John M. McCabe
Legislative Director / Legal Counsel
jmmccabe@nccusl.org

Memo to: Interested Parties

Subject: The Uniform Electronic Transactions Act and Consumers

The Internet is the marketplace for the 21st Century, but it is a marketplace where the principal advantage belongs to the buyer and the borrower, not the seller or the lender. It is a marketplace without borders. Every seller and every lender must compete with their counterparts in every part of the world. It is capitalism and price competition in its most merciless form. Consumers receive understandable comparative information on price and other terms of deals in nanoseconds. Do you want to buy a car? On the "Net" the best price and best financing deal are a keystroke away. You may also ask other consumers about their experiences with the model that you may want to buy in the nearest chat room or bulletin board. There is no place for sellers and lenders to hide on the Internet, and the power it gives to consumers is extraordinary and unprecedented.

80 million people in the United States are on-line. They have reached into their wallets to do their business there. On-line retail sales, alone, rose to an estimated $20 billion from almost zero in 1999. Businesses spent an additional $109 billion buying from each other in the same year. By 2003, estimates suggest on-line retail sales of $144 billion and business sales of $1.3 trillion. Consumers like electronic transactions for their convenience and speed, and because they can comparison shop as never before. They are voting with their modems and buying with a click. It is an unstoppable tide.

The Uniform Electronic Transactions Act (UETA), approved by the National Conference of Commissioners on Uniform State Laws in 1999, was drafted to eliminate any doubt concerning the enforceability of electronic transactions, whether in the form of retail Internet transactions, electronic credit transactions, electronic data interchange or e-mail usage. UETA is designed to put electronic transactions on a par with paper transactions.

Concerns have been raised in consumer circles about electronic consumer transactions; fears about the unknown impact upon consumers engaged in this new marketplace. The arguments are as follows: electronic transactions are unfamiliar; they take place too quickly; consumers won't find all the terms of a deal before signing on to it; there may be new opportunities for fraud.

UETA responds to these concerns, but not by confining consumer transactions to the paper world. The paper world prevents consumers from obtaining the best information for making good choices. That is why much consumer law is concerned with disclosure of information-disclosure that often defeats itself because the consumer does not get information in understandable forms. The Internet is disclosure with a vengeance. There is also fraud in the paper world, made easier by consumer inability to obtain and process information about cost-effective choices. UETA does not confine consumer transactions to the paper world because that does not benefit consumers.

It is important to make sure that the rules which validate electronic transactions do not burden those who are unprepared for electronic transactions. UETA applies only to transactions in which the parties have agreed to do business with each other, electronically. For an electronic record to be effective, it must be capable of being retained by the recipient. The sender of a record cannot inhibit the ability of the recipient to print or store the electronic record. Simply put, electronic records and signatures may not be imposed on anybody, but particularly those who do not have computers or access to them.

UETA recognizes the existence of computer programs used by sellers and lenders to automate their transactions. It makes it clear that those who use such programs, called "electronic agents," are bound to contracts made by those "electronic agents." UETA provides a special remedy in the event an "electronic agent" makes an error.

Of course, the main consumer benefit from UETA is its contribution to the level playing field. All the substantive legal rules, including those for consumer protection, apply in the electronic marketplace as they do in the traditional, paper-bound marketplace. A sale remains a sale. A credit transaction remains a credit transaction.

"Under no circumstances should electronic commerce operate independently from existing legal systems," says Patricia Brumfield Fry, chair of the UETA drafting committee. "While every estimate of growth of electronic commerce has been exceeded in a matter of months, the power of the consumer in dealings with merchants has kept pace. Until it is shown that specific needs have arisen online, the electronic market should be dealt with on a par with existing markets. UETA assures consumers the protections and safeguards which have been developed through the decades, and lets them take full advantage of the benefits of electronic commerce.