ECOMMERCE LAW

Ecommerce
INTRODUCTION
Clinton 1997 in the Presidential Directive on Electronic
Commerce:
The invention of the steam engine two centuries ago and
the subsequent harnessing of electricity for
communications ushered in an industrial revolution that
fundamentally altered the way we work, brought the
world's people closer together in time and space, changed
the way we organize our economies, and brought us
greater prosperity.
Today, we are on the verge of another revolution.
Inventions like the integrated circuit, the computer, fiber
optic cable, and the Internet are changing the way we
work, learn, and communicate with each other.
INTRODUCTION
 As the Internet empowers citizens and democratizes societies, it is
also changing the way business is conducted: entrepreneurs are
able to start new businesses more easily by accessing the
Internet's worldwide network of customers; world trade involving
computer software, entertainment products, information services,
professional consulting, financial services, education businesses,
medical diagnostics, advertising, and technical services is
increasing rapidly as the Internet dramatically lowers costs and
facilitates new types of commercial transactions.
 According to several estimates, commerce on the Internet will
total tens of billions of dollars by the turn of the century and
could expand rapidly after that, helping fuel economic growth
well into the 21st century.
INTRODUCTION
Prediction more than fulfilled in the ensuing years
With greater mobility, also greater dangers
Integration of world economies
The present world economic crisis
Focus of this talk: ecommerce law
Perceived legal uncertainties
UNCITRAL harmonisation efforts
UNCITRAL Model Law
UN Convention for Electronic Communications in
International Contracts (UNECE)
 Practical Example

Consumer Webtrader
Serbia South Africa

Server
India
Visa South
VISA Serbia
Africa
Types of ecommerce
Electronic Data Interchange (EDI)
Earliest forms of electronic trade 80’s and 90’s
Business to business
Closed communities
Recurring transactions
Just-in time manufacturing and distribution
UNECE WP 4
 Standardisation
 Standard Interchange agreement
Most legal issues resolved by the IA
Remains an important part of ecommerce
Types of ecommerce
Internet Ecommerce
Has overtaken EDI
Business to business
Business to consumers
Individual transactions
Exchanges of emails
Combinations with emails and other forms of
communications
Website trading
 Website inviting email enquiries/offers
 Automated trading sites such as Amazon.com
 Internet banking
Legal Issues Arising
 Unease with businesspeople about the legality and
effectiveness of ecommerce transactions
 Guide to Enactment of the Model Law, UNCITRAL:
The use of modern means of communication such as
electronic mail and electronic data interchange (EDI) for
the conduct of international trade transactions has been
increasing rapidly and is expected to develop further as
technical supports such as information highways and the
INTERNET become more widely accessible. However, the
communication of legally significant information in the
form of paperless messages may be hindered by legal
obstacles to the use of such messages, or by uncertainty as
to their legal effect or validity.
Legal Issues Arising
Validity of the agreement
Offer and acceptance
Does the advertisement for goods or services on a
website constitute and offer that is open to acceptance by
the world at large or is it merely an invitation to do
business, especially if the buyer can negotiate a deal by
simply interacting with the website?
Automated contracts and agency
Is it possible to conclude a binding contract where either
or both parties use an 'electronic agent
Legal Issues Arising
Time and place of contracting
When and where does the contract come into existence?
Formalities
Writing
Signature
Third party authentication
Incorporation of standard terms
How do webtraders make sure that their standard terms
and conditions will form part of the agreement
Legal Issues Arising
 Jurisdiction
Where the transaction transcends international boundaries,
which courts will have jurisdiction over any dispute
 The courts where seller is situated?
 The courts where buyer is situated?
 Courts where server is situated in the case of automated transactions?
 Applicable law
Which legal system will apply to any dispute?
Rules of private international law
 Evidential questions
Admissibility
Originality
Storage
UNCITRAL Model Law
Response to these legal questions and uncertainties
National initiatives
Regional initiatives: European Directive on Electronic
Commerce (2000/31/ec)
UN Commission for International Trade Law
Model Law on Electronic Commerce (1996)
 Suggested text for adoption
 Flexibility – adaptation to national law
Model Law on Electronic Signature (2001)
UN Convention on Electronic Communications in
International Contracts (2005)
UNCITRAL Model Law
Legislation implementing the model law
Australia (1999), Brunei Darussalam (2000), China (2004),
Colombia* (1999), Dominican Republic* (2002), Ecuador*
(2002), France (2000), Guatemala (2008), India* (2000),
Ireland (2000), Jordan (2001), Mauritius (2000), Mexico
(2000), New Zealand (2002), Pakistan (2002), Panama* (2001),
Philippines (2000), Republic of Korea (1999), Singapore
(1998), Slovenia (2000), South Africa* (2002), Sri Lanka
(2006), Thailand (2002), United Arab Emirates (2006),
Venezuela (2001) and Viet Nam (2005)
Certain territories of the UK
48 States of the United States of America
Some Canadian Provinces
UNCITRAL Model Law e-
signatures
Legislation based on ML on e-signatures
China (2004), Guatemala (2008), Mexico (2003),
Thailand (2001), United Arab Emirates (2006), Viet Nam
(2005),Costa Rica (2005)
 Specific Issues
Solutions provided by the ML
Basic principles
Removal of legal uncertainty
Technological neutrality and Functional Equivalence
Different practical solutions to obtain the same legal results
Electronic transactions should not legally be treated differently
from transactions using traditional methods of communication
Enabling legislation – ensuring validity and legal certainty
Removal of obstacles, whether real or perceived
Special solutions needed for situations that do not occur
with traditional modes of communication – automated
transactions
Freedom of contract
Legal validity of electronic messages
Article 2: Definitions
(a)"Data message" means information generated,
sent, received or stored by electronic, optical or
similar means including, but not limited to, electronic
data interchange (EDI), electronic mail, telegram,
telex or telecopy
(f) "Information system" means a system for
generating, sending, receiving, storing or otherwise
processing data messages.
Legal validity of electronic messages
Principle of freedom of contract or party autonomy
In most legal systems parties have a great deal of
freedom to structure their contractual relationships
according to their own needs and without outside
interference

