Uniform Elec. Transaction Act

Establishes the legal validity of electronic records, signatures,
and contracts, and provides procedural guidelines for their use.
(HB2585 CD1)

HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                S.D. 1
STATE OF HAWAII                                            C.D. 1

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The Hawaii Revised Statutes is amended by adding
 2 a new chapter to be appropriately designated and to read as
 3 follows:
 4                             "CHAPTER
 6         -1  Short title.  This chapter shall be cited as the
 7 Uniform Electronic Transactions Act.
 8         -2  Definitions.  In this chapter:
 9      "Agreement" means the bargain of the parties in fact, as
10 found in their language or inferred from other circumstances and
11 from rules, regulations, and procedures given the effect of
12 agreements under laws otherwise applicable to a particular
13 transaction.
14      "Automated transaction" means a transaction conducted or
15 performed, in whole or in part, by electronic means or electronic
16 records, in which the acts or records of one or both parties are
17 not reviewed by an individual in the ordinary course in forming a
18 contract, performing under an existing contract, or fulfilling an
19 obligation required by the transaction.

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 1      "Computer program" means a set of statements or instructions
 2 to be used directly or indirectly in an information processing
 3 system in order to bring about a certain result.
 4      "Contract" means the total legal obligation resulting from
 5 the parties' agreement as affected by this chapter and other
 6 applicable law.
 7      "Electronic" means relating to technology having electrical,
 8 digital, magnetic, wireless, optical, electromagnetic, or similar
 9 capabilities.
10      "Electronic agent" means a computer program or an electronic
11 or other automated means used independently to initiate an action
12 or respond to electronic records or performances in whole or in
13 part, without review or action by an individual.
14      "Electronic record" means a record created, generated, sent,
15 communicated, received, or stored by electronic means.
16      "Electronic signature" means an electronic sound, symbol, or
17 process attached to or logically associated with a record and
18 executed or adopted by a person with the intent to sign the
19 record.
20      "Governmental agency" means an executive, legislative, or
21 judicial agency, department, board, commission, authority,
22 institution, or instrumentality of the federal government or of a
23 state or of a county, municipality, or other political
24 subdivision of a state.

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 1      "Information" means data, text, images, sounds, codes,
 2 computer programs, software, data bases, or the like.
 3      "Information processing system" means an electronic system
 4 for creating, generating, sending, receiving, storing,
 5 displaying, or processing information.
 6      "Person" means an individual, corporation, business trust,
 7 estate, trust, partnership, limited liability company,
 8 association, joint venture, governmental agency, public
 9 corporation, or any other legal or commercial entity.
10      "Record" means information that is inscribed on a tangible
11 medium or that is stored in an electronic or other medium and is
12 retrievable in perceivable form.
13      "Security procedure" means a procedure employed for the
14 purpose of verifying that an electronic signature, record, or
15 performance is that of a specific person or for detecting changes
16 or errors in the information in an electronic record.  The term
17 includes a procedure that requires the use of algorithms or other
18 codes, identifying words or numbers, encryption, or callback or
19 other acknowledgment procedures.
20      "State" means a state of the United States, the District of
21 Columbia, Puerto Rico, the United States Virgin Islands, or any
22 territory or insular possession subject to the jurisdiction of
23 the United States.  The term includes an Indian tribe or band, or

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 1 Alaskan native village, which is recognized by federal law or
 2 formally acknowledged by a state.  "This State" refers to the
 3 State of Hawaii.
 4      "Transaction" means an action or set of actions occurring
 5 between two or more persons relating to the conduct of business,
 6 commercial, or governmental affairs.
 7       -3 Scope.(a)  This chapter shall apply to electronic
 8 records and electronic signatures relating to a transaction.  A
 9 transaction subject to this chapter shall be subject to other
10 applicable substantive law.
11      (b)  This chapter does not apply to a transaction to the
12 extent it is governed by:
13      (1)  A law governing the creation and execution of wills,
14           codicils, or testamentary trusts;
15      (2)  The Uniform Commercial Code other than sections 490:1-
16           107 and 490:1-206, article 2 and article 2A; and
17      (3)  A law or rule governing notice of:
18           (i)       Default, including but not limited to notices
19                     relating to acceleration, repossession,
20                     eviction, foreclosure, or the right to cure;
21           (ii)      Utility shutoff, including water, telephone,
22                     gas and electricity; or 

