The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



 

STATE OF MICHIGAN

MIKE COX, ATTORNEY GENERAL

REGISTER OF DEEDS:

RECORDS AND RECORDATION:

UNIFORM ELECTRONIC TRANSACTIONS ACT:

Acceptance for recording by register of deeds of "electronic" records

A county Register of Deeds may, but is not required to, accept and record documents affecting title that are part of a transaction "between two or more persons relating to the conduct of business, commercial or government affairs" in electronic format and bearing electronic signatures, consistent with the Uniform Electronic Transactions Act. A document recorded with respect to these "transactions" provides notice against grantees in subsequent recorded conveyances notwithstanding that the document was submitted in electronic format and was executed and acknowledged with electronic signatures. The Uniform Electronic Transactions Act does not require a record or signature to be in electronic form and only applies to transactions where each party has agreed to conduct the transaction by electronic means.

Opinion No. 7207

October 2, 2007

Honorable Mark Meadows
State Representative
The Capitol
Lansing, MI 48909

You have asked whether a Register of Deeds may accept for recording and record instruments affecting title to or interests in real property that are "electronic" and bear "electronic signatures" rather than paper documents bearing, where required, written signatures. We are informed that Registers of Deeds in at least four counties are accepting for recording certain electronic documents with electronic signatures conforming to the requirements of the Uniform Electronic Transactions Act.

A. Recording of Instruments Affecting Title to or Interests in Real Property.

The county Register of Deeds holds a constitutional office. The powers and duties of that office are to be prescribed by law. Const 1963, art 7, 4. The Register is to accept for recording and to record all deeds and other instruments affecting title to or interests in property that meet the formal requirements for recordation and for which the requisite fees have been paid. MCL 565.25. Certified copies of deeds and other instruments so recorded may be offered as evidence in judicial proceedings with the same effect as the original documents. MCL 600.2107-600.2110; MCL 600.2138. See also MCL 24.401; MRE 902 and 1005; FRE 902 and 1005; and FR Civ P 44.1

More importantly, the prompt recording of these documents provides actual or constructive notice to all persons of the identity of any owners, holders, lienors, or others claiming an interest in lands and affords priority and security to these persons and parties. Michigan Land Title Standard 3.182 summarizes the applicable law regarding the risks associated with failing to timely record one's property interests:

A conveyance of real property is void as against the grantee in a subsequent recorded conveyance given for a valuable consideration, if the subsequent grantee has no knowledge of the prior conveyance and the prior conveyance is not recorded or is recorded after the recording of the subsequent conveyance.[3]

For a deed or instrument affecting title to be properly recorded, it is essential that it meet current statutory requirements, including, among others, 1937 PA 103, MCL 565.201 et seq. A deed or instrument that fails to satisfy the requirements for recording may, even though recorded, be ineffectual as notice. Galpin v Abbott, 6 Mich 17, 45-46 (1858) (holding that a deed not bearing the requisite number of witnesses was not entitled to be recorded and, though recorded, was "notice to no one") and Wing v McDowell, Walk Ch 175 (1843). See also Dutton v Ives, 5 Mich 515, 519-520 (1858) (holding that an agreement to pay off and discharge a first mortgage and stating related terms was not a document of a kind for which recording was allowed, and therefore the filing of the document was not binding notice on subsequent purchasers) and Hall v Redson, 10 Mich 21 (1862) (holding that a recorded deed can only constitute evidence of the deed insofar as it affected those grantors as to whom the deed was properly executed and witnessed).

According to its title, 1937 PA 103 (Act) is "AN ACT to prescribe certain conditions relative to the execution of instruments entitled to be recorded in the office of the register of deeds." Section 1 of the Act specifies those conditions, including detailed physical requirements, each sheet of the document must satisfy:4

(1) An instrument executed after October 29, 1937 by which the title to or any interest in real estate is conveyed, assigned, encumbered, or otherwise disposed of shall not be received for record by the register of deeds of any county of this state unless that instrument complies with each of the following requirements:

(a) The name of each person purporting to execute the instrument is legibly printed, typewritten, or stamped beneath the original signature or mark of the person.

