Model Law of E-Commerce

Introduction
In today’s world, a large number of international trade transactions are carried out by
electronic data interchange and other means of communication, commonly known as
“electronic commerce”. It uses alternatives to paper-based methods of communication and
storage of information. The United Nations Commission on International Trade Law
(UNCITRAL), by the means of Model Law on Electronic Commerce (MLEC), sought to provide
a set of internationally acceptable rules with an aim to remove legal obstacles and increase
legal predictability for e-commerce. It has further improved the efficiency in international
trade by providing equal treatment to paper based and electronic information, thus enabling
the use of paperless communication.

The model law is not a comprehensive, code-like articulation of the rules for the electronic
transactions. It does not intend to govern every aspect of electronic contracting. It adopts a
limited framework approach and enables and facilitates e-commerce. It has adopted the
following fundamental principles of the modern electronic-commerce law:

 The principle of non-discrimination – It ensures that any document would not be

denied legal validity, effect, and enforceability solely on the basis that it is in
electronic form. 
 The principle of technological neutrality – It mandates the adoption of such
provisions which are neutral with respect to technology used. This aims at
accommodating any future developments without any further legislative work.
 The functional equivalence principle – It sets out the specific requirements that e-
communication ought to meet in order to fulfill the same functions that certain
notions ,in traditional paper based system, seek to achieve, for example,
“writing”, “original”, “signed”, and “record”. 
All the states have given favourable consideration to the model law while enacting or
revising their laws so that uniformity of the law applicable to the alternatives to the paper-
based methods of communication is facilitated. This article deals with a brief history and key
provisions of the Model Law of E-commerce to better understand the objectives of MLEC and
how they are achieved. 

History
With the advent of globalization and rapid increase in digitization of work, a major change in
the mode and method of communication between businesses was witnessed. This was the
introduction of the electronic mode of communication and storage of information. UNCITRAL
decided to prepare the Model law in response to such change, thus, giving the nations an
internationally acceptable set of rules for the evaluation and modernization of their laws and
practices in the field of commercial relationships involving the use of computerized mode of
communication. It also helped in establishment of relevant legislation where none existed
and promotion of harmonization and unification of international trade laws. Thus, the
UNCITRAL Model Law of E-commerce was adopted by the United Nations Commission on
International Trade Law in 1996.

In 1984, at its seventeenth session, the Commission considered a report of the Secretary-
General which talked about the legal aspects of automated data processing. This report
identified a number of legal issues related to the legal value of computer records and the
requirement of written authentication, general conditions, liability, bills of lading, etc. A
report of the working party on the facilitation of the international trade procedures
suggested that the legal problems arising in this field were essentially those of international
trade law. Since the Commission was the core legal body in the field of international trade
law, it seemed appropriate for it to undertake necessary action. Thus, work on legal
implications of automatic data processing to flow of international trade began.

In 1985, a report by the Secretariat noted that the legal obstacles to the use of computers
in international trade arose out of the requirement that documents had to be signed or be in
paper form. Following this report, the Commission adopted a recommendation expressing to
review the legal requirements of written form of trade documents and transactions,
handwritten signature and authentication requirements, written form of the documents
being submitted to government, and the requirement of such provisions relating to written
form of documents as a condition for enforceability, etc. 

Yet, little progress was made in removal of provisions in national legislation requiring the
use of written documents and authentication. 

In 1988, the Commission proposed to examine the need to provide legal principles
applicable to formation of international commercial contracts by electronic means.

After consideration of the reports “Preliminary study of legal issues related to the formation
of contracts by electronic means” and “Electronic data interchange” and much deliberation,
it was concluded that problems existed due to following of local laws by different parties
which prevented uniformity in the legal perspective, functionality, as well as practices. Thus,
the process of preparation of the Model Law came into being. 

The UNCITRAL Model Laws for E-commerce

The Model Law has been divided into two parts. The Part I relates to the general provisions
relating to e-commerce, it legislates the three principles of non-discrimination, technological
neutrality, and functional equivalence. Besides establishing uniformity in the laws regarding
e-commerce and legal relevance for data communicated through electronic mode, MLEC
also establishes rules for formation and validity of e-contracts, for data message attribution,
for receipt acknowledgement and for determining receipt of data messages, etc. 