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 1           (iii)     Cancellation, termination, lapse or material
 2                     alteration of a contract of insurance,
 3                     insurance benefits, life settlement or
 4                     viatical settlement agreement, or service
 5                     contract.
 6      (c)  This chapter applies to an electronic record or
 7 electronic signature otherwise excluded from the application of
 8 this chapter under subsection (b) when used for a transaction
 9 subject to a law other than those specified in subsection (b).
10      (d)  A transaction subject to this chapter is also subject
11 to other applicable substantive law.
12         -4  Prospective application.  This chapter shall apply
13 to any electronic record or electronic signature created,
14 generated, sent, communicated, or received on or after the
15 effective date of this chapter.
16         -5  Use of electronic records and electronic signatures;
17 variation by agreement.(a)  This chapter does not require a
18 record or signature to be created, generated, sent, communicated,
19 received, stored, or otherwise processed or used by electronic
20 means or in electronic form.
21      (b)  This chapter shall apply only to transactions between
22 parties each of which has agreed to conduct transactions by
23 electronic means.  Whether the parties agree to conduct a

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 1 transaction by electronic means is determined from the context
 2 and surrounding circumstances, including the parties' conduct.
 3 Except for a separate and optional agreement, the primary purpose
 4 of which is to authorize a transaction to be conducted by
 5 electronic means, an agreement to conduct a transaction
 6 electronically shall not be contained in a standard form contract
 7 that is not an electronic record.  An agreement in such a
 8 standard form contract shall not be conditioned upon an agreement
 9 to conduct transactions electronically.  An agreement to conduct
10 a transaction electronically cannot be inferred solely from the
11 fact that a party has used electronic means to pay an account or
12 register a purchase or warranty.  This subsection shall not be
13 varied by agreement.
14      (c)  A party that agrees to conduct a transaction by
15 electronic means may refuse to conduct other transactions by
16 electronic means.  If a seller sells goods or services by both
17 electronic and nonelectronic means and a buyer purchases the
18 goods or services by conducting the transaction electronically,
19 the buyer may refuse to conduct further transactions regarding
20 the goods and services electronically.  The right granted by this
21 subsection may not be waived by agreement.
22      (d)  Except as otherwise provided in this chapter, the
23 effect of any of its provisions may be varied by agreement.  The

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 1 presence in certain provisions of this chapter of the words
 2 "unless otherwise agreed", or words of similar import, shall not
 3 imply that the effect of other provisions may not be varied by
 4 agreement.
 5      (e)  Whether an electronic record or electronic signature
 6 has legal consequences is determined by this chapter and other
 7 applicable law.
 8         -6  Construction and application.  This chapter shall be
 9 construed and applied:
10      (1)  To facilitate electronic transactions consistent with
11           other applicable law;
12      (2)  To be consistent with reasonable practices concerning
13           electronic transactions and with the continued
14           expansion of those practices; and
15      (3)  To effectuate its general purpose to make uniform the
16           law with respect to the subject of this chapter among
17           states enacting it.
18         -7  Legal recognition of electronic records, electronic
19 signatures, and electronic contracts.(a)  A record or signature
20 shall not be denied legal effect or enforceability solely because
21 it is in electronic form.
22      (b)  A contract shall not be denied legal effect or
23 enforceability solely because an electronic record was used in
24 its formation.

