final dissertation on electronic contracts

7/23/2019 Final Dissertation on Electronic Contracts

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THE ROBERT GORDON UNIVERSITY

ABERDEEN BUSINESS SCHOOL

DEPARTMENT OF LAW

Electronic Contracts: Are traditional rules of contracting

still applicable? A study of the EU, US, and InternationalLegislations

20

!y

E"ea#a Chidiebele $% &02'()

*issertation Super+isor: Eric gil+ie

Sub#itted in partial co#pletion of the re-uire#ent forthe a.ard of /asters degree in International

Infor#ation echnology La. &LL/)

Word Count: 18,007(Excluding References)


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Abstract

On a global level it is truism that trade and commerce has evolved as a tool for economic andsocial development of any existing human society. Currently, this has transcended the act of

physical transactions between parties into the electronic world of endless possibilities where

business transactions are preceded by legally binding contracts free from the hassle of

traditional paper contracts.

The internet and electronic contracting has changed the mode of business is transaction

around the world. Despite the huge success recorded from electronic contracting, certain

legal issues have emerged while applying the traditional principles of contract law to a

borderless and paperless electronic urisdiction. !eneral principles of contract law, such as

invitation to treat, consensus ad idem, offer and acceptance, urisdiction and form and validity

re"uirements have become ambiguous when applied to e#contracting.

This wor$ will identify the challenges faced while trying to apply the general rules of

contracts to e#contract agreements. %ost importantly, the wor$ see$s to determine if the

principles of e#contracting vary from one urisdiction to the other. &egislative efforts in

correcting the ambiguity raised by the advent of e#contracting will also be critically analy'ed

by this wor$. (inally, this wor$ will address the "uestion) to what extent can the traditional

and basic rules of contracting be applied to electronic contracting*

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Ackno!"#$"%"nts

(irst and foremost my appreciation goes to !od almighty for the gift of life.

To my supervisor +ric Ogilvie, than$s for your support and encouragement, you made me

believe in myself.

To my wonderful parents and siblings, love you all and than$s so much for your support and

love.

This appreciation goes to all the &ecturers and -taff of the berdeen /usiness -chool. 0ou

have created yet another 1rofessional. !od bless you all.

To %s. 2woyi wara, who did proof read my wor$, appreciate and !od bless you.

(inally to my colleagues and classmates especially Cynthia, lex, Chisa, Chris, and all

others, than$s for your $ind advice, really appreciate.

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LIST OF CASES

1.-.!./ vs. /oots Chemists 345678 4 ll +9 :;48 4 =/, 75:

1artridge vs !rittenden 345>;8 < ll +9, :


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%ining nd. &td. 3

1roCD vs. Iiedenberg ;> (.7d, 4::B, 3BthCircuit

455>8

/remen vs. Iapata Offshore co. :AB F.-. 4, 48 5:B, (. -upp, 47


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LIST OF STATUTES

UNITED STATES LEGISLATIONS

The (ourteenth mendment 3mendment J8 of the Fnited -tates Constitution

adopted on Guly 5, 4;>;.

Fnited -tates Fniform Commercial Code 3456


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Fnited 2ations Convention on the Fse of +lectronic Communications in nternational

Contracts, ;

Fnited 2ations Convention on the Fse of +lectronic Communications in nternational

Contracts


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Tab!" o& Cont"nts

1age number

bstract KKKKKKKKKKKKKKKKKKKKKKKKKK..KK.. ..ii

c$nowledgements KKKKKKKKKKKKKKKKKKKKK.KKK... iii

&ist of Cases KKKKKKKKKKKKKKKKKKKKKKKKKKK.... iv

&ist of -tatutes KKKKKKKKKKKKKKKKKK..KKKKKKKK... vi

Table of Contents KKKKKKKKKKKKKKKKKKKKKKKK..K. viii

ntroduction KKKKKKKKKKKKKKKKKKKKKKKKKKK.K. 4

ims and Obectives KKKKKKKKKKKKKKKKKKKKKKKKK 4

%ethodology and pproach KKKKKKKKKKKKKKKKKKKK.KK AA

4 ibid

1
http://www.pepperlaw.com/publications_article.aspx?Articlekey=600http://www.pepperlaw.com/publications_article.aspx?Articlekey=600


