On June 30, 2000, President Clinton signed the “Electronic Signatures in Global and National Commerce Act” (the “E-Signature Act”). To effect this historic piece of legislation, the President used both a traditional pen and an electronic “smart card,” a card which contains an integrated microprocessor chip instead of a magnetic stripe. The E-Signature Act, which became effective on October 1, 2000, gives electronic contracts the same legal authority as paper contracts, and encourages electronic transactions and record-keeping. The primary significance of the Act is that “a signature, contract or other record . . . may not be denied legal effect, validity, or enforcement solely because it is in electronic form.”
The E-Signature
To begin, we should clarify what an “electronic signature” or “e-signature” is. Unlike a “digital signature” which functions in a closed environment where just one person provides authorization, e.g., ATM machines, an “e-signature” works where two or more signatures are required. An e-signature refers to a number of different technologies that can be used to execute a contract by electronic means and are designed to provide safeguards for the material being transmitted. The most common technology combines the technology of the digital signature with “public key” encryption. It employs an encryption method using two electronic keys and a separate function which creates a “signature” or identifier for the document by translating a document into a short alphanumeric code. In a nutshell, the way it works is this: person X wants person Y to send him an encrypted document, so he sends Y his “public key.” Y uses the public key to encrypt the “signature” and the document. Once the document is encrypted, only the owner of the “private key” can decrypt the document. X then uses his private key to decrypt the signature and the document. These functions assure that the documents being sent and received are one and the same. Furthermore, once the document is electronically signed, if the document is altered in any way, the signature is invalidated.
Consumer Protection Standards of the E-Signature Act
An important provision of the Act is its standard for consumer protection.
First, the Act provides that the consumer must affirmatively consent to the use of an electronic record and not have withdrawn such consent.
Second, prior to consenting, the consumer must be provided with a clear statement that informs the consumer of his right to have the record provided on paper and the right to withdraw his consent, along with any conditions or fees related to such withdrawal. It must inform the consumer whether the consent applies only to the particular transaction or to records that may be provided during the course of the parties’ relationship. It must describe the procedures to withdraw consent and to update contact information. It must also inform the consumer how to obtain a paper copy of the electronic record and whether any fee will be charged.
Third, prior to consenting, the consumer must be provided with a statement of the hardware and software required for accessing and retaining the electronic record. And finally, the consumer must consent, or confirm his consent, electronically, in a manner that demonstrates that the consumer can access the electronic information.
The Act does not apply to all types of contracts and records, however. For example, it does not apply to wills, adoptions, divorces, court orders and notices of product recalls. For these matters, paper documents and traditional signatures are still required.
– Denise Ciampitti