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 1      (c)  If a law requires a record to be in writing, an
 2 electronic record satisfies the law.
 3      (d)  If a law requires a signature, an electronic signature
 4 satisfies the law.
 5         -8  Provision of information in writing; presentation of
 6 records.(a)  If parties have agreed to conduct a transaction by
 7 electronic means and a law requires a person to provide, send, or
 8 deliver information in writing to another person, the requirement
 9 is satisfied if the information is provided, sent, or delivered,
10 as the case may be, in an electronic record capable of retention
11 by the recipient at the time of receipt.  An electronic record is
12 not capable of retention by the recipient if the sender or the
13 sender's information processing system inhibits the ability of
14 the recipient to print or store the electronic record.
15      (b)  If a law other than this chapter requires a record to:
16 be posted or displayed in a certain manner; be sent,
17 communicated, or transmitted by a specified method;  or contain
18 information that is formatted in a certain manner, the following
19 rules shall apply:
20      (1)  The record shall be posted or displayed in the manner
21           specified in the other law;
22      (2)  Except as otherwise provided in subsection (d)(2), the
23           record shall be sent, communicated, or transmitted by
24           the method specified in the other law; and

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 1      (3)  The record shall contain the information formatted in
 2           the manner specified in the other law.
 3      (c)  If a sender inhibits the ability of a recipient to
 4 store or print an electronic record, the electronic record shall
 5 not be enforceable against the recipient.
 6      (d)  The requirements of this section shall not be varied by
 7 agreement, but:
 8      (1)  To the extent a law other than this chapter requires
 9           information to be provided, sent, or delivered in
10           writing but permits that requirement to be varied by
11           agreement, the requirement under subsection (a) that
12           the information be in the form of an electronic record
13           capable of retention may also be varied by agreement;
14           and
15      (2)  A requirement under a law other than this chapter to
16           send, communicate, or transmit a record by first-class
17           mail, postage prepaid, may be varied by agreement to
18           the extent permitted by the other law.
19         -9  Attribution and effect of electronic record and
20 electronic signature.(a)  An electronic record or electronic
21 signature is attributable to a person if it was the act of the
22 person.  The act of the person may be shown in any manner,
23 including a showing of the efficacy of any security procedure

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 1 applied to determine the person to which the electronic record or
 2 electronic signature was attributable.
 3      (b)  The effect of an electronic record or electronic
 4 signature attributed to a person under subsection (a) is
 5 determined from the context and surrounding circumstances at the
 6 time of its creation, execution, or adoption, including the
 7 parties' agreement, if any, and otherwise as provided by law.
 8         -10  Effect of change or error.  If a change or error in
 9 an electronic record occurs in a transmission between parties to
10 a transaction, the following rules shall apply:
11      (1)  If the parties have agreed to use a security procedure
12           to detect changes or errors and one party has conformed
13           to the procedure, but the other party has not, and the
14           nonconforming party would have detected the change or
15           error had that party also conformed, the conforming
16           party may elect to avoid the effect of the changed or
17           erroneous electronic record;
18      (2)  In an automated transaction involving an individual,
19           the individual may elect to avoid the effect of an
20           electronic record that resulted from an error made by
21           the individual in dealing with the electronic agent of
22           another person if the electronic agent did not provide
23           an opportunity for the prevention or correction of the

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 1           error and, at the time the individual learns of the
 2           error, the individual:
 3           (A)  Promptly notifies the other person of the error
 4                and that the individual did not intend to be bound
 5                by the electronic record received by the other
 6                person;
 7           (B)  Takes reasonable steps, including steps that
 8                conform to the other person's reasonable
 9                instructions, to return to the other person or, if
10                instructed by the other person, to destroy the
11                consideration received, if any, as a result of the
12                erroneous electronic record; and
13           (C)  Has not used or received any benefit or value from
14                the consideration, if any, received from the other
15                person;
16      (3)  If neither paragraph (1) nor paragraph (2) applies, the
17           change or error has the effect provided by other law,
18           including the law of mistake, and the parties'
19           contract, if any; and
20      (4)  Paragraphs (2) and (3) shall not be varied by
21           agreement.
22         -11  Notarization and acknowledgment.  If a law requires
23 a signature or record to be notarized, acknowledged, verified, or

