On December 16, 1999, Pennsylvania Governor Tom Ridge signed into law Senate Bill 555, the Electronic Transactions Act, Pennsylvania's version of the Uniform Electronic Transactions Act. (73 P.S. Trade and Commerce §§ 2260.101 - 2260.5101.) The law gives legally binding effect to transactions conducted entirely by electronic means and provides legal recognition for electronic records and signatures. Significantly, the portion of the law relating to electronic transactions applies only where parties have agreed to conduct transactions electronically.
The law provides generally that:
- no record or signature may be denied legal effect solely because it is in electronic form;
- no contract may be denied legal effect or enforceability solely because an electronic record was used in its formation;
- if a law requires a record to be in writing, an electronic record satisfies the law; and
- if a law requires a signature, an electronic signature satisfies the law.
Acknowledgment or notarization of a signature may also be accomplished electronically.
The law allows for the formation of a binding contract between parties by interaction of an individual with an electronic agent of the other party, or by the interaction of electronic agents of both parties even if no human was aware of or reviewed the electronic agents' actions or the resulting terms and agreements.
Except in transactions involving consumers, the parties to a transaction may agree to use any commercially reasonable security procedure to verify that an electronic record has been sent or that an electronic record or signature is attributable to the person identified by that procedure. Commercial reasonableness of a security procedure is to be determined by the courts in accordance with applicable law and the commercial circumstances at the time the parties agree to or adopt the procedure.
Sent and Received
Unless the parties to a transaction agree otherwise, an electronic record is considered to be sent if it is properly directed to an electronic processing system outside the sender's control which has been designated by the recipient, and the record is in a form capable of being processed by that system. An electronic record is received when it enters the receiver's designated system in a form capable of being processed by that system. Unless otherwise expressly provided in the electronic record or agreed to by the parties, an electronic record is deemed by the law to be sent from the sender's place of business and received at the recipient's place of business. An electronic record may be deemed received even if no individual is aware of its receipt.
Attribution to an Individual
An electronic record or signature can be "attributed" to a person by showing the efficacy of the security system used to identify the record or signature with the particular person. The Act does not require any specific protocol such as an encrypted digital signature. The risk of change or error in an electronic record in a transmission is generally allocated to a party who has deviated from the agreed upon verification and security procedure.
Applicability and Exclusions
The law does not apply to transactions governed by any law relating to the creation and execution of wills, codicils or testamentary trusts. It does apply to transactions for the sale or lease of goods under Articles 2 and 2A of the Uniform Commercial Code (UCC), and to certain other UCC transactions. However, most other transactions governed by the UCC (e.g. under the articles on commercial paper and secured transactions) are excluded.
With respect to consumer agreements, the Act requires a "separate and express acknowledgment" specifically indicating which parts of the transaction are to be conducted by electronic means and in what manner.
If another law requires that a record be retained, the requirement is satisfied by retaining an accurate electronic record which remains accessible for later reference. The law expressly allows the required retention of checks or other information required for evidentiary or audit purposes to be accomplished electronically. A governmental agency may, however, specify additional record retention requirements, including requiring copies to be retained in nonelectronic form.
Similarly, if other law requires information relating to the transaction to be posted or displayed in a certain manner, the information must be displayed or posted in accordance with that law.
Each Commonwealth governmental agency is afforded discretion under the Act to determine whether and the extent to which it will create, send and accept electronic records. The law expressly does not mandate that government agencies use or accept electronic records or signatures.
The process of electronic transactions will continue to develop as business adopt practices and technology changes. The Electronic Transactions Law is a step toward ensuring that electronic transactions are secure and reliable, but will need to continue to evolve to accommodate advances.