THROUGH THE DEVELOPMENT OF LAWS TO
RECOGNIZE ELECTRONIC DOCUMENTS AND TRANSACTIONS
Law and Government Division
20 November 2000
TABLE OF CONTENTS
UNCITRAL MODEL LAW
ON ELECTRONIC COMMERCE
A. State Initiatives
B. Federal Initiatives
A. Uniform Electronic Commerce
B. Federal Initiatives
C. Provincial Initiatives
THROUGH THE DEVELOPMENT OF LAWS TO
RECOGNIZE ELECTRONIC DOCUMENTS AND TRANSACTIONS
Electronic commerce is having
a dramatic impact on the way in which business is being done. Increasingly,
business communications are being conducted with computers, telephones
and television cable lines as businesses move online and adapt their operations
to an electronic environment. In this new business environment where electronic
transactions are becoming the norm, the use of paper to document business
transactions is becoming less important. In fact, one of the benefits
of conducting business by using digitized information is that it obviates
the need to transmit and store paper.
Although businesses are
adapting to the electronic environment, legal rules continue to stipulate
that certain transactions or documents be in writing. Many see such legal
requirements as an impediment to transacting business electronically.
It is argued that, with a few exceptions, there is little or no benefit
in requiring that electronic transactions be put in written form and signed
manually. Indeed, it is now widely recognized that legal requirements
calling for written documents and manual signatures must somehow accommodate
the world of electronic communications. This view has been the driving
force behind efforts by international bodies and individual countries
to develop rules which would give the same level of legal recognition
to electronic transactions as is accorded to paper documents that perform
the same function.
This paper will review initiatives
by the United Nations Commission on International Trade Law (UNCITRAL)
and in the United States, Australia, the European Union and Canada to
develop legislation governing the use of electronic alternatives to paper-based
forms of communication.
UNCITRAL MODEL LAW ON ELECTRONIC
In furtherance of its mandate
to promote the harmonization and unification of international trade law,
in 1996, the United Nations Commission on International Trade Law (UNCITRAL)
adopted the UNCITRAL Model Law on Electronic Commerce.
The UNCITRAL Model Law was
developed in response to the rapid changes that have taken place in the
methods of communication used to conduct business and international trade.
As the use of electronic mail and electronic data interchange increased
and became more prevalent, the existence of legal impediments to electronic
communications and uncertainty about their legal effect and validity became
to formulate model legislation on electronic commerce was also a response
to the fact that much of the existing legislation governing the communication
and storage of information did not contemplate the use of electronic commerce.
In a number of cases, this legislation imposed or implied restrictions
on the use of modern means of communication, for example, by prescribing
the use of "written," "signed" or "original"
The Model Law aims to provide
national legislatures with a set of internationally recognized rules to
remove legal obstacles and create a more certain legal environment for
electronic commerce. It seeks to provide equivalent treatment for users
of paper-based documentation and for users of computer-based information.
As a "framework" law, however, it does not set out all the rules
or cover every aspect of the use of electronic commerce.
The Model Law adopts a "functional
equivalent approach" to dealing with electronic commerce. This approach
is based on analyzing the purposes and functions of paper-based requirements
and determining how those purposes and functions can be fulfilled through
electronic-commerce techniques. For instance, paper documents serve some
of the following functions, i.e., they:
the reproduction of documents so that parties can have a copy of the
the authentication of data by means of a signature; and
that a document will be in a form acceptable to public authorities
The Guide to the Model Law
notes that for "all of the above-mentioned functions of paper, electronic
records can provide the same level of security as paper and, in most cases,
a much higher degree of reliability and speed, especially with respect
to the identification of the source and content of the data, provided
that a number of technical and legal requirements are met."(3)
Article 5 sets out the fundamental
principle of the Model Law: that electronic communications should not
be discriminated against or denied legal effect simply because they are
in electronic form. Article 6 establishes the basic standard to be met
by an electronic document when there is a legal requirement for a document
to be in writing; it provides that a legal requirement to present information
in writing will be met by providing an electronic document if information
contained in the document is "accessible so as to be usable for subsequent
Article 7 of the Model Law
acknowledges that in a paper-based environment, the role of a signature
is to indicate approval of a documents contents and to verify the
documents authenticity. This article provides that a requirement
for a persons signature will be met in the case of an electronic
document if a reliable method is used to identify the person and to indicate
the persons approval of the information contained in the document.
