Doc. No.: 758
Date: May 4, 2001
WEBSITE AND TECHNOLOGY
FORMAL REPORT OF THE COMMITTEE ON
ELECTRONIC COMMUNICATIONS AND COMMERCE
1. The chair reported on the status of the website
library. It was suggested that other types of documents be added to the
library, including practice forms, and the index of MLA seminar papers
prepared by the CLE Committee. As to the index, the chair is to follow
up with Bob Glenn. It was also suggested that all meeting notices sent
by the MLA secretary be posted in the library.
Two additional projects were suggested. The first
is to investigate whether the website could be used to streamline the process
of appointing and confirming and listing Committee members. David Sharpe
of New Orleans volunteered to investigate the possibilities in this area
and make a report to the next meeting of the Committee.
The second project was to investigate whether
the Committee might be able to recommend to other Committees an efficient
way to organize, set up and find a host for listservs. John Edginton agreed
to investigate the possibilities. The Committee looks forward to his report
at its next meeting.
2. Ed Cattell made a report to the Committee.
Ed has been appointed as one of two American Law Institute members to the
committee which is redrafting Article 7 of the UCC, covering documents
of title such as bills of lading and warehouse receipts, etc., in order
to accommodate e-commerce. Ed reported that the committee would be looking
at the 1990 CMI Rules as well as a possible new convention being produced
Ed reported that President Dorsey had asked him
to work with this committee as well as the CMI committee during the redrafting
process for Article 7. Any ideas that anyone has for Ed should be brought
to the attention of this Committee. Ed will periodically update this Committee
3. The chair made a presentation of E-sign, UETA
and New York’s ESRA. An outline of the presentation is attached as Schedule
A. A handout consisting of extracts of the three laws including the introductory
notes and some comments on § 16 of UETA was distributed. (Extra copies
of which are available from the Chair.)
4. John Edginton reported that the Northern District
of California has initiated an electronic filing system similar to the
one (demonstrated at our last meeting) in effect in the Eastern district
of New York. Only one member of the Committee present had actual experience
in e-filing and mentioned that the scanning and filing of bulky exhibits
is somewhat inconvenient, but otherwise the system seemed to be working
Thirteen members attended the meeting, including
David Sharpe by conference telephone from New Orleans.
Glen T. Oxton, Chair
SCHEDULE A to Report of Committee
on Electronic Communications and Commerce
Is a Negotiable Bill of Lading Covered by the
New Electronic Signature Laws? — Answer: it depends.
I. The Federal Electronic Signature Law (“E-sign”)
became effective in October, 2000 and is contained in 15 U.S.C. §§
7001, et seq.
A. Section 7001 of E-sign generally validates
electronic signatures and electronic documents and records. With respect
to transactions in interstate commerce, E-sign preempts state law to the
B. Section 7001 of E-sign excludes
1. Wills and Trusts
2. Matters of family law
3. Any contract or record to the extent it is
governed by the UCC other than Articles 2 (Sales) and 2A (Leases)
C. Section 7021 of E-sign deals with “transferable
records,” which is essentially a new definition for a negotiable instrument,
except that under E-sign it is limited to promissory notes secured by real
1. A transferable record is defined as an electronic
a. would be a note under UCC Article 3 if it were
b. the issuer expressly agrees that it is a transferable
c. relates to a loan secured by real property.
2. Transferable records may be electronic, provided
that there is a method of control as defined in the statute to reliably
establish the owner of the transferable record.
D. Section 7002 of E-sign contains its two preemption
1. If a state adopts the Uniform Electronic Transactions
Act (“UETA”) “as approved and recommended” for enactment by NCCUSL, it
is exempt from preemption, except that:
a. any restriction of the scope of UETA by a state
under Section 3(b)(4) of UETA shall be preempted to the extent it is inconsistent
b. any requirement by a state of any particular
technology (in violation of Section 2002(2)(A)(ii) of E-sign) will be preempted.
