Connecticut Law Revision Commission - Electronic Communications

I. Milton Widem, Chairman
William R. Breetz
Judge H. Maria Cone
Representative Robert Farr
Jon P. Fitzgerald
Robert W. Grant
Representative Michael P. Lawlor
Michael W. Lyons
Representative Arthur J. O'Neill
Mary Anne O'Neill
Joel I. Rudikoff
Edmund F. Schmidt
Joseph J. Selinger, Jr.
Judge Elliot N. Solomon
Professor Colin C. Tait
Professor Terry J. Tondro
Senator Donald E. Williams, Jr.
David D. Biklen
Executive Director
David L. Hemond
Chief Attorney

Jo A. Roberts
Senior Attorney

Connecticut Law Revision Commission
State Capitol
Room 509A
Hartford, Connecticut 06106-1591
(860) 240-0220
FAX (860) 240-0322
Email: lrc@po.state.ct.us

REPORT OF THE LAW REVISION COMMISSION ELECTRONIC COMMUNICATIONS DRAFTING COMMITTEE

to the

JUDICIARY COMMITTEE OF THE CONNECTICUT GENERAL ASSEMBLY

December 17, 1998

Prepared by
Jo A. Roberts
Senior Attorney

Report of the Law Revision Commission Electronic Communications Drafting Committee

to the Judiciary Committee of the Connecticut General Assembly

December 17, 1998

By request dated May 30, 1997, the Judiciary Committee of the Connecticut General Assembly asked the Law Revision Commission (LRC) to study the use of digital signatures, identify issues concerning that technology and make recommendations for any necessary remedial legislation. The LRC formed a drafting committee consisting of individuals in both the state public and private sectors who are knowledgeable about electronic technology to undertake the study (a list of committee members is attached to this report as Attachment A). At its December 17, 1998 meeting, the Law Revision Commission voted to adopt the following report of the drafting committee and to submit the report to the Judiciary Committee for its consideration.

I. Overview of Project

Initially, the drafting committee agreed that it should expand the Judiciary Committee request to include consideration of technologies in addition to digital signatures, since others are being used presently, with more likely to be developed. In an effort to assure that any state legislation in this area is compatible with other legislation within the United States and throughout the world, the drafting committee reviewed model acts being developed by the United Nations Committee on International Trade Law, or UNCITRAL ( the Model Law on Electronic Commerce), and by the National Conference of Commissioners on Uniform State Laws, or NCCUSL (the Uniform Electronic Transactions Act), several bills being sponsored in Congress and legislation passed or proposed in other states.

The drafting committee elected to use the proposed NCCUSL Uniform Act as the primary basis for its work. The Uniform Act draws heavily from existing state law and from the UNCITRAL model act, and represents the expertise of committee members from across the country. However, the difficulty with that choice is that the Uniform Act is itself an incomplete and frequently changing document. The NCCUSL drafting committee had hoped to complete its work by the Fall of 1998, but was unable to do so, largely because it is wrestling with the same issues and concerns as the LRC drafting committee. In general, both the technology and the impact of technology effecting electronic commerce are evolving rapidly. While electronic commerce is already quite common, it is still unclear what problems or harms it might create, and thus, what problems or harms legislation should address, without unnecessarily burdening such commerce.

Given the difficulty of drafting legislation in such a volatile area, the drafting committee agreed that it should be cautious in its approach. Further, the committee felt it premature to recommend adoption of legislation in Connecticut that is as comprehensive as the Uniform Act, especially since the Uniform Act is still in a state of flux. Instead, the drafting committee decided to confine itself to addressing limited but critical issues at this time, while continuing to monitor global developments in electronic commerce and in electronic commerce law. Thus, the drafting committee is proposing a general framework of legislation upon which more detailed provisions may be added as deemed appropriate. The overarching goal of the committee's proposal is to permit and encourage electronic commerce and communication in Connecticut in both the public and private sectors, without imposing barriers to the development or use of new technologies or new applications for technology.

Guided by this important goal, the drafting committee prepared the proposed Electronic Record and Signature Act (ERSA), attached to this report as Attachment B. In addition to the valuable input from the private entities and state agencies represented on the drafting committee, approximately 30 additional executive agencies received copies of the ERSA and were given an opportunity to comment.