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This research will)

- dentify the maor legal challenges faced by both the courts and businesses while

attempting to apply the existing principles of contract law to electronic contracts

- Determine to what extent the existing legal principles of contract law apply to

electronic contracts

- dentify the legislative changes made in the Fnited -tates of merica, the +uropean

Fnion and the nternational Community to the existing principles of contract law in

order to accommodate e#contracting, and determine if entirely new laws were created

or existing laws were modified where lacunae existed to accommodate electronic

contracting

- Comprehensively analy'e and evaluate electronic commerce legislations in the Fnited

-tates of merica, the +uropean Fnion and the nternational Community.

To accomplish the above, it is necessary to examine the following)

- bac$ground of the general principles of contract law which lays a proper foundation

for further discussion.

- The rationale behind the creation of some existing principles in contract law

- The ephemeral nature of the internet vis#a#vis electronic contracts and how they have

created unforeseen legal problems

- 9elevant electronic contract legislations in the Fnited -tates, the +uropean Fnion and

the nternational Community

- The effect of these legislations on the existing legal principles of contract law and

their ease of applicability and enforceability

M"t'o#o!o$- an# A((roac'

This research will center on the process of electronic contracting and the obstacles

encountered while applying the basic rules of contract law that govern it. close study of the

three urisdictions namelyP the Fnited -tates of merica, the +uropean Fnion and the

nternational Community will be carried out. To accomplish this, wor$s of learned authors

and articles on this subect will be examined. 9elevant legislations of different urisdictions

will also be analy'ed.

Sco(" an# Str*ct*r"

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This research wor$ is divided into four distinct chapters. +ach chapter is further sub#divided

into sub heads for clarity.

Chapter One underta$es to explain the basics of a contract and explains the elements that

must be present before a contract is said to be concluded. +lectronic contracts will also be

introduced and an analysis of the legal issues that arise while trying to apply rules of basic

contracting to electronic contracts will be conducted.

Chapter Two offers an overview on the form and validity re"uirements in specific types of

contracts. t also discusses the rationale behind the introduction of these rules on form and

validity. n analysis of these legal forms or re"uirements against electronic contracting will

be tac$led in this chapter.

Chapter Three will discuss the legal issue of determining urisdiction and choice of law to

govern electronic contracts and will loo$ at the three urisdictions covered in this wor$ to see

how they have attempted to solve the problems through legislations or case law.

Chapter (our identifies all the legal issues discussed in the previous chapters apart from the

issue of urisdiction and analyses how different laws in the Fnited -tates, the +uropean

Fnion and the nternational Community have addressed those issues. This Chapter also tal$s

of the new scheme still being developed which is called the Online dispute 9esolution

3OD98. t will loo$ at the challenges that are envisaged and will proffer possible solutions for

safe implementation of the scheme.

Chapter four concludes by answering the "uestion if really traditional rules of contracting are

still applicable to electronics contracts or whether the agitation by Cyberliberterians to create

an entirely new legal environment governing electronic transactions has been achieved so far.

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CHAPTER ONE

BAC,GROUND AND GENERAL DEFINITION OF ,EY TERMS

149 MEANING OF CONTRACT

On a fundamental level, a contract is an agreement between parties that a court will enforce. 6

Fnder the +nglish law, a contract can be said to be an agreement giving rise to obligations,

which are enforced or recogni'ed by law.> Fnder any contract law whether +nglish or

merican legal systems, there are some basic elements that must be present before a court

will enforce a contract.BThese elements will be discussed in the next part.

141 BASIC PRINCIPLES OF CONTRACT LAW

/efore proceeding in explaining the legal issues raised in relation with electronic contract

formation, it is important to ma$e a brief reference to the general rules that govern contract

formation.;Contract formation usually involves some $ind of negotiation, or at least a period

before parties finally ma$e up their minds. The meeting of minds 3consensus ad idem8 is very

necessary for the conclusion of a contract.5 n the course of negotiation, there may be

invitations to ma$e offers and counter offers, but the general rule is that contract formation

re"uires an offer and acceptance to be communicated between parties. 4A

5 +# ContractingP -ociety and &egal ssues. /y Co-operative Research Center for Construction Innovation for

Icon.net Pty Ltd.