Article 4. Variation by agreement

(1) As between parties involved in generating, sending,
receiving, storing or otherwise processing data
messages, and except as otherwise provided, the
provisions of chapter III may be varied by agreement.
Legal validity of electronic messages
Article 5. Legal recognition of data messages
Information shall not be denied legal effect, validity
or enforceability solely on the grounds that it is in
the form of a data message.
Most legal systems require no specific form for the
validity of communications or conclusion of contracts
Oral contracts
Formalities requirements the exception
Commercial agreements:
 Russian Federation
 USA Statute of Frauds – Contracts over $500 in value
Contract formation and validity
 In most legal systems the formation of contract is analysed
into a construction of offer and acceptance
 Consensus between the parties reached where the offer and
acceptance mirror each other

Article 11. Formation and validity of contracts

(1) In the context of contract formation, unless otherwise
agreed by the parties, an offer and the acceptance of an
offer may be expressed by means of data messages.
Where a data message is used in the formation of a
contract, that contract shall not be denied validity or
enforceability on the sole ground that a data message
was used for that purpose.
Webtrader’s site: Offer?
Issue not resolved in the UN Model Law – local law
to determine
No provision in SA ECT Act, because common law
provisions adequate
Offerings on website not to be regarded as an offer, but
simply an invitation to do business.
Response by customer to the website to be considered an
offer which can be accepted or rejected
Approach followed in most legal systems, but there are
exceptions – Turkish law
Webtrader’s site: Offer?
UN ECE Approach
Article 11 Invitations to make offers
A proposal to conclude a contract made through one or
more electronic communications which is not
addressed to one or more specific parties, but is
generally accessible to parties making use of
information systems, including proposals that make
use of interactive applications for the placement of
orders through such information systems, is to be
considered as an invitation to make offers, unless it
clearly indicates the intention of the party making the
proposal to be bound in case of acceptance.
Webtrader’s site: Certainty
Practical problems in the past:
UK example: correct special offer; website overrun with
orders
Hong Kong example: automated website; incorrect pricing;
certain unscrupulous buyers placing huge orders
Webtrader can determine the conditions on which
contracts be concluded on the website
Standard term stipulating website constitutes only an
invitation to do business; contract only concluded when
order acknowledged and payment confirmed
Escape clauses providing for:
 Insufficient stock
 Mistakes on the website
Contract formation and validity
Article 12. Recognition by parties of data messages
(1) As between the originator and the addressee of a
data message, a declaration of will or other
statement shall not be denied legal effect, validity or
enforceability solely on the grounds that it is in the
form of a data message.