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 1 made under oath, the requirement is satisfied if the electronic
 2 signature of the person authorized to perform those acts,
 3 together with all other information required to be included by
 4 other applicable law, is attached to or logically associated with
 5 the signature or record.
 6         -12  Retention of electronic records; originals.(a)
 7 If a law requires that a record be retained, the requirement is
 8 satisfied by retaining an electronic record of the information in
 9 the record that:
10      (1)  Accurately reflects the information set forth in the
11           record after it was first generated in its final form
12           as an electronic record or otherwise; and
13      (2)  Remains accessible for later reference.
14      (b)  A requirement to retain a record in accordance with
15 subsection (a) shall not apply to any information the sole
16 purpose of which is to enable the record to be sent,
17 communicated, or received.
18      (c)  A person may satisfy subsection (a) by using the
19 services of another person if the requirements of that subsection
20 are satisfied.
21      (d)  If a law requires a record to be presented or retained
22 in its original form, or provides consequences if the record is
23 not presented or retained in its original form, that law is

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 1 satisfied by an electronic record retained in accordance with
 2 subsection (a).
 3      (e)  If a law requires retention of a check, that
 4 requirement is satisfied by retention of an electronic record of
 5 the information on the front and back of the check in accordance
 6 with subsection (a).
 7      (f)  A record retained as an electronic record in accordance
 8 with subsection (a) satisfies a law requiring a person to retain
 9 a record for evidentiary, audit, or like purposes, unless a law
10 enacted after the effective date of this chapter specifically
11 prohibits the use of an electronic record for the specified
12 purpose.
13      (g)  This section does not preclude a governmental agency of
14 this State from specifying additional requirements for the
15 retention of a record subject to the agency's jurisdiction.
16         -13  Admissibility in evidence.  In a proceeding,
17 evidence of a record or signature shall not be excluded solely
18 because it is in electronic form.
19         -14  Automated transaction.  In an automated
20 transaction, the following rules shall apply:
21      (1)  A contract may be formed by the interaction of
22           electronic agents of the parties, even if no individual

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 1           was aware of or reviewed the electronic agents' actions
 2           or the resulting terms and agreements;
 3      (2)  A contract may be formed by the interaction of an
 4           electronic agent and an individual, acting on the
 5           individual's own behalf or for another person,
 6           including by an interaction in which the individual
 7           performs actions that the individual is free to refuse
 8           to perform and which the individual knows or has reason
 9           to know will cause the electronic agent to complete the
10           transaction or performance; and
11      (3)  The terms of the contract are determined by the
12           substantive law applicable to it.
13         -15  Time and place of sending and receipt.(a)  Unless
14 the sender and recipient agree to a different method of sending
15 that is reasonable under the circumstances, an electronic record
16 is sent when it:
17      (1)  Is addressed properly or otherwise directed properly to
18           an information processing system that the recipient has
19           designated or uses for the purpose of receiving
20           electronic records or information of the type sent and
21           from which the recipient is able to retrieve the
22           electronic record;

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 1      (2)  Is in a form capable of being processed by that system;
 2           and
 3      (3)  Enters an information processing system outside the
 4           control of the sender or of a person who sent the
 5           electronic record on behalf of the sender or enters a
 6           region of the information processing system designated
 7           or used by the recipient which is under the control of
 8           the recipient.
 9      (b)  Unless the sender and recipient agree to a different
10 method of receiving that is reasonable under the circumstances,
11 an electronic record is received when:
12      (1)  It enters an information processing system that the
13           recipient has designated or uses for the purpose of
14           receiving electronic records or information of the type
15           sent and from which the recipient is able to retrieve
16           the electronic record; and
17      (2)  It is in a form capable of being processed by that
18           system.
19      (c)  Subsection (b) applies even if the place the
20 information processing system is located is different from the
21 place the electronic record is deemed to be received under
22 subsection (d).