The drafting committee believes the ERSA meets the goal of permitting and encouraging electronic commerce in Connecticut by:

A. Providing "technology neutral" legislation.

Some states, such as Washington and Utah, have passed laws that specifically require

digital signature technology to secure electronic signatures and authenticate electronic documents. Other states, e.g., Illinois and Oklahoma, have adopted laws with broader scopes that address electronic writings and electronic signatures without requiring parties to use a particular technology. The Uniform Act follows the latter approach, taking a "technology neutral" position. The drafting committee likewise believes that legislatively favoring a particular technology restricts the benefits of other technologies and of technologies yet to be developed, either limiting the kinds of electronic commerce that can occur in Connecticut or requiring amendment of the law when parties wish to use (or actually use) other technologies.

B. Providing greater certainty for parties involved in interstate/intrastate commerce in Connecticut.

At a minimum, parties doing business in or with Connecticut should have confidence that their transactions will be legally recognized in this state, so long as other applicable legal requirements, other than those that mandate certain documents to be in writing or to be signed, are met. In the future, the legislature may wish to consider additional statutory provisions, such as are being drafted by the NCCUSL drafting committee, that, e.g., set criteria for acceptable security procedures, establish detailed requirements for how electronic records are to be maintained to assure accuracy or provide more specific requirements as to how and when electronic contracts are formed.

C. Validating electronic documents and signatures.

Parties conducting business in Connecticut should be assured that electronic contracts, both those yet to be made and those already made, will be given the same legal effect as contracts in paper form, and that electronic contracts will not be denied legal effect simply because they are electronic.

D. Assuring admissibility of electronic documents and signatures in Connecticut courts.

Presently, uncertainty exists as to whether electronic "writings" and "signatures" satisfy statutory sections or common law that require certain documents to be "in writing," or to be "signed." Connecticut courts could develop a common law body of law that recognizes electronic writings and signatures as meeting those requirements. However, the courts need not do so, and the committee believes that the courts might welcome guidance from the legislature as to the admissibility of electronically-generated documents and signatures into evidence. By addressing the issue statutorily, parties should have more certainty about the admissibility of electronic evidence than they would if the law on this point were left to develop in individual courts.

E. Granting permissive authority to state agencies to conduct business by electronic means.

The committee believes that legislation is necessary to encourage state agencies to expand the number of transactions in each agency that may be completed electronically.

However, the committee strongly recommends that any such legislation be permissive and give agencies assurance that no agency will be required by statute to adopt technologies or procedures that the agency does not wish to adopt, may not be prepared to adopt or may not have the budget to adopt.

Presently in Connecticut, some agencies are authorized to accept electronic filings in accordance with specific statutory provisions giving them that authority. For example, the Secretary of the State’s Office is statutorily authorized, under section 3-99a of the general statutes, to accept electronic filings if it so chooses. The Secretary may adopt rules and regulations specifying how documents are to be filed electronically. Thus, the office is empowered to determine its own needs and resources, rather than the legislature doing so, and can adopt rules that accord with the office’s level of technology and operations generally. The committee used this statute as a model for a similar provision in Section 7 of the proposed ERSA that is intended to apply to all state agencies. The provision enables state agencies to begin doing business electronically, but in a time frame and in a manner that suits each agency’s ability to do so.

The drafting committee recommends favorable consideration of the ERSA by the Judiciary Committee, and further recommends continued monitoring of legislation being drafted outside of Connecticut. Adding provisions to the ERSA that coincide with those being accepted on both the national and international levels will keep Connecticut on track with the rest of the world and help make the state a friendly environment for electronic commerce.

II. Summary of Electronic Record and Signature Act (ERSA)

The following is a brief summary of the ERSA. The commentary to some sections of the Act include material from the Reporter's Notes to sections of the Uniform Act.

Section 1. Definitions.

As used in this Act:

(1) "Agency" means any executive department, board, commission, authority or institution of this state, including any quasi-public entity operating under the direction of this state.

(2) "Electronic" means of or relating to technology having electrical, digital, magnetic, wireless, optical, analog or electromagnetic technology or other similar capabilities.

(3) "Electronic device" means a computer program or other electronic or automated means configured and enabled by a person to initiate or respond to electronic records or that performs in whole or in part without review by an individual.

(4) "Electronic record" means a record created, stored, generated, received or communicated by electronic means.

(5) "Electronic signature" means any signature in electronic form, attached to or logically associated with an electronic record.