(b) A discrepancy does not exist between the name of each person as printed, typewritten, or stamped beneath their signature and the name as recited in the acknowledgment or jurat on the instrument.

(c) The name of any notary public whose signature appears upon the instrument is legibly printed, typewritten, or stamped upon the instrument immediately beneath the signature of that notary public.

(d) The address of each of the grantees in each deed of conveyance or assignment of real estate, including the street number address if located within territory where street number addresses are in common use, or, if not, the post office address, is legibly printed, typewritten, or stamped on the instrument.

* * *

(f) If the instrument is executed after April 1, 1997, each sheet of the instrument complies with all of the following requirements:

(i) Has a margin of unprinted space that is at least 2-1/2 inches at the top of the first page and at least 1/2 inch on all remaining sides of each page.

(ii) Subject to subsection (3), displays on the first line of print on the first page of the instrument a single statement identifying the recordable event that the instrument evidences.

(iii) Is electronically, mechanically, or hand printed in 10-point type or the equivalent of 10-point type.

(iv) Is legibly printed in black ink on white paper that is not less than 20-pound weight.

(v) Is not less than 8-1/2 inches wide and 11 inches long or more than 8-1/2 inches wide and 14 inches long.

(vi) Contains no attachment that is less than 8-1/2 inches wide and 11 inches long or more than 8-1/2 inches wide and 14 inches long.

(2) Subsection (1)(e) and (f) do not apply to instruments executed outside this state or to the filing or recording of a plat or other instrument, the size of which is regulated by law.

* * *

(4) Any instrument received and recorded by a register of deeds shall be conclusively presumed to comply with this act. The requirements contained in this act are cumulative to the requirements imposed by any other act relating to the recording of instruments.

(5) An instrument that complies with the provisions of this act and any other act relating to the recording of instruments shall not be rejected for recording because of the content of the instrument. [MCL 565.201(1)-(5); emphasis added.]

Prior to amendment by 2002 PA 23, MCL 565.8 required that each deed executed in this State be executed in the presence of two witnesses, but the requirement for witnesses has since been removed. MCL 565.8 continues to require an acknowledgment by the person(s) executing the deed taken by a notary public or other person authorized by law. The officer taking the acknowledgment must endorse on the deed a certificate of acknowledgment and the true date of taking the acknowledgment "under his or her hand." (Emphasis added.)

Two laws found in the Revised Statutes of 1846 also relate to your inquiry. The first is the Statute of Frauds, RS 1846, Ch 80, section 8, MCL 566.108. It requires that certain contracts be in writing or they are void:

Every contract for the leasing for a longer period than 1 year, or for the sale of any lands, or any interest in lands, shall be void, unless the contract, or some note or memorandum thereof be in writing, and signed by the party by whom the lease or sale is to be made, or by some person thereunto by him lawfully authorized in writing . . . . [MCL 566.108.]

The second is RS 1846, Ch 65, MCL 565.1 et seq, titled "Of Alienation by Deed, and the Proof and Recording of Conveyances, and the Canceling of Mortgages." Section 1 of chapter 65 provides in part:

Conveyances of lands, or of any estate or interest therein, may be made by deed, signed and sealed[5] by the person from whom the estate or interest is intended to pass, being of lawful age, or by his lawful agent or attorney, and acknowledged or proved and recorded as directed in this chapter, without any other act or ceremony whatever.

In Boothroyd v Engles, 23 Mich 19, 21 (1871), the Court observed that:

Our statutes now require every deed to be "signed and sealed by the person from whom the estate or interest is intended to pass," as well as acknowledged by the person executing it.

The signing cannot be dispensed with, and no one but the signer can be regarded as the grantor. [Emphasis in original.]

The above-quoted statutes indicate that manual signatures on paper medium are necessary to comply with their requirements.6 This raises the question whether a Register of Deeds may nevertheless accept and record "documents" submitted electronically and bearing "electronic signatures" and whether such documents, if accepted and recorded, provide lawful notice entitling the grantee, lienor, etc., the priority and security offered by the recording statutes to "paper" filings conforming to the requirements of 1937 PA 103.

