CHAPTER 13 E-COMMERCE LAW & PRACTICE: AN INTRODUCTION FOR THE ENERGY PRACTITIONER
| Jurisdiction | United States |
(2001)
E-COMMERCE LAW & PRACTICE: AN INTRODUCTION FOR THE ENERGY PRACTITIONER
Law Offices of Philip Marston
Alexandria, Virginia
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The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.
— Ecclesiastes 1
Like most "buzz-words" that burst onto the business scene, the term "electronic commerce" (or "e-commerce") describes for the most part new ways of doing some very old things. Similarly, the law governing e-commerce turns out to concern itself with a host of legal matters with which the practitioner is already thoroughly familiar, including some topics so old that most attorneys haven't given them a fresh thought since the first year of law school. For example, as seen below, expertise of legal historians familiar with the "law of the seal" may be helpful in understanding the developing legal standards for document authenticity in a digital age.
Hence, while there is much that is new in the rapidly changing world of electronic commerce, transactions — and law practice — there is much that is not. The goal of this paper is to summarize that which is new in a manner that is readily recognizable by those experienced in the "good old ways" of conducting business and practicing law. It is thus intended to merely point the way to the various statutes, principles or rapidly developing bodies of law addressing electronic commerce and practice, and is emphatically not intended to be a definitive discussion of the various matters touched upon.
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I. CHANGES IN THE SUBSTANTIVE LAW
A. Contract formation and document execution — electronic signatures. For most attorneys involved in the energy industries, the formal requirements for contract formation probably conjure up memories of hairy hands2 or the case of the negotiable cow.3 Such formalities come back to the fore, however, with the adoption of electronic signature and electronic recordkeeping legislation. The adoption of federal and state statutes endorsing the use of electronic signatures and the trend among energy regulatory agencies, and to a lesser degree, the courts, promise significant practical changes.
1. UETA, E-SIGN and UCITA: Electronic signatures, recordkeeping and sales.
a. The new statutory framework. There are three key statutes that bear on the validity of electronic signatures. The interplay of the three texts is thus likely to become increasingly significant in coming years.
• The first statute is known as the Uniform Electronic Transactions Act (UETA).4 It is a uniform state statute recommended by the National Conference of Commissioners on Uniform State Laws (NCCUSL). UETA is the fruit of a multi-year effort that focused as much, if not more, on electronic recordkeeping (e.g., the reliance on electronic records by the financial services industry) as on electronic signatures. It is an effort to create a comprehensive statutory scheme establishing the legal equivalence of electronic records and signatures with paper writings and manually-signed signatures and removing barriers to electronic commerce. As of this writing, UETA has been adopted by approximately three dozen states.5
• The second statute, the Electronic Signatures in Global and National Commerce Act (or E-SIGN),6 is a federal statute adopted in 2000. It largely copied the provisions of UETA with regard to the general validity of electronic signatures and record-keeping and was designed in theory to ensure the validity of electronic signatures and records pending actual adoption of the uniform state law by the various states. Accordingly, it is designed to be largely superseded by state law as the states adopt UETA. This, at least in theory, would leave the bulk of the law of electronic signatures and recordkeeping to develop as state, not federal, law. The federal statute is not as comprehensive in scope as UETA.
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• A third statute that addresses computer information transactions is known, appropriately enough, as the Uniform Computer Information Transactions Act (UCITA).7 It is a far more comprehensive effort than either E-SIGN or UETA and is intended to create the functional equivalent of a uniform commercial code for the licensing or sale of computer information (e.g., software and similar information intangibles). Hence, UCITA is designed largely to parallel Article 2 of the Uniform Commercial Code governing the sale of "goods." The UCC practitioner will find in UCITA many a cyberspace homologue to the comparable Article 2 provision involving warranties (and their disclaimer), risks of loss, etc.8
While UCITA includes electronic signature provisions that are similar in intent to those of UETA and E-SIGN,9 it has to date been adopted by only a couple of states. Normally, that would justify ignoring it until it gained wider acceptance. In this case, however, one of the adopting states is Virginia,10 home to a number of retail-focused, electronic commerce businesses (including, e.g., America Online). In addition, as adopted by the Commonwealth, (see Section 59.1-501.9(b) of the Virginia Code), the "default" choice of applicable law is that of ... Virginia.11 As a
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result, the provisions of UCITA may be found to apply to a vastly larger number of transactions than one might otherwise anticipate, such that any attorney whose practice includes computer information transactions that could come within the scope of UCITA would be well-advised to be generally familiar with UCITA as well as UETA and E-SIGN.
UCITA has become a lighting rod for criticism from consumer and other groups who charge that it is overly friendly to the seller/licensor of computer information.12 As a result, a significant, and to date rather successful, effort has been undertaken to preclude its adoption by state legislatures.
All three of these statutory texts may present issues for the energy practitioner in coming years. The present article, however, will leave UCITA to one side as presenting matters of interest primarily to those whose products or services consist primarily of computer information, and focus instead on the more straightforward electronic signature and recordkeeping provisions of UETA and E-SIGN.13
b. The General Rule of Validity. As noted below, the federal E-SIGN law is designed primarily to serve as a nationally-available federal "backstop" that will ensure the validity of electronic signatures until it is superseded by the more-comprehensive, state-enacted UETA. Accordingly, E-SIGN and UETA are basically intended to accomplish three purposes: (a) ensure the general validity of electronic signatures; (b) allow for electronic records and recordkeeping; and (c) create certain minimal consumer protection rules for electron1ic transactions.
The basic provisions governing electronic signatures in both statutes are nearly the same.14 First and foremost, is what E-SIGN terms the "general rule of validity." This provides that a record or signature may not be denied legal effect or enforceability solely because it is in electronic form.15 If a law requires a record to be in writing, an electronic record satisfies
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that requirement.16 In addition, if a law requires a record to be in writing, an electronic record satisfies that requirement.17
The Comment to Section 7 of UETA explains that the "fundamental premise" of UETA is that "the medium in which a record, signature, or contract is created, presented or retained does not affect it's [sic] legal significance."18 Hence the statute is designed to eliminate "the single element of medium" as grounds for denying legal effect or enforceability to records, signature or contracts: "[t]he fact that the information is set forth in an electronic, as opposed to paper, record is irrelevant."19
c. What, then is an electronic signature? The short answer is, virtually anything (with the pun, unfortunately perhaps, fully intended). Section 2 (8) of UETA defines an electronic signature as "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." The definition in E-SIGN is nearly identical.20 The term "electronic" is also defined in the statutes, and means "relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities."21
This phrase covers a lot of ground. It doesn't take an electrical engineer to notice that while optical storage or transmission of information may certainly be "digital," it involves photons, and not electrons. Moreover, the phrase "relating to technology" having capabilities that are "similar" to wireless technology is open-ended indeed. Does that include a telephone? A two-way radio conversation? In short, the definition is very broad and inclusive.
While there is little in the legislative history of the federal E-SIGN statute to shed light on what the Congress intended through this phrase, the corresponding provision of UETA is accompanied by detailed and explicit explanatory comments.22 The UETA drafters intended this broad scope, stating that it was intended to assure that the act will be applied broadly as new technologies develop.23
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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...
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