(6) "Governmental record" means any record relating to the conduct of the public's business prepared, owned, used, received or retained by an agency.

(7) "Information" means data, text, images, sounds, codes, computer programs, software, databases or the like.

(8) "Informational integrity" means (i) for a contract that the information contained in the electronic record (A) was the same when each person signing the electronic record signed it, and (B) is the same at the time the dispute arose as it was when the last person signing the record signed it; and (ii) for other electronic records that the information contained in the electronic record is the same at the time of the dispute as it was when the electronic record was created, stored, generated or signed by the person or electronic device responsible for creating, storing, generating or maintaining it. An electronic record does not lack informational integrity because of the addition of any endorsement and of any change arising in the normal course of communication, storage or display,

(9) "Information processing system" means a system for creating, generating, sending, receiving, storing, displaying or otherwise processing information, including electronic records.

(10) "Person" means an individual, corporation, public or private, business trust, limited liability partnership, limited liability company, society, association, joint venture, agency, quasi-public entity operating under the direction of the state or any other legal entity.

(11) "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 form.

(12) "Security procedure," means a procedure or methodology established by law or by agreement or knowingly adopted by each person 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 informational integrity of an electronic record. The term includes a procedure that requires the use of algorithms or other code, identifying words or numbers, encryption, callback or other acknowledgement procedure, or any other procedures that are reasonable under the circumstances.

(13) "Sign" means to execute or adopt a signature.

(14) "Signature" means any identifying symbol, sound or process of a record in whole or in part that is executed or adopted by a person as part of the record.

(15) "Term" means that portion of an electronic record that relates to a particular matter.

(16) "Writing" includes printing, typewriting and any other intentional reduction of a record to tangible form. "Written" has a corresponding meaning.

COMMENT

(1) The definition includes only state entities, not municipalities. The drafting committee believes that, initially, legislation permitting agencies to expand their use of technology in conducting business should apply only to agencies at the state level, including quasi-public agencies that function similarly to state agencies, with application extended to local agencies after assessing the impact of the legislation on state agencies.

(2) This broad definition is intended to assure that the Act will apply to both existing and new technologies.

(3) An electronic device is capable of initiating, responding or interacting, on behalf of a party, with other parties or electronic devices, without any further action (other than programming) by the party. Two computers, for example, could participate in automatically ordering and shipping parts used in the business of the ordering party without any human involvement once the computers have been properly programmed. The Act holds parties responsible for the actions of their electronic devices to the extent they would have been responsible if they had conducted the transaction personally.

(4),(5) An electronic record is a subset of the broader term "record" (definition 11). Likewise, an electronic signature is a subset of "signature" (definition 14).

(6) This definition tracks the definition of "public records or files" found in section 1-18a(d) of the general statutes. It has been modified to accommodate other defined terms in this Act, such as "record."

(8) The definition establishes the criteria for a record's having "informational integrity," permitting the record to be relied on as unaltered. An electronic contract must contain the same information at the time each party signed it as it does at the time in question. Other records must contain the same information at the time in question as when they were created, stored, generated or signed by the person or electronic device responsible for doing so.

The last sentence of the subsection reflects the reality that some discrepancies may exist in a record due to transferring the record to different computer programs, etc. that do not affect the integrity of the record.

(11) This definition is taken directly from the Uniform Act.

(12) The definition limits the types of security procedures to those established by law, agreed to by the parties or knowingly adopted by the parties. Section 5(c) provides that a record is signed as a matter of law if it is signed by a security procedure. Security procedures may use such technologies as encryption or optical scanning .

(14) This definition tracks that found in the Uniform Act. Earlier versions of the definition attempted to delineate specific functions of a signature. The ULC drafters concluded that the critical function of a signature is to identify a person and limited the definition to that function. The definition requires some volition on the part of the signing party by providing that the signature be "executed or adopted" by the party. The signature must be linked to or logically associated with a record, noted in the requirement that a signature be a part of the record, which in turn requires inscription in a tangible medium.

Section 2. Statement of purpose. Scope of act.

(a) This Act is intended to permit and encourage the use of electronic records and electronic signatures.

(b) This Act applies to all electronic records and electronic signatures.

(d) Nothing in this Act shall in any way limit the rights or remedies otherwise available to a consumer under any law.