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14141 OFFER

n offer is an expression of willingness to contract, made with the intention that it shall

become binding on the offeror as soon it is accepted by the offeree. genuine offer is

different from what is $nown as an invitation to treat i.e. where a party is merely inviting

offers, which he is then free to accept or reect. 44The display of goods with a price tic$et

attached to a shop window or on a supermar$et shelf is not an offer to sell but an invitation

for customers to ma$e an offer,4


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nAdams vs. Lindsell,4;it was held that where acceptance by post has been seen re"uested,

or where it is an appropriate and reasonable means of communication between parties, then

acceptance is complete as soon as the letter of acceptance is posted, even if the letter is

delayed, destroyed or lost in the post so that it never reaches the offeror.

?aving outlined the basic principles of contract law, the next section of this wor$ will address

issues concerning electronic contracts and decipher whether e#contracts satisfy the traditional

re"uired elements explained above for a contract to be valid. t will also address the

application of various contractual rules to electronic contracts.45

146 ELECTRONIC CONTRACTS

/y definition, an e# contract is a contract modeled, specified, executed and deployed by a

software system.


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2ew forms of communication have been a maor distinguishing factor in electronic contracts

from other types of traditional paper contracts and these new forms of communication will be

analy'ed.

The E!"ctron+c Co%%*n+cat+ons Act defines electronic communication as a

communication transmitted 3whether from one person to another, from one device to another

or from a person to a device or vice versa8 Q

a8 /y means of telecommunication system 3within the meaning of the FE

Telecommunications ct 45;:8P or

b8 /y other means, but while in an electronic form.


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This is the most basic process used to form agreements on the internet and permits

individuals to send electronic messages to another individual. -imilar to letters 3post8, email

is usually written and distributed by a person for another specific person. They can be

digitally signed for authentication and files can be attached to email messages. The text of an

email may include information relating to negotiations, offer and acceptance and draft

contracts.


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performances on the personLs behalf without review or action by an individual at the time of

the action or response to a message or performance.7


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down railway tic$ets from the case of Thorton vs. Shoe Lane Parking.7>This attempt has

been critici'ed by many scholars. n ThortonLs case, the plaintiff made a first visit to an

automatic car par$, where upon driving up to the barrier, a tic$et was issued by a machine,

which the customer paid for by putting money into the slot. ?e too$ the tic$et which was said

to be issued subect to conditions which were not visible to the customer, and which were

purported to exclude liability for personal inury. &ord Denning held that

)... the customer pays his money and ets a tic*et. +e cannot refuse it. +e cannot et his money 'ac*.

+e may protest to the machine! even swear at it! 'ut it will remain unmoved. +e is committed 'eyond recall. +e

was committed at the very moment when he put his money into the machine. $he contract was concluded at that

time. It can 'e translated into offer and acceptance in this way, the offer is made when the proprietor of the

machine holds it out as 'ein ready to receive the money. $he acceptance ta*es place when the customer puts

money into the slot.

On whether the offer was made by the company and acceptance by the customer, &ord

Denning said

)the offer was contained in the notice at the entrance ivin chares for arain and sayin )at owner/s

ris*. $he offer was accepted 'y 0r. $horton when he drove up to the entrance and 'y movement of his car!

turned the liht from red to reen and the tic*et was thrust at him

?e said the offer and acceptance were made at an earlier point than in railway tic$et cases,

because the customer had no chance to inspect the tic$et before he was committed, saying the

contract was made before the customer had the opportunity to read the conditions on the

tic$et.7B

This decision by &ord Denning cannot be said to be an authority on the analysis in terms of

offer and acceptance. There was no clear distinguishing factor between ThortonLs case and

cases of automatic machines handling down railway tic$ets, as a careful study of the two

cases seem to be the same. 2ormally, in automatic railway tic$ets, the offer is made by the

trader and acceptance by the customer.7;%ore recent technology today have shown that the

two processes mentioned above are unsophisticated, as machines, today, 3-elf chec$ out8reserve a discretionnot to go ahead with a contract.75n the above situation where electronic