Another important function
carried out by a paper-based document is to satisfy a legal requirement
for an original document. Article 8 of the Model Law aims to remove the
obstacles that a requirement for an original document may pose to electronic
documents. It provides that where the law requires information to be presented
or retained in its original form, that requirement will be met by an electronic
a reliable assurance as to the integrity of the information from the
time when it was first generated in its final form as an electronic
is capable of being displayed to the person to whom it is to be presented.
Article 9 of the Model Law
deals with the admissibility of electronic documents in legal proceedings.
Article 10 addresses the
legal requirement for certain documents to be retained for a period of
time or for specified purposes by setting out the conditions that must
apply if electronic documents are to meet this requirement. These conditions
to access the information contained in the electronic document so
that it can be usable for subsequent reference;
the document in the format in which it was generated, sent or received;
the information to enable the identification of the origin and destination
of the document as well as the time when it was sent or received.
Another important purpose
of the Model Law is to inject certainty into contracts that are concluded
electronically. The Model Law deals with the formation of contracts, the
form in which an offer and acceptance may be expressed, and the time and
place of dispatch and receipt of electronic documents. It does not, however,
change the law dealing with the formation of contracts.
In formulating the Model
Law, UNCITRAL believed that electronic communications would most likely
be used for contracts relating to the carriage of goods. As a result,
Articles 16 and 17 deal specifically with documents in this area.
Since its inception, the
UNCITRAL Model Law has gained increasing international acceptance as the
model upon which a number of national laws are being based. It has informed
electronic commerce statutes in a number of countries including the United
States, Australia, the European Union and Canada.
A. State Initiatives
In 1999, the National Conference
of Commissioners on Uniform State Laws (NCCUSL) promulgated the Uniform
Electronic Transactions Act (UETA). The UETA represents
the first national effort at providing uniform rules to govern electronic
The UETA applies
only to transactions that the parties have agreed to conduct electronically.
It does not create a new system of legal rules for the electronic marketplace,
but rather ensures that electronic transactions are equivalent to and
as enforceable as paper-based transactions.
The basic rules, set out
in section 7 of the UETA, provide that:
or signature may not be denied legal effect or enforceability solely
because it is in electronic form;
may not be denied legal effect or enforceability solely because an
electronic record was used in its formation;
that requires writing will be satisfied by an electronic record; and
requirement in the law will be met if there is an electronic signature.
Most of the other rules
in the UETA are derived from these basic rules and serve to answer
legal questions about the use of electronic documents and signatures.
Section 15, for instance, sets out when information is legally sent or
delivered in electronic form. It establishes when electronic delivery
takes place, i.e., when an electronic record capable of retention by the
recipient is legally sent and received.
The UETA defines
and validates electronic signatures. An electronic signature is defined
as "an electronic sound, symbol, or process attached to or logically
associated with an electronic record and executed or adopted by a person
with the intent to sign the electronic record." It removes writing
and signature requirements that create barriers to electronic transactions.
The UETA ensures that contracts and transactions are not denied
enforcement because electronic media are used.
Another rule supporting
the validity of electronic documents and signatures in transactions is
set out in section 9 of the UETA which provides that a signature
is attributable to a person if it is an act of that person, and that act
may be shown in any manner. Section 10 establishes rules relating to errors
and changes in electronic documents.
The UETA validates
contracts formed by electronic agents, i.e., computer programs that operate
automatically to conduct business in electronic form. It also protects
against errors by providing appropriate standards for the use of technology
to ensure the identification of the parties involved.
