BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 1097 (Holden)
Version: May 11, 2015
Hearing Date: July 7, 2015
Fiscal: No
Urgency: No
RD
SUBJECT
Alarm companies: electronic transactions
DESCRIPTION
This bill would, notwithstanding the existing prohibition,
authorize persons licensed, certified, or registered pursuant to
the Alarm Company Act (Act), to conduct transactions,
electronically, for services or activities authorized under that
Act, if the contracting customer consents.
This bill would provide that a notice of cancellation and copies
of the contract or offer, as described under existing law, may
be provided and transmitted electronically. This bill would
also provide that notwithstanding the existing requirements for
home solicitation contracts to be in specified form and include
certain disclosures and a detachable written notice of
cancellation, for contracts for services or other activities
authorized by this chapter, the signatures, disclosures, and
documents described in those provisions may be provided and
transmitted electronically.
BACKGROUND
Enacted in 1971, California law has long governed "home
solicitation" contracts with the intent to protect consumers
against the types of pressures that typically can arise when a
salesman appears at a buyer's home. (See Civ. Code Sec. 1689.5
et seq.) The statute applies to any contract, or offer which is
subject to approval, for the sale, lease, or rental of goods or
services, over $25, which is "made at other than appropriate
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trade premises." Under these provisions, the contract must be
written in the same language as the oral presentation and the
buyer's right to cancel must be conspicuously stated in the
agreement, in a specified form. Additionally, this law provides
special requirements pertaining to personal emergency response
units provided for under the Alarm Company Act. Perhaps most
importantly, a detailed notice of these protections must also be
set forth in the agreement and orally explained to the buyer,
and the buyer must be given a copy of the contract with a
detachable "Notice of Cancellation" form showing the seller's
address and the time the right to cancel expires. Until these
requirements are complied with, the buyer maintains the right to
cancel the contract at any time. (Civ. Code Sec. 1689.7.)
Separately, in 1999, based on the model law proposed by the
National Conference of Commissioners on Uniform State Laws to
set rules by which electronic commerce may be conducted across
the country, California enacted the Uniform Electronic
Transactions Act (UETA). (SB 820 (Sher, Ch. 428, Stats. 1999).)
One of the critical motivators for enacting a law validating
electronic records was the Statute of Frauds, which requires
that certain contracts be in writing. In California, the
Statute of Frauds is codified at Section 1624 of the Civil Code,
which expressly states that certain contracts are invalid (i.e.
unenforceable) unless they, or some note or memorandum thereof,
are in writing and subscribed by the party to be charged or by
the party's agent. Such contracts include, for example, an
agreement that by its terms is not to be performed within a year
from the making thereof; an agreement for the leasing for a
longer period than one year, or for the sale of real property,
or of an interest therein; or specified contracts, promises,
undertakings, or commitments to loan money or to grant or extend
credit, in an amount greater than $100,000.
Today, California's UETA provides that a record or signature may
not be denied legal effect or enforceability solely because it
is in electronic form, that a contract may not be denied legal
effect or enforceability solely because an electronic record was
used in its formation, and that an electronic record or
signature satisfies a requirement in the law that a record be in
writing or a signature be affixed or if a law provides
consequences if there is no record or signature. This act,
however, does not apply to all contracts. For example,
expressly excluded from the UETA are transactions that are
subject to a law governing the creation and execution of wills,
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codicils, or testamentary trusts; specified transactions in the
Uniform Commercial Code, that were specifically drafted in
consideration of electronic records; and transactions subject to
a law that requires that specifically identifiable text or
disclosures in a record or a portion of a record be separately
signed, including initialed, from the record (such as real
estate transactions). Most pertinent to this bill, existing law
also excludes from the UETA specific transactions described
under various laws, including those relating to buyers' home
solicitation contracts.
This bill now seeks to permit alarm companies, upon the consent
of the contracting customer, to execute home solicitation
contracts electronically, as specified. This bill would also
allow for the execution of a notice of cancellation by
electronic means.
CHANGES TO EXISTING LAW
Existing law establishes the Alarm Company Act, which provides
for the licensure, registration, and regulation of alarm company
operators and alarm agents by the Bureau for Security and
Investigative Services (BSIS). (Bus. & Prof. Code Sec. 7590 et
seq.)
Existing law , the Alarm Company Act, requires every agreement,
including, but not limited to, lease agreements, monitoring
agreements, and service agreements, including all labor,
services, and materials for the installation of an alarm system,
to be in writing and to contain specified information,
including:
the approximate dates when the work will begin and be
substantially completed;
a description of the work to be done, a description of the
materials to be used, and the agreed consideration for the
work; and
a description of the alarm system including the major
components thereof and services to be provided to the
purchaser once the alarm is installed, including response or
monitoring services, if any. (Bus. & Prof. Code Sec.