Reiterates the principle stated in Article 5

Contract formation and validity
Attribution of messages
Article 13. Attribution of data messages
(1) A data message is that of the originator if it was sent by the
originator itself.
(2) As between the originator and the addressee, a data
message is deemed to be that of the originator if it was sent:
(a) by a person who had the authority to act on behalf of the
originator in respect of that data message; or
(b) by an information system programmed by, or on behalf
of, the originator to operate automatically, unless it is
proved that the that the information system did not
properly execute such programming.
Time and place of contract
Importance of establishing time and place
Formal validity at the place of conclusion
Factor in determining applicable legal system –
substantive validity
Factor in determining jurisdiction
Directly applicable legislation such as consumer
protection legislation
Liability for payment of interest
Determination of time limits for
 Termination of time for acceptance, options or resolutive
conditions
 Withdrawal of offers
 Performance
Time and place of contract
Different theoretical and practical approaches to determine
where and when a contract comes into existence:
General rule and direct forms of communication
Information theory: when and where the offeror receives notice
of the acceptance and takes actual notice of that fact
Exception used in cases of indirect means of communication
Reception theory: when and where the offeror receives notice of
the acceptance, but no need for subjective knowledge
Despatch or postal theory: when and where the offeree
despatches the acceptance
 Practical Example: Time and Place