2. If a state law other than UETA is consistent
with the requirements of E-sign, does not require a particular technology,
and, if enacted after the enactment date of E-sign (June 30, 2000) makes
specific reference to e-sign, then it will be exempt from preemption.
II. The Uniform Electronic Transactions Act (“UETA”)
was approved by NCCUSL in July 1999. The full text is available at http://www.law.upenn.
A. UETA Section 3 defines its scope. It applies
to electronic records and electronic signatures relating to a transaction.
A transaction is defined as including interaction between two or more persons.
It excludes transactions governed by
1. Laws governing wills and trusts
2. UCC Articles 2 and 2A
3. The Uniform Computer Information Transactions
4. Other laws, if any, identified by the state
(this is Section 3(b)(4) referred to in E-sign Section 7002).
B. Like E-sign, UETA (in Section 16) defines a
“transferable record” and states that they are governed by UETA provided
that there is a method of control over the transferable record in a single
C. The categories of documents that may constitute
a transferable record under UETA is broader than that under E-sign. UETA
1. a note under UCC Article 3 if the issuer has
expressly agreed it shall be a transferable record, regardless of whether
it is secured by real estate; and
2. a document under UCC Article 7 if the issuer
has expressly agreed it shall be a transferable record. This would include
a negotiable bill of lading.
D. The UETA comments to Section 16 acknowledge
that the most likely means of satisfying the control requirements for transferable
records is a registry system of some kind. Section 16 leaves open the possibility
that control could be provided by some kind of technological advance that
would provide a standalone method for establishing control such as by permitting
each holder to transfer the record only once.
III. ESRA — New York adopted an Electronic Signatures
and Records Act in September 1999, predating E-sign, as Chapter 57-A of
the Technology Law. ESRA generally validates electronic records and electronic
A. ESRA appears to satisfy Section 7002(a)(2)(A)
of E-sign and is thus exempt from preemption.
B. Section 107 of ESRA contains its exceptions
to applicability, which are as follows:
1. Wills, trusts and healthcare proxies
2. Any negotiable instruments — “unless an electronic
version of such record is created, stored or transferred pursuant to this
article in a manner that allows for the existence of only one unique, identifiable
and unalterable version which cannot be copied except in a form that is
readily identifiable as a copy.”
3. Any instrument “recordable under Article 9
of the Real Property Law.”
4. Any other document specifically excepted in
the rules and regulations.
IV. Conclusion. If the law governing the issuance
of an electronic negotiable bill of lading is that of a state which has
passed UETA, is governed by New York State’s ESRA or by another state’
laws which are similar to ESRA, then the negotiable bill be covered by
the electronic signature laws, provided that the control provisions referred
to above have been satisfied. The CMI Rules (1990) provide a specific type
of registry system that would comply with these provisions. Registry systems
such as those provided by Bolero would also comply. If the governing law
is that of a state that does not have a digital signature act, E-sign would
be applicable without supplementation by state law, and an electronic negotiable
bill of lading would not be recognized.
V. The possibility of including a governing law
clause in an electronic record was discussed. It was pointed out that a
governing law clause might have no effect on the threshold issue of whether
a valid contract had been made. The chair reported that in order to sidestep
this threshold issue, some companies are unilaterally declaring that they
will not challenge a contract solely on the grounds that it is in electronic
form or is electronically signed. If both parties to an electronic contract
have taken this position, then the threshold question of whether a contract
was made at all, at least to the extent of issues as to its electronic
form and electronic signatures should no longer be a concern.
On the other hand, the Restatement 2d of Conflicts
of Law §187, states that parties may bootstrap themselves into a valid
contract based on a choice of law provision in the contract except when
the law chosen has no substantial relationship to the parties or the transaction,
or when the law chosen would be contrary to a fundamental policy of a state
with a materially greater interest in the transaction. The first exception
has been diluted by subsequent cases. With respect to the second, few,
if any, jurisdictions have a policy expressly against the use of electronic
signatures and documents in commercial transactions. The problem in jurisdictions
that do not have electronic signature acts, is a lack of clarity as to
whether electronic documents satisfy the requirements for legality.