1. The Electronic Signatures in National and Global Commerce Act.
E-Sign was signed by President Clinton on June 30, 2000 and became effective on October 1, 2000. Like all electronic signature legislation, E-Sign answers the first two questions posed above: An electronic signature and an electronic document satisfy requirements that a document be "signed" and "in writing." In order to benefit from E-Sign, however, the vendor must comply with a complicated set of disclosure and consent provisions designed to protect consumers. For example, in order for the electronic signature to be effective, the consumer must consent to its use, and the consumer has the right to withdraw such consent in certain circumstances. Prior to consenting, the consumer must be provided with clear and conspicuous notice of certain rights he or she may have, including the right to have the electronic record produced in paper form and the right to access the electronic record at a later time.
2. The Uniform Electronic Transactions Act.
UETA also answers the first two questions posed above: An electronic signature and an electronic document satisfy requirements that a document be "signed" and "in writing." However, unlike E-Sign, UETA's notice and consent requirements are less rigid and leave room for interpretation by state courts. For example, the issues of whether the parties agreed to use electronic signatures and whether an electronic signature may be attributed to a party are determined "from the context and surrounding circumstances."27
E-Sign generally preempts state electronic signature statues, unless the state has adopted UETA.28 Thus, states essentially have the opportunity to opt out of the federal notice and consent requirements by adopting UETA unchanged. In fact, nearly half of the states have already done so.29
3. What is missing?
Neither E-Sign nor UETA effectively address the third and fourth questions posed above: How does the vendor know that the purchaser is actually the one who produced the electronic signature, and how do the parties know that the electronic contract has not been tampered with after being signed? These questions go to the authenticity of electronic signatures and documents, which is addressed only in the Illinois ECSA, discussed in more detail below.
III. Electronic authenticity and the Illinois Electronic Commerce Security Act
The Illinois Electronic Commerce Security Act became effective on July 1, 1999. Like E-Sign and UETA, it requires electronic signatures and documents to be given the same effect as their paper counterparts. Unlike these statutes, however, the ECSA also addresses the authenticity of both electronic signatures and documents. It does so by encouraging the use of a particular kind of electronic signature, called a "digital signature." Prior to discussing the ECSA in any detail, one should have a basic understanding of the technology that underlies digital signatures.
A. The basics of a digital signature
Digital signatures are based on a technology called public key infrastructure, or "PKI." In a PKI system, each party to a contract has two "keys," which can be thought of as passwords or ID numbers. One key is called a "public key" and it is posted on the Internet where everyone in the world can see it. The other key is called a "private key" and it is kept secret, much like we safeguard our ATM PIN numbers. In order to endorse PKI technology, one must make two basic assumptions: (1) the public and private key have a relationship which is so unique that no other matching keys can possibly be generated; and (2) the unique relationship between the public and private key is so complicated that no hacker, no matter how talented, can crack it.
Public and private keys can be used to encrypt electronic messages in two ways. To illustrate the encryption methods, picture two fictitious parties, "Bob" and "Alice." First, Bob can send a message to Alice by scrambling the message using the algorithm in her public key, which Bob can easily access because it is a public record. When Alice receives the scrambled message, she can then decode it using her private key. If the message decodes properly, then she knows it has not been tampered with since Bob sent it, since no one but her knows her private key and her private key will only open messages scrambled using her public key.
On the other hand, Bob might scramble the message using his own private key. When Alice receives the message, she should decode it using Bob's public key, which is available to her since it is a public document. If the message decodes properly, then Alice knows that only Bob could have sent it, because Bob's public key will only decode messages that were scrambled using Bob's private key (which only Bob knows).
The first type of encoding, where Bob scrambles a message using Alice's public key, is the PKI method for authenticating documents. Alice knows the document she received is the same one Bob sent because, if it had been tampered with en route, then her private key would not have opened it. As discussed below, the ECSA calls this kind of encrypted document a "secure electronic record."
The second type of encoding, where Bob scrambles a message using his own private key, is the PKI method for authenticating signatures. Alice knows that Bob signed the message she received, because Alice used Bob's public key to open the message, Bob's public key can only open messages encrypted with Bob's private key, and only Bob knows his private key. As discussed below, the ECSA calls this kind of encrypted document a "secure electronic signature."