The UETA authorizes
state governmental entities to create, communicate, receive and store
records electronically, and encourages state governmental entities to
move to electronic media. It also ensures that the courts accept electronic
records into evidence.
The vast majority of U.S.
states have adopted some variation of the UETA.(5)
The U.S. federal Electronic
Signatures in Global and National Commerce Act(6)
came into effect on 1 October 2000. The Act gives electronic signatures
and documents equivalent legal status with handwritten signatures and
paper-based documents. It is technology-neutral so that the parties entering
into electronic contracts can choose the system they want to use to validate
an online agreement.
The law provides that no
one is required to use or accept electronic documents or signatures. If
a notice must be provided to a consumer in writing, an electronic version
will meet that requirement only if the consumer consents to accepting
an electronic version and can access the information in electronic form.
The Act specifies that a
state can preempt the federal law, but only by adopting the Uniform
Electronic Transactions Act or by passing a law that is consistent
with the federal act and essentially technologically neutral. In addition,
the Act does not apply to documents such as:
and testamentary trusts;
divorce or other family law matters;
of cancellation or termination of utility services or the default,
acceleration, repossession, foreclosure or eviction under a credit
agreement secured by, or a rental agreement for, an individuals
or termination of health or life insurance benefits; or
or notification of a material failure of a product.
Although many states have
passed electronic signature laws, the U.S. Congress held the view that
a federal law was necessary because state electronic signature and electronic
commerce statutes lacked uniformity. Some states, for example, provide
that any type of electronic signature is valid. Others require some form
of security such as tying the electronic signature to the person signing
or being able to determine that the electronic message has not been altered.
Still others recognize only digital signatures. In addition, state laws
have provided different uses for electronic signatures. Some laws allow
electronic signatures to be used only in relation to transactions with
government agencies; others allow the signatures to be used only for certain
kinds of commercial transactions.
In 1999, the Australian
Parliament passed the Electronic Transactions Act 1999 (ETA).(7)
The ETA is designed to facilitate the development of electronic
commerce in Australia by removing existing legal impediments, under national
law, to using electronic communications.
The Act is based on the
recommendations of the Australian Electronic Commerce Expert Group which
recommended that Australia enact legislation based on the UNCITRAL Model
Law on Electronic Commerce.(8)
The ETA is founded
on two principles:
equivalence (sometimes called
media neutrality): ensures that paper-based transactions and electronic
transactions are treated equally by the law; and
neutrality: ensures that the
law does not discriminate between different forms of technology.
The basic requirement under
the Act for any electronic communication is that it must be readily accessible
so as to be usable for subsequent reference. This ensures that others
will be able to access and use the information contained in the electronic
communication. In addition, a person should also be able to retain the
information in some way if he or she wishes to do so.
One of the basic requirements
of the Act is that a person must consent to receiving electronic communications.
Consent, however, can be express or inferred from a persons conduct.
The Act sets out general
rules that allow certain legal requirements to be satisfied by electronic
communications. In addition to these general rules, the Act covers specific
issues such as electronic signatures. To comply with the Act, electronic
signatures must identify the person and indicate their approval of the
information communicated. The Act provides for the production of an electronic
document where the law requires the production of a paper document.
Other provisions deal with
the electronic recording of information, the retention of documents electronically,
and retention of electronic communications. The Act also sets out rules
in relation to the time and place of sending and receiving electronic
The ETA has a two-stage
implementation process. As of 15 March 2000, the Act applies to certain
laws. The second stage application to all national laws unless
specifically excluded will be implemented by 1 July 2001.
Along with developments
at the national level, the national, state and territory governments have
developed the Uniform Electronic Transactions Bill 2000 for enactment
by the state and territorial governments. The bill is closely modelled
on the Electronic Transactions Act 1999 and will apply to contract
On 4 May 2000, the European
Parliament approved the Directive on Electronic Commerce. Member States
will be required to implement the Directive into national law within 18
months by amending laws that could impede the use of electronic contracts.