B. The Federal Electronic Signatures in Global and National Commerce Act (E-Sign Act), 15 USC 7001 et seq.

In June 2000, the Electronic Signatures in Global and National Commerce Act (E-Sign Act), Pub L No. 106-229, 114 Stat 464, 15 USC 7001 et seq, was signed into law. Section 7001(a) of the E-Sign Act provides the general rule validating electronic transactions covered by the act and superseding all other laws, including certain state laws:

(a)  In general. Notwithstanding any statute, regulation, or other rule of law (other than this title and title II), with respect to any transaction in or affecting interstate or foreign commerce

(1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and

(2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation. [15 USC 7001(a).]

Section 7001(b) of the E-Sign Act clarifies the scope of the act's protections:

(b) Preservation of rights and obligations. This title does not

(1) limit, alter, or otherwise affect any requirement imposed by a statute, regulation, or rule of law relating to the rights and obligations of persons under such statute, regulation, or rule of law other than a requirement that contracts or other records be written, signed, or in nonelectronic form; or

(2) require any person to agree to use or accept electronic records or electronic signatures, other than a governmental agency with respect to a record other than a contract to which it is a party. [15 USC 7001(b).]

Section 7002(a) of the E-Sign Act, however, permits a State to avoid the preemption of its laws by adopting the Uniform Electronic Transactions Act or comparable procedure consistent with the E-Sign Act:

(a) In General A State statute, regulation, or other rule of law may modify, limit, or supersede the provisions of section 101 with respect to State law only if such statute, regulation, or rule of law

(1) constitutes an enactment or adoption of the Uniform Electronic Transactions Act as approved and recommended for enactment in all the States by the National Conference of Commissioners on Uniform State Laws in 1999, except that any exception to the scope of such Act enacted by a State under section 3(b)(4) of such Act shall be preempted to the extent such exception is inconsistent with this title or title II, or would not be permitted under paragraph (2)(A)(ii) of this subsection; or

(2)(A) specifies the alternative procedures or requirements for the use or acceptance (or both) of electronic records or electronic signatures to establish the legal effect, validity, or enforceability of contracts or other records, if

(i) such alternative procedures or requirements are consistent with this title and title II; and

(ii) such alternative procedures or requirements do not require, or accord greater legal status or effect to, the implementation or application of a specific technology or technical specification for performing the functions of creating, storing, generating, receiving, communicating, or authenticating electronic records or electronic signatures . . . . [15 USC 7002(a).]

C. Michigan's Uniform Electronic Transactions Act, 2000 PA 305, MCL 450.831 et seq.

The Uniform Electronic Transactions Act (the Model Act) referred to in 15 USC 7002(a)(1) above was approved and recommended for enactment in all states by the National Conference of Commissioners on Uniform State Laws at its annual conference in 1999. The Commissioners released a Prefatory Note and Comments to provide assistance to the states considering adoption of the Model Act that explain its purpose and also its limitations, particularly delineating the transactions to which the act applies and those to which it does not.7 The Prefatory Note explains the Model Act's scope:

With regard to the general scope of the Act, the Act's coverage is inherently limited by the definition of "transaction." The Act does not apply to all writings and signatures, but only to electronic records and signatures relating to a transaction, defined as those interactions between people relating to business, commercial and governmental affairs. . . . An exclusion of all real estate transactions would be particularly unwarranted in the event that a State chose to convert to an electronic recording system, as many have for Article 9 financing statement filings under the Uniform Commercial Code.

* * *

Finally, recognition that the paradigm for the Act involves two willing parties conducting a transaction electronically, makes it necessary to expressly provide that some form of acquiescence or intent on the part of a person to conduct transactions electronically is necessary before the Act can be invoked. [Prefatory Note pp 7-8.]