7599.44.)
Existing law requires that the written document also include
additional information if the total cost of the agreement
exceeds $250 over the time period fixed by the agreement,
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including the cost of all labor, service, or material to be
provided by the licensee for the installation. (Bus. & Prof.
Code Sec. 7499.44(i).)
Existing law , the Uniform Electronic Transactions Act (UETA),
generally authorizes the transaction of business, commerce and
contracts by electronic means. (Civ. Code Sec. 1633.1.) The
UETA does not apply to transactions that are subject to certain
laws, such as laws governing the creation and execution of
wills, codicils, or testamentary trusts. In addition, the UETA
does not apply to specific transactions described under various
statutes, including certain provisions of the Civil Code
relating to home solicitation contracts (such as home
solicitation contracts conducted for purposes of activities
authorized under the Alarm Company Act.) (Civ. Code Sec.
1633.3(a), (b).)
Existing law provides that the UETA applies only to a
transaction between parties each of which has agreed to conduct
the transaction by electronic means, as specified. (Civ. Code
Sec. 1633.5(b).)
Existing law provides that, except as otherwise provided in the
UETA, the effect of any of its provisions may be varied by
agreement. (Civ. Code Sec. 1633.5(d).)
Existing law sets forth certain principles governing the legal
effect of conducting transactions electronically. Specifically:
a record or signature may not be denied legal effect or
enforceability solely because it is in electronic form;
a contract may not be denied legal effect or enforceability
solely because an electronic record was used in its formation;
if a law requires a record to be in writing, an electronic
record satisfies the law; and
if a law requires a signature, an electronic signature
satisfies the law. (Civ. Code Sec. 1633.7.)
Existing law provides that an electronic record or electronic
signature is attributable to a person if it was the act of the
person, which may be shown in any manner, including a showing of
the efficacy of any security procedure applied to determine the
person to which the electronic record or electronic signature
was attributable. (Civ. Code Sec. 1633.9(a).)
Existing law provides that the effect of an electronic record or
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electronic signature attributed to a person is determined from
the context and surrounding circumstances at the time of its
creation, execution, or adoption, including the parties'
agreement, if any, and otherwise as provided by law. (Civ. Code
Sec. 1633.9(b).)
Existing law , the UETA, applies only to a transaction that all
parties have agreed to conduct electronically. Existing law
provides that agreement is determined from the context and
surrounding circumstances, including the parties' conduct.
Except for a separate and optional agreement whose primary
purpose is to authorize a transaction to be conducted
electronically, an agreement to conduct a transaction by
electronic means may not be contained in a standard form
contract that is not an electronic record. An agreement in such
a standard form contract may not be conditioned on an agreement
to conduct transactions by electronic means. Further, an
agreement to conduct a transaction electronically may not be
inferred solely from the fact that a party has used electronic
means to pay an account or register a purchase or warranty.
Existing law provides that these provisions may not be varied by
agreement. (Civ. Code Sec. 1633.5(b).)
Existing law allows a party that agrees to conduct a transaction
electronically to refuse to conduct other transactions by
electronic means. If a seller sells goods or services by both
electronic and non-electronic means and a buyer purchases the
goods or services by conducting the transaction electronically,
the buyer may refuse to conduct further transactions regarding
the goods or services by electronic means. Existing law provides
that these provisions may not be varied by agreement. (Civ.
Code Sec. 1633.5(c).)
Existing law provides that a party to an agreement to conduct a
transaction electronically may satisfy a law requiring that
information be provided, sent, or delivered by one person to
another in writing by providing, sending, or delivering the
information in an electronic record capable of retention by the
recipient at the time of receipt. Existing law provides that an
electronic record is not capable of retention by the recipient
if the sender or its information processing system inhibits the
ability of the recipient to print or store the electronic
record. (Civ. Code Sec. 1633.8(a).)
Existing law provides that if a law other than the UETA requires
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that a notice of the right to cancel be provided or sent, an
electronic record may not substitute for a writing under that
other law unless, in addition to satisfying the requirements of
that other law and the UETA, the notice of cancellation may be
returned by electronic means. Existing law provides that this
provision may not be varied by agreement. (Civ. Code Sec.
1633.16.)