COMMENT

(a),(b) The purpose of the Act is to encourage the inevitable transition from paper to computers in commerce and for other uses. To the extent that transition has already occurred and continues to do so rapidly, the Act seeks to provide parties acting in or with other parties in this state the confidence that Connecticut will recognize the use of technology to conduct business or for other purposes. The Act applies to all electronic records and signatures without exception. The drafting committee discussed at length whether some documents (such as wills and deeds, e.g.) should be excluded from the Act's coverage, largely because they have traditionally been held to higher levels of formalities to ensure accuracy and deter fraud, which many individuals may not be convinced can be achieved electronically, since the widespread use of electronic records is relatively recent and still unfamiliar to many. The committee decided not to include specific exceptions, because the purpose of the Act is to permit, and not to mandate, the use of electronic communication. In the private sector, parties can agree to the form of records they wish to use (Section 3 permits a person to establish reasonable requirements as to the type of records that the person finds acceptable). As between a person and a state agency, the agency may permit the use of electronic records, but may not require it (Section 7). To the extent a person is uncomfortable executing a document electronically, he may ask that it be completed in paper form.

(c) This Act is intended to Act in concert with other law (such as that governing contract, commercial transactions, fraud, etc.) and, unless a provision of the Act specifically does so, does not prevent other law from applying where appropriate.

(d) The drafting committee was particularly concerned that nothing in this Act be construed to deprive consumers of any rights or protections afforded them under any other law. Presently, consumer transactions account for a significant portion of business being conducted on the internet (consumers purchasing goods with credit cards). Because the records involved with those transactions will be covered by this Act, the drafting committee highlighted the consumer's right to invoke other law.

Section 3. Legal recognition of electronic records.

(a) A record may not be denied legal effect, validity, or enforceability solely because it is an electronic record.

(b) If any law requires a record to be in writing, or provides consequences if it is not, an electronic record satisfies the requirement.

(d) Notwithstanding subsections (a) and (b), no agency shall be required to accept any governmental record in the form of an electronic record, unless the agency has adopted regulations permitting governmental records to be in electronic form.

COMMENT

(a) This subsection establishes the fundamental premise of the Act: That the form in which a record is generated, presented, communicated, or stored may not be the only reason for denying the record legal recognition. However, nothing in this provision prevents an electronic record from being denied legal validity if it fails to meet other procedural or substantive requirements for which a written document would be denied legal effect.

(b) Reporter's Note 4 to Section 201 of the Uniform Act provides the following example of how an electronic record is to be regarded as the equivalent of a writing, subject to the same analysis of its validity as a writing would undergo:

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 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 2-201(1).

(c) This provision permits parties to set reasonable requirements as to the form of document they will accept. If a party is uncomfortable with using electronic documents, or is unconvinced that an electronic document will be adequately secured, the party may require the transaction to be completed in paper form (a party may require that a document that must be acknowledged, e.g., be in paper form with a traditional acknowledgement), or may specify that a certain security procedure be used. The Act is not intended to coerce persons into using technology to conduct their affairs.

(d) This subsection is intended to provide state agencies assurance that, even though an electronic record may be legally sufficient in place of a writing, no agency can be required to accept an electronic version of a license application, e.g., if the agency has not adopted regulations permitting the application to be filed electronically.

Section 4. Originals.

If any law requires a record to be retained in its original form, or provides consequences if the record is not presented or retained in its original form, that requirement is met by an electronic record if there exists a reliable assurance as to the informational integrity of the electronic record. The standard of reliability required must be assessed in the light of the purpose for which the information was generated and in the light of all relevant circumstances.

COMMENT

This section addresses the difficulty in determining what constitutes an "original" electronic document. When a document is being drafted electronically, the drafter periodically saves the document either to a hard drive, a disk or both. Arguably, the "original" exists only in the RAM of the computer and is destroyed when the information is saved to a hard drive or disk. To circumvent this problem and to satisfy the primary purpose in requiring certain documents to be in original form, that being that the document has not been altered, the section permits electronic records to be deemed comparable to original writings if reasonable assurances exist as to the informational integrity of the document. No specific means for determining reliability is specified. Reliability must be determined on the basis of individual circumstances.

Section 5. Legal recognition of electronic signatures.

(a) A signature may not be denied legal effect, validity or enforceability solely because it is an electronic signature.

(b) If any law requires a signature, or provides consequences in the absence of a signature, that requirement is satisfied with respect to an electronic record if the electronic record includes an electronic signature.