Generally, the Model Act permits persons to voluntarily conduct business, commercial, or governmental affairs utilizing "electronic records" and "electronic signatures." It further provides that these records and signatures shall not, as between the consenting persons, be denied legal effect because they fail to satisfy a state's statute of frauds requiring written signatures or a paper medium. The Model Act does not compel any governmental agency to conduct business "electronically" or to accept for retention electronically generated records. Significantly, moreover, neither does the act require acceptance by registers of deeds of electronically memorialized real estate "transactions."

In 2000, the State of Michigan adopted the Model Act into Michigan law as the Uniform Electronic Transactions Act (UETA or Act), 2000 PA 305, MCL 450.831 et seq. The pertinent sections of the UETA warrant closer examination.

Section 2 of the UETA is the Act's definitional section. Crucial to analyzing your question is the Act's definition of "transaction," which means "an action or set of actions occurring between 2 or more persons relating to the conduct of business, commercial, or governmental affairs." MCL 450.832(p).

Because the Model Act served as the basis for the enactment of the UETA, it is appropriate to look to the Model Act's Prefatory Note and Comments to achieve a better understanding of the UETA.8 The Model Act's Comment corresponding to the definitional section explains the meaning of "transaction":

"Transaction." The definition has been limited to actions between people taken in the context of business, commercial or governmental activities. The term includes all interactions between people for business, commercial, including specifically consumer, or governmental purposes. However, the term does not include unilateral or non-transactional actions. As such it provides a structural limitation on the scope of the Act as stated in the next section.

It is essential that the term commerce and business be understood and construed broadly to include commercial and business transactions involving individuals who may qualify as "consumers" under other applicable law. . . .

* * *

A transaction must include interaction between two or more persons. Consequently, to the extent that the execution of a will, trust, or a health care power of attorney or similar health care designation does not involve another person and is a unilateral act, it would not be covered by this Act because not occurring as a part of a transaction as defined in this Act. However, this Act does apply to all electronic records and signatures related to a transaction, and so does cover, for example, internal auditing and accounting records related to a transaction. [Section 2, Comment 12, p 16.]

Section 3 of the UETA provides that the Act "applies to electronic records and electronic signatures relating to a transaction." MCL 450.833. Section 3(2), MCL 450.833(2), also explains that the UETA does not apply to a transaction to the extent it is governed by either of the following:

(a) A law governing the creation and execution of wills, codicils, or testamentary trusts.

(b) Except as otherwise provided in subsection (3), the uniform commercial code, 1962 PA 1974, MCL 440.1101 to 440.11102. [This refers to articles 2 or 2A of the Uniform Commercial Code.]

Importantly, "[a] transaction subject to this act is also subject to other applicable substantive law." MCL 450.833(4). This would include statutes relating to the recording of documents affecting title to or interests in real property.

One of the Model Act's Comments provides additional explanatory commentary concerning real estate transactions and specifically concerning the requirements of government filing:

Real Estate Transactions. It is important to distinguish between the efficacy of paper documents involving real estate between the parties, as opposed to their effect on third parties. As between the parties it is unnecessary to maintain existing barriers to electronic contracting. There are no unique characteristics to contracts relating to real property as opposed to other business and commercial (including consumer) contracts. Consequently, the decision whether to use an electronic medium for their agreements should be a matter for the parties to determine. Of course, to be effective against third parties state law generally requires filing with a governmental office. Pending adoption of electronic filing systems by States, the need for a piece of paper to file to perfect rights against third parties, will be a consideration for the parties. In the event notarization and acknowledgment are required under other laws, Section 11 provides a means for such actions to be accomplished electronically.

With respect to the requirements of government filing, those are left to the individual States in the decision of whether to adopt and implement electronic filing systems. (See optional Sections 17-19.) However, government recording systems currently require paper deeds including notarized, manual signatures. Although California and Illinois are experimenting with electronic filing systems, until such systems become widespread, the parties likely will choose to use, at the least, a paper deed for filing purposes. Nothing in this Act precludes the parties from selecting the medium best suited to the needs of the particular transaction. Parties may wish to consummate the transaction using electronic media in order to avoid expensive travel. Yet the actual deed may be in paper form to assure compliance with existing recording systems and requirements. The critical point is that nothing in this Act prevents the parties from selecting paper or electronic media for all or part of their transaction.9

Section 5 of the UETA describes the scope of the act:

(1) This act does not require a record or signature to be created, generated, sent, communicated, received, stored, or otherwise processed or used by electronic means or in electronic form.

