TEXAS LAWYERS' INSURANCE EXCHANGE
The Texas Legislature and the U.S. Congress both enacted legislation recently approving the use of electronic records and signatures. The underlying goals of both these statutes are to establish legal certainty for electronic commerce and to ensure that electronic technologies are treated on an even par with their paper equivalents. In most instances, where the law required either a written record or signature, electronic versions will now be valid and enforceable. In such instances (and subject to certain exceptions), electronic records, signatures and contracts cannot be denied enforceability or validity solely because they are in electronic form. However, a party cannot demand or require that a transaction be conducted electronically merely because an electronic format is now permissible.
On June 13, 2001, the Texas Legislature passed Senate Bill 393, entitled the "Uniform Electronic Transactions Act." The Act becomes effective January 1, 2002, as Chapter 43 of the Texas Business & Commerce Code. This uniform act was approved by the National Conference of Commissioners on Uniform State Laws in 1999 and has been enacted in almost 40 states since that time. Texas' UETA statute will apply to all electronic records or signatures created, generated, sent, or received on or after January 1, 2002.
UETA applies to all electronic records and signatures relating to a transaction if the parties have agreed to conduct the transaction by electronic means. Section 43.005 (b). This agreement can be found from the context and circumstances surrounding the parties' contacts. Id. However, UETA does not apply to unilaterally generated signatures. For example, the mere fact that someone may have provided a business card that has an e-mail address may not constitute that person's consent to conduct transactions by electronic means.
A valid electronic signature under UETA may be any 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. Section 43.002 (8). In short, this requires merely an affirmative, recognizable authentication of a record by its purported signer. Moreover, documents that are required by law to be notarized, acknowledged, verified, or made under oath may be done so electronically, so long as the electronic signature of the person authorized to perform those acts is attached to or logically associated with the signature or record.
UETA also validates automated transactions. Pursuant to the statute, a contract can be formed by the interaction of two "electronic agents" (i.e., computer-generated transactions), even if no individual is aware of or reviewed the agents' actions or resulting terms and agreements. Section 43.014 (b). Similarly, a contract may be formed by the interaction of a single electronic agent and an individual, so long as the individual is aware that his actions will cause the electronic agent to complete the transaction.
The presumptions of delivery and receipt under Section 43.015 of UETA roughly parallel the standard "mailbox rule." Unless otherwise agreed, an electronic record or signature is sent when it:
Likewise, unless otherwise agreed, an electronic record is received when it:
One important caveat: under UETA Section 43.015(b), an e-mail containing an electronic record or signature is deemed received when the addressee's computer system actually receives the mail, regardless of when the recipient actually opens and reads the e-mail.
According to Section 43.003 (b), UETA does not apply to:
Pursuant to UETA, parties will now be permitted to introduce electronic versions of records in Texas courts (other than wills and other records excluded from UETA's application). Such records cannot be denied legal effect merely because they are in electronic form. Section 43.013 of UETA specifically notes that evidence of a record or signature may not be excluded by a court solely because it is in electronic form.1
Because electronic records and signatures under UETA will be treated like their paper counterparts for all purposes, the standard rules presumably apply to venue of contract actions and conflict of law issues. Section 43.014 (d). The Texas UETA statute specifically states that it does not modify the venue provisions of Chapter 15 of the Texas Civil Practice & Remedies Code. Therefore, absent another mandatory venue provision, lawsuits arising out of an electronic transaction may be brought where the underlying cause of action accrued or where the defendant resides, if a natural person. Consumer transaction disputes may also be brought in the county in which the defendant "e-signed" the contract. Regarding choice of law, Texas courts will still determine the state with the "most significant relationship" to the electronic transaction, examining the place of contract, place of negotiation, place of performance, location of the contract's subject matter, and parties' domiciles.
Finally, one interesting area that may develop under the UETA statute is electronic fee arrangements between attorneys and their clients. Because contingent fee agreements must be in writing pursuant to Rule 1.04 of the Texas Disciplinary Rules of Professional Conduct, it appears that electronic versions of such agreements will now be permissible, provided also that both client and attorney sign as required by Section 82.065 of the Texas Government Code. However, attorneys should carefully consider whether entering into such electronic arrangements for any fee agreement is advisable, contingent or otherwise. For example, the comments to Rule 1.04 note that, in determining whether a fee is unconscionable, one factor will be the "failure of the lawyer to give at the outset a clear and accurate explanation of how a fee was to be calculated." If the attorney and client consummate fee arrangements without a face to face meeting providing the client an opportunity to ask questions regarding the nature of representation and fee, then the likelihood of a claim increases to the extent that the attorney failed to provide a clear and accurate" explanation of the fee. Attorneys should tread carefully in this area.
On October 1, 2000, UETA's federal counterpart, E-SIGN ("Electronic Signatures in Global and National Commerce Act"), Pub. L. No. 106-229, became effective. 15 U.S.C. Sec. 7001, et seq.2 Although this federal statute borrows considerably from UETA's wording, its application is somewhat more complex. E-SIGN expressly permits its own provisions to be preempted by those states (like Texas) that have enacted UETA in its uniform version. In fact, the Texas UETA statute specifically notes that it preempts E-SIGN with certain specified exceptions. Section 43.009. In effect, E-SIGN serves as a short-term "band aid" for electronic commerce in those states that have not yet enacted UETA.
In contrast to UETA's simple requirement that the parties agree to conduct a transaction by electronic means, E-SIGN has rather complex provisions and prerequisites before consent will be recognized to conduct transactions in an electronic form. For example, Section 101 (c) requires that a business wishing to conduct an electronic transaction with a consumer must:
Considering their significance in business transactions, UETA and E-SIGN have been introduced and enacted with remarkable rapidity. Both statutes recognize the increasingly important role of electronic commerce. With the explosive growth of Internet economy revenues, these statutes have paved the way for business transactions in the new millennium.
W. Stephen Benesh is a partner in the trial section of Bracewell & Patterson, LLP's Austin office. Mr. Benesh serves as Chairman of the Technology Section of the Travis County Bar Association and is a member of the TCBA's Board of Directors. Mr. Benesh engages in commercial and technology litigation and may be reached at . TLIE greatly appreciates his contribution of this article.
1 On a similar note, Sections 2 - 4 of S.B.393 permit County Clerks to accept electronic records as instruments suitable for filing (as archival items or for evidentiary purposes), if the instrument meets the requirements of UETA Section 43.002 and is not otherwise rejected for filing under rules adopted pursuant to Chapter 195. LOC. GOVT. CODE, Sections 191.009, 195.002, and 195.009
2 The text of this legislation (Chapter 96, 15 U.S.C. 7001 et seq.) should be available through http://www4.law.cornell.edu/uscode/15/ch96.html or http://www4.law.cornell.edu/uscode/15/ch96.html#PC96.
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