The Part II of the Model Law deals with specific provisions for e-commerce in certain areas.
Key Provisions

General Provisions
Article 2 of the Law provides six definitions, the most important one is of “Data message”. It
is defined as information generated, sent, received, or stored by electronic, optical, or
similar means.This definition has been attributed after taking into consideration the future
technological developments as well, which is the reason for inclusion of the term similar
means. This wide definition includes the notion of a record and even revocation and
amendment. The sphere of application that Article 1 talks about, is for the information in
the form of data messages, in the context of commercial activities. 

The Model Laws give the interpretational tools(Article 3) which call for a standard of
international origin and uniformity in application of general principles of law. There can be
variation in the communication of data messages by the agreement of the parties(Article 4).

Application of legal requirement to data messages

The principle of non-discrimination has been enforced by the means of Article 5 which
specifies that the information communicated via electronic mode, i.e., in the form of data
messages cannot be denied legal validity and effect. Information by the way of reference
has also been given legal validity(Article 5 bis) and thus, the application of this law has been
considerably widened. This is of utmost importance in the context of international law.

The nations required the documents to be in writing and validation was only given to the
hand written signature as a form of authentication. By the means of provisions in Articles 6
& 7, the Model has done away with both of the above obstacles. Accessibility of data
messages does not require the document to be in writing, and recognition of digital
signature marks the approval of the full structure of the contract. This provision is termed
relevant for every circumstance including a relevant agreement.

The notion of originality is defined in Article 8 which provides that data messages can fulfill
the legal requirement of presentation and retention of information in its original form
subject to the assurance of integrity and presentability of data messages. Presentability
meaning the ability to display the information where required. Article 9 specifies that the
data messages cannot be denied admissibility in the court of law solely on the basis that the
information is in the form of a data message. Thus, evidentiary value has been granted to
data messages. The requirement of retention of information is also met by retention of
information in the form of data messages subject to the accessibility, accuracy and
originality of format and identity of origin(Article 10). 

Communication of data messages

Offer and acceptance of offer, when communicated in the form of data messages, cannot be
denied legal validity and enforceability solely on the grounds that they are in the form
of data messages. Thus, the formation of a valid contract was made possible through the
means of data messages.(Article 11)

Acknowledgement in the form of receipt of data messages has also been granted legal
validity.(Article 12)

The data message is attributed to the originator if it is sent by him or by a person

authorised by him(Article 13).

Article 14 provides that the receipt of the data message and its acknowledgement can also
be agreed upon by the parties beforehand.

The transaction ensues when the information goes out of control of the sender. The place of
dispatch is the place of business and the time is when the acceptance enters the system of
the addressee(Article 15).

Specific provisions
Articles 16 & 17 talk about carriage of goods and transport documents. They enforce the
ability to achieve carriage of goods by the means of data messages and fulfillment of the
requirement of transport documents through the same as well. It is imperative for the
objective of furtherance of international trade. This part has been complemented by other
legislative texts such as the Rotterdam Rules and it may be the object of additional work of
UNCITRAL in the future.

Implementation & Judicial Interpretations across the globe

The Model Law of Electronic Commerce was adopted to facilitate the international trade
through electronic modes of communication. It aimed at encouraging national legislators to
adopt a set of internationally acceptable rules regulating e-commerce. Thus, Model Law is
accompanied with a guide which provides background and explanatory information to assist
the states in preparing the necessary legislative provisions. 

Different states enacted laws based on the principles of this Model Law. Thus, the courts
have interpreted the provisions of their domestic laws according to the Model Law. 

Khoury v. Tomlinson is a landmark case decided by the Texas Court of Appeal. The facts
of this case are such that an agreement was entered via e-mail which was not signed but
only the name of the originator appeared in the ‘from’ section. Referring to the principles in
Article 7 of the Model Law, the court found sufficient evidence that the name in the ‘from’
section establishes the identity of the sender. 

Chwee Kin Keong and others is a case dealt with by the Singapore High Court. There was
the issue of unilateral mistake in this case as the wrong price was quoted on the seller’s
website for a product. The server of the seller automatically sent a confirmation mail when
the buyers placed an order. All the elements of the contract were established but with a
mistake which eliminated consensus ad idem. Referring to the Singapore Electronic
Transactions Act based on Model Laws, the court found that human errors, system errors,
and transmission errors could vitiate a contract.

Martha Helena Pilonieta v Gabriel Humberto Pulido Casas is a case dealt with
by the Supreme Court of Justice of Columbia. The court found that the electronic message
by a spouse was not relevant on the ground of evidential thresholds.