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 1      (d)  Unless otherwise expressly provided in the electronic
 2 record or agreed between the sender and the recipient, an
 3 electronic record is deemed to be sent from the sender's place of
 4 business and to be received at the recipient's place of business.
 5 For purposes of this subsection, the following rules shall apply:
 6      (1)  If the sender or recipient has more than one place of
 7           business, the place of business of that person is the
 8           place having the closest relationship to the underlying
 9           transaction; 
10      (2)  If the sender or the recipient does not have a place of
11           business, the place of business is the sender's or
12           recipient's residence, as the case may be; and
13      (3)  Notwithstanding any other provision of this chapter, if
14           an individual enters into a transaction for personal,
15           family, or household purposes that is created or
16           documented by an electronic record, the transaction
17           shall be deemed to have been made or to have occurred
18           at the individual's residence.
19 This subsection is not variable by agreement.
20      (e)  An electronic record is received under subsection (b)
21 even if no individual is aware of its receipt.
22      (f)  Receipt of an electronic acknowledgment from an
23 information processing system described in subsection (b)

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 1 establishes that a record was received but, by itself, does not
 2 establish that the content sent corresponds to the content
 3 received.
 4      (g)  If a person is aware that an electronic record
 5 purportedly sent under subsection (a), or purportedly received
 6 under subsection (b), was not actually sent or received, the
 7 legal effect of the sending or receipt is determined by other
 8 applicable law.  Except to the extent permitted by the other law,
 9 the requirements of this subsection may not be varied by
10 agreement.
11      (h)  Notwithstanding any other section of this chapter, a
12 record has not been received unless it is received by the
13 intended recipient in a manner in which it can be opened and read
14 by that recipient.
15      (i)  If a law other than this chapter requires that a notice
16 of the right to cancel be provided or sent, an electronic record
17 may not substitute for a writing under the other law unless, in
18 addition to satisfying the requirements of the other law and this
19 chapter, the notice of cancellation may be returned by electronic
20 means.  This subsection may not be varied by agreement.
21         -16  Transferable records.(a)  In this section,
22 "transferable record" means an electronic record that:

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 1      (1)  Would be a note under article 3 of the Uniform
 2           Commercial Code or a document under article 7 of the
 3           Uniform Commercial Code if the electronic record were
 4           in writing; and
 5      (2)  The issuer of the electronic record expressly has
 6           agreed is a transferable record.
 7      (b)  A person has control of a transferable record if a
 8 system employed for evidencing the transfer of interests in the
 9 transferable record reliably establishes that person as the
10 person to which the transferable record was issued or
11 transferred.
12      (c)  A system satisfies subsection (b), and a person is
13 deemed to have control of a transferable record, if the
14 transferable record is created, stored, and assigned in such a
15 manner that:
16      (1)  A single authoritative copy of the transferable record
17           exists which is unique, identifiable, and, except as
18           otherwise provided in paragraphs (4), (5), and (6),
19           unalterable;
20      (2)  The authoritative copy identifies the person asserting
21           control as:
22           (A)  The person to which the transferable record was
23                issued; or