Consumer Webtrader
Serbia South Africa

Server
India
Visa South
VISA Serbia
Africa
Time
Article 15. Time and place of dispatch and receipt of data messages
(1) Unless otherwise agreed between the originator and the addressee, the
dispatch of a data message occurs when it enters an information system
outside the control of the originator or of the person who sent the data
message on behalf of the originator.
(2) Unless otherwise agreed between the originator and the addressee, the time of
receipt of a data message is determined as follows:
(a) if the addressee has designated an information system for the purpose of
receiving data messages, receipt occurs:
(i) at the time when the data message enters the designated information system;
or
(ii) if the data message is sent to an information system of the addressee that is
not the designated information system, at the time when the data message is
retrieved by the addressee;
(b) if the addressee has not designated an information system, receipt occurs
when the data message enters an information system of the addressee.
(3) Paragraph (2) applies notwithstanding that the place where the information
system is located may be different from the place where the data message is
deemed to be received under paragraph (4).
Place
Article 15. Time and place of dispatch and receipt of data
messages
(4) Unless otherwise agreed between the originator and the
addressee, a data message is deemed to be dispatched at the
place where the originator has its place of business, and is
deemed to be received at the place where the addressee has its
place of business. For the purposes of this paragraph:
(a) if the originator or the addressee has more than one place of
business, the place of business is that which has the closest
relationship to the underlying transaction or, where there is
no underlying transaction, the principal place of business;
(b) if the originator or the addressee does not have a place of
business, reference is to be made to its habitual residence.
Conclusion of the contract
South African Electronic Communications and
Transactions Act 5 of 2002
22 Formation and validity of agreements
(1) An agreement is not without legal force and effect
merely because it was concluded partly or in whole by
means of data messages.
(2) An agreement concluded between parties by means
of data messages is concluded at the time when and
place where the acceptance of the offer was
received by the offeror.
Formalities
Need for formalities: Writing
Legal certainty
Parol evidence rule in common law countries
Objective evidence
Consumer protection
Need for formalities: Signature
Attribution
Identification
Authentication
Consent
Attestation
Formalities: Writing
Article 6. Writing
(1) Where the law requires information to be in writing,
that requirement is met by a data message if the
information contained therein is accessible so as to be
usable for subsequent reference.
(2) Paragraph (1) applies whether the requirement
therein is in the form of an obligation or whether the
law simply provides consequences for the
information not being in writing.
(3) The provisions of this article do not apply to the
following: [...].
Formalities: Signature
Article 7. Signature
(1) Where the law requires a signature of a person, that
requirement is met in relation to a data message if:
(a) a method is used to identify that person and to indicate that
person's approval of the information contained in the data
message; and
(b) that method is as reliable as was appropriate for the
purpose for which the data message was generated or
communicated, in the light of all the circumstances, including
any relevant agreement.
(2) Paragraph (1) applies whether the requirement therein is in the
form of an obligation or whether the law simply provides
consequences for the absence of a signature.
(3) The provisions of this article do not apply to the following:
[...].
Formalities: Signature ECT Act
SA ECT Act: 13 Signature
(1) Where the signature of a person is required by law and such law does not
specify the type of signature, that requirement in relation to a data message is
met only if an advanced electronic signature is used.
(2) Subject to subsection (1), an electronic signature is not without legal force and
effect merely on the grounds that it is in electronic form.
(3) Where an electronic signature is required by the parties to an electronic
transaction and the parties have not agreed on the type of electronic signature
to be used, that requirement is met in relation to a data message if-
(a) a method is used to identify the person and to indicate the person's
approval of the information communicated; and
(b) having regard to all the relevant circumstances at the time the method
was used, the method was as reliable as was appropriate for the purposes for
which the information was communicated.
(4) Where an advanced electronic signature has been used, such signature is
regarded as being a valid electronic signature and to have been applied
properly, unless the contrary is proved.
Formalities: Third party attestation
SA ECT Act
18 Notarisation, acknowledgement and certification
(1) Where a law requires a signature, statement or document
to be notarised, acknowledged, verified or made under
oath, that requirement is met if the advanced electronic
signature of the person authorised to perform those acts
is attached to, incorporated in or logically associated with
the electronic signature or data message.
(2) Where a law requires or permits a person to provide a
certified copy of a document and the document exists in
electronic form, that requirement is met if the person
provides a print-out certified to be a true reproduction
of the document or information.
Other formal requirements
19 Other requirements
...
(3) Where a seal is required by law to be affixed to a document
and such law does not prescribe the method or form by which
such document may be sealed by electronic means, that
requirement is met if the document indicates that it is required
to be under seal and it includes the advanced electronic
signature of the person by whom it is required to be sealed.
(4) Where any law requires or permits a person to send a
document or information by registered or certified post or
similar service, that requirement is met if an electronic copy
of the document or information is sent to the South African
Post Office Limited, is registered by the said Post Office and
sent by that Post Office to the electronic address provided by
the sender.
Automated contracts: Formation
Theoretical problems caused by automated contracts
and electronic agents
Construing consent
Offer and acceptance
Meeting of minds where there is no human intervention?
Reliance and similar doctrines
Reasonable inference to be drawn from the statement
made by the other party
Website constitutes “a statement”
Abandonment of right to receive notice of acceptance
Estoppel or similar doctrines
Automated Contracts: Mistake
Mistakes can occur in two ways:
Hong Kong example: mistake on the website
 Obvious mistake (Hong Kong example) – goods usually priced
$1,000 shown as $10.00
 Non-obvious mistake – goods priced at $219 whereas it should
have been $291
Mistaken response by the customer
 Placing order twice because the website was slow
 Hitting the wrong key – placing order for 100 items instead of 10
No solution for this problem in the UNCITRAL Model
Law
 American and South African solutions
Automated Contracts: Mistake
SA ECT Act
20 Automated transactions
In an automated transaction-
(a) an agreement may be formed where an electronic agent
performs an action required by law for agreement formation;
(b) an agreement may be formed where all parties to a
transaction or either one of them uses an electronic agent;
(c) a party using an electronic agent to form an
agreement is, subject to paragraph (d), presumed to be
bound by the terms of that agreement irrespective of
whether that person reviewed the actions of the electronic
agent or the terms of the agreement;
Automated Transactions
20Automated transactions (SA ECT Act)
(d) A party interacting with an electronic agent to form an agreement is
not bound by the terms of the agreement unless those terms were
capable of being reviewed by a natural person representing that party
prior to agreement formation.
(e) no agreement is formed where a natural person interacts directly
with the electronic agent of another person and has made a material
error during the creation of a data message and-
(i) the electronic agent did not provide that person with an
opportunity to prevent or correct the error;
(ii) that person notifies the other person of the error as soon as
practicable after that person has learned of it;
(iii) that person takes reasonable steps, including steps that
conform to the other person's instructions to return any performance
received, or, if instructed to do so, to destroy that performance; and
(iv) that person has not used or received any material benefit
or value from any performance received from the other person.
Automated Transactions UNECE
Article 14 Error in electronic communications
1. Where a natural person makes an input error in an electronic
communication exchanged with the automated message system
of another party and the automated message system does not
provide the person with an opportunity to correct the error,
that person, or the party on whose behalf that person was acting,
has the right to withdraw the portion of the electronic
communication in which the input error was made if:
(a) The person, or the party on whose behalf that person was acting,
notifies the other party of the error as soon as possible after
having learned of the error and indicates that he or she made an
error in the electronic communication; and
(b) The person, or the party on whose behalf that person was
acting, has not used or received any material benefit or value
from the goods or services, if any, received from the other party.
Automated Agents: Practical steps
Webtrader can take the following steps to protect itself
from consequences of mistake when making use of
automated systems:
Ensure that customer assents to standard conditions
Standard conditions to make provision for mistakes on
the website
Providing a summary of the transaction to the
customer after the customer has placed its order,
requiring confirmation that the order is correct
Examples: airline tickets; amazon.com; banking
transactions
Incorporation of standard terms
Use of standard terms in trade generally
Restrictions in many countries – validity will depend on
the applicable legal system
Incorporation by reference – “clickwrap”