The Directive provides that, in certain circumstances, Member States will
be able to maintain restrictions on the use of electronic contracts. It
also obliges Member States to impose requirements for the conclusion of
electronic commerce to assist consumers in avoiding technical errors.(9)
Uniform Electronic Commerce Act
In June 1999, the Uniform
Law Conference of Canada adopted the Uniform Electronic Commerce Act
(UECA), a model law designed to implement the principles of the
UNCITRAL Model Law on Electronic Commerce.(10) Drafted over a two-year period, the UECA
has been proposed as the model upon which provincial and territorial governments
can develop a harmonized approach to electronic commerce.
The UECA is divided
into three parts:
Part 1 (sections
5-18) sets out rules for functional equivalence between electronic
and paper-based documents, and spells out that they apply when the
parties involved in a transaction have agreed, expressly or by implication,
to use electronic documents. This part also allows governments to
set their own rules for accepting electronic documents because a blanket
acceptance of any electronic communication may expose governments
to formats and media that they cannot handle and that may not work
for their particular purposes.(11)
Part 2 (sections
19-23) sets out rules for specific types of communications, such as
the formation and operation of contracts, the effect of using automated
transactions, the correction of errors when dealing with computer-based
transactions, and deemed or presumed time and place of sending and
receiving computer messages.(12)
In Part 1, the governing
principle of the UECA is set out in section 5 which provides that
information shall not be denied legal effect or enforceability solely
because it is in electronic form. Section 6 makes it clear that a person
is not compelled to use electronic documents but a persons consent
to do so may be inferred from the persons behaviour. For instance,
providing a person with your e-mail address could be considered as consent
to receive communications via e-mail. Information coming into government,
however, is subject to special provisions.
Under the UECA, a
legal requirement that information be in writing is satisfied by information
in electronic form if the information is accessible so as to be usable
for subsequent reference.(13) A legal requirement for a person to provide information
in writing to another person is satisfied by the provision of the information
in an electronic document, if the electronic document is accessible by
the other person and capable of being retained by that person so as to
be usable for subsequent reference.(14) The drafters of the UECA reasoned
that when the law requires someone to provide information to someone else
in writing, then more is needed than mere accessibility. The recipient
has to receive the document in a way that gives him or her control over
what becomes of it. This section therefore requires the information to
be accessible for subsequent use, and that the information be capable
of being retained by the person to whom it is provided.(15)
The UECA deals with
legal requirements to provide information in a specific non-electronic
form by allowing such information to be provided electronically if it
is provided in the same or substantially the same form, and the electronic
document is accessible by the other person and capable of being retained
by the other person so as to be usable for subsequent reference.(16)
The UECA allows for
the use of electronic signatures. The Act requires that the information
purporting to constitute the signature be created or adopted by a person
with the intent to sign the document, and that it be associated in some
way with the document.(17) Signatures
submitted to governments, however, would have to meet information technology
standards and rules established by such governments.
Under section 11 of the
UECA, an electronic document can function as an original if there
are sufficient assurances about the integrity of the information in it.
Part 2 of the UECA
covers the formation of contracts by electronic means. The Act does not
change the general law of contracts, but rather seeks to ensure that electronic
communications are capable of conveying the kinds of intention that are
necessary to support contractual relations. Section 21 provides that a
contract may be formed by the interaction of a computer and an individual
or by the interaction of two computers. Section 22 deals with errors that
may arise in these situations. The UECA provides that an electronic contract
made by an individual with an electronic agent (computer) has no "legal
effect and is not enforceable" if the individual made a material
error in the document and
agent did not provide the natural person with an opportunity to
prevent or correct the error;
person notifies the other person of the error as soon as practicable
when the natural person learns of it and indicates that he or she
made an error in the electronic document;
person takes reasonable steps, including steps that conform to the
other persons instructions to return the consideration received,
if any, as a result of the error or, if instructed to do so, to
destroy the consideration; and
person has not used or received any material benefit or value from
the consideration, if any, received from the other person.
