UETA and UCITA

The purpose of this essay is to provide an overview of statutes relating to "e-commerce," with focus on the language and provisions of UETA. The world of sales has changed dramatically in the last decade with the advent of Internet sales, and law has been scrambling to catch up to the changes. One major issue has been settled, and one remains unsettled. Let's begin with the unsettled issue.

Article 2B and UCITA

One of the motivations for the Article 2 amendment process beginning in the late 1980s was to deal with the brave new world of "information." According to what would later be called UCITA, information is defined as "data, text, images, sounds, mask works, or computer program, including collections or compilations thereof." Computer information is "information in electronic form that is obtained from or through the use of a computer, or that is in digital or equivalent form capable of being processed by a computer. The term includes a copy of information in that form and any documentation or packaging associated with the copy." Well, you get the point. The amendments to Article 2 were going to deal with this "computer world," which at the time was different and confusing, but now is commonplace (if still confusing for many).

For the first five years of the amendment process, the focus was on developing a method by which "information" transactions could be included in a separate Article 2B. But the revision process became too cumbersome, and the ideas behind UCITA too controversial, and the process came to a halt in 1999. UCITA then ceased to become a UCC project, and was submitted to legislatures beginning in 1999 as simply that--a uniform act drawn up by NCCUSL. As with any uniform act, it must be approved by the individual legislatures in order to have effect. Only two states adopted it (VA and MD). The Oregon effort, chaired by Professor Chiappetta, led to UCITA's being introduced in the 2001 Legislative Assembly, but it received little support and died in committee. Several states then adopted protective legislation which would prevent transactions in other states formed through UCITA from taking effect in their states. Clearly something was felt to be deeply controversial if not outright wrong with UCITA. One of the issues which those of you who are writing on UCITA (or e-commerce) should probe is where we are now with respect to UCITA, now that very few jurisdictions have adopted it.

In brief, what UCITA sought to do was to recognize five things: (1) that the paradigm transaction is a license of computer information, rather than a sale of goods; (2) that innovation and competitiveness have come from small entrepreneurial companies, as well as larger companies; (3) that computer information transactions engage fundamental free speech issues; (4) that a commerical law statute should support contract freedom and interpretation of agreements in light of the practical commercial context; and (5) a substantive framework for Internet contracting is needed to facilitate commerce in computer information. There is much, much more to be said about UCITA, and a good web site describing it is here. The most influential "anti-UCITA" web-site is here.

UETA

The UETA sought to accomplish different ends than UCITA. Whereas UCITA was concerned primarily with software and information technology, UETA focuses on the legitimacy of contracts and signatures effected through computer technology. That is, UETA has to do with "e-commerce," and the validity of contracts and signatures concluded "online." The Uniform Law was proposed by NCCUSL in 1999, and then the Congress passed a similar statute in 2000, called ESIGN (Electronic Signatures in Global and National Commerce Act) in 2000. A provision of ESIGN allowed states to adopt their own forms of UETA, which would take them out of the federal statute. All states, with possibly one or two exceptions, have now adopted their own versions of the UETA, with minor variations from the uniform Act. Oregon adopted its UETA in 2001. New or amended Article 2 has three sections (2-211 through 2-213) which pull out some of the "sales-related" provisions of UETA, but since these sections will probably not be adopted by any state, and since UETA has been adopted in Oregon, I will focus here on the Oregon UETA. It is found in ORS 84.001-84.061, with the consumer protection feature of ESIGN now at ORS 84.070.

Several key sections of Oregon UETA should be noted. First, is the definition of transaction:

(16) “Transaction” means an action or set of actions occurring between two or more persons relating to the conduct of business, commercial or governmental affairs. ORS 84.004(16).

Thus, we see that the scope of the statute relates to contracts in general, and also includes dealings with government, as well as traditional sales contracts.

The statute wants to emphasize the legitimacy of electronic transactions. To that end, various definitions including "electronic" are here:

(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 individual.
(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. ORS 84.004(5)-(8).

We should pause for a second on the breadth of the last definition. An electronic signature would include voice mail, an email header or footer, a firm name on a fax or anything else that can be argued was an "intent" to sign the record. The major substantive provision of the Act is found in ORS 84.019.

"(1) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.
(2) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.
(3) If a law requires a record to be in writing, an electronic record satisfies the law.
(4) If a law requires a signature, an electronic signature satisfies the law."

You might note that this is identical to amended 2-211. This means that electronic contracting is legitimate. But, as the statute provides, it is not required.

"(1) ORS 84.001 to 84.061 do 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.
(2) ORS 84.001 to 84.061 apply 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.
(3) 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." ORS 84.013.

There is even a "mailbox rule" for this type of contract in ORS 84.043.

"(1) Unless otherwise agreed between the sender and the recipient, an electronic record is sent when it:
      (a) 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;
      (b) Is in a form capable of being processed by that system; and
      (c) 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 and that is under the control of the recipient.
(2) Unless otherwise agreed between a sender and the recipient, an electronic record is received when:
      (a) 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; and
      (b) It is in a form capable of being processed by that system."

There are several other provisions of the act, which I may mention in class, concerning notarization, admission of electronic records into evidence and the consumer protection statute, but this suffices for now.

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