36345B48 < =/, 4>7

37Todd, 1., op cit, n


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or intelligent agents have been deployed to conclude transactions and have the ability to ma$e

decisions whether to go ahead with a transaction or not, a pertinent "uestion will be whether a

contract, that has been generated and conducted by an electronic agent without any direct

human intervention is legally binding and on whom*:A

-ome reasons have been proffered by some authors ustifying why legal personality should

be accorded to electronic agents. %oral, entitlement, -ocial capacity and legal convenience

have been said to be the reasons why electronic agents must be accorded personality. On the

first reason, it has been argued that an entity that is conscious should be treated as a legal

person. ?owever this reasoning has been critici'ed since it is not all electronic agents can

achieve that self Q consciousness. -uch devices cannot be said to be ma$ing conscious, moral

decisions of their own. The second line of reasoning confers legal personality on electronic

agents on the basis of social capacity, as it arises once those who interact with it regard it

rather than its human controllers. &astly, in favor of the reason of legal convenience, it has

been argued that ascribing legal personality to an electronic agent would mean that such an

agent would be able to have patrimonial rights and also be subect to liability for negligent

acts or omissions, ust as a natural person.:4

The above controversy, as to whether computers are legal persons that can ma$e valid offers

and acceptances in electronic transactions has been cleared by the 12CI$RAL 0odel Law on

Electronic Commerce!34which states that data messages that are generated automatically by

computers, without human intervention, should be regarded as originating from the legal

entity on behalf of which the computer is operated.

14541 MA,ING OFFERS AND INVITATION TO TREAT ONLINE

Determining whether a particular representation is an offer or an invitation to treat will

impact when a contract is formed:7. 2ormally, under traditional contract rules, shop window

40 @eit'enboec$, +. +lectronic gents and the formation of Contracts 3


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displays,::and adverts:6are invitation to treat not offers. n electronic contracts, the "uestion

may arise as to the effect of web#based advertisements and whether they are merely an

invitation to treat.:>@hile applying the reasoning inPSGB vs. Boots!to analy'e electronic

offers, it will be fair to argue that as in the case of Boots, if the shop front constituted the offer

and not the invitation to treat, the company could not exercise control over persons whom it

did business with and it would be difficult for the company if it ran out of the product on the

shop window. pplying this argument in a web based context, ust as a normal shop, the

customer should normally see an online advert, which will amount to an invitation to treat,

and he ma$es an offer. t is left for the company that hosted the website to accept the online

offer.:Bny contrary scenario, where it is intended by suppliers for their online adverts to

constitute offers, may invo$e the application of laws from other urisdictions, considering the

ubi"uitous nature of the internet. +xport and import restrictions, consumer protection

legislations, etc., may affect the suppliers of such product.:;

14546 ELECTRONIC ACCEPTANCE AND THE POSTAL RULE

t the national and international level, the directives, model laws and conventions governing

electronic commercial transactions do not cover when offers and acceptances become

effective for purposes of contract formation.:5One of the most critical "uestions concerning

internet transactions is whether a contract has been formed since it is still unclear whether the

existing rule of time of dispatch and receipt of electronic communication will be sufficient to

ascertain an offer and acceptance.6AFnder the general rule, as explained earlier, an offer to a

44(isher s. /ell 345>48 4 =/, 75:

451artridge vs !rittenden 345>;8 < ll +9, :


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contract is effective when received by the offeree. The general common law rule is that

acceptance is effective when sent.64This rule is often called the mailbox rule and originated

in +ngland,6?e said)

) a person! for instance! sends an order to a merchant in London! offerin to pay a certain price for so

many oods. $he merchant writes an answer acceptin the offer! and oes that instant into the mar*et and

purchases the oods in order to ena'le him fulfill the contract. But! accordin to the arument presented to us! if

the person who has sent the offer finds that the mar*et is fallin! and that it will 'e a 'ad 'arain for him! he

may! at any time! 'efore he has received an answer 5acceptance6! revo*e the offer.