(2) This applies only to transactions between parties each of which has agreed to conduct transactions by electronic means. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties' conduct.

(3) A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. The right granted by this subsection may not be waived by agreement.

(4) Unless otherwise prohibited by this act, a provision of this act may be varied by agreement.

(5) Whether an electronic record or electronic signature has legal consequences is determined by this act and other applicable law. [MCL 450.835.]

The Model Act's Comment corresponding to section 5 of the UETA emphasizes the noncompulsory nature of the transactions that is contemplated:

This section limits the applicability of this Act to transactions which parties have agreed to conduct electronically. Broad interpretation of the term agreement is necessary to assure that this Act has the widest possible application consistent with its purpose of removing barriers to electronic commerce.

1. This section makes clear that this Act is intended to facilitate the use of electronic means, but does not require the use of electronic records and signatures. This fundamental principle is set forth in subsection (a) and elaborated by subsections (b) and (c), which require an intention to conduct transactions electronically and preserve the right of a party to refuse to use electronics in any subsequent transaction. [Section 5, Comment, p 23.]

The UETA addresses the legal effect and enforceability of electronic records and signatures in section 7:

(1) A record or signature may not be denied legal effect or enforceability solely because it is in electronic form.

(2) A contract may not be denied legal effect or enforceability solely because an electronic record was used in its formation.

(3) If a law requires a record to be in writing, an electronic record satisfies the law.

(4) If a law requires a signature, an electronic signature satisfies the law. [MCL 450.837(1)-(4); emphasis added.]

As noted in the earlier discussion of the numerous other Michigan laws bearing on your question, Michigan's recording statutes repeatedly use language requiring manual signatures on paper medium before a record is deemed properly recordable. Consistent with subsections (3) and (4) of section 7 above, to the extent a "transaction" is governed by the UETA, an "electronic signature" and an "electronic record" satisfy the strictures of 1937 PA 103, MCL 565.201, and other acts otherwise compelling the use of paper and written signatures.

This conclusion is supported by the Model Act's Comment that corresponds to section 7 of the UETA, which provides in part:

1. This section sets forth the fundamental premise of this Act: namely, that the medium in which a record, signature, or contract is created, presented or retained does not affect it's [sic] legal significance. Subsections (a) and (b) are designed to eliminate the single element of medium as a reason to deny effect or enforceability to a record, signature, or contract. The fact that the information is set forth in an electronic, as opposed to paper, record is irrelevant.

2. Under Restatement 2d Contracts Section 8, a contract may have legal effect and yet be unenforceable. Indeed, one circumstance where a record or contract may have effect but be unenforceable is in the context of the Statute of Frauds. Though a contract may be unenforceable, the records may have collateral effects, as in the case of a buyer that insures goods purchased under a contract unenforceable under the Statute of Frauds. The insurance company may not deny a claim on the ground that the buyer is not the owner, though the buyer may have no direct remedy against seller for failure to deliver. See Restatement 2d Contracts, Section 8, Illustration 4.

While this section would validate an electronic record for purposes of a statute of frauds, if an agreement to conduct the transaction electronically cannot reasonably be found (See Section 5(b)) then a necessary predicate to the applicability of this Act would be absent and this Act would not validate the electronic record. Whether the electronic record might be valid under other law is not addressed by this Act.

3. Subsections (c) and (d) provide the positive assertion that electronic records and signatures satisfy legal requirements for writings and signatures. The provisions are limited to requirements in laws that a record be in writing or be signed. This section does not address requirements imposed by other law in addition to requirements for writings and signatures. See, e.g., Section 8.

Subsections (c) and (d) are particularized applications of subsection (a). The purpose is to validate and effectuate electronic records and signatures as the equivalent of writings, subject to all of the rules applicable to the efficacy of a writing, except as such other rules are modified by the more specific provisions of this Act. [Section 7, Comment, pp 27-29.]

