ibt - e-commerce contracts issues victor h. bouganim wcl, american university

IBT - E-Commerce IBT - E-Commerce Contracts IssuesContracts Issues

Victor H. Bouganim

WCL, American University

© 2001 Victor H. Bouganim, WCL, American University IBT - Intro - 2

E-Commerce LawsE-Commerce Laws

UNCITRAL – United Nations Commission on International Trade Model Law on Electronic Commerce 1996

UETA – Uniform Electronic Transactions Act 1999

UCITA – Uniform Computer Information Transactions Act 1999


UNCITRALUNCITRAL

Model law has no authority until individual countries adopt it through legislation– e.g. EU Directives on E-Commerce

Minimalist approach towards providing clarity to electronic contracts

Generally provides that contracts may be made and signed in the electronic context and that electronic transmissions may satisfy signature requirements


UNCITRAL - ContractsUNCITRAL - ContractsArticle 11Article 11

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.


UETAUETA Uniform code, which is recommended for

adoption in all states. Minimalist approach to legislating the

conditions for electronic contracts based on existing contract law

Provides a general framework for further state law on electronic transactions

Clearly validates electronic signature and contracts formed by electronic agents


UETA- Legislative HistoryUETA- Legislative History

Approved by the National Conference of Commissioners on Uniform State Laws (NCCUSL) in July 1999.

Adopted by most states (at least 20 states) as of February 2000 including MD and VA.

Pending bills in other states. Slow process of adoption by each state

See: UetaOnline.Com


UCITAUCITA Approved by the NCCUSL in July 1999. Began as a proposed “Article 2B” of the UCC on

licensing Essential purpose is to identify the terms and

conditions for making contracts in the electronic environment.

Principal application is to computer software and information products– Currently adopted in some states, while others

introduced bills. See: UcitaOnline.Com


UETA & UCITA UETA & UCITA Approved IssuesApproved Issues

equivalency of electronic records and writings validity of electronic signatures contracts can be formed by electronic agents contracts can be formed by interaction of an

electronic agent and a human being a person is attributed with an electronic act if the

other person can prove that the act was the result of the person or its agent


Can Computers Make Contracts?Can Computers Make Contracts?

Artificial Intelligence (“AI”) and autonomy of computer software

The Computer as a Legal Person

The Computer as a mere machine

UETA & UCITA clarify the legal status of Electronic Agents


Electronic AgentElectronic Agent“Electronic agent” means a computer

program, or electronic or other automated means, used by a person to initiate an action, or to respond to electronic messages or performances, on the person’s behalf without review or action by an individual at the time of the action, or response to a message or performance.

UCITA, Sec. 102; EUTA, Sec. 2(6)


Automated TransactionAutomated Transaction "Automated transaction" means a transaction

conducted or performed, in whole or in part, by electronic means or electronic records, in which the acts or records of one or both parties are not reviewed by an individual in the ordinary course in forming a contract, performing under an existing contract, or fulfilling an obligation required by the transaction.

EUTA, Sec. 2(2)


Assent & Opportunity to Review In UCITA, a "manifest assent" to a contract is -

– having had an opportunity to review the written terms,

essentially means having a chance to look at the contract before you assent to it.

– you act or fail to act,

– you have reason to know that the other party will infer from your conduct or lack of conduct that you agree to the contract.


Mass Market Licenses

A new concept of contracts under UCITA. A mass market license (MML) is a standard

form contract used for transactions with the general public in a retail setting where the information is generic and the customer can be anyone.

The term "MML" also includes all consumer contracts.


Validity of MLLValidity of MLL

An MML is effective only if -– the licensee manifests assent to it– after having an opportunity to review the terms of the

contract The terms of the license are limited by the

following rules: – Unconscionable terms are unenforceable– Terms that violate a fundamental public policy are

unenforceable.– Terms that conflict with the actual agreement

of the parties are unenforceable


Shrink-wrapShrink-wrap

Contract of Adhesion

The term "shrink-wrap" refers to a contract that you do not see until after you initially agree to acquire a product and receive it.

You might order a product over the phone or by mail: once it is delivered and you open the box, a contract might be contained in the box or in the start-up screen for the software.


Shrink-wrap LicenseShrink-wrap License

A mass market shrink-wrap license is unenforceable unless: – you had reason to know that more terms would be

coming– you are given a right to return the product if you don't

like the terms– your right of return is cost-free– you are reimbursed any reasonable costs of restoring

your system if it was altered when you tried to read the license terms.


ProCD v ZeindenbergProCD v Zeindenberg7th Cir., 19967th Cir., 1996

ProCD compiled information from over 3,000 telephone directories into a computer database and sells the database in a 5 CD-ROM set.

Zeidenberg purchases the ProCD database, accompanied by a shrinkwrap license, and makes the information available on the Internet for a price that is less than ProCD charges.

The court finds, under theories of contract law, that shrinkwrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general.


Class DiscussionClass Discussion

Should shrink-wrap licenses and MML contracts be valid?

What are the industry arguments for the enforceability of these licenses?

What are the consumers concerns regarding the validation of these licenses?

How to balance between the industry needs and protection of consumers?

Are there any other solutions?


What Terms Apply?What Terms Apply?

Conflicts of Laws: How do we define the effective terms of the contract? What law applies to the transaction?

Which court has jurisdiction to resolve a particular dispute?

Choice of Law / Choice of Forum– Parties to a contract can agree upon applicable

law and forum.


UCITA - Choice of LawUCITA - Choice of Law In Internet transactions - the state law of the

licensor's principal place of business. In consumer cases where a tangible product is

delivered - the law of the state where the product is to be delivered.– Often, this is the consumer's residence or the place where

the transaction physically occurred.

In all other cases, the law of the state with the most significant relationship to the transaction.


UCITA - Choice of ForumUCITA - Choice of Forum UCITA allows choice of an exclusive judicial

forum, but only if the choice is not "unreasonable and unjust."

Choice of Forum can be stated in a non-negotiable standard form contract.

Courts can invalidate abusive terms regarding choice of forum on the basis of fairness and reasonableness.

ibt - e-commerce contracts issues victor h. bouganim wcl, american university

Documents