One can consider the economic conse"uences if the person who made the offer supports his

argument, applying the receipt rule.

51/an$ of 0olo vs. -perry (lour Co. 345A78 4:4 Cal. 74:3B:, 1. ;66#;>68

52dams vs &indsell 34;4;8


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nother argument in favor of the postal rule was analy'ed by Thesiger &G in Household Fire

and Carriage Accident Insurance Co. ltd vs. Grant,6Bwhere it was held that communication

of acceptance to the agent of the offeror is regarded as communication to the offeror

himself.6;n his words, Thesiger &G saw the post office as the agent of both parties and said

that)

)as soon the letter of acceptance is delivered to the post office! the contract is made as complete and final and

a'solutely 'indin as if the acceptor had put his letter into the hands of the messener sent 'y the offeror

himself as his aent to deliver the offer and receive the acceptance

-ince contracts, today, are formed electronically through different manners explained earlier,

and having analy'ed the theoretical and historical basis for the mailbox rule, it is now

imperative to examine the various methods of contract formation today, vis# a# vi' the

mailbox rule.65

1454/ POSTAL RULE COMPARED WITH MODERN DAY ELECTRONIC

COMMUNICATIONS

@hile considering more modern forms of communication other than the snail mail, &ord

Denning, inEntores Ltd vs. iles Far Eastern Cor!,>Afurther analy'ed.

)(hen a contract is made 'y post! it is clear law throuhout the common law countries that the acceptance is

complete as soon as a letter is put into the post 'o7! and that is the place where the contract is made. But thereis no clear rule a'out contract made 'y telephone or 'y tele7. Communications 'y those means are virtually

instantaneous and stand on a different footin.

?aving cited different examples, &ord Denning further explained that, if a man who sends a

message of acceptance $nows that, for some technical reasons, it has not been received or he

has reason to $now that it has not been received, he must repeat communication of

acceptance. The other way round, if the listener does not catch the words or message of

acceptance and does not trouble himself to get a repeat of the acceptance, in both scenarios,

both parties are estopped from saying that the acceptance need not be repeated or acceptance

was not received. ?owever, if both parties, in good faith, believe that acceptance has been

57?ousehold (ire and Carriage ccident nsurance Co. ltd vs. !rant 34;B58 : +x, D

58Todd, 1. op cit, n.

59@atnic$, ., op cit. n 67, pg 4;


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sent and has been received and yet the other party did not receive any acceptance, then there

is no contract.>4&ord Denning concluded that the rule about instantaneous communication

between the parties is different from the mailbox rule and that the contract is only complete

when the acceptance is received by the offeror, and the contract is made at the place where

acceptance is received.

1454> POSTAL RULE COMPARED WITH E:MAIL ACCEPTANCES

?aving concluded that acceptance in instantaneous communications is completed when it is

received by the offeror, it will then follow to as$ the "uestion, whether email communications

are instantaneous* The emailLs ourney as we all $now may re"uire travelling across the

world even though the person receiving the message might be in the next building. >7 n Ch"ee #in #eong vs

$igiland all.Com Pro!ert% Ltd!83a case decided in -ingapore, 9aah GC held) unli$e a fax

or a telephone call, it 3emails8 is not instantaneous. +mails are processed through servers,

routers, and internet service providers. Different protocols may result in messages arriving in

an incomprehensible form. rrival can also be immaterial unless a recipient accesses the

email, but, in this respect, email does not really differ from mail that has not been opened.

(rom the above, it is logical to reason that the application of the postal rule in communication

of acceptance will also involve email acceptances.