Section 11 of the UETA directly addresses how requirements regarding notarized signatures are to be handled:

If a law requires a signature or record to be notarized, acknowledged, verified, or made under oath, the requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable law, is attached to or logically associated with the signature or record. [MCL 450.841.]

The Model Act's corresponding Comment offers the following explanation of how this section works:

This section permits a notary public and other authorized officers to act electronically, effectively removing the stamp/seal requirements. However, the section does not eliminate any of the other requirements of notarial laws, and consistent with the entire thrust of this Act, simply allows the signing and information to be accomplished in an electronic medium. [Section 11, Comment, p 37.]

The UETA also addresses evidentiary issues that may arise regarding electronic signatures and makes clear that in legal proceedings "evidence of a record or signature may not be excluded solely because it is in electronic form." MCL 450.843. The Model Act's corresponding Comment explains that:

Like Section 7, this section prevents the nonrecognition of electronic records and signatures solely on the ground of the media in which information is presented.

Nothing in this section relieves a party from establishing the necessary foundation for the admission of an electronic record. See Uniform Rules of Evidence 1001(3), 1002, 1003 and 1004. [Section 13, Comment, p 41.]

Section 2(i) of the UETA, MCL 450.832(i), defines the term "governmental agency" to include, among others, state and county agencies.10  Section 18 of the UETA, MCL 450.848, describes how state departments may use electronic records and signatures:

(1) Except as otherwise provided in section 12(6), the department of management and budget shall determine whether, and the extent to which, each state department will send and accept electronic records and electronic signatures to and from other persons and otherwise create, generate, communicate, store, process, use, and rely upon electronic records and electronic signatures.

(2) To the extent that a governmental agency uses electronic records and electronic signatures under subsection (1), the department of management and budget, giving due consideration to security, may specify any or all of the following:

(a) The manner and format in which the electronic records must be created, generated, sent, communicated, received, and stored and the systems established for those purposes.

(b) If an electronic record is required to be signed by electronic means, the type of electronic signature required, the manner and format in which the electronic signature is to be affixed to the electronic record, and the identity of or criteria that is to be met by any third party used by a person filing a document.

(c) Control processes and procedures as appropriate to ensure adequate preservation, disposition, integrity, security, confidentiality, and auditability of electronic records.

(d) Any other required attributes for electronic records that are specified for corresponding nonelectronic records or reasonably necessary under the circumstances.

(3) Except as otherwise provided in section 12(6), this act does not require a governmental agency or official of this state to use or permit the use of electronic records or electronic signatures.

Section 19(1) of the UETA, MCL 450.849(1), dovetails with these standards by allowing the Department of Management and Budget to "encourage and promote consistency and interoperability with similar standards adopted by other governmental agencies of this state and other states and the federal government and nongovernmental persons interacting with governmental agencies of this state."11

Under these provisions, a Register of Deeds may, but is not required to, accept documents affecting real property involving transactions governed by the UETA. Given the numerous and detailed statutory provisions that currently govern the recording of documents affecting real property and the potential for uncertainty created by the many technological and other changes that have occurred since those statutes were last amended, the Legislature may wish to comprehensively address this subject to bring more clarity to this important area of practice.

It is my opinion, therefore, that a county Register of Deeds may, but is not required to, accept and record documents affecting title that are part of a transaction "between two or more persons relating to the conduct of business, commercial or government affairs" in electronic format and bearing electronic signatures, consistent with the Uniform Electronic Transactions Act.  A document recorded with respect to these "transactions" provides notice against grantees in subsequent recorded conveyances notwithstanding that the document was submitted in electronic format and was executed and acknowledged with electronic signatures.  The Uniform Electronic Transactions Act does not require a record or signature to be in electronic form and only applies to transactions where each party has agreed to conduct the transaction by electronic means.

MIKE COX
Attorney General

1These state and federal statutes and rules do not, by express words, make an exception for electronic documents or documents bearing electronic signatures; whether documents of this type may be recorded in the office of the Register of Deeds in the first instance is the question to be addressed here.