The UECA also establishes
rules with respect to the time and place of sending and receiving electronic
documents. Section 23 provides that a message is sent when it leaves the
control of the sender and creates a presumption as to when a message is
received. If the recipient designates an information system or uses a
particular information system for receiving documents, then the document
is presumed to have been received when it enters the information system.
If the recipient does not designate or use an address, then the message
is not presumed to be received until the addressee has notice of it, and
is able to retrieve and process it.
In Part 3, sections 24 and
25 of the UECA address the electronic versions of contracts pertaining
to the carriage of goods.
At the federal level, the
Personal Information Protection and Electronic Documents Act(18)
implements measures to create functional equivalency between electronic
and paper documents. Part 2 of the Act provides for "the use of electronic
alternatives ... where federal laws contemplate the use of paper to record
or communicate information or transactions." Among other things,
the Act provides for:
to the federal government in electronic form;
information to the federal government in electronic form;
documents to satisfy a requirement under federal law for a document
to be in writing;
electronic documents when an original document is required.
In some situations, the
Act requires the use of a "secure electronic signature"
an electronic signature resulting from the application of a prescribed
technology or process. Before a technology or process can be prescribed,
it must be proved that:
signature is unique to the person using it;
whose electronic signature is on the document has control of the use
of the technology to attach the signature;
can be used to identify the person using the electronic signature;
signature can be linked to an electronic document to determine if
the document has been changed after the electronic signature was attached
The Act also deals with
electronic documents used as evidence in legal proceedings. In a typical
court proceeding, original documents are usually required to satisfy a
court that the terms and conditions of an agreement have not been changed
since it was signed. This requirement is difficult to satisfy where electronic
documents are involved because the original cannot be distinguished from
an amended document and because handwritten signatures do not authenticate
the document. The Act requires the use of secure electronic signatures
for electronic documents whenever the law provides for original documents
or statements of truth.
In addition, the Act provides
that notices and acts published electronically by the Queens Printer
have the same legal authority as notices and acts published in paper form,
and gives official status to the electronic version of revisions of the
statutes and regulations of Canada as well as the consolidated version
of the statutes and regulations.
Provincial governments are
moving to facilitate electronic commerce by clarifying the status of electronic
documents. Saskatchewan,(19) Manitoba(20) and Ontario(21) have
enacted legislation to recognize electronic documents and signatures.
Nova Scotia,(22) British Columbia,(23)
Quebec(24) and Yukon(25)
have introduced bills in their respective legislative assemblies. Most
of the other provinces are in the process of developing legislation.
These statutes and bills
are, for the most part, modeled on the Uniform Electronic Commerce
Act and consistent with the UNCITRAL Model Law on Electronic Commerce.
They contain a series of "functional equivalency" rules that
set out the conditions that must be met for an electronic communication
to satisfy a legal requirement for written communication. For example,
when information or a document must be in writing, the electronic equivalent
is acceptable if it is accessible so as to be usable for subsequent reference.
Where there is a legal requirement to provide information or a document
to a person in writing, an electronic document will satisfy the requirement
if it is accessible and capable of being retained by the person to whom
it is provided.
The legislation establishes
that an electronic document will be equivalent to an original document.
Where there is a legal requirement for an original document to be provided,
retained or examined, an electronic document will be acceptable if the
integrity of the information has been maintained. In addition, electronic
signatures will satisfy a legal requirement for a written signature.
The retention of documents
and provision of copies are also covered. Where a document has to be retained
for a period of time, an electronic version can be retained if it is accurate
and available to the same extent as the original document and for the
same length of time. Where multiple copies of a document must be provided,
a single electronic version will be acceptable.
Rules are established for
the formation of contracts by electronic means which:
contract to be formed by using electronic communication which includes
an action such as touching or clicking on an icon or place on a computer
valid contract to be made by way of electronic communication that
is automated at one or both ends of the transaction;
transaction entered into between an individual and an electronic agent
(computer program) to be cancelled if a significant mistake is made,
if there is no opportunity to prevent or correct the mistake, and
the individual does not benefit from the transaction; and
when messages are sent electronically, and when they are presumed
to have been received.
