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 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
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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, 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
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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, 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.)
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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 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 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
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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 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
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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
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,
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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 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
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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 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 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
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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 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
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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
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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