Existing law provides for the general right of a consumer to
cancel a home solicitation contract up to three business days
after entering into the contract. Existing law further provides
for the general right of a consumer to cancel a home
solicitation contract or offer for the purchase of a personal
emergency response unit for seven business days. Existing law,
however, provides that a personal emergency response unit
installed with, and as part of, a home security alarm system
subject to the Alarm Company Act which has two or more
stationary protective devices used to enunciate an intrusion or
fire and is installed by an alarm company operator operating
under a current license issued pursuant to the Alarm Company
Act, is instead subject to the three day cancellation
provisions. (Civ. Code Sec. 1689.6.)
Existing law requires, in a home solicitation contract or offer,
that the buyer's agreement or offer to purchase be written in
the same language as principally used in the oral sales
presentation, dated and signed by the buyer, and contain a
conspicuous statement, as specified, stating that: "You, the
buyer, may cancel this transaction at any time prior to midnight
of the third business day after the date of this transaction.
See the attached notice of cancellation form for an explanation
of this right." Existing law includes a similar disclosure
requirement for a home solicitation contract or offer that is
for the purchase of a personal emergency response unit.
Existing law requires that the agreement or offer for purchase
be accompanied by a written notice of cancellation which a buyer
can return to the seller to cancel the contract, as specified.
(Civ. Code Sec. 1689.7.)
Existing law generally defines "home solicitation contract or
offer" as any contract, whether single or multiple, or any offer
which is subject to approval, for the sale, lease, or rental of
goods or services or both, made at other than appropriate trade
premises in an amount of $25 or more, including any interest or
service charges. Existing law defines "appropriate trade
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premises" to mean premises where either the owner or seller
normally carries on a business, or where goods are normally
offered or exposed for sale in the course of a business carried
on at those premises, and also provides specific definitions of
"goods" and "services." (Civ. Code Sec. 1689.5.)
This bill would provide that notwithstanding the Alarm Company
Act's requirement for every agreement to be in writing,
contracts for services or other activities authorized by the Act
may be conducted by electronic means. This bill would also
provide that notwithstanding the provisions exempting certain
transactions relating to home solicitation contracts from the
UETA, the UETA applies to electronic records and electronic
signatures relating to transactions conducted by a person
licensed, certified, or registered pursuant to the Alarm Company
Act, for purposes of activities authorized by the Alarm Company
Act. This bill would prohibit the use of an electronic contract
for services or other activities authorized by the Alarm Company
Act without the consent of the contracting consumer.
This bill would provide that notwithstanding specified law
generally allowing a buyer the right to cancel certain home
solicitation contracts or offers for up for up to 3 or 7 days,
as specified, for contracts for services or other activities
authorized by the Alarm Company Act, a notice of cancellation
and copies of the contract or offer described in those
provisions may be provided and transmitted electronically.
This bill would further specify that notwithstanding the
provisions of the Civil Code requiring home solicitation
contracts to be in specified form and include certain
disclosures and a detachable written notice of cancellation, for
contracts for services or other activities authorized by this
chapter, the signatures, disclosures, and documents described in
those provisions may be provided and transmitted electronically.
This bill would add a provision to the UETA to provide that
notwithstanding the provisions exempting certain transactions,
the UETA shall apply to electronic records and electronic
signatures relating to transactions conducted by a person
licensed, certified, or registered pursuant to the Alarm Company
Act for purposes of activities authorized by that Act.
COMMENT
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1. Stated need for the bill
According to the author:
In 1999, California adopted the Uniform Electronic Transaction
Act (UETA), which gave electronic contracts (e-contracts) and
signatures the same legal standing as traditional paper
contracts. In an effort to further protect consumers, the
state [ . . . ] exempted in-home sales from UETA, which means
that in-home sales vendors were required to continue leaving a
paper copy of the contract and two copies of the notice of
three-day right of recession with the consumer at the time of
the sale.
AB 1097 allows alarm company salespeople to use electronic
contracts, at the discretion of the customer.
Although most businesses and individuals selling alarm systems
are legitimate, some use deceptive tactics as a core component
of their sales practices and often target the elderly. With
paper contracts it is virtually impossible to know who signed
a contract, when they signed, and whether or not copies of the
contract and notice of cancellation were actually delivered.
With e-contracts, however, it is possible to see when the
actual customer logged into the e-contract system, reviewed
and signed the contract, and exactly when and whether the
contract and notices were electronically delivered to the
customer.
The California Alarm Association (CAA) writes in support of this
bill that, "[m]any alarm companies are equipping their sales
people with tablet devices. Tablets allow customers to adjust
font size to better read the terms and conditions of the
contract. In addition, software can be used to force a customer
to read and acknowledge each page of the contract before
advancing to the next page. Ultimately, once the customer
reviews, initials, and signs the contract[,] an electronic copy
of the contract will be sent immediately to the customer. The
contract can then be electronically stored on the customer's
computer, whereas paper contracts are often lost or destroyed.