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 1           (B)  If the authoritative copy indicates that the
 2                transferable record has been transferred, the
 3                person to which the transferable record was most
 4                recently transferred;
 5      (3)  The authoritative copy is communicated to and
 6           maintained by the person asserting control or its
 7           designated custodian;
 8      (4)  Copies or revisions that add or change an identified
 9           assignee of the authoritative copy can be made only
10           with the consent of the person asserting control;
11      (5)  Each copy of the authoritative copy and any copy of a
12           copy is readily identifiable as a copy that is not the
13           authoritative copy; and
14      (6)  Any revision of the authoritative copy is readily
15           identifiable as authorized or unauthorized.
16      (d)  Except as otherwise agreed, a person having control of
17 a transferable record is the holder, as defined in section
18 490:1-201(20) of the Uniform Commercial Code, of the transferable
19 record and has the same rights and defenses as a holder of an
20 equivalent record or writing under the Uniform Commercial Code,
21 including, if the applicable statutory requirements under section
22 490:3-302(a), 490:7-501, or 490:9-308 of the Uniform Commercial
23 Code are satisfied, the rights and defenses of a holder in due

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 1 course, a holder to which a negotiable document of title has been
 2 duly negotiated, or a purchaser, respectively.  Delivery,
 3 possession, and indorsement are not required to obtain or
 4 exercise any of the rights under this subsection.
 5      (e)  Except as otherwise agreed, an obligor under a
 6 transferable record has the same rights and defenses as an
 7 equivalent obligor under equivalent records or writings under
 8 chapter 490.
 9      (f)  If requested by a person against which enforcement is
10 sought, the person seeking to enforce the transferable record
11 shall provide reasonable proof that the person is in control of
12 the transferable record.  Proof may include access to the
13 authoritative copy of the transferable record and related
14 business records sufficient to review the terms of the
15 transferable record and to establish the identity of the person
16 having control of the transferable record.
17         -17  Creation and retention of electronic records and
18 conversion of written records by governmental agencies.  Each
19 governmental agency of this State shall determine whether, and
20 the extent to which, it will create and retain electronic records
21 and convert written records to electronic records.
22         -18  Acceptance and distribution of electronic records
23 by governmental agencies.(a)  Except as otherwise provided in

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 1 section    -12(f), each governmental agency of this State shall
 2 determine whether, and the extent to which, it will send and
 3 accept electronic records and electronic signatures to and from
 4 other persons and otherwise create, generate, communicate, store,
 5 process, use, and rely upon electronic records and electronic
 6 signatures.
 7      (b)  To the extent that a governmental agency uses
 8 electronic records and electronic signatures under subsection
 9 (a), the governmental agency, giving due consideration to
10 security, may specify:
11      (1)  The manner and format in which the electronic records
12           shall be created, generated, sent, communicated,
13           received, and stored and the systems established for
14           those purposes;
15      (2)  If electronic records must be signed by electronic
16           means, the type of electronic signature required, the
17           manner and format in which the electronic signature
18           shall be affixed to the electronic record, and the
19           identity of, or criteria that shall be met by, any
20           third party used by a person filing a document to
21           facilitate the process;
22      (3)  Control processes and procedures as appropriate to
23           ensure adequate preservation, disposition, integrity,

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 1           security, confidentiality, and auditability of
 2           electronic records; and
 3      (4)  Any other required attributes for electronic records
 4           which are specified for corresponding nonelectronic
 5           records or reasonably necessary under the
 6           circumstances.
 7      (c)  Except as otherwise provided in section    -12(f), this
 8 chapter does not require a governmental agency of this State to
 9 use or permit the use of electronic records or electronic
10 signatures.
11         -19  Interoperability.  An agency of this State which
12 adopts standards pursuant to section    -18 may encourage and
13 promote consistency and interoperability with similar
14 requirements adopted by other agencies of this and other states
15 and the federal government and nongovernmental persons
16 interacting with governmental agencies of this State.  If
17 appropriate, those standards may specify differing levels of
18 standards from which governmental agencies of this State may
19 choose in implementing the most appropriate standard for a
20 particular application."
21      SECTION 2. If S.B. No. 2819 C.D.1 is enacted into law,
22 Section 2 of that measure is amended by deleting 431:10D-L and
23 Section 3 of that measure is amended by deleting 431:10D-J.
24      SECTION 3. This Act shall take effect upon its approval.