61/rin$ibon &td vs. -tahag -tahl Fnd -tahlwavenhandelgeselischaft mb? 345;


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14542 REASONS FOR E?TENDING THE APPLICATION OF POSTAL

ACCEPTANCE RULE TO EMAIL COMMUNICATIONS

pplying the postal rule to email contracts avoids business uncertainty regarding the timing

of email contracts. pplying the general rule will create uncertainty as illustrated. f sends

his email acceptance late (riday afternoon and recipient / left his office at lunchtime not to

return until following %onday morning, at what time can we consider receipt* s it %onday

morning, when / returns to wor$ or at any time / opens his email account and accesses the

particular email, even if it was out of wor$ing hours* The postal rule applied in this situation

will create a definite conclusion.>6

nother reason for extending the application of the postal acceptance rule to email

communications is the non#instantaneous nature of email acceptances earlier discussed.>>

The last reason is the contention that applying the general rule to email acceptances will

complicate the situation as there are numerous identifiable points along the communication

networ$ at which a communication may be considered received by the addressee, thereby

creating uncertainty.>B

?aving outlined some logical arguments why the postal rule should apply to email

communications, Art+c!" 19 o& t'" UN Con8"nt+on states that the time of receipt of an

electronic communication is the time when it becomes capable of being retrieved by the

addressee at an electronic address designated by the addressee.>; rticle 4A has failed to

further explain the rule of electronic offers and acceptance. n explanatory note to that

rticle is needed to explain if an electronic contract will be concluded when an auto# email

message says message has been sent, message has been received, message had been

delivered or message has been read. This explanation is necessary to remove the legal

65brahim, %. et al. op cit., n >


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uncertainty of the effectiveness of electronic contracting and boost confidence in online

contracting.>5

n concluding this chapter, it is settled that there is no difference in principle, between the

process of offer and acceptance online and the process offline. ?owever, to avoid prematurely

being bound, traders should specify acts that constitute offer and acceptance in their terms

and conditions and ensure that those terms and conditions are properly brought to the

attention of users before the contract is concluded.BAt is also settled that website adverts do

not constitute offers but mere invitation to treat. B4t is still unclear at what time an electronic

acceptance 3email messages especially8 is deemed to have been communicated for a contract

to be enforceable. This uncertainty has left the courts the powers to decide, but it is

recommended that an explanatory note to rticle 4A F2 convention be made available so that

the controversy will be laid to rest.

69@ang, (.op cit., n:5, pg


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CHAPTER TWO

FORM AND VALIDITY RE@UIREMENTS IN ELECTRONIC CONTRACTS

649 INTRODUCTION

%a$ing a contract may involve formalitiesP for example, it may be re"uired to be in writing.

9e"uirements such as a signature or writing may provide obstacles to efficient electronic

contracting.Bin the F-8, which impose

some formal re"uirements such as writing and signature in contracts that electronic contracts

cannot satisfy, have created some legal obstacles for electronic contracting,B>s contained in

the !uide to the +nactment of the &'CIT(AL odel La" on Electronic Commerce!::

K..in a number of countries, the existing legislation governing communication and storage

of information is inade"uate or outdated because it does not contemplate the use of electronic

commerce. n certain cases, existing legislation imposes or implies restrictions on the use of

modern means of communication, for example, by prescribing the use of written, signed or

original documents. number of reasons have made it mandatory for certain contract

agreements to be enforced only if they are in a certain form and the reasons may range from)

a8 +videntiary 9eason) (ormality establishes that a contract exists

b8 Cautionary 9eason) (ormality ma$es the parties to slow down and thin$ about what they

are doing

729owland, D. and %acdonald, +., op cit, n 7:, 1g. 7A;

73FE -tatute of (rauds 34>BB8

74 /raley, -. @hy electronic signatures can increase electronic transactions and the need for laws governing

electronic signatures, 3


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c8 The Channeling (unction) (ormality is a simple and cheap test of enforceability. t is a

signal to courts and laymen that the contract is good and enforceable.B;

Clearly, therefore, an analysis of legal formsHre"uirements against electronic contracting will

be tac$led in this chapter. ?owever, before legislative attempts to settle the above dispute will

be discussed in subse"uent chapters, it is necessary to examine whether, by their virtues,

electronic contracts in their form, can actually satisfy the most problematic and common law

re"uirement of form, i.e. 3writing and signature8.B5@hile answering the above "uestion, the

courts have adopted two approaches to it. The first is the straightforward literal approach

where interpretation of writing or signature will be given a literal meaning. The second

approach would re"uire a more reasonable and imaginative interpretation, where the courts

will ta$e into consideration the purpose or rationale behind the writing or signature

re"uirements in contracts.;A

641 INTERPRETATION OF WRITING RE@UIRMENT IN ELECTRONIC

CONTRACTS

(ormal re"uirements, li$e writing, pose difficulties when contracting online, bearing in mind

the ephemeral and intangible nature of electronic contracts,;4hence, an opportunity to revisit

the legislations li$e statute of frauds and the Fniform Commercial Code to determine its

modern validity as they re"uire a written memorial. ;