These legislative provisions
aim to provide increased legal certainty to formation of contracts in
an online environment.
Following upon the Uniform
Electronic Commerce Act, the legislation also provides for the formation
of contracts for the carriage of goods by electronic means.
It is important to note
that the legislation does not specify what an electronic signature is,
other than to provide a general definition along the following lines:
"information in electronic form that a person creates or adopts in
order to sign a document and that is attached to or associated with the
document." An electronic signature therefore could be a digitized
image of a handwritten signature, a biometric signature such as an electronically
recorded thumbprint, a persons name spelled in ASCII characters,
a digital signature using a public key infrastructure and a certification
authority, or a voiceprint of a person saying his or her name.
Finally, it is important
to note that the legislation does not compel a person to provide, use
or retain documents in electronic form; however, a persons consent
to do so can be inferred from the persons conduct.
The move to pass legislation
to integrate the world of electronic communication into long-standing
legal requirements for written communications, signatures and the formation
of contracts started with the UNCITRAL Model Law on Electronic Commerce
in 1996, the creation of model laws in Canada and the United States in
1999, and the more recent directive of the European Union in 2000. Now,
national, state and provincial governments are introducing or have enacted
laws to reduce or remove the legal uncertainties surrounding the conduct
of business over the Internet.
In Canada, these efforts
are well underway: three provinces have electronic commerce laws in force;
bills are now before a number of provincial legislatures; other provinces
are at various stages of developing legislation; and the federal government
has passed the Personal Information Protection and Electronic Documents
Act. Recognizing that electronic commerce extends beyond provincial
and national boundaries, Canadian governments are opting to model their
legislation on the Uniform Electronic Commerce Act and the UNCITRAL
Model Law. This approach acknowledges that lack of consistent rules governing
the use of electronic signatures is an impediment to the continued growth
of business-to-business and business-to-consumer transactions over the
(1) United Nations Commission on International
Trade Law, UNCITRAL Model Law on Electronic Commerce with Guide to Enactment,
1966, p. 13.
(2) Ibid., p. 15.
(3) Ibid., pp. 15-16.
(4) National Conference of Commissioners on
Uniform State Laws, Uniform Electronic Transactions Act, 1999.
(5) National Conference of Commissioners on
Uniform State Laws, Introductions and Adoptions of Uniform Acts,
(6) Electronic Signatures in Global and National Commerce
(7) Electronic Transactions Act 1999.
(8) Information about the Electronic Transactions
Act 1999 is largely drawn from the document, Summary of the Electronic
Transactions Act 1999.
(9) European Union, "Electronic Commerce:
Commission welcomes final adoptions of legal framework Directive"
(10) Uniform Law Conference of Canada, Uniform
Electronic Commerce Act Annotated, 1999.
(11) Ibid., p. 2.
(13) UECA, section 7.
(14) UECA, section 8.
(15) UECA, p. 7.
(16) UECA, section 9.
(17) UECA, section 10.
(18) Statutes of Canada 2000, Chapter
(19) The Electronic Information and Documents Act,
2000, Statutes of Saskatchewan, Chapter E-7.22.
(20) The Electronic Commerce and Information
Act, Chapter E55 Continuing Consolidation of the Statutes of Manitoba
(Royal Assent, 18 August 2000). Parts 1, 3, 4, 5 and 7 proclaimed
in force as of 23 October 2000.
(21) The E-Commerce Act, 2000, Chapter
17, Statutes of Ontario 2000 (Royal Assent, 16 October 2000).
(22) Electronic Commerce Act, Statutes of Nova
Scotia, 2000, Chapter 26.
(23) Bill 32-2000, Electronic Transactions Act (first
reading, 5 July 2000).
(24) Bill 161, An Act to Establish a legal
framework for information technology (first reading, 14 November
(25) Bill 29, Electronic Commerce Act (first
reading, 26 October 2000).