B. The burden shifting provisions of the ECSA
The Illinois ECSA provides an important procedural benefit to contracting parties who use technology similar to PKI. First, ECSA §10-120(a) provides that "in resolving a civil dispute involving a secure electronic record, it shall be irrebutably presumed that the electronic record has not been altered since the specific point in time to which the status relates." In other words, if a contract was encrypted using the public key of the recipient, the recipient cannot offer evidence to show that the document was changed en route. Second, ECSA §10-120(b) provides that "in resolving a civil dispute involving a secure electronic signature, it shall be rebuttably presumed that the secure electronic signature is the signature of the person to whom it correlates." In other words, if the contract was encrypted using the private key of the sender, the sender must work against the presumption that he or she signed the document. Such a presumption might be thwarted, for example, by evidence that one had lost his private key and a third party was using it to make contracts in his name.
C. Likely preemption of the ECSA
As noted above, E-Sign preempts state law, unless the state has adopted UETA. Obviously, the ECSA goes far beyond UETA in creating burden shifting presumptions based upon one's use of technology similar to PKI. Thus, it is likely that the ECSA's provisions have been preempted by E-Sign and are not currently enforceable.30
Nonetheless, ECSA is an important statute, in that it recognizes and clarifies how one might garner protection using commercially reasonable means, such as PKI techniques. Even though the presumptions may be preempted, the burden one carries in proving up an electronic signature or document will surely be lighter if the electronic contract is structured according to the principles set forth in the ECSA. For these reasons, practitioners are urged to become familiar with the ECSA and the technology concepts it embraces.
IV. Conclusion
In summary, one can see that the elusive long distance contract has evolved along a twisted path. Prior to long distance commerce, parties were privileged to conduct face-to-face negotiations and sign their resulting agreement together. As commerce became national and global, the privilege of locality was eviscerated and the search for new contracting methods ensued. For years, the UCC provided some guidance to resolve long distance contracting disputes; however, the UCC's solution has become unwieldy and cumbersome. Pseudo-contracting methods, such as the shrinkwrap and clickwrap agreements have enjoyed some success, but not the stable predictability required to support a robust e-commerce economy. In the long run, the ironic solution seems to now be upon us: A return to the days where we negotiate and sign the contract together. Electronic signatures and the laws which facilitate them are the clear path to a vibrant e-commerce system. In time, these statutes will evolve into a cohesive and predictable body of commercial law based upon aged principles of face-to-face negotiation and individual execution of contracts. In essence, the advances of technology have finally enabled us to return to basic principals of contract law, albeit, with an electronic twist.
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1 810 ILCS 5/2-101, et.seq.
2 810 ILCS 5/2-204(a).
3 Northrop Corporation v. Litronic Industries, 29 F.3d 1173 (7th Cir. 1994).
4 810 ILCS 5/2-207.
5 810 ILCS 5/2-207(1).
6 810 ILCS 5/2-207(3).
7 The UCC defines the term "merchant" as "a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill." 810 ILCS 5/2-104(1).
8 810 ILCS 5/2-207(2); See also, 810 ILCS 5/2-207, Comment 3.
9 id.
10 810 ILCS 5/2-207(2)(a).
11 Richard Raysman and Peter Brown, Computer Law: Drafting and Negotiating Forms and Agreements, §1A.05[2][a] (2000).
12 847 F.2d 255 (5th Cir. 1988).
13 See, Step-Saver Data Systems v. Wyse Technology, 939 F.2d 91 (3d Cir. 1991), and Arizona Retail Systems, Inc. v. The Software Link, Inc. 831 F.Supp. 759 (D. Ariz. 1993).
14 105 F.3d 1147 (7th Cir. 1997).
15 www.ksd.uscourts/gov/opinions/99-2499-26.htm (D. Kan. 2000).
16 Hill v. Gateway 2000, Inc., 105 F.3d at 1149.
17 847 F.2d 255 (5th Cir. 1988).
18 www.ksd.uscourts/gov/opinions/99-2499-26.htm (D. Kan. 2000).
