The Use of Electronic Notes in Ohio

In 2000, Ohio enacted the Ohio Uniform Electronic Transaction Act (UETA) which was codified by Ohio Revised Code Chapter 1306. Pursuant to the act, Ohio recognized the use and enforceability of electronic documents and contracts. 

According to ORC 1306.15, a person having control of a transferable record is the holder of the transferable record and has the same rights and defenses as a holder of an equivalent record or writing under the uniform commercial code.  Delivery, possession and indorsement are not required to obtain or exercise any of these rights.  The person seeking enforcement of the transferable recorded must provide reasonable proof that they are in control of the record, if requested.  Proof may include access to the authoritative copy and related business records.

Additionally, control of the transferable record is met if the following requirements are fulfilled:

• A single authoritative copy of the record exists that is unique, identifiable, and unalterable
• The authoritative copy identifies the person asserting control as either:
  • The person to which the record was issued; or
  • The person that the record was most recently transferred
• The authoritative copy is communicated  to and maintained by the person asserting control or its designated custodian
• Copies or revisions that add or change the assignee can only be made with the consent of the person asserting control
• Copies must readily be identifiable as copies
• Any revision of the authoritative copy is readily identifiable as authorized or unauthorized

It is now over thirteen years since UETA was enacted in Ohio and transferable records or e-Notes are still vastly underused.  As outlined above, the enforceability requirements for e-Notes are virtually identical for those of physical, paper Notes.  However, old habits are hard to break.   It is natural for individuals to feel a little better with a tangible, physical Note in their hands.  It is a little scary to think that an original contract only exists in digital form.

Despite these concerns, the world is becoming more and more digital and traditional, paper contracts may soon become a thing of the past.  There are certainly major advantages to begin using e-Notes sooner rather than later. 

The first is cost reduction.  With e-Notes, there is minimal need to print, scan, deliver, store or dispose of the contract.  Delivery and storage are the two largest cost reducing factors.  The e-Note can easily be sent as an email attachment as opposed to the costs of mailing or sending the contract overnight.  Storage costs are also minimal as filing cabinets and fireproofed rooms are no longer needed.  Most businesses already utilize off-site media storage for account information, etc.  The cost is minimal to increase the amount of data storage to include e-Notes.

Another major advantage to e-Notes is the fact that the integrity of the original documents is actually safer.  This may seem hard to believe, but think about the fact that physical documents are subject to degradation over time and are especially susceptible to fire and water damage.  An e-Note is not subject to any of these factors.  The contract can be viewed or printed in the same condition one year from now or one hundred years from now.  Also, digital data is routinely backed-up in the event of computer virus, etc. and is likely safer than physical data.  Additionally, an e-Note cannot be altered as easily as a physical document.  Physical documents can be erased or written over, while e-Notes cannot.