LRB-4037/1
JTK/RK/RC/RN/JK:cjs:pg
2003 - 2004 LEGISLATURE
January 21, 2004 - Introduced by Senators Kanavas, Cowles, S. Fitzgerald,
Roessler and Risser, cosponsored by Representatives Nischke, Townsend,
Ladwig, Olsen, Kerkman, McCormick, Ott, Jensen, Miller, Montgomery,
Owens and Hahn. Referred to Committee on Transportation and Information
Infrastructure.
SB404,1,7
1An Act to repeal 137.04 and 137.06;
to renumber and amend 137.05;
to
2amend chapter 137 (title), subchapter I (title) of chapter 137 [precedes s.
3137.01], 137.01 (3) (a), 137.01 (4) (a), 137.01 (4) (b), subchapter II (title) of
4chapter 137 [precedes 137.04], 224.30 (2), 228.01, 228.03 (2), 889.29 (1), 910.01
5(1), 910.02 and 910.03; and
to create 16.61 (7) (d), 16.611 (2) (e), 16.612 (2) (c),
6137.11 to 137.24 and 137.26 of the statutes;
relating to: electronic transactions
7and records.
Analysis by the Legislative Reference Bureau
In 1999, the National Conference of Commissioners on Uniform State Laws
approved the Uniform Electronic Transactions Act (UETA) and recommended it for
enactment in all the states. Generally, UETA establishes a legal framework that
facilitates and validates certain electronic transactions. This bill enacts UETA in
Wisconsin, with minor, nonsubstantive changes necessary to incorporate the act into
the existing statutes.
Current law regarding electronic documents,
transactions, and signatures
Currently, a combination of state and federal laws govern the use of electronic
records, transactions, and signatures in this state. The most significant federal law
in this regard is the Electronic Signatures in Global and National Commerce Act,
commonly known as "E-sign," which was enacted after UETA was recommended for
enactment in all of the states. With certain exceptions relating to existing or pending
document retention requirements, E-sign took effect on October 1, 2000. Although
much of E-sign represents new law in this state, some of the issues addressed in
E-sign were addressed under state law previous to E-sign. With certain exceptions,
E-sign preempts the state law to the extent that the treatment is inconsistent with
the treatment under E-sign.
Public records
Under E-sign, any law that requires retention of a contract or document
relating to a transaction in or affecting interstate or foreign commerce may be
satisfied by retaining an electronic document, as long as the retained information
satisfies certain requirements relating to accuracy and accessibility. Thus, under
E-sign, a custodian of a public record relating to a covered transaction is likely
permitted to destroy the original record if a proper electronic copy is retained. This
authority is consistent with current provisions in state law that, in most cases,
permit electronic retention of public records; however, the state law in certain cases
imposes additional quality control and evidentiary preservation requirements that
must be followed if a public record is to be retained electronically. It is unclear
whether these additional requirements continue to apply or would be preempted as
inconsistent with these provisions of E-sign.
Acceptance of electronic documents by governmental units
Current law relating to the acceptance of electronic documents by
governmental units in this state is ambiguous. Under current state law, any
document that is required by law to be submitted in writing to a governmental unit
and that requires a written signature may be submitted in an electronic format, as
long as the governmental unit consents. Current state law does not require any
governmental unit to accept documents in an electronic format, but provides that an
electronic signature may be substituted for a manual signature if certain
requirements are met.
E-sign, however, may require any governmental unit that is a "governmental
agency" under E-sign (an undefined term) to accept certain electronic documents
that relate to transactions in or affecting interstate or foreign commerce. E-sign
states that it does not require any person to agree to use or accept electronic
documents or electronic signatures, other than a governmental agency with respect
to any document that is not a contract to which it is a party. Although no provision
of E-sign specifically requires a governmental agency to use or accept electronic
documents or signatures, under E-sign, a document relating to a covered transaction
may not be denied legal effect solely because it is in electronic form. Thus, E-sign
implies that a governmental agency may be required under E-sign to accept an
electronic document relating to a covered transaction, as long as the document is not
a contract to which the governmental agency is a party. This implication conflicts
with another provision of E-sign, which states that E-sign generally does not limit
or supersede any requirement imposed by a state regulatory agency (an undefined
term) that documents be filed in accordance with specified standards or formats.
