest importance in the system used is the ability to securely and
 demonstrably be able to transfer the record to others in a manner which assures that
 only one "holder" exists.  The need for such certainty and security resulted in the
 very stringent standards for a system outlined in subsection (c).  A system relying
 on a third party registry is likely the most effective way to satisfy the requirements
 of subsection (c) that the transferable record remain unique, identifiable and
 unalterable, while also providing the means to assure that the transferee is clearly
 noted and identified.

  It must be remembered that Section 16 was drafted in order to provide
 sufficient legal certainty regarding the rights of those in control of such electronic
 records, that legal incentives would exist to warrant the development of systems
 which would establish the requisite control.  During the drafting of Section 16,
 representatives from the Federal Reserve carefully scrutinized the impact of any
 electronicization of any aspect of the national payment system.  Section 16
 represents a compromise position which, as noted, serves as a bridge pending more
 detailed study and consideration of what legal changes, if any, are necessary or
 appropriate in the context of the payment systems impacted.  Accordingly, Section
 16 provides limited scope for the attainment of important rights derived from the
 concept of negotiability, in order to permit the development of systems which will
 satisfy its strict requirements for control.

  4.  It is important to note what the section does not provide.  Issues related
 to enforceability against intermediate transferees and transferors (i.e., indorser
 liability under a paper note), warranty liability that would attach in a paper note,
 and issues of the effect of taking a transferable record on the underlying obligation,
 are NOT addressed by this section.  Such matters must be addressed, if at all, by
 contract between and among the parties in the chain of transmission and transfer of
 the transferable record.  In the event that such matters are not addressed by the
 contract, the issues would need to be resolved under otherwise applicable law.
 Other law may include general contract principles of assignment and assumption,
 or may include rules from Article 3 of the Uniform Commercial Code applied by

  For example, Issuer agrees to pay a debt by means of a transferable record
 issued to A.  Unless there is agreement between issuer and A that the transferable
 record "suspends" the underlying obligation (see Section 3-310 of the Uniform
 Commercial Code), A would not be prevented from enforcing the underlying
 obligation without the transferable record.  Similarly, if A transfers the transferable
 record to B by means granting B control, B may obtain holder in due course rights
 against the obligor/issuer, but B's recourse against A would not be clear unless A
 agreed to remain liable under the transferable record.  Although the rules of Article
 3 may be applied by analogy in an appropriate context, in the absence of an express
 agreement in the transferable record or included by applicable system rules, the
 liability of the transferor would not be clear.

  5.  Current business models exist which rely for their efficacy on the
 benefits of negotiability.  A principal example, and one which informed much of
 the development of Section 16, involves the mortgage backed securities industry.
 Aggregators of commercial paper acquire mortgage secured promissory notes
 following a chain of transfers beginning with the origination of the mortgage loan
 by a mortgage broker.  In the course of the transfers of this paper, buyers of the
 notes and lenders/secured parties for these buyers will intervene.  For the ultimate
 purchaser of the paper, the ability to rely on holder in due course and good faith
 purchaser status creates the legal security necessary to issue its own investment
 securities which are backed by the obligations evidenced by the notes purchased.
 Only through their HIDC status can these purchasers be assured that third party
 claims will be barred.  Only through their HIDC status can the end purchaser avoid
 the incredible burden of requiring and assuring that each person in the chain of
 transfer has waived any and all defenses to performance which may be created
 during the chain of transfer.

  6.  This section is a stand-alone provision.  Although references are made to
 specific provisions in Article 3, Article 7, and Article 9 of the Uniform Commercial
 Code, these provisions are incorporated into this Act and made the applicable rules
 for purposes of this Act.  The rights of parties to transferable records are established
 under subsections (d) and (e).  Subsection (d) provides rules for determining the
 rights of a party in control of a transferable record.  The subsection makes clear that
 the rights are determined under this section, and not under other law, by
 incorporating the rules on the manner of acquisition into this statute.  The last
 sentence of subsection (d) is intended to assure that requirements related to notions
 of possession, which are inherently inconsistent with the idea of an electronic
 record, are not incorporated into this statute.

  If a person establishes control, Section 16(d) provides that that person is the
 "holder" of the transferable record which is equivalent to a holder of an analogous
 paper negotiable instrument.  More importantly, if the person acquired control in a
 manner which would make it a holder in due course of an equivalent paper record,
 the person acquires the rights of a HIDC.  The person in control would therefore be
 able to enforce the transferable record against the obligor regardless of intervening
 claims and defenses.  However, by pulling these rights into Section 16, this Act
 does NOT validate the wholesale electrification of promissory notes under Article 3
 of the Uniform Commercial Code.

  Further, it is important to understand that a transferable record under
 Section 16, while having no counterpart under Article 3 of the Uniform
 Commercial Code, would be an "account," "general intangible," or "payment
 intangible" under Article 9 of the Uniform Commercial Code.  Accordingly, two
 separate bodies of law would apply to that asset of the obligee.  A taker of the
 transferable record under Section 16 may acquire purchaser rights under Article 9
 of the Uniform Commercial Code, however, those rights may be defeated by a
 trustee in bankruptcy of a prior person in control unless perfection under Article 9
 of the Uniform Commercial Code by filing is achieved.  If the person in control
 also takes control in a manner granting it holder in due course status, of course that
 person would take free of any claim by a bankruptcy trustee or lien creditor.

