(1) The following classes of contracts are subject to a statute, commonly called the Statute of Frauds, forbidding enforcement unless there is a written memorandum or an applicable exception:
(a) a contract of an executor or administrator to answer for a duty of his decedent (the executor-administrator provision);
(b) a contract to answer for the duty of another (the suretyship provision);
(c) a contract made upon consideration of marriage (the marriage provision);
(d) a contract for the sale of an interest in land (the land contract provision);
(e) a contract that is not to be performed within one year from the making thereof (the one-year provision).
(2) . . .
(3) . . .
(4) In addition the Uniform Commercial Code requires a writing signed by the debtor for an agreement which creates or provides for a security interest in personal property or fixtures not in the possession of the secured party.
(5) In many states other classes of contracts are subject to a requirement of a writing.
Restatement (Second) of Contracts § 110 (1979). The Statute of Frauds pri-mary function is to prevent fraud in contracts, which by their very nature have been sub-ject to such wrongdoing. While electronic contracting does not involve a writing or a signature in the classical sense of ink and paper, leading commentators to question whether electronic contracting violates the Statute of Frauds, there is authority that elec-tronic contracts can satisfy it. The requirements of a "writing" and a "signature" can be found although their virtual world counterparts do not, in the traditional sense, exist. The record of the agree-ment will be found either in the computer's memory, or on it's internal storage (hard disk drive or, for longer term storage, tape). Information stored in a com-puter's memory con-stitutes a "writing" where that information is capable of being repro-duced in tangible form such as on a printer. See e.g., Smith v. International Paper Co., 87 F.3d 245 (8th Cir. 1996); Armstrong v. Executive Office of the President, 877 F. Supp. 690 (D.D.C. 1995); Clyburn v. Allstate Ins. Co., 826 F. Supp. 955 (D.S.C. 1993). Simi-larly, the signa-ture requirement has been found to be met by a long line of cases which argue that any symbol, meant as a signature satisfies the Statute of Frauds. See e.g., Mat-ter of Save-on-Carpets of Arizona, Inc., 545 F.2d 1239 (9th Cir. 1976) (typed name on UCC financing statement); Associated Hardware Supply Co. v. Big Wheel Distrib. Co., 355 F.2d 114 (3d Cir. 1966). Such symbols should include digital signatures or other re-liable computer generated identification techniques.
We may think that the Internet, e-mail and the World Wide Web provide this novel form of entering into contracts. But let's not forget that telegrams, telexes, and telecopying-all involving communication through machines-have for years now, presented a means of remote contracting which the courts have found satisfying Statute of Frauds requirements provided that the messages (i) identify the parties, (ii) set forth terms of agreement, and (iii) indicate the parties intent to be bound. See e.g., Hawley Fuel Coalmart, Inc. v. Steag Handel GmbH, 796 F.2d 29 (2d Cir. 1986) (telex); Petroleum, Inc. v. Liberty Petroleum Corp., 505 F.2d 1384 (6th Cir. 1974) (combination of correspondence, cablegrams and telegrams); Miller v. Wells Fargo Bank Intern. Corp., 406 F. Supp. 452 (D.C.N.Y. 1975), aff'd, 540 F.2d 548 (2d Cir. 1976) (teletype machine answer-back).
(1) a "signature, contract, or other record relating to such transaction may not be denied legal effect validity, or enforceability solely because it is in electronic form; and (2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.
Section 7 of UETA, parroting ESGNC § 101(a), indicates that elec-tronic contracts may satisfy Statute of Fraud Requirements. ESGNC § 102(a) (15 U.S.C. § 7002) specifically cites UETA and UETA's dominance over the federal enactment. The Uniform Computer Information Transactions Act ("UCITA") controls the licensing of computer software whether by means of traditional or electronic contracting.
UETA legitimizes electronic contracting and "removes the barriers without affecting the underlying legal rules and requirements." UETA Prefatory Note. It is not a general contracting statute; traditional substantive rules of contracting remain unaffected by UETA and "subject to other applicable substantive law." UETA § 3(d). UETA's ultimate objective is to make electronic contracts as enforceable as contracts memorialized on pa-per; it does not set forth new standards for the formation or performance of contracts.
UETA does not formally mandate electronic contracts, UETA § 5(a), but leaves it to the option of the parties involved whether or not to contract electronically or by traditional means. UETA expressly provides that it "applies only to transactions be-tween par-ties each of which has agreed to conduct transactions by electronic means." UETA § 5(b). The Act also makes it clear that "[a] party that agrees to conduct a transac-tion by electronic means may refuse to conduct other transactions by electronic means." Id. at § 5(c). Decisions to contract by electronic means may be made on a case-by-case basis.
Section 3(b)(1) of UETA expressly recognizes that not all types of transactions are appropriate for electronic transactions:
(1) a law governing the creation and execution of wills, codicils, or testa-mentary trusts;
(2) [The Uniform Commercial Code other than Sections 1-107 and 1-206, Article 2, and Article 2A];
(3) [the Uniform Computer Information Transactions Act]; and
(4) [other laws, if any, identified by State].
The materials in square brackets may be filled in as appropriate by respective state legislatures with statutory schemes to be excluded from electronic contracting. For example, California's subsection (4) states "A law that requires that specifically identifiable text or disclosures in a record or a portion of a record be separately signed, including initialed, from the record. However, this paragraph does not apply to Section 1677 or 1678 [default on real property purchase contracts] of this code or Section 1298 of the Code of Civil Procedure [arbitration of disputes in real property contracts]."
The substantive rules of contracts remain unaffected by UETA. UETA § 3(d) Prefatory Note. Offer, acceptance and consideration remain. And like traditional contract-ing, electronic contracts can be express or implied in fact through the online conduct of the parties.
To date, twenty three states have adopted UETA with six states introducing the uniform act as legislation.
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Copyright © 2001 Richard J. Greenstone. All rights reserved. The green diamond device is a registered trademark and Law Bytesis a trademark of Richard J. Greenstone.
This article was first published in The Licensing Journal,March 2001.