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The new law validates electronic signatures, contracts and records, but does not affect any substantive rights or obligations of the parties. A signature, contract or other record relating to a transaction in interstate or foreign commerce "may not be denied legal effect, validity, or enforceability solely because it is in electronic form." Similarly, a contract may not be denied legal effect simply because it was formed using an electronic signature or record. The law does not, however, affect any other right or obligation under any statute, regulation or rule of law (except those requiring that signatures, contracts or other records be in writing). For example, E-SIGN does not affect any existing statutory and common law rules regarding formation of contracts, such as those requiring manifestation of assent and authentication, other than to recognize the validity of electronic records to create binding agreements.

Uniformity: The law promotes uniformity in electronic contracting nationwide by pre-empting inconsistent state laws. Currently, 18 states have adopted some form of digital signature or electronic transaction legislation. Although many of those laws are derived from the Uniform Electronic Transactions Act ("UETA"), some states, such as California, have adopted variations on UETA that differ significantly. E-SIGN pre-empts those inconsistent state provisions. It also expressly pre-empts any state law that is not technology neutral, such as a Utah law that recognizes digital signatures originating from jurisdictions with similar (non-UETA) authentication requirements.

Certain procedures must be used in consumer transactions. If state or federal law requires written notices to "consumers" (defined in E-SIGN as individuals who obtain "products or services that are used primarily for personal, family or household purposes"), electronic transmission of such notices will satisfy those requirements but only if certain procedures are implemented. For example, the consumer must affirmatively consent to receiving communications electronically and must be provided with a "clear and conspicuous statement" that such consent is strictly optional - and that consent may be withdrawn. The consumer also must demonstrate, e.g., through the exchange of confirming e-mails, that he or she can access the electronic information upon which consent will be based. The business also must inform the consumer how to obtain a hard copy of an electronic record and what fees, if any, will be charged to obtain that record. E-SIGN establishes other requirements.

E-SIGN carves out several exceptions. The new law does not apply to wills and testamentary trusts or to records related to adoption, divorce or "other matters of family law." E-SIGN also does not affect any contract governed by the Uniform Commercial Code other than those formed under Articles 2 and 2A, relating to the sale of goods and leases of personal property, respectively.

The law also does not allow for electronic communication of "court orders or notices, or official court documents." E-SIGN specifically excludes notices to: (1) cancel or shut-off "utility services" (defined to include "water, heat, and power"); (2) repossess, evict or foreclose on a primary residence of an individual; or (3) cancel health or life insurance benefits. Notices recalling or warning of defects in products that could endanger health or safety and documents accompanying hazardous materials, pesticides and other toxic substances also must be in paper form.

The law is neutral as to the methods or technologies used to accomplish its purposes. E-SIGN permits the parties to decide whether electronic signatures will be used at all and what technologies to apply to the transaction.

E-SIGN also does not require anyone to accept or to use electronic records or electronic signatures (other than a governmental agency, in some circumstances).

Validity: The law expressly recognizes the validity of contracts or other records created by electronic agents. Electronic agents are computer programs or other means used to automate an electronic communication or response "in whole or in part without review or action by an individual at the time of the action or response." E-SIGN expressly validates contracts and records made using electronic agents.

E-SIGN authorizes federal and state regulators and self-regulatory organizations to make or amend their rules consistently with E-SIGN's principles and procedures. The new law also preserves the authority of federal agencies to make rules consistent with E-SIGN. Prior interpretive releases and other rulings on electronic transmissions therefore remain in effect.

If existing law mandates the retention of a contract or other record, parties can satisfy that requirement by retaining an electronic record that "accurately reflects the information" set forth in the contract or other record and "remains accessible" to anyone entitled to access to that document. In addition, federal regulators have until March 1, 2001, to propose rules "to specify performance standards to assure accuracy, record integrity and accessibility of records that are required to be retained" by federal law or regulation.

Although certain aspects of the new law, such as the prohibition on "inconsistent" state laws, undoubtedly will find their way into the courts for judicial interpretation, E-SIGN eliminates much of the uncertainty encountered by businesses that wish to enter into transactions online. The new powers E-SIGN gives to businesses - whether buying or selling over the Internet or simply negotiating transactions using e-mail -plainly make it imperative for any business operating in the 21st Century to evaluate with counsel how the new law affects its operations.

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