  7.  Subsection (e) accords to the obligor of the transferable record rights
 equal to those of an obligor under an equivalent paper record.  Accordingly, unless
 a waiver of defense clause is obtained in the electronic record, or the transferee
 obtains HDC rights under subsection (d), the obligor has all the rights and defenses
 available to it under a contract assignment.  Additionally, the obligor has the right
 to have the payment noted or otherwise included as part of the electronic record.

  8.  Subsection (f) grants the obligor the right to have the transferable record
 and other information made available for purposes of assuring the correct person to
 pay.  This will allow the obligor to protect its interest and obtain the defense of
 discharge by payment or performance.  This is particularly important because a
 person receiving subsequent control under the appropriate circumstances may well
 qualify as a holder in course who can enforce payment of the transferable record.

  9.  Section 16 is a singular exception to the thrust of this Act to simply
 validate electronic media used in commercial transactions.  Section 16 actually
 provides a means for expanding electronic commerce.  It provides certainty to
 lenders and investors regarding the enforceability of a new class of financial
 services.  It is hoped that the legal protections afforded by Section 16 will engender
 the development of technological and business models which will permit
 realization of the significant cost savings and efficiencies available through
 electronic transacting in the financial services industry.  Although only a bridge to
 more detailed consideration of the broad issues related to negotiability in an
 electronic context, Section 16 provides the impetus for that broader consideration
 while allowing continuation of developing technological and business models.

 GOVERNMENTAL AGENCIES.  [Each governmental agency] [The [designated
 state officer]] of this State shall determine whether, and the extent to which, [it] [a
 governmental agency] will create and retain electronic records and convert written
 records to electronic records.]
  See Comments following Section 19.

  (a)  Except as otherwise provided in Section 12(f), [each governmental
 agency] [the [designated state officer]] of this State shall determine whether, and
 the extent to which, [it] [a governmental agency] will send and accept electronic
 records and electronic signatures to and from other persons and otherwise create,
 generate, communicate, store, process, use, and rely upon electronic records and
 electronic signatures.
  (b)  To the extent that a governmental agency uses electronic records and
 electronic signatures under subsection (a), the [governmental agency] [designated
 state officer], giving due consideration to security, may specify:
(1) the manner and format in which the electronic records must be
 created, generated, sent, communicated, received, and stored and the systems
 established for those purposes;
(2) if electronic records must be signed by electronic means, the type of
 electronic signature required, the manner and format in which the electronic
 signature must be affixed to the electronic record, and the identity of, or criteria that
 must be met by, any third party used by a person filing a document to facilitate the
(3) control processes and procedures as appropriate to ensure adequate
 preservation, disposition, integrity, security, confidentiality, and auditability of
 electronic records; and
(4) any other required attributes for electronic records which are
 specified for corresponding nonelectronic records or reasonably necessary under the
  (c)  Except as otherwise provided in Section 12(f), this [Act] does not
 require a governmental agency of this State to use or permit the use of electronic
 records or electronic signatures.]
 Source:  Illinois Act Section 25-101; Florida Electronic Signature Act, Chapter
 96-324, Section 7 (1996).

  See Comments following Section 19.

   [SECTION 19.  INTEROPERABILITY.  The [governmental agency]
 [designated officer] of this State which adopts standards pursuant to Section 18
 may encourage and promote consistency and interoperability with similar
 requirements adopted by other governmental agencies of this and other States and
 the federal government and nongovernmental persons interacting with
 governmental agencies of this State.  If appropriate, those standards may specify
 differing levels of standards from which governmental agencies of this State may
 choose in implementing the most appropriate standard for a particular application.]
 Source:  Illinois Act Section 25-115.

 See Legislative Note below   Following Comments.

  1.  Sections 17-19 have been bracketed as optional provisions to be
 considered for adoption by each State.  Among the barriers to electronic commerce
 are barriers which exist in the use of electronic media by state governmental
 agencies   whether among themselves or in external dealing with the private sector.
 In those circumstances where the government acts as a commercial party, e.g., in
 areas of procurement, the general validation provisions of this Act will apply.  That
 is to say, the government must agree to conduct transactions electronically with
 vendors and customers of government services.

  However, there are other circumstances when government ought to establish
 the ability to proceed in transactions electronically.  Whether in regard to records
 and communications within and between governmental agencies, or with respect to
 information and filings which must be made with governmental agencies, these
 sections allow a State to establish the ground work for such electronicization.

  2.  The provisions in Sections 17-19 are broad and very general.  In many
 States they will be unnecessary because enacted legislation designed to facilitate
 governmental use of electronic records and communications is in place.  However,
 in many States broad validating rules are needed and desired.  Accordingly, this Act
 provides these sections as a baseline.