Electronic contracts also provide better verification on whom
and when a contract was signed, as well as when the contract and
notice of cancelation are received. A date and time stamp
appears on emails, verifying when they are sent. It is also
possible to see when the customer has logged into the e-contract
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system." At the same time, CAA notes that "AB 1097 would still
allow the customer to receive a paper contract."
2. Bill seeks to create an exception to the general rule
against electronic contracting for home solicitation contracts
Existing law, the Alarm Company Act (Act), provides for the
licensure, registration, and regulation of alarm company
operators and alarm agents by the Bureau for Security and
Investigative Services (BSIS). (Bus. & Prof. Code Sec. 7590 et
seq.) That Act requires that all agreements be in writing.
Separately, existing law, the Uniform Electronic Transactions
Act (UETA), generally authorizes the transaction of business,
commerce and contracts by electronic means, except as specified.
These exceptions include transactions subject to certain laws
(such as wills and trusts), and specific transactions described
under various statutes, including those related to home
solicitation contracts. Separately, existing law governing home
solicitation contracts, including a contract or offer for a
personal emergency response unit installed with, and as part of,
a home security alarm system subject to the Alarm Company Act,
authorizes a buyer to cancel a contract within the applicable
three or seven day statutory cooling-off period, by way
returning a written notice of cancellation to the seller, as
specified.
This bill now seeks to allow for home solicitation contracts to
be conducted electronically when involving transactions between
a consumer and a person licensed, certified, or registered
pursuant to the Alarm Company Act for activities authorized by
that Act.
The sponsor, ADT Alarm Services, asserts that "[t]echnology has
now advanced to such a degree that e-contracts can offer
consumer protection measures that exceed those of traditional
paper contracts. Electronic contracts are reproducible, and
metadata showing when the contract and other documents were
signed, emailed, and even opened, can be subpoenaed, whereas
paper contracts are easily misplaced and can be damaged over
time. We believe it is time to update California statute to
allow companies in the state to fully utilize e-contracts and to
electronically send (email) the required contract and notice of
rescission documents to the customer, without requiring that
wasteful paper copies also be generated and left behind. Of
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course, electronic contracting is voluntary, and consumers must
first consent."
With respect to electronic contracting, concerns can arise both
with the potential burdens that would be placed on consumers who
do not have the same access to computers, printers, and the
internet, as others might have, and as to the authenticity of
the signature or the awareness of the consumer that he or she is
entering into a binding contract of specified terms. This bill
arguably addresses some of those concerns by seeking to ensure
that electronic contracting only be utilized where the customer
has consented to it. Under the UETA, whether the parties agree
to conduct a transaction by electronic means is determined from
the context and surrounding circumstances, including the
parties' conduct. Further, the UETA expressly prohibits an
agreement to conduct a transaction by electronic means from
being contained in a standard form contract that is not an
electronic record, except for a separate and optional agreement
the primary purpose of which is to authorize a transaction to be
conducted by electronic means. Additionally, under the terms of
the UETA, an agreement in such a standard form contract cannot
be conditioned upon an agreement to conduct transactions by
electronic means, nor can an agreement to conduct a transaction
by electronic means be inferred solely from the fact that a
party has used electronic means to pay an account or register a
purchase or warranty. (Civ. Code Sec. 1633.5(b).)
Significantly, just because a party agrees to conduct a
transaction by electronic means, does not mean that party cannot
refuse to conduct other transactions by electronic means. If a
person sells goods or services by both electronic and
nonelectronic means and a buyer purchases the goods or services
electronically, the buyer may refuse to conduct further
transactions regarding the goods or services by electronic
means. (See Civ. Code Sec. 1633.5(c).)
With respect to potential concerns about the authenticity of a
consumer's signature, or unauthorized or forged signatures,
under the terms of the UETA, an electronic record or signature
is attributable to a person only if it was that person's act,
which can be proved by a showing of the efficacy of the security
procedure applied to determine the person to which the
electronic record or signature was attributable. Additionally,
the effect of a record or signature under the UETA must be
determined from the context and surrounding circumstances at the
time of its creation, execution, or adoption, including the
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parties' agreement, if any. (See Civ. Code Sec. 1633.9.) As a
practical matter, as reflected in this Committee's analysis of
the UETA's enabling legislation, SB 820 (Sher, Ch. 428, Stats.
