What is the Uniform Electronic Transactions Act?

The Uniform Electronic Transactions Act is legislation crafted to establish a national standard for electronic transactions nationwide. Drafted in 1999, it was designed to prevent a situation where different standards are established by each of the states, leading to confusion and misunderstanding.

Many of the laws governing financial transactions in the United States are established by the states themselves. For example, state law regarding contracts sets forth whether or not a contract may be signed electronically, or whether only an actual signature is permissible on a contract. Likewise, state law governs record retention — specifically, the retention of paper checks by the banks honoring them. In both cases, if the laws of the 50 states were developed separately, the cost of doing business could be increased dramatically as companies and banks labored to keep track of, and observe, all the variable permutations of the many different laws.

While there are many areas where differing laws among the many states pose no problems or real obstacles to commerce, in the case of electronic transactions, it’s to the advantage of all concerned that the same standards be in effect nationwide. Due to the fact that it’s a matter in the states’ jurisdiction, it cannot be legislated by the US Congress. The National Conference of Commissioners on Uniform State Laws (NCCUSL) drew up this act to provide all states the opportunity of adopting the same statute as adopted by the other states, without any of the problems that might arise if the statute had been drafted by a particular state.

The bill provides for the recognition of electronic documents, records and contracts, and stipulates that documents signed electronically carry the same force as those signed manually, as long as they meet certain basic requirements applicable as well to hard-copy documents. For example, with hard-copy documents, all parties must be provided a copy; if the sender of an electronic document uses information processing software that inhibits or prevents the recipient from saving a copy, the contract is unenforceable.

Another important provision of the Uniform Electronic Transactions Act is that in setting forth standards for the retention of records, it provides that electronic records are as good as hard-copy records. This is highly significant for large organizations with a large volume of hard-copy records, which heretofore had paid substantial sums to maintain hard-copy records. Banks, for example, had earlier been relieved of the requirement that they return all checks they’d paid to their account holders, but had to maintain those checks on file. With the enactment of the Uniform Electronic Transactions Act, they were able to transfer those records to electronic form and dispose of the paper checks.

The Uniform Electronic Transactions Act is one of a number of laws drafted by the NCCUSL or other, similar organizations with the purpose of harmonizing state laws in a number of different areas outside the jurisdiction of the Congress. While it was intended that different states would enact different laws, the growth and sophistication of the US has mitigated against such a patchwork approach to the laws governing business, finance and commerce. Such uniform Acts as the Uniform Commercial Code, the Uniform Probate Code and the Uniform Rules of Evidence Act, as well as the Uniform Electronic Transactions Act have facilitated the smooth and unencumbered conduct of commerce throughout the nation.