|Legislators and business leaders
long recognized that the passage of a digital legislation was of
central importance to the development of e-commerce. However, for
several years members of the United States Congress debated over
what to include in such a bill. During this time several states
passed their own legislation allowing some forms of digital signatures
to be legally binding in certain situations. When a major piece
of national legislation went into effect in 2000, it was heralded
as a giant step toward the harmonization of interstate and national
laws, and was expected to help propel e-commerce forward.
The Electronic Signatures in Global and National Commerce Act,
popularly known as the E-Sign Act was signed into law by President
Bill Clinton on June 30, 2000, and became effective in October
of that year. Under the E-Sign Act, digital signatures used in
interstate and foreign commerce assume the same legally binding
status as old-fashioned, handwritten signatures. The Act defined
an ‘electronic signature’ broadly as any "electronic
sound, symbol, or process attached to or logically associated
with a contract or other record and executed or adopted by a person
with the intent to sign the record." This flexibility allows
the legislation to remain valid through the course of technological
development. It was expected to pave the way for a flood of financial
transactions over the Internet, from securing loans to transferring
money to closing home sales.
Significantly, no individual is required to use a digital signature
in any situation, nor is any business compelled to accept them.
However, once parties agree to make use of digital signatures,
then all parties are bound to recognize the signatures as legally
binding. In short, the Act bars discrimination against a signature
for the sole reason that it is electronic.
Prior to the E-Sign Act, almost every state had at least one
law that validated electronic signatures in some situation, while
twenty states had signed onto the Uniform Electronic Transactions
Act (UETA), which recognized digital signatures as legally binding
for contracts. However, in adopting UETA, several states made
their own modifications that progressively eroded the uniformity
of the law. In particular, modifications tended to reflect the
more popular technologies of the day, thereby reducing the degree
of flexibility e-commerce laws need to remain valid over time
and across borders. With the passage of the E-Sign Act came the
harmonization between such laws and made national what many states
had already standardized.
In addition, the E-Sign Act includes provisions for electronic
record keeping. It allows electronically stored records to be
considered legally valid, provided they accurately convey the
information in the original record and are freely accessible to
all involved parties in a valid, reproduced form. As long as these
conditions are met, the record keeper fulfills the legal obligation
to retain documents in their original form.
The E-Sign Act is a self-executing law, meaning it imposes no
provisions or requirements for a state or federal regulatory agency
to adopt or enforce its measures. Regulatory actions that involve
aspects of E-Sign are permissible only if the regulations remain
consistent with the Act, do not issue any requirement that a record
be in paper form, remain technologically neutral, and confer no
unreasonable costs on the use of electronic signatures.
E-Sign charges the Secretary of Commerce with promoting the use
of digital signatures in international transactions and the harmonization
of signature standards. For these efforts, the Act refers to the
Model Law on Electronic Commerce as its basis, which was adopted
by the United Nations Commission on International Trade Law. By
the time the E-Sign Act went into effect, many European countries
already recognized digital signatures. With its emphasis on international
commerce, the E-Sign Act placed the United States at the same
level as other leading countries.
E-sign's importance to e-commerce is difficult to estimate. It
may take some time before digital signatures take hold on a widespread
basis, particularly in business-to-consumer markets. However,
the growing approval of electronic signatures at the national
and international levels translates into modern legislation that
reflects the sweeping changes the Internet and other technologies
carried into the twenty-first century.