1999), one example of the application of the UETA's attribution
provision is a click-through transaction. "In the case where a
click-through transaction includes a process and identification,
the click-through would be an electronic signature covered by
this Act. In the context of an anonymous click-through, this
section would be relevant to establish that the resulting
electronic record (no electronic signature could be used because
there was no identification) would be attributable to a
particular person upon the requisite proof, including the
security procedures which may track the source of the
click-through." (Sen. Judiciary Com. analysis of AB 820
(1998-1999 Reg. Session) May 11, 1999, p. 8.)
In addition to the above discussed provisions, all of the UETA
provisions, including those specifying the legal effect of the
electronic signature or record would apply to an electronic
contract created pursuant to activities authorized under the
Alarm Company Act between a consumer and a registered, licensed,
or certified individual. These also include the UETA's
provisions that prohibit an electronic record from substituting
for a writing under a separate law that requires a notice of the
right to cancel be provided or sent (Section 1689.7 of the Civil
Code, in this instance), unless, in addition to satisfying the
requirements of that other law and the UETA, the notice of
cancellation may be returned by electronic means. (See Civ.
Code Sec. 1633.16.) Thus, this bill could arguably simplify and
improve the ability of consumers who have access to a computer
and to the internet, to swiftly exercise their right of
cancellation in the event they regret signing the contract
during the statutory cooling-off period, as long as the notice
of cancellation may be returned by electronic means and the
other requirements of the Civil Code provisions governing
cancellation of home solicitation contracts are met.
3. Notice of cancellation requirements
As noted in the Background, California law has long governed
"home solicitation" contracts with the intent to protect
consumers against the types of pressures that typically can
arise when a salesman appears at a buyer's home. These laws,
for example, specify the right of a buyer to cancel a home
solicitation contract (such as a contract for activities
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authorized under the Alarm Company Act) at any time within a
statutory cooling-off period by returning a written notice of
cancellation to the seller. (Civ. Code Sec. 1689.6.)
Furthermore, existing law requires that the buyer's agreement or
offer to purchase be written in the same language as principally
used in the oral sales presentation, dated and signed by the
buyer, and set forth certain disclosures. Additionally, the
agreement or offer for purchase must be accompanied by a written
notice of cancellation which a buyer can return to the seller to
cancel the contract, as specified. (Civ. Code Sec. 1689.7.)
This bill would now allow the required notice of cancellation
and copies of the contract or offer to be provided and
transmitted electronically and would further allow the
signatures, disclosures, and documents required under existing
law to be provided and transmitted electronically.
As a matter of public policy, it is important that this bill
does not inadvertently undermine the protections of California
laws on home solicitation contracts simply in order to codify a
rising business practice that can lower the cost of contracting.
To that end, staff notes that even though the bill would
authorize the notice of cancellation to be given electronically,
the bill still requires that the underlying substantive
requirements of the existing home solicitation contract
provisions continue to apply. Specifically, the bill provides
both that "a notice of cancellation and copies of the contract
or offer described in those provisions" and "the signatures,
disclosures, and documents described in those provisions" can be
provided and transmitted electronically. Accordingly, the
existing requirements described in those provisions that would
apply to written home solicitation contracts, such as the
requirement that the agreement or offer be in the language
principally used in the oral presentation, disclosure
requirements relating to the buyer's right of cancellation, and
the requirement for that the buyer be provided a detachable
notice of cancellation, would continue to apply to their
electronic counterparts.
Support : California Alarm Association; California Cable &
Telecommunications Association
Opposition : None Known
HISTORY
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Source : ADT Alarm Services
Related Pending Legislation : AB 1131 (Dababneh, 2015), would
amend the UETA to authorize additional persons to send life
insurance records by electronic transmission by providing that
an insurer, agent, broker, or any other person licensed by the
Department of Insurance may send electronic records. The bill
would also allow these licensees to send any written record by
electronic transmission if not specifically excluded and if the
licensee meets specified requirements. This bill is currently
awaiting hearing in the Senate Insurance Committee.
Prior Legislation :
SB 536 (Berryhill, 2014), was substantially similar to this
bill, but would have also excluded contracts for services or
other activities authorized by the Alarm Company Act from the
definition of a home solicitation contract. That bill died in
the Assembly Rules Committee.
AB 2747 (Committee on Judiciary, Ch.913, Stats. 2014), the
Assembly Judiciary Committee's omnibus bill, among other things,
deleted the UETA's prohibition against electronic transmissions
of security for a rental agreement for residential property, and
thereby effectively authorized electronic transfers of rental
security deposits.
Prior Vote :
Senate Business, Professions and Economic Development Committee
(Ayes 9, Noes 0)
Assembly Floor (Ayes 78, Noes 0)
Assembly Business and Professions Committee (Ayes 14, Noes 0)
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