Vol. 74, No. 7, July 2001

Electronic Commerce Page 1

Retention of Contracts and Documents

Title I permits a business to use electronic storage as a more efficient means of retaining copies of documents relating to the business's transactions. Under Title I, electronically retained information satisfies any law that requires retention of a contract or other document relating to a transaction, as long as the retained information satisfies certain requirements relating to accuracy and accessibility.19 Title I contains similar provisions with regard to laws requiring retention of a check.20

In addition, a person may use an electronic document relating to a transaction to satisfy any law that requires the person to retain an original copy of the document.21 Any document retained in electronic form under this provision also must satisfy certain requirements relating to accuracy and accessibility. Although these provisions may be interpreted narrowly to apply only in the context of electronic transactions, the plain language of the provisions would permit a business that was a party in a paper transaction to scan the original contract into the business's electronic files and destroy the nonelectronic original.

Exemptions From Title I

All of the following documents are exempt from the provisions discussed above and, as a result, their use is largely unaffected by E-sign:

• a contract or document to the extent that it is governed by a law covering the creation and execution of wills, codicils, or testamentary trusts;
• a contract or document to the extent that it is governed by a law covering adoption, divorce, or other matters of family law;
• a contract or document to the extent that it is governed by sections of the Uniform Commercial Code other than the statute of frauds (Wis. Stat. section 401.206), the chapter regulating sales of goods (Wis. Stat. chapter 402), the chapter regulating leases (Wis. Stat. chapter 411), and provisions governing written waivers (Wis. Stat. section 401.107);
• notices of the cancellation or termination of utility services, including water, heat, and power;
• notices of default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, an individual's primary residence;
• notices of the cancellation or termination of health insurance or life insurance, other than annuities; and
• product recall notices.22

Title I and Pending State Legislation

Although Title I provides increased certainty in the law of electronic transactions, the legal environment with regard to electronic commerce in Wisconsin may change again soon. Despite the fact that Title I generally preempts state laws that are inconsistent with it, Title I does allow the states to regulate electronic transactions by enacting a version of the Uniform Electronic Transactions Act (UETA).23 This uniform act was approved by the National Council of Commissioners on Uniform State Laws in 1999 and recommended for passage in all states.24 A version of UETA was introduced in Wisconsin for the first time as part of the 2001 executive budget bill.25

If enacted, UETA would for the most part displace Title I as the law of electronic commerce in this state. There are major differences between UETA and Title I, including:

• UETA's exemptions are less extensive than those in Title I and, as a result, UETA applies to more types of transactions and documents. (For example, unlike Title I, UETA permits the use of an electronic foreclosure notice under a credit agreement secured by a primary residence.)
• UETA contains no provisions that specifically apply only to consumer transactions. (For example, unlike Title I, UETA does not require a business to give any special notice or warning to a consumer with regard to the technical requirements necessary to access information electronically disclosed to the consumer.)
• UETA creates standards for determining, for legal purposes, the location where an electronic transaction takes place and the time an electronic document is sent or received. (For example, UETA specifies that, with certain exceptions, an electronic document is deemed to be sent from the sender's place of business that has the closest relationship to the underlying transaction. This provision, which may be important for tax reasons and for determining jurisdiction in the event of a lawsuit, is unlike anything in Title I.)
• UETA has provisions outlining the legal effect of errors that occur during an electronic transmission. (For example, unlike Title I, UETA includes a procedure an individual may follow to avoid the effect of certain erroneous, automated transactions.)

Although uncertainty over the status of UETA may slow the expansion of electronic commerce in Wisconsin, there are some areas of overlap between UETA and Title I that would permit businesses to adopt more efficient practices immediately. For example, both UETA and E-sign authorize electronic storage of documents relating to transactions.26 Furthermore, the debate over UETA provides an opportunity for citizens to shape the regulation of electronic commerce.

Conclusion

Title I goes a long way toward fostering the continued expansion of electronic commerce. It provides certainty to parties who enter into electronic transactions and provides safeguards for consumers who may be wary of transacting business electronically. However, Title I establishes some policies with which Wisconsin businesses or consumers may disagree. In addition, as Title I is litigated, certain unforeseen and potentially undesirable consequences may become apparent. The possible enactment of UETA further complicates the status of Title I as the law of electronic commerce in Wisconsin. Given the differences between Title I and UETA, businesses and consumers both have interests at stake and both can be expected to take part in the debate as it takes place in the legislature.

Endnotes

1 Amazon.com Releases Preliminary Fourth Quarter Highlights - Sales Up More than 40% Over 1999, Fueled by Growth in Electronics, Kitchen and Tools, (Press release, Jan. 8, 2001).

2 Organisation for Economic Co-operation and Development, The Economic and Social Impacts of Electronic Commerce: Preliminary Findings and Research Agenda, copyright OECD, (OECD 1999) .

3 The Boston Consulting Group, Business-to-Business Race is On, (BCG 2000) .

4 U.S. Small Business Administration, Small Business Expansions in Electronic Commerce, (SBA 2000) .

5 15 U.S.C. 7007.

6 E-sign also contains two other Titles that are relevant to electronic commerce. Title II deals with electronic versions of certain negotiable instruments that are secured by an interest in real property. See 15 U.S.C. 7021. Title III deals with the promotion of international electronic commerce. See 15 U.S.C. 7031.

7 15 U.S.C. 7001 (a) (1).

8 15 U.S.C. 7001 (a) (2).

9 See 15 U.S.C. 7006 (4), (5), and (9) (definitions of "electronic record," "electronic signature," and "record," respectively).

10 See Wis. Stat. sections 402.201 (1) and 706.02, which, among other things, require certain sales of goods or land to be evidenced in writing.

11 15 U.S.C. 7001 (b) (2).

12 15 U.S.C. 7001 (a) (1).

13 15 U.S.C. 7006 (1).

14 15 U.S.C. 7001 (c) (2) (A). Under 15 U.S.C. 7004 (d), however, a federal agency may exempt a specified category or type of document from the consumer requirements in Title I, if the agency determines that the consumer requirements are too great of a burden on electronic commerce.

15 15 U.S.C. 7001 (c) (6).

16 15 U.S.C. 7001 (c) (1).

17 15 U.S.C. 7001 (c) (1) (C) (ii). However, under 15 U.S.C. 7001 (c) (3), the legal effect of a contract may not be denied solely because of a failure to obtain the consumer's consent consistent with this requirement.

18 See Wis. Stat. §§ 421.301 (17) and 421.202 (6) and 12 C.F.R. 226.2 (a) (11) and 226.3 (b).

19 15 U.S.C. 7001 (d) (1).

2015 U.S.C. 7001 (d) (4).

21 15 U.S.C. 7001 (d) (3). See, for example, Wis. Stat. section 422.303 (5), which requires certain creditors to retain copies of documents that evidence closed-end consumer credit transactions.

2215 U.S.C. 7003. This statute also permits a federal agency to remove any of these exemptions if the agency finds that exemption is no longer necessary for the protection of consumers and that elimination of the exemption will not increase the material risk of harm to consumers.

23 15 U.S.C. 7002 (a) (1).

24 The text of UETA may be obtained from http://www.law.upenn.edu/bll/ulc/ulc_frame.htm.

25 See 2001 Assembly Bill 144, sections 261-263, 2829-2841, 3028, 3036, 3037, 3862, 3874-3876, 9101 (5) and (6), and 9301 (2) .

26 See 15 U.S.C. 7001 (d) (1) and UETA § 12.