Electronic documents and signatures in commerce
Promissory notes
Currently, this state's version of the Uniform Commercial Code contains the
primary legal framework allowing for transactions in this state involving promissory
notes (commonly, loan documents). Title II of E-sign contains the primary legal
framework relating to a new type of promissory note, termed a "transferrable
record," which allows for the marketing of electronic versions of promissory notes in
transactions secured by real property.
Other documents and records
The primary electronic commerce provisions of E-sign are contained in Title I,
which establishes a legal framework relating to electronic transactions in or
affecting interstate or foreign commerce. Generally, Title I contains provisions that
relate to the use of "electronic records" and signatures in covered transactions, the
retention of "electronic records" of covered transactions, and the notarization and
acknowledgement of covered electronic transactions. Title I broadly defines the term
"electronic record" to include, among other things, any information that is stored by
means of electrical or digital technology and that is retrievable in perceivable form.
This definition likely covers such things as information stored on a computer disk or
a voice mail recording. Because of this broad definition, in this analysis of E-sign,
the term "document" is generally used in place of the term record. Title I also defines
"transaction" broadly to mean any action or set of actions relating to the conduct of
business, consumer, or commercial affairs between two or more persons, including
governmental agencies.
Currently, under Title I, a signature, contract, or other document relating to a
covered transaction may not be denied legal effect, validity, or enforceability solely
because it is in an electronic form, as long as the electronic contract or record, if it
is otherwise required to be in writing, is capable of being retained and accurately
reproduced by the relevant parties. Similarly, a contract relating to a covered
transaction may not be denied legal effect solely because an electronic signature or
electronic document was used in its formation.
Title I also permits electronic notarization, acknowledgement, or verification
of a signature or document relating to a covered transaction, as long as the electronic
signature of the person performing the notarization, acknowledgement, or
verification is accompanied by all other information required by law. In addition,
Title I provides that no person is required under Title I to agree to use or accept
electronic records or signatures.
However, under Title I, any law that requires retention of a contract or
document relating to a covered transaction may be satisfied by retaining an
electronic document, as long as the retained information satisfies certain
requirements relating to accuracy and accessibility. Title I contains similar
provisions with regard to laws requiring retention of a check. An electronic contract
or document retained in compliance with these provisions generally has the same
legal status as an original document. As discussed above with regard to public
records custodians, this provision of Title I also likely permits any private custodian
of records relating to covered transactions to destroy original records if a proper
electronic copy is retained.
Consumer protections
Under Title I, with regard to consumer transactions in or affecting interstate
or foreign commerce, existing laws requiring written disclosure currently may be
satisfied electronically only if the consumer consents after being informed of certain
rights and of the technical requirements necessary to access and retain the electronic
document. In addition, the consumer must consent or confirm his or her consent
electronically in a manner that reasonably demonstrates that the consumer can
access the information that is required to be provided to the consumer. The legal
effect of a contract, though, may not be denied solely because of a failure to obtain
the consumer's electronic consent consistent with this requirement. Title I also
specifies that the use of electronic documents permitted under these consumer
provisions does not include the use of an oral communication, such as a voice mail
recording, unless that use is permitted under other applicable law.
Any federal regulatory agency, with respect to a matter within the agency's
jurisdiction, may exempt a specified category or type of document from the general
consumer consent requirement, if the exemption is necessary to eliminate a
substantial burden on electronic commerce and will not increase the material risk
of harm to consumers.
Exemptions
All of the following are exempt from coverage under the primary electronic
commerce provisions of E-sign and, as a result, currently may not be provided in
electronic format unless otherwise authorized by law:
1. A document to the extent that it is governed by a law covering the creation
and execution of wills, codicils, or testamentary trusts.