  Of paramount importance in all States however, is the need for States to
 assure that whatever systems and rules are adopted, the systems established are
 compatible with the systems of other governmental agencies and with common
 systems in the private sector.  A very real risk exists that implementation of
 systems by myriad governmental agencies and offices may create barriers because
 of a failure to consider compatibility, than would be the case otherwise.

  3.  The provisions in Section 17-19 are broad and general to provide the
 greatest flexibility and adaptation to the specific needs of the individual States.  The
 differences and variations in the organization and structure of governmental
 agencies mandates this approach.  However, it is imperative that each State always
 keep in mind the need to prevent the erection of barriers through appropriate
 coordination of systems and rules within the parameters set by the State.

  4.  Section 17 authorizes state agencies to use electronic records and
 electronic signatures generally for intra-governmental purposes, and to convert
 written records and manual signatures to electronic records and electronic
 signatures.  By its terms the section gives enacting legislatures the option to leave
 the decision to use electronic records or convert written records and signatures to
 the governmental agency or assign that duty to a designated state officer.  It also
 authorizes the destruction of written records after conversion to electronic form.

  5.  Section 18 broadly authorizes state agencies to send and receive
 electronic records and signatures in dealing with non-governmental persons.
 Again, the provision is permissive and not obligatory (see subsection (c)).
 However, it does provide specifically that with respect to electronic records used
 for evidentiary purposes, Section 12 will apply unless a particular agency expressly
 opts out.

  6.  Section 19 is the most important section of the three.  It requires
 governmental agencies or state officers to take account of consistency in
 applications and interoperability to the extent practicable when promulgating
 standards.  This section is critical in addressing the concern that inconsistent
 applications may promote barriers greater than currently exist.  Without such
 direction the myriad systems that could develop independently would be new
 barriers to electronic commerce, not a removal of barriers.  The key to
 interoperability is flexibility and adaptability.  The requirement of a single system
 may be as big a barrier as the proliferation of many disparate systems.

   Legislative Note Regarding Adoption of Sections 17-19
  1.  Sections 17-19 are optional sections for consideration by individual
 legislatures for adoption, and have been bracketed to make this clear.  The inclusion
 or exclusion of Sections 17-19 will not have a detrimental impact on the uniformity
 of adoption of this Act, so long as Sections 1-16 are adopted uniformly as
 presented.  In some States Sections 17-19 will be unnecessary because legislation is
 already in place to authorize and implement government use of electronic media.
 However, the general authorization provided by Sections 17-19 may be critical in
 some States which desire to move forward in this area.

  2.  In the event that a state legislature chooses to adopt Sections 17-19, a
 number of issues must be addressed:

A.  Is the general authorization to adopt electronic media, provided by
   Sections 17-19 sufficient for the needs of the particular jurisdiction, or is more
   detailed and specific authorization necessary?  This determination may be
   affected by the decision regarding the appropriate entity or person to oversee
   implementation of the use of electronic media (See next paragraph).  Sections
   17-19 are broad and general in the authorization granted.  Certainly greater
   specificity can be added subsequent to adoption of these sections.  The question
   for the legislature is whether greater direction and specificity is needed at this
   time.  If so, the legislature should not enact Sections 17-19 at this time.

B.  Assuming a legislature decides to enact Sections 17-19, what entity or
   person should oversee implementation of the government's use of electronic
   media?  As noted in each of Sections 17-19, again by brackets, a choice must be
   made regarding the entity to make critical decisions regarding the systems and
   rules which will govern the use of electronic media by the State.  Each State
   will need to consider its particular structure and administration in making this
   determination.  However, legislatures are strongly encouraged to make
   compatibility and interoperability considerations paramount in making this

C.  Finally, a decision will have to be made regarding the process by which
   coordination of electronic systems will occur between the various branches of
   state government and among the various levels of government within the State.
   Again this will require consideration of the unique situation in each State.

  3.  If a State chooses not to enact Sections 17-19, UETA Sections 1-16 will
 still apply to governmental entities when acting as a "person" engaging in
 "transactions" within its scope.  The definition of transaction includes
 "governmental affairs."  Of course, like any other party, the circumstances
 surrounding a transaction must indicate that the governmental actor has agreed to
 act electronically (See Section 5(b)), but otherwise all the provisions of Sections
 1-16 will apply to validate the use of electronic records and signatures in
 transactions involving governmental entities.

  If a State does choose to enact Sections 17-19, Sections 1-16 will continue
 to apply as above.  In addition, Sections 17-19 will provide authorization for intra-
 governmental uses of electronic media.  Finally, Sections 17-19 provide a broader
 authorization for the State to develop systems and procedures for the use of
 electronic media in its relations with non-governmental entities and persons.

   SECTION 20.  SEVERABILITY CLAUSE.  If any provision of this [Act] or
 its application to any person or circumstance is held invalid, the invalidity does not
 affect other provisions or applications of this [Act] which can be given effect
 without the invalid provision or application, and to this end the provisions of this
 [Act] are severable.

   SECTION 21.  EFFECTIVE DATE.  This [Act] takes effect .........................