2Michigan Land Title Standards is a compilation prepared by a committee of the Real Property Law Section of the State Bar of Michigan. Various standards have been cited by the courts as representing constructions of property laws that have been relied upon for years. See, e.g., Snover v Snover, 199 Mich App 627, 629; 502 NW2d 370 (1993).

3Michigan Land Title Standards, 5th Edition, 7th Supplement (Real Property Law Section of State Bar of Michigan), Standard 3.18, citing MCL 565.25, MCL 565.29, and Attwood v Bearss, 47 Mich 72; 10 NW112 (1881); Michigan Nat'l Bank v Morren, 194 Mich App 407; 487 NW2d 784 (1992); and First of America Bank West Michigan v Alt, 848 F Supp 1343 (WD Mich, 1993).

4Section 3 of the Act, MCL 565.203, makes the following exceptions:

The provisions of this act shall not apply to the following instruments: any decree, order, judgment or writ of any court, will, death certificate, or any instrument executed or acknowledged outside of the state of Michigan. The provisions of paragraphs (a), (c) and (d) of section 1 shall not apply to any instrument upon which the signature itself is printed, typewritten or stamped.

5Section 3 of the Act, MCL 565.203, makes the following exceptions:

The provisions of this act shall not apply to the following instruments: any decree, order, judgment or writ of any court, will, death certificate, or any instrument executed or acknowledged outside of the state of Michigan. The provisions of paragraphs (a), (c) and (d) of section 1 shall not apply to any instrument upon which the signature itself is printed, typewritten or stamped.

6Section 3 of the Act, MCL 565.203, makes the following exceptions:

The provisions of this act shall not apply to the following instruments: any decree, order, judgment or writ of any court, will, death certificate, or any instrument executed or acknowledged outside of the state of Michigan. The provisions of paragraphs (a), (c) and (d) of section 1 shall not apply to any instrument upon which the signature itself is printed, typewritten or stamped.

7The Prefatory Note is lengthy and is provided as an appendix to this opinion for reference. The complete text of the Model Act, Prefatory Note, and Comments is also available by accessing: http://www.law.upenn.edu/bll/ulc/fnact99/1990s/ueta99.htm.

8See section 6(c) of the UETA, MCL 450.836(c), which provides that the act shall be construed to "[e]ffectuate its general purpose to make uniform the law with respect to electronic transactions among the states."

9See Comment 9(3), p 21, corresponding to "Section 3. Scope" of the Model Act.

10"Governmental Agency" is defined to mean: "[A]n executive, legislative, or judicial agency, department, board, commission, authority, institution, or instrumentality of the federal, state, or local government." MCL 450.832(i).

11All the authority, powers, duties, functions, and responsibilities of the Department of Management and Budget under the UETA were transferred to the Department of Information Technology by Executive Order 2006-19 [redesignated Executive Reorganization Order 2006-4 in the compiling process], MCL 18.43.



ATTACHMENT:

PREFATORY NOTE TO MODEL UNIFORM ELECTRONIC TRANSACTIONS ACT

With the advent of electronic means of communication and information transfer, business models and methods for doing business have evolved to take advantage of the speed, efficiencies, and cost benefits of electronic technologies. These developments have occurred in the face of existing legal barriers to the legal efficacy of records and documents which exist solely in electronic media. Whether the legal requirement that information or an agreement or contract must be contained or set forth in a pen and paper writing derives from a statute of frauds affecting the enforceability of an agreement, or from a record retention statute that calls for keeping the paper record of a transaction, such legal requirements raise real barriers to the effective use of electronic media.

* * *

It is important to understand that the purpose of the UETA is to remove barriers to electronic commerce by validating and effectuating electronic records and signatures. It is NOT a general contracting statute - the substantive rules of contracts remain unaffected by UETA. Nor is it a digital signature statute. To the extent that a State has a Digital Signature Law, the UETA is designed to support and compliment that statute.