ML Article 5 bis. Incorporation by reference

Information shall not be denied legal effect, validity or
enforceability solely on the grounds that it is not contained
in the data message purporting to give rise to such legal
effect, but is merely referred to in that data message.
Incorporation of standard terms
SA ECT Act
11 Legal recognition of data messages
(3) Information incorporated into an agreement and that is not
in the public domain is regarded as having been
incorporated into a data message if such information is-
(a) referred to in a way in which a reasonable person
would have noticed the reference thereto and
incorporation thereof; and
(b) accessible in a form in which it may be read, stored
and retrieved by the other party, whether electronically or
as a computer printout as long as such information is
reasonably capable of being reduced to electronic form by
the party incorporating it.
Applicable legal system
Determined by the rules of private international law of
the legal system where the litigation is taking place
Serbian court will apply Serbian PIL rules
Most systems recognises party autonomy – the parties
can determine which legal system will apply by
agreement
Practically, the webtrader can determine this in its
standard terms of agreement.
Restrictions imposed by national legislation, directly
applicable legislation and consumer protection
legislation
Jurisdiction
In 1995 the Attorney-General of Minnesota stated that:
“Persons outside of Minnesota who transmit
information via the internet knowing that the
information will be disseminated in Minnesota will be
subject to the jurisdiction of Minnesota Courts for the
violations of state, criminal and civil law”
Jurisdiction
Jurisdiction is the power of a court to adjudicate upon,
determine and dispose of matter invested in it by law
The law that determines jurisdiction is the domestic
national law of the court or courts where proceedings
may potentially be initiated.
Plaintiff/Claimant’s choice
Traditional grounds of jurisdiction:
Submission – prior agreement or at the time of litigation
Residence and the defendant/respondent
Where the cause of action arose
Jurisdiction
Extended grounds of jurisdiction
Attachment of goods
Presence in the court’s area of jurisdiction
Ownership of land
European the Consumer Contracts Regulation of 1999
Contracts with consumers in its area of jurisdiction
Jurisdiction
American extensions:
Minimum contacts: Cacioppo v Pool Mart Services, Inc
A.2d, 2007 WL 2162427
The threshold requirement for specific jurisdiction is the
concept of “minimum contacts” where “there some act
by which the defendant purposefully avails of the
privilege of conducting activities within the forum state,
thus invoking the benefits and protections of its laws
Jurisdiction
Active website extension - Maritz, Inc. v Cybergold,
Inc. 947 F Supp. 1328; ED Mo. 1996
Through its website, CyberGold has consciously
decided to transmit advertising information to all
internet users, knowing that such information will be
transmitted globally. Thus, CyberGold’s contacts are
of such a quality and nature, albeit a very new quality
and nature for personal jurisdiction jurisprudence,
that they favor the exercise of personal jurisdiction
over defendant.
International Contracts
Vienna Convention for the International Sale of Goods 1980
(CISG)
Article 13
For the purposes of this Convention “writing” includes telegram
and telex.
UNECE
Article 9. Form requirements
2. Where the law requires that a communication or a contract
should be in writing, or provides consequences for the absence
of a writing, that requirement is met by an electronic
communication if the information contained therein is
accessible so as to be usable for subsequent reference.
Harmonisation: UNECE
Objects of the Convention
 Noting that the increased use of electronic communications
improves the efficiency of commercial activities, enhances trade
connections and allows new access opportunities for previously
remote parties and markets, thus playing a fundamental role in
promoting trade and economic development, both domestically
and internationally,
 Considering that problems created by uncertainty as to the legal
value of the use of electronic communications in international
contracts constitute an obstacle to international trade,
 Convinced that the adoption of uniform rules to remove obstacles
to the use of electronic communications in international contracts,
including obstacles that might result from the operation of
existing international trade law instruments, would enhance legal
certainty and commercial predictability for international contracts
and help States gain access to modern trade routes,
Conclusion
Harmonisation to be welcomed
Acceptance of the Model Law by a significant number
of countries
Future of the UNECE uncertain as yet – important to
get harmonised approach to electronic
communications in a number of international
conventions