On January 1, 2000, California became the first state to expressly legitimize certain electronic transactions. This was accomplished by Governor Gray Davis signing the Uniform Electronic Transactions Act (the "UETA" or the "Act") into law on September 22, 1999. While in some ways, the new law's embrace of electronic transactions is tentative, it nonetheless is a bold first step towards the creation of a truly "paperless society," and will no doubt help to hasten the development of electronic commerce on the internet.

Even though millions of electronic transactions routinely occur on the internet each week, questions abound regarding the legal validity of electronically created contracts and the evidentiary acceptability of electronic records, documents and "signatures." It remains an open question whether ordering goods from amazon.com, for example, by clicking a button titled "I ACCEPT" creates a legally binding written contract, and if so, under what terms. Moreover, it is unclear whether the consumer in that scenario can be deemed to have "signed" the contract. These issues raise serious questions for the legal practitioner-for example, will a court impose the statute of limitations applicable to written contracts or oral contracts on electronic transactions? Where the law requires that certain types of transactions must be in writing, does an electronic transaction, where, arguably, no writing exists, meet that requirement? The same question can be asked with respect to documents which must be signed to be legally enforceable. With billions of dollars riding on the answers to these questions, certainty is a must.

The Act attempts to address these matters , in various ways. First, it recognizes an "electronic record" as an enforceable writing which a Court may review to ascertain the terms of an agreement between contracting parties. The Act defines an"electronic record" as information which is created, sent, communicated and/or stored electronically. This would appear to include emails, terms and conditions appearing on a website, license agreements contained in a piece of software's installation program, and purchase orders, among other things, as enforceable agreements.

The UETA also equates an "electronic signature" with a party's act of signing a document. The UETA defines an"electronic signature" as "an electronic sound, symbol or process attached to or logically associated with an electronic record and executed or adopted by a person with the intent to sign the electronic record." This broad wording goes well beyond a party's affixing its name on a sheet of paper, and appears to include clicking a button or check box on a web site or providing and submitting billing information (such as credit card information) in designated areas on an internet order form. Moreover, this definition appears broader than a "digitial signature," which is an encrypted methodology for verifying one's online identity. The Act also attempts to address record retention requirements imposed by law and the rules of evidence. Thus, where the law requires that a notice be retained for some period of time, the UETA allows that it be retained in an electronic form. Where a law requires retention of a check, the Act will deem that requirement to be satisfied by retention of an electronic record of the information on the front and back of the check. An important note, however: Where a law requires that records be retained in a certain form, that requirement will continue to control over any general rights provided under the UETA.

The UETA recognizes, and attempts to address the fact that certain transactions may be accomplished entirely by "electronic agent"(computer program or other automated means) without the involvement of a person-on one side, or both. For example, ordering a book from amazon.com would involve an electronic agent on the seller's side. The UETA recognizes that these activities may create a binding contract-even without human involvement.

Caution is given that UETA contains an imposing list of transactions which are not covered by its terms; in other words, transactions which will not be given legal effect if completed electronically. A complete list of such transactions would encompass several pages, and will not be attempted in this article. Nonetheless, the following should give the reader a flavor of certain types of excluded transactions:

a. Wills, codicils or testamentary trusts;
b. Transactions involving negotiable instruments;
c. Bank lending transactions;
d. Foreclosure and eviction proceedings notices;
e. Various consumer matters (eg., credit reporting, medical information release forms, etc.).

We strongly suggest that the reader not rely on an electronic contract or notice without first specifically verifying that the proposed transaction is covered under the statute.

Various other limitations to the Act's coverage must be considered. The Act only applies to transactions which are generated after January 1, 2000. The Act only applies to contracts which are otherwise governed by California law. Jurisdiction is a complicated subject, and must be carefully considered before traditional written methodology is abandoned. Electronic transactions will only be enforceable where the parties have previously agreed to such treatment. Whether parties have agreed or not is subject to a review of all of the facts and circumstances. The law is clear, however, that one party may not obtain the consent of the other by imposing the requirement in a standard form contract. Additionally, either party may withdraw their consent to electronic transactions at any time for any reason. Where the writing is required to be in specific form by another law, that law's requirements shall control. Where the other law allows the parties to vary the form of the writing, then electronic notice shall be acceptable.

In conclusion, the UETA is an important and historic first step towards universal electronic commerce. While other states have been considering such legislation, California is the first state to take the plunge. Like any new statutory scheme, the Act will create as many new questions as it answers. For merchants already engaged in wholly electronic transactions, the Act will likely provide some measure of additional protection. For all other parties, caution must be the watch word.

For those interested in reading the Act, a link can be found on the firm's web site. The Act will be found in the California Civil Code, commencing at Section 1633.1, and will amend Section 18608 of the Financial Code.