Electronic contracts law – Term Paper

The Internet offers a remarkable opportunity for market penetration and is globally being used to do business in what is dubbed as e-commerce. Initially, the internet was meant to enable free and fast exchange of information. Over time, most businesses incorporated e-commerce into their businesses. Similar to other offline commerce, e-commerce has contractual obligations . With the current growing use of the internet commercially, so many contracts are being entered into through the electronic highway. The contracts can be between businesses (b2b business) or between consumers and businesses (b2c business) or between consumers and consumers (c2c business) . In domestic business operations, the consumer’s right is protected by a single body, particularly the national judicial system. The scenario is different when consumer purchase products from abroad since the contractual agreement is protected by more than one legal system. This paper aims to determine the applicable law that protects international commercial contracts and particularly the electronic contracts.

Electronic Contract

There is no comprehensive definition of electronic contract provided in legislation. However, the possibility of entering into a contract via “electronic means” is explicitly acknowledged by Article 9 of the Directive of European Parliament and of the Council regarding certain legal aspects of information society services, particularly electronic commerce, in the internal market” (Directive on electronic commerce). The same provision is available in the Directive of the European Parliament and Council on the protection of consumers with respect to distance contract (Distance selling Directive) that allows parties to form a contract “by means of one or more distance communication.” To this end, electronic contract can be defined as ‘an agreement between the service provider and the user, which is operated by electronic means on the internet’ Electronic contract are typical contracts of connection but are mostly one-sided, particularly in favor of the party presenting it . Consumers are faced with the scenario of ‘take-it or leave-it’ and ideally, the contract offers no room for negotiation. Usually, the consumer is only allowed access into the offered service or product after acceding to the agreement. Electronic contracts are universal and cover all individuals from those who want to buy products or services online or access some websites, to those who are seeking to acquire an account with an internet service provider (ISP) to enable internet access.  

Types of Electronic Contracts

Click-Wrap Contracts

Off-line contracts involves two parties who agree to the agreement’s terms and conditions and are usually characterized by their signatures. However, in on-line contracts only one party, particularly the surfer agrees to the agreement usually by clicking on the ‘I accept’ or ‘I agree’ icon.  In most paper contracts, there is thorough negotiations on the terms and conditions of the contract before signing into it but in electronic contract the consumer has no room for bargaining. The only option they have is to either click on the ‘I agree’ icon or be denied access into the website, service or product they sought. However, the nature of e-commerce partly makes it logistically impossible for the providers to effectively negotiate with the consumers. The clip-wrap contracts have numerous goals including allowing access into the webpages, allowing purchase of a service or product, enables software download, for contractual certainty and enumerate the terms of use of a website, as well as the privacy policy.  They also inflict limitations on how the downloaded material can be utilized and also in case of user infringement or violations, it would be easier to pursue them.  

Browse-Wrap Agreements

These are very different from ‘click-wrap’ agreements because the user does not actively consent. In a browse-wrap, the users accept the contract just by browsing or performing any other activity on the website and it is not as a result of the user reviewing the electronic contract. Typically, the browse-wrap agreements are in form of a link located at the bottom of a webpage where the terms and conditions of the contract are documented. There is no provision for the user to review the contract but rather the user accesses the page in order to proceed.

Email-based Contracts

In the recent years, courts have shown a judicial trend of formally acknowledging emails as a potential place where contracts are consummated.  Many scholars have considered email as an instantaneous form of communication and acceptance can be made through it.  Ideally, the contracts is immediately formed at the place it is received rather than where it is sent. For an email to constitute an immediate and binding agreement between the parties, the basic contractual requirements of an offer and acceptance must be met. It must also be evident to the courts that through the email exchanges, external conversations and surrounding circumstances, both parties intended to form and be bound by a contract.

Role of International Organizations in Electronic Contracting

UN Commission on International Trade Law (UNCITRAL)

UNCITRAL is a fundamental legal frame of the United Nations Structure in the international trade realm. It aims at unifying and harmonizing the laws that administrate international trade. UNCITRAL commenced its legal work on e-commerce in 1992 with the objective of designing a legal framework that would be espoused by Member States and ensure harmonization of the legal codes that apply to e-commerce. UNCITRAL has fashioned a number of development in the electronic transaction field including promoting confidence in electronic commerce in 2009: legal issues on international use of electronic authentication and signature methods. There is also the United Nations Convention on the Use of Electronic Communications in International Contracts, 2005; UNCITRAL Model law on Electronic signature with Guide to Enactment, 2001 and UNCITRAL Model Law on Electronic Commerce, 1996 that was meant to promote utilization of electronic communication.

International Chamber of Commerce (ICC)

The Commission on Commercial Law and Practice (CLP) promotes a uniform regulatory and self-regulatory legal context for b2b transactions internationally, as well as facilitating international trade. The ICC has established various task forces including those on the applicable law and jurisdiction regarding e-commerce and e-contracting.

European Commission (EC)

The Council of the European Union, as well as the European Parliament have approved several directives aimed at impacting the electronic contracting process in the European Union. In 2000, the Electronic Commerce Directive was espoused, which establishes an Internal Market outline for electronic commerce to afford legal certainty for both consumers and businesses.  The Internal Market clause ensures proper operation of the Internal Market in e-commerce. Moreover, the Electronic Commerce Directive (2000/31/EC) establishes rules that enables the establishment of online services in the European Union and certifies that a certain criteria is maintained. This, because of the technological neutrality that it provides, it defined the basis of cross-border online services.