19 See, Hotmail v. Van$ Money Pie, Inc., 47 U.S.P.Q.2d 1020 (N.D. Cal. 1998), and Storm Impact v. Software of the Month Club, 13 F.Supp. 2d 782 (N.D. Ill. 1998).
20 86 F.3d 1447 (7th Cir. 1996).
21 105 F.3d 1147.
22 105 F.3d at 1148.
23 See, e.g., Uniform Electronic Transactions Act, §2(8) (1999).
24 2000 Senate Bill 761, enacted June 30, 2000.
25 www.uetaonline.com/uetaoc.html
26 5 ILCS 175/1-101 et. seq.
27 Uniform Electronic Transactions Act, §§5(b) and 9(b) (1999).
28 S.761 §102.
29 The law firm of McBride, Baker and Coles maintains a table showing the status of UETA adoption on a state by state basis. It is located at http://www.mbc.com/ecommerce/ legis/table09.htm.
30 For a more detailed examination of the preemptive effect of E-Sign, see Raymond T. Nimmer, Electronic Signatures in Global and National Commerce Act of 2000: Effect on State Laws, www.bmck.com/ecommerce/ueta-esign-2.doc.
Striving to meet the needs of members, ISBA expanded its free e-mail case law update service to 12,000 members. The e-mail update service provides members with a digest of every Illinois Appellate and Supreme Court decision as soon as that decision is available on the Reporter of Decision's Web site. The service also includes a link directly to the case on the Reporter's Web site.
Adrienne Albrecht, a lawyer and an ISBA member in Kankakee, writes the Illinois case law digests and Michael Robinson, a lawyer and ISBA member in Springfield, digests Seventh Circuit cases for a similar ISBA service.
All case digests are categorized into civil or criminal matters and then further broken down into specific areas of the law. The case name, number and name of the Judge penning the opinion are also provided. Below is an example of one recent digest:
Civil
Administrative law sovereign immunity
1st Dist. Alden Nursing Center-Lakeland, Inc., v. Patla No. 1-99-3268
(October 23, 2000) 1st div. (MCNULTY) .
<http://www.state.il.us/court/2000/1993268.htm>
Trial court and administrative hearing officer lacked jurisdiction to hear claims by nursing homes that claimed underpayments for public aid patients should be offset against overpayments made by State. Only Court of Claims has jurisdiction to hear issue of claimed underpayments by virtue of sovereign immunity.
<A HREF="http://www.state.il.us/court/2000/1993268.htm"> Alden Nursing Center-Lakeland, Inc., v. Patla</A>
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The ISBA's Standing Committee on Government Lawyers wants to include you in its constituency. Historically, neither the Attorney Registration and Disciplinary Commission nor the Illinois State Bar Association has maintained data with respect to those attorneys engaged in government practice. Created by the ISBA's Board of Governors in March of 1999 to encourage government lawyer participation in the ISBA and the Illinois Bar, the Standing Committee on Government Lawyers is in the process of identifying some of those attorneys employed either full-time or part-time by a unit of federal, state or local government and those private practitioners who represent units of government.
Last Spring, in anticipation of publishing the Committee's first newsletter, the chief legal counsels of various state and federal agencies and several state's attorneys' offices were contacted with respect tot hose government attorneys in their employ. Although the Committee heard from only a very small percentage of those persons contacted, it was able to develop a 3,000 person mailing list for its first newsletter. Currently, the Committee is preparing for the publication of the next issue of its newsletter, which will again contain substantive articles of interest to federal, state and local government attorneys, legislative updates, case law updates, Attorney General opinion summaries, profiles of government attorneys or government offices and information regarding upcoming Committee, ISBA and Bar activities of interest to the government lawyer. In addition, the Committee is beginning to develop a Web site, CLE programs and other activities directed at the government bar. If you are a government lawyer or private practitioner, who did not receive a copy of the first edition of our newsletter and you would like to receive a complimentary copy of our next newsletter or other mailings regarding upcoming government lawyer programs and activities, please contact Teri Litwiller in the ISBA's Springfield office by e-mail at MACROBUTTON HtmlResAnchor Teri@isba.org or by telephone at 800/252-8908 and have your name added to the government lawyer mailing list.
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