A. Scope of the Act and Procedural Approach. The scope of this Act provides coverage which sets forth a clear framework for covered transactions, and also avoids unwarranted surprises for unsophisticated parties dealing in this relatively new media. The clarity and certainty of the scope of the Act have been obtained while still providing a solid legal framework that allows for the continued development of innovative technology to facilitate electronic transactions.

With regard to the general scope of the Act, the Act's coverage is inherently limited by the definition of "transaction." The Act does not apply to all writings and signatures, but only to electronic records and signatures relating to a transaction, defined as those interactions between people relating to business, commercial and governmental affairs. In general, there are few writing or signature requirements imposed by law on many of the "standard" transactions that had been considered for exclusion. A good example relates to trusts, where the general rule on creation of a trust imposes no formal writing requirement. Further, the writing requirements in other contexts derived from governmental filing issues. For example, real estate transactions were considered potentially troublesome because of the need to file a deed or other instrument for protection against third parties. Since the efficacy of a real estate purchase contract, or even a deed, between the parties is not affected by any sort of filing, the question was raised why these transactions should not be validated by this Act if done via an electronic medium. No sound reason was found. Filing requirements fall within Sections 17-19 on governmental records. An exclusion of all real estate transactions would be particularly unwarranted in the event that a State chose to convert to an electronic recording system, as many have for Article 9 financing statement filings under the Uniform Commercial Code.

The exclusion of specific Articles of the Uniform Commercial Code reflects the recognition that, particularly in the case of Articles 5, 8 and revised Article 9, electronic transactions were addressed in the specific contexts of those revision processes. In the context of Articles 2 and 2A the UETA provides the vehicle for assuring that such transactions may be accomplished and effected via an electronic medium. At such time as Articles 2 and 2A are revised the extent of coverage in those Articles/Acts may make application of this Act as a gap-filling law desirable. Similar considerations apply to the recently promulgated Uniform Computer Information Transactions Act ("UCITA").

The need for certainty as to the scope and applicability of this Act is critical, and makes any sort of a broad, general exception based on notions of inconsistency with existing writing and signature requirements unwise at best. The uncertainty inherent in leaving the applicability of the Act to judicial construction of this Act with other laws is unacceptable if electronic transactions are to be facilitated.

Finally, recognition that the paradigm for the Act involves two willing parties conducting a transaction electronically makes it necessary to expressly provide that some form of acquiescence or intent on the part of a person to conduct transactions electronically is necessary before the Act can be invoked. Accordingly, section 5 specifically provides that the Act only applies between parties that have agreed to conduct transactions electronically. In this context, the construction of the term agreement must be broad in order to assure that the Act applies whenever the circumstances show the parties intention to transact electronically, regardless of whether the intent rises to the level of a formal agreement.

B. Procedural Approach. Another fundamental premise of the Act is that it be minimalist and procedural. The general efficacy of existing law in an electronic context, so long as biases and barriers to the medium are removed, validates this approach. The Act defers to existing substantive law. Specific areas of deference to other law in this Act include: (1) the meaning and effect of "sign" under existing law, (2) the method and manner of displaying, transmitting and formatting information in section 8, (3) rules of attribution in section 9, and (4) the law of mistake in section 10.

The Act's treatment of records and signatures demonstrates best the minimalist approach that has been adopted. Whether a record is attributed to a person is left to law outside this Act. Whether an electronic signature has any effect is left to the surrounding circumstances and other law. These provisions are salutary directives to assure that records and signatures will be treated in the same manner, under currently existing law, as written records and manual signatures.

The deference of the Act to other substantive law does not negate the necessity of setting forth rules and standards for using electronic media. The Act expressly validates electronic records, signatures and contracts. It provides for the use of electronic records and information for retention purposes, providing certainty in an area with great potential in cost savings and efficiency. The Act makes clear that the actions of machines ("electronic agents") programmed and used by people will bind the user of the machine, regardless of whether human review of a particular transaction has occurred. It specifies the standards for sending and receipt of electronic records, and it allows for innovation in financial services through the implementation of transferable records. In these ways the Act permits electronic transactions to be accomplished with certainty under existing substantive rules of law.