CONFERENCE COMMITTEE REPORT NO. 32

                            Honolulu, Hawaii
                                            , 2000

                            RE:   H.B. No. 2585
                                  H.D. 1
                                  S.D. 1
                                  C.D. 1




Honorable Calvin K.Y. Say
Speaker, House of Representatives
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committee on Conference on the disagreeing vote of the
House of Representatives to the amendments proposed by the Senate
in H.B. No. 2585, H.D. 1, S.D. 1, entitled:

    "A BILL FOR AN ACT RELATING TO THE UNIFORM ELECTRONIC
    TRANSACTIONS ACT,"

having met, and after full and free discussion, has agreed to
recommend and does recommend to the respective Houses the final
passage of this bill in an amended form.

     The purpose of this measure is to adopt the Uniform
Electronic Transactions Act (UETA) that establishes a law to
govern electronic records and electronic signatures on a
transaction.  

     The UETA was drafted by the National Conference of
Commissioners on Uniform State Laws and represents a
comprehensive attempt to provide uniform state law for the area
of electronic commerce.  It has been adopted by three states and
is being deliberated by 13 other.  UETA is designed to assure

 
 
 
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uniform regulations of commercial transactions, which are
conducted electronically throughout the United States.  

     At the same time, the United States Congress is currently
considering two electronic commerce schemes, which threaten to
broadly preempt state regulations governing commercial
transactions conducted by electronic means, unless states adopt
the provisions of UETA in a relatively uniform fashion.
Therefore, in deliberations over UETA, each state is advised to
consider uniformity with other states.  Your Committee on
Conference notes that the language proposed by this measure has
been reviewed and approved by both the National Conference of
Commissioners on Uniform State Laws, and the Department of
Commerce and Consumer Affairs.

     UETA's main purpose is to facilitate the transition of
commercial transactions into the digital age by ensuring that
legal recognition be granted to electronic signatures, documents
and transactions.  However, in drafting UETA, the National
Conference of Commissioners on Uniform State Laws recognized that
certain transactions and documents should be preferentially
granted legal recognition in their paper and ink form.
Therefore, the National Conference of Commissioners on Uniform
State Laws has provided for certain exclusions from UETA's
provisions and allowed the individual states to consider whether
additional exclusions should be created.

     Although the provisions of UETA apply only to transactions
in which both parties have agreed to conduct them electronically,
your Committee finds that in cases of consumer contracts where a
greatly disparate level of bargaining power and expertise exists
between the parties, application of the provisions of UETA may
very well result in unintended outcomes, which weaken existing
consumer protection laws.

     In the transition into the digital age, your Committee is
cognizant of the need to remain conscious of the fact that many
of Hawaii's residents do not yet own personal computers or are
not yet on-line.  Therefore, your Committee finds that certain
consumer notices which are required by other laws or rules, and
carry significant legal implications, may not be anticipated by a
consumer, and should continue to be sent and received in paper
and ink, regardless of an agreement between the parties.  These
include notices of foreclosure, eviction, repossession, utility
shut-off or cancellation of insurance benefits.

     After careful consideration, your Committee on Conference
has amended this measure by replacing the original section -3 of
this measure with a new scope section -3 that has been approved

 
                            CONFERENCE COMMITTEE REPORT NO. 32
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by the National Conference of Commissioners on Uniform State
Laws.  The new section -3 has the approval of the Department of
Commerce and Consumer Affairs, Insurance Division, and Office of
Consumer Protection.  

     As amended, section -3, of this measure applies to
electronic records and electronic signatures relating to a
transaction, except:

     (1) wills, codiciles, testamentary trusts; 

     (2) certain provisions of the Uniform Commercial Code; 

     (3) certain rights of action for property owners;

     (4) utility shutoff for water, telephone, gas, or
         electricity; and

     (5) cancellation, termination, or lapse of an insurance
         contract.

     Your Committee also finds that it is important to exclude
notices of "material alteration" of contracts of insurance,
insurance benefits and service contracts that are required by
law.  However, this exception does not create and is not intended
to create any new substantive notice requirements for Hawaii
Revised Statutes Chapter 431.

         An alteration is material if it (1) changes the burden
         of a party (as by changing the date, time, place,
         amount, or rate of interest), (2) changes the
         liabilities or duties of any party (as by adding or
         removing the name of a maker, drawer, indorser, payee,
         or co-surety), or (3) changes the operation of the
         instrument or its effect in evidence (as by adding words
         of negotiability, changing the form of an indorsement,
         or changing the liability from joint to several).

     Black's Law Dictionary 77 (7th ed. 1999).  A material
alteration is one which alters the form to that substantially
different from its original composition.  See Kimball v. Lincoln,
72 Haw. 117; 809 P.2d 1130 (1991); Francone v. McClay, 41 Haw. 72
(1955).  When the law requires such notices, every effort should
be made to ensure their receipt. 

     At the same time, the term "material" is employed as an
adjective in hundreds of provisions of the Hawaii Revised
Statutes, consistently with the definition supported by Black's

 
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Law Dictionary.  There is nothing ambiguous about the use of the
term when used as an adjective.

     In the case of this measure, notices of material alteration
are legally-binding and are infrequent and unanticipated by the
consumer.  When the law requires such notices, every effort
should be made to ensure receipt of the notice.  Currently, the
Insurance Code contains few requirements.  In the future,
experience may show that similar requirements are warranted with
the rise of innovations in the offering of insurance products.
At that time new notice requirements may be enacted.  Therefore,
your Committee finds that some flexibility should be retained in
the enactment of this provision.  

     Your Committee is aware that notices regarding life
settlement and viatical settlement agreements are also excluded
by this measure, even though no substantive laws requiring such
notices are currently in place.  However, your Committee finds
that it is anticipated that such laws will be enacted in the near
future.  

     For purposes of consistency, your Committee has also amended
this measure by inserting section 2 to address overlapping notice
and disclosure provisions that are present in this measure and
S.B. No. 2819, in the event that both measures are enacted.

     As affirmed by the record of votes of the managers of your
Committee on Conference that is attached to this report, your
Committee on Conference is in accord with the intent and purpose
of H.B. No. 2585, H.D. 1, S.D. 1, as amended herein, and
recommends that it pass Final Reading in the form attached hereto
as H.B. No. 2585, H.D. 1, S.D. 1, C.D. 1.

                                   Respectfully submitted on
                                   behalf of the managers:

  ON THE PART OF THE SENATE          ON THE PART OF THE HOUSE
                                   
                                   
                                   
                                   
______________________________     ______________________________
BRIAN KANNO, Co-Chair              RON MENOR, Chair




______________________________
BRIAN T. TANIGUCHI, Co-Chair

 
                            CONFERENCE COMMITTEE REPORT NO. 32
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______________________________
DAVID Y. IGE, Co-Chair