Topic:
CONSTITUTIONAL LAW; ELECTRONIC SIGNATURES; EVIDENCE; BUSINESS (GENERAL); CORPORATIONS;
Location:
INFORMATION TECHNOLOGY-ELECTRONIC SIGNATURES;
Scope:
Connecticut laws/regulations;

OLR Research Report


August 11, 2000

 

2000-R-0795

FEDERAL AND STATE ELECTRONIC SIGNATURE LAWS

 

By: Christopher Reinhart, Associate Attorney

You asked for a copy and summary of the new federal law on electronic signatures, the basis for the preemption of state laws, how it affects Connecticut law, and what other states have adopted electronic signature laws.

SUMMARY

The Electronic Signatures in Global and National Commerce Act (S. 761, signed by the President on June 30, 2000) applies to transactions in interstate or foreign commerce, which the Constitution grants the federal government authority to regulate (Art. I, 8). The act validates the use of electronic records and electronic signatures in transactions but does not require anyone to agree to use or accept electronic records or signatures. The act is effective October 1, 2000 with some exceptions.

The federal law generally preempts state laws on electronic signatures that are inconsistent with it. It allows states to adopt the Uniform Electronic Transactions Act (UETA) as approved by the National Conference of Commissioners of Uniform State Laws (NCCUSL) in place of the federal law. And states can modify the federal requirements by specifying an alternative procedure if it is consistent with the federal law and does not require or favor a particular technology.

Connecticut law is limited in this area. Connecticut law validates electronic signatures under the corporation laws and authorizes state agencies to allow government records to be signed by electronic signatures. It is unclear whether federal law preempts these laws but they are not inconsistent with the federal law. The federal law limits the ability of the state to legislate in this area in the future.

Other state laws vary. Some state laws validate any type of electronic signature, others require some form of security, and others only validate digital signatures (a type of signature that uses encryption). These laws also vary with respect to the types of transactions that are covered.

Attached is a copy of the federal law, a copy of Connecticut laws, and information on other state laws.

MAJOR PROVISIONS OF THE FEDERAL ACT

The Electronic Signatures in Global and National Commerce Act applies to transactions in interstate or foreign commerce. A transaction is an action or set of actions relating to conducting business, consumer, or commercial affairs between two or more people. It includes the sale, lease, license, trade, or barter of personal property including intangibles, and services. It also includes a sale, lease, or other disposition of real property.

The act validates the use of electronic records and electronic signatures in transactions but does not require anyone to agree to use or accept electronic records or signatures. An electronic signature is an electronic sound, symbol, or process that is attached to or logically associated with a contract or record used by someone intending to sign the record. An electronic record is a record created, sent, received, or stored by electronic means.

The act provides that an electronic record satisfies a legal requirement to retain a record if it accurately reflects the information in the record and is accessible to anyone who is entitled to see the record. It must be in a form that can be accurately reproduced. Notarization, acknowledgement, and verification can be made electronically. Records can be made under oath electronically.

Among other provisions, the act requires various reports, requires the secretary of commerce to promote international electronic commerce, and includes specific provisions on transferable records (negotiable notes in transactions secured by real property).

Exceptions to the Act's Coverage

The act does not apply to contracts or records governed by:

1. laws on the creation and execution of wills, codicils, or testamentary trusts;

2. laws on adoption, divorce, and family matters; and

3. the Uniform Commercial Code (UCC) (with a few exceptions including Article 2 which governs the sale of goods).

It also does not apply to:

1. court papers;

2. notices canceling or terminating utility services;

3. certain notices in credit agreements or residential rental agreements;

4. cancellation or termination of health or life insurance or benefits;

5. certain product recall notices; and

6. certain documents for hazardous, toxic, or dangerous materials.

The secretary of commerce must review these exceptions over the next three years and a federal agency can eliminate them under certain conditions.

The act also addresses consumer disclosures. It provides that a consumer must consent to the use of electronic records when a state law, regulation, or rule requires written information to be given to a consumer. The consumer must receive a clear and conspicuous statement about his right to refuse to use electronic records. But the act does not invalidate a consumer contract solely because of the failure to obtain consent or confirmation of consent.

Preemption of State Law

The federal law applies to any transaction in or affecting interstate or foreign commerce. It supercedes any state statute, regulation, or rule on the topic with certain exceptions. The act allows a state to adopt UETA as its law in place of the federal law. But a state cannot adopt certain exceptions to UETA (which the NCCUSL version allows) that are inconsistent with the federal act's provisions on electronic records, signatures, and transferable records and cannot require or favor particular technologies.

The act also allows a state law to modify the federal law if it specifies the alternative procedures for electronic records or signatures, is consistent with the federal provisions, and does not require or favor particular technologies (this provision does not apply to state procurement procedures). If enacted after the federal act, the law must specifically reference it.

Federal and State Agencies

The act prohibits federal and state regulations or orders from imposing requirements in addition to those of the federal law and they cannot require or give greater legal status to a specific technology. When adopting a regulation, an agency must find that the regulation is substantially justified, is substantially equivalent to requirements for paper records, and does not impose unreasonable costs on the use of electronic records. Regulations must be consistent with the federal law.

A regulation can require the retention of information on paper if there is a compelling interest related to law enforcement or national security and the paper is essential to attain that interest. The regulation can specify standards for accuracy, integrity, and accessibility. It can require specific formats or give legal status to use of a particular technology if it serves an important government objective and is substantially related to achieving that objective. But it cannot require a particular software or hardware.

The act does not limit or supersede federal or state agency requirements for filing with specific standards or formats.

CONNECTICUT LAW

Connecticut law validates electronic signatures as signatures under the state's corporation laws and permits state agencies to allow government records to be signed by electronic signatures (PA 98-137, PA 99-155). Agencies can adopt regulations including regulations specifying the type of electronic signature required and its manner and format.

The federal act's exceptions to preemption do not apply to the provisions on state agencies. It appears that federal law prevails to the extent it overlaps with state law. In general, the Connecticut laws are not inconsistent with the federal legislation and preemption would seem to have little effect. But to the extent that Connecticut law allows agencies to adopt regulations requiring specific types of electronic signatures, it might conflict with the federal law.

The federal law also limits the ability of the state to legislate about electronic records and signatures in the future. The federal act provides that its provisions govern unless a state adopts UETA or modifies the federal requirements by specifying an alternate procedure that is consistent with the federal law and does not require or favor a particular technology.

OTHER STATES

Other state laws vary. Some state laws validate any type of electronic signature, others require some form of security, and others only validate digital signatures (a type of signature that uses encryption). These laws vary with respect to the types of transactions that are covered. Some are limited to tax documents, others address state documents in general, and others apply to all communications. The new federal law may preempt some of these laws. Through early July, 22 states had adopted UETA. More detailed information on state laws is attached in a table compiled by the Chicago law firm of McBride Baker & Coles (their website contains additional electronic commerce information at http://www.mbc.com).

CR:eh