2. A document to the extent that it is governed by a law covering adoption,
divorce, or other matters of family law.
3. A document to the extent that it is governed by certain sections of the
Uniform Commercial code.
4. Court orders or notices and official court documents, including briefs,
pleadings, and other writings.
5. Notices of cancellation or termination of utility services, including water,
heat, and power.
6. Notices of default, acceleration, repossession, foreclosure, or eviction or the
right to cure under a credit agreement secured by, or a rental agreement for, a
primary residence of an individual.
7. Notices of the cancellation or termination of health insurance or life
insurance, other than annuities.
8. Product recall notices.
9. Documents required to accompany the transportation of hazardous
materials.
A federal regulatory agency may remove any of these exemptions, as the
particular exemption applies to a matter within the agency's jurisdiction, if the
agency finds that the exemption is no longer necessary for the protection of
consumers and that the elimination of the exemption will not increase the material
risk of harm to consumers.
Limits on the scope of Title I
In addition to these specific exemptions, Title I has a limited effect upon certain
specified laws. For example, Title I states that it does not affect any requirement
imposed by state law relating to a person's rights or obligations other than the
requirement that contracts or other documents be in nonelectronic form. However,
this provision may conflict with other provisions of Title I which appear to
specifically affect obligations other than writing or signature requirements. Title I
also has a limited effect on any state law enacted before E-sign that expressly
requires verification or acknowledgement of receipt of a document. Under Title I,
this type of document may be provided electronically only if the method used also
provides verification or acknowledgement of receipt. In addition, Title I does not
affect any law that requires a warning, notice, disclosure, or other document to be
posted, displayed, or publicly affixed within a specified proximity.
State authority under Title I
Title I provides that a state regulatory agency that is responsible for rule
making under any statute may interpret the primary electronic commerce provisions
of Title I with respect to that statute, if the agency is authorized by law to do so.
Rules, orders, or guidance produced by an agency under this authority must meet
specific requirements relating to consistency with existing provisions of Title I; to
regulatory burden; to justification for the rule, order, or guidance; and to neutrality
with regard to the type of technology needed to satisfy the rule, order, or guidance.
A state agency may also mandate specific performance standards with regard to
document retention, in order to assure accuracy, integrity, and accessibility of
retained electronic documents. However, under state law, the rule-making
authority of a state agency is limited to interpretation and application of state law
and no state agency may promulgate a rule that conflicts with state law.
Relationship between E-sign and UETA
With certain exceptions, E-sign preempts state laws that are inconsistent with
its provisions. One of the exceptions permits a state to supersede the effect of the
primary electronic commerce provisions of Title I by enacting a law that constitutes
an enactment of UETA. However, a state may not use the optional provision in UETA
that permits a state to insert exemptions relating to specific areas of state law from
the application of UETA as a loophole to avoid the requirements of E-sign. If a state
enacts UETA without significant change and containing no new exemptions under
this provision of UETA, the state enactment of UETA will likely not be preempted
by E-sign.
Because this bill makes no significant changes to the substance of UETA and
the text is consistent with the intent of the version of UETA recommended for
enactment in all of the states, the bill likely qualifies for this exception from
preemption and, if enacted, would likely supplant the primary electronic commerce
provisions of E-sign in this state. However, certain provisions of UETA and, as a
result, this bill, are susceptible to varying interpretations. Many of these provisions
are similar to current law under E-sign. This bill generally does not clarify these
provisions. Rather, in order to avoid preemption, the text of this bill generally
remains consistent with the recommended version of UETA.
UETA
The following analysis of the version of UETA contained in this bill generally
reflects an interpretation that is consistent with the prefatory note and official
comments accompanying UETA, which generally discuss the intent of each
recommended provision of UETA. For the provisions that are subject to varying
interpretations, this analysis discusses each primary interpretation and indicates
which interpretation, if any, is supported by the prefatory note or comments.