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1rofessor 9eed, while giving a literary interpretation on the issue whether pages visible on

computer screens satisfy writing re"uirement, argued that digital information held either as

onHoff states switches in a processing chip or as a magnetic or optical variations on the

surface of some recording medium, is not in fact a representation or reproduction of words in

visible form.;:

Transactions such as communication between +lectronic Data nterchange 3+D8 are rarely

reduced to writing and will hardly fall within the definition of writing.;6

The +nglish courts, on the other hand, have given a purposive interpretation in some of their

decisions that an electronic document which is visible on the computer screen is in writing, in

line with re"uirements of the statute of frauds. nAnson vs. Trum!,;>the court held that a

paper document, re"uired to be served as part of the litigation process, could be served by

facsimile transmission. The court recogni'ed that between the time the document was copied

into the fax machine and the time it was received in paper form at the recipientMs machine, it

underwent a conversion which constituted the transmission process, and the fact that it

remained in the facsimiles machineLs memory in digital form before being printed out or read

is irrelevant.;BThe same approach was adopted in the case of Lockheed vs. )"en**, where

%ann &G, in his consideration whether a photocopy could be classed as a writing, reiterated

the opinion that) an ongoing statute ought to be read so as to accommodate technological

change.

n the Fnited -tates, courts have also been willing to interpret that an electronic document

that is visible on a computer screen meets the writing re"uirement of the Fniform

Commercial Code as decided in the case of +ilkens vs. I)+A Insurance Commissioner.;5

The court held that a re"uirement to $eep a written record of an insurance contract was

84 9eed, C. @hat is a -ignature, 3


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satisfied by the insurer $eeping records in computer systems. lso the +uropean Fnion in its

proposal on certain aspects of electronic contract in the internal mar$et reasoned that

electronic commerce will not fully develop if concluding on#line contracts is hampered by

certain form and other re"uirements which are not adapted to the on#line environment. 5A

The purposive approach re"uires the courts, as seen in the above cases, to discover the

parliamentMs intention in introducing the writing re"uirement and to implement the

re"uirement54. This purposive approach type of interpretation will, however, be restricted if

the purposes of the mandatory writing re"uirement would be undermined by accommodating

the technological change.5


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achieved the same purpose of a handwritten signature.56 n Goodman vs. , E-an,5> it was

held that the essential re"uirement of signing is the affixing, either by writing with a pen or

pencil or by otherwise, impressing on the document, oneLs name or signature so as personally

to authenticate the document. +ven though this decision has not made it mandatory for a

signature to mean a personLs writing with pen and paper, but, till date, the ordinary meaning

has been accepted to be personal writing of oneLs name or mar$ on a written document. 5B

64641 RATIONALE BEHIND THE SIGNATURE RE@UIREMENT UNDER THE

STATUTE OF FRAUDS

@hile interpreting the statute of frauds, courts have established that the act of signing is not

critical to the validity of the documentP the critical element appears to be that the person

ma$ing the mar$ approves of the content of the document.5;Therefore, it can be concluded

that for a mar$ to suffice as a signature, it must satisfy the characteristics below)

a8 t is usually affixed through a physical process by the authori'ed signatory.

b8 t can be affixed by mechanical means unless prohibited

c8 t is relatively difficult to forge

d8 The signature becomes affixed to the document such that the signature, document and

contents become one composite physical thing

e8 t is relatively difficult to remove without trace

f8 t can be reproduced by a party and it is relatively standard for all documents signed by the

same person.55

645 ELECTRONIC SIGNATURES

n electronic signature has been said to mean any electronic mar$ that indicates the identity

of some person who is being attributed as being the signatory. They do not possess an

95In reClar*e


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ade"uately secure mechanism of authentication as will be explained, as the authentication not

only relates to the document but also relates to the authentication of the person to be charged

with being bound by the contents of the document.4AA

64541 HOW CAN AN ELECTRONIC DOCUMENT BE SIGNED=

There are various types of electronic signatures, all of which can demonstrate the intent of the

signing party to sign. The different types are)

a8 Typing a name into a document, such as an e#mail. This was accepted in the

Industrial Tri-unal case o Hall v Cognos Ltd.=>=a series of e#mails between %r.