(c) An electronic record containing an electronic signature is signed as a matter of law if the electronic signature is verified in conformity with a reasonable security procedure for the purpose of verification of electronic signatures.

(d) A person may establish reasonable requirements regarding the method and type of signatures the person shall accept.

COMMENT

(a) Subsection (a) establishes that the form in which a signature is generated, presented, communicated, or stored may not be the only reason for denying the signature legal recognition. However, nothing in this provision prevents an electronic signature from being denied legal validity if it fails to meet other procedural or substantive requirements for which a written signature would be denied legal effect.

(b) This subsection reiterates that an electronic record containing an electronic signature satisfies legal requirements. The critical issue as to either the record or the signature is what the signer intended by the execution, attachment or incorporation of the signature into the record.

(c) This subsection (as is the section generally) is technology-neutral. It neither adopts nor prohibits any particular form of electronic signature or security procedure. Although using a security procedure to sign an electronic record results in the record being deemed signed as a matter of law, only the fact of signature, and not the effect of the signature, is established.

(d) As in Section 3 relating to electronic records, the parties may impose reasonable requirements on each other as to the kind of signature each will accept.

Section 6. Admissibility into evidence.

(a) In any legal proceeding, the rules of evidence may not be applied to deny the admissibility in evidence of an electronic record or electronic signature on either or both of the following grounds:

(1) That it is an electronic record or electronic signature.

(2) That it is not in its original form or is not an original.

(b) In assessing the evidentiary weight of an electronic record or electronic signature, the trier of fact shall consider the manner in which the electronic record or electronic signature was generated, stored, communicated or retrieved, the reliability of the manner in which the informational integrity of the electronic record or electronic signature was maintained, the manner in which its originator was identified or the electronic record was signed, and any other relevant circumstances.

COMMENT

(a) Subsection (a) reasserts that electronic records and signatures may not be denied admissibility based solely on their electronic form or because that form may not be technically original. Nothing in the section relieves the party seeking to introduce an electronic record or signature from establishing the necessary foundation for admission of the record or signature.

(b) Subsection (b) gives guidance to the trier of fact in determining the weight of electronic evidence. The factors include those used to determine the informational integrity of an electronic record. While the circumstances of the electronic record or signature may satisfy minimal admissibility queries, those circumstances may nevertheless affect the weight to be given the evidence once admitted.

Section 7. State agencies. Governmental records in electronic form. State agencies to adopt regulations governing technology.

(a) Any agency may permit any governmental record relating to that agency to be in the form of an electronic record.

(b) Any agency may adopt regulations, in accordance with chapter 54 and not inconsistent with other state law, governing:

(1) The agency’s creation, distribution, acceptance and maintenance, in accordance with sections 11-8 and 11-8a, of governmental records in the form of electronic records;

(2) the conversion of written governmental records into electronic records;

(3) the adoption and use of technology by the agency in the performance of the agency’s duties;

(4) if a governmental record may be electronically signed, the type of electronic signature required, and the manner and format in which the electronic signature may be affixed to the electronic record; and

(5) the provision of electronic access and other related products or services to the agency that result from the adoption or use of such technology.

(c) To the extent practicable under the circumstances, regulations adopted by any agency relating to the use of electronic records or electronic signatures shall be drafted in a manner designed to encourage and promote consistency and interoperability with similar requirements adopted by other agencies or by the federal government or other states.

(d) This section does not require any agency to use or permit the use of electronic records or electronic signatures.

COMMENT

(a) This subsection authorizes any state agency to permit governmental records of that agency to be in electronic form. Nothing in this section authorizes agencies to require that records be electronic. Thus, any agency may permit license applications, e.g., to be submitted to the agency electronically, but cannot make electronic filing the exclusive means of submitting the application.

(b) Each agency may establish its own procedures for handling electronic documents, as long as the agency's regulations do not conflict with other law.

(c) Subsection (c) recognizes the need for technological conformity among state agencies and with parties outside of state government. The subsection encourages agencies to monitor and Act in accordance with developments both within and beyond the state.

(d) Nothing in this section mandates that any agency convert from its use of written governmental records to electronic records or signatures. In accordance with Section 3(d), an electronic record shall not be deemed to satisfy an agency's requirements for a written document unless the agency has adopted a regulation that so permits.

View ATTACHMENT "A" - Drafting Committee Members View ATTACHMENT "B" - the bill

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