Although the prefatory note and comments have no legal effect, in the past courts
have often relied on the prefatory notes and comments to other uniform laws when
interpreting ambiguous provisions of those laws. In some instances, the
interpretation supported by the prefatory note or comments is difficult to derive from
the text of the bill.
Public records
This bill includes a provision potentially affecting the maintenance of public
records that is similar to the provision currently in effect under E-sign. With certain
exceptions, the bill permits a person to satisfy any law that requires retention of a
document by retaining an electronic document, as long as the retained information
satisfies certain requirements relating to accuracy and accessibility. Like current
law under E-sign, this provision may be interpreted to permit a custodian of a public
record relating to a transaction to destroy the original record and retain an electronic
copy, notwithstanding other current statutes regarding the conversion of public
records into electronic format and retention requirements.
However, this interpretation is less likely to occur under this bill than it is in
current law under E-sign. Unlike E-sign, this bill specifically states that it applies
only to transactions between parties each of which has agreed to conduct
transactions by electronic means. (See discussion under "Electronic Documents and
Signatures in Commerce" (subheading "Applicability and definitions") below.)
Although the definition of "transaction" may be interpreted broadly to include a
typical governmental action like the filing of a document, the prefatory note and
comments to UETA imply that a narrower interpretation is intended which covers
only the actions of the government as a market participant. Thus, if interpreted
consistently with the prefatory note and comments, the electronic document
retention provisions will likely apply to the parties to a transaction, rather than to
a governmental unit that stores public records relating to the filings and
transactions of others.
This bill also provides that a person may comply with these electronic document
retention provisions using the services of another person. If the term "transaction"
is interpreted broadly, this provision may permit a public records custodian to
transfer public records to other governmental or private parties for retention.
However, if the term "transaction" is interpreted consistently with the prefatory note
and comments to UETA, this provision generally would not apply to a public records
custodian's retention of most public records.
Acceptance of electronic documents by governmental units
The same ambiguities regarding the acceptance of electronic documents by
governmental units exist under this bill as exist currently under E-sign, although
under this bill it is more likely that a governmental unit is not required to accept
electronic documents. This bill attempts, in a manner consistent with UETA, to
restore the law as it existed in this state before E-sign regarding the acceptance of
electronic documents by governmental units. Thus, under this bill, any document
that is required by law to be submitted in writing to a governmental unit and that
requires a written signature may be submitted in an electronic format if the
governmental unit consents. Although this bill, like current law under E-sign, also
states that a document relating to a transaction may not be denied legal effect solely
because it is in electronic form, it is more likely under this bill that this provision has
no effect on the authority of a governmental unit to refuse to accept an electronic
document. Unlike current law under E-sign, this bill does not contain any statement
that a governmental unit is required to accept an electronic document.
This bill also requires any governmental unit that adopts standards regarding
the governmental unit's receipt of electronic records or electronic signatures to
promote consistency and interoperability with similar standards adopted by other
governmental units, the federal government, and other persons interacting with
governmental units of this state.
Electronic documents and signatures in commerce
Rule of construction
This bill specifies that it must be construed and applied to facilitate electronic
transactions consistent with other applicable law, to be consistent with reasonable
practices concerning electronic transactions and with the continued expansion of
those practices, and to bring about uniformity in the law of electronic transactions.
Applicability and definitions
Generally, the bill applies to the use of electronic records and electronic
signatures relating to transactions. Like current law under E-sign, this bill broadly
defines the term "electronic record" to include, among other things, any information
that is stored by means of electrical or digital technology and that is retrievable in
a perceivable form. This definition would likely cover such things as information
stored on a computer disk or a voice mail recording. Because of this broad definition,
in this analysis of the version of UETA contained in this bill, the term "document"
is generally used in place of the term "record." Under the bill, an "electronic
signature" includes, among other things, a sound, symbol, or process that relates to
electrical technology, that is attached to or logically associated with a document, and
that is executed or adopted by a person with intent to sign the document.