The federal government recently enacted the Electronic Signatures in Global and National Commerce Act (the "E-Sign Act"), US Public Law 106-229, which took effect on October 1, 2000. The E-Sign Act has met with a curious reception. Commentators have tended to welcome it as a very positive statement by the federal government and as a crucial aid to e-commerce. In the same breath, however, most of the very same commentators have almost dismissed the E-Sign Act as not very useful in the short run because of a lack of standards. While this is certainly true, it misses two crucial points.

First, the lack of standards is exactly the feature of the E-Sign Act that makes it most attractive. The high-tech community has generally wanted to keep Washington at arms’ length, for a variety of good reasons. You may recall the recent "holy wars" fought over the exporting of 56-bit encryption technology (defined by Washington as a "munition" for purposes of export controls) and the Communications Decency Act. The very last thing the high-tech community needed (or even wanted) was for Washington to dictate, and thereby set in stone, one and only one standard for all time. The technology-neutral aspect of the E-Sign Act is a beautiful thing indeed. For once Washington got it right, and the first time at that!

Second, the scope of the E-Sign Act is much broader than merely legalizing electronic signatures. Unquestionably, the E-Sign Act tears down all barriers to enforcing electronically signed documents. But it also does much more.

First, the E-Sign Act is very pro consumer. It doesn’t require that any consumer use electronic documents. Consumers who wish (as will the vast majority for the next few years) may continue to do business in paper.

In consumer transactions, the E-Sign Act permits the use of electronic records if and only if the consumer has consented, has not withdrawn consent, and has been given "clear and conspicuous" statement explaining his rights to have documents produced in writing or electronically and the right and procedures to withdraw consent. The E-Sign Act also has very stringent requirements affecting the accessibility of electronic documents and the disclosure to the consumer of the hardware and software requirements for access. Before implementing any electronic signature feature to a webpage, companies should consult competent counsel.

The E-Sign Act also establishes that oral communications or recordings of oral communications do not qualify as electronic documents, except as may otherwise be provided. In other words, if you’re going to rely on an oral communication or a recording of an oral communication you better not count on the E-Sign Act to legitimate your deal. You (actually, your counsel) better look elsewhere.

The E-Sign Act also permits the substitution of accurate electronic versions of documents in place of traditional paper documents in cases where there exists a legal duty to retain documents for a period of time. It does, however, require that the electronic substitute be accessible to all pertinent parties. In one fell swoop Washington has taken one huge step toward reducing the vast number of archived documents and facilitating their retrieval. This is very significant.

The E-Sign Act also legitimates electronic notarization of documents and, presumably, electronic notarization of electronic signatures. How this last item will (if ever) be accomplished is beyond me. Today, a notary can easily tell if an individual signed a document because he is required to do so in the notary’s presence. The notary sees the individual, sees the act of applying a signature to a document, and compares the signature to other forms of identification. How will the notary of tomorrow know that the electronic signature applied to a document belongs to the individual standing in her presence? This sounds like a business opportunity to me!

What doesn’t the E-Sign Act do? It specifically exempts wills, trusts, adoption, divorce, and other family documents as well as state governmental and court documents. This makes sense given that the federal government has historically stayed out of family matters and the direct administration of state and local government.

In sum, Washington took a stab at a new field of law and appears to have got it just right. Remember this event because it is unlikely to happen again!