?all and his line manager and personnel were held to be signed when printed, and

varied the terms of the written contract of employment.

b8 Clic$ing the S acceptS icon to confirm that you wish to enter a contract when buying

goods or services electronically.

c8 1ersonal dentification 2umber 3128, used to obtain money from cash machines or

to SsignS a credit card with a 12.

d8 biodynamic version of a manuscript signature, a special pen and pad measure and

record the actions of the person as they sign. This creates a digital version of the

manuscript signature. The file can then be attached to electronic documents.

e8 scanned manuscript signatureP a manuscript signature is scanned and transformed

into digital format, which can then be attached to an electronic document.

f8 The digital signature, which uses cryptography. The signing party uses a $ey pair

3private and public $ey8. The sender affixes the signature using their private $ey, and

the recipient chec$s the signature with the public $ey.4A@@4:

102 http)HHwww.fetchitnow.co.u$HarticlesHelectronicNsignaturesNlegality.php accessed on the Bth of -eptember


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signature. f the courts concern themselves only with the form of the signature, then clearly

an electronic signature cannot be considered e"uivalent to its physical counterpart.

Conversely, if all that matters is that it performs the same function or purpose as its physical

counterpart, then a purposive interpretation will have to be given by the courts, where the

form of the electronic signature is ettisoned and the function is ta$en into consideration. 4A7

The +nglish courts have followed this line of argument in interpreting what amounts to an

electronic signature. n a recent case between Golden )cean Grou! /G)G0 Ltd vs.

Salgaocar ining Industries /SI0 P1T ltd. and another,4A: !O! offered -% the

opportunity to charter one of their vessels. -% agreed to enter negotiations with !O! to

charter the vessel on a ten year contract through the -%Ls chartering arm, Trust worth

1roperty &td 3T1&8. 2egotiations proceeded between !O! and %r. -algaocar acting for -%

and T1&. The negotiations were concluded in


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This case demonstrates the growing udicial recognition of emails as a means of forming

binding agreements, including those such as guarantees that must be in writing and be

signed.4A6

64546 MANDATORY RE@UIREMENTS OF A MODEL ELECTRONIC SIGNATURE

LEGISLATION

+ven though law ma$ers cannot give electronic signatures the "ualities and attributes of a

written signature, they can ma$e laws that place the two on the same pedestal legally.4A>

&awma$ers, while ma$ing laws on electronic signatures, should be careful to ensure that

electronic signatures are not denied their evidentiary value. +lectronic -ignature legislation

should also avoid favoring one form of contracting over the other 3i.e. favoring electronic

signatures over handwritten signatures, parties must be allowed to decide which form to use

in their contract8. (inally, any +lectronic signature legislation must be technology#neutral and

must be internationally compatible.4AB

t can be seen, so far, that electronic signatures and email messages have satisfied statutory

formal re"uirements. This, of course, has been made possible by the udicial activism of the

courts by adopting a purposive and functional approach while interpreting the re"uirements

of the statute of fraud. ?owever, there are some instant cases where the courts will interpret

the formal re"uirements strictly, so that a clear intention to be bound will be established 3e.g.

ma$ing of @ills8. n such cases, the formal re"uirements 3writing and signature8 are arguably

more important than function or purpose.4A;

64/ ELECTRONIC AGREEMENTS AND ASSENT ONLINE

t common law, a contract is formed when a party assents or accepts another partyLs offer4A5.

Over the years, contract law has evolved to accommodate modern business practices as

105http)HHdocuments.dsupra.comH4c7adbecc6.pdf accessed on the 44th of

-eptember


38/83

rticle < of the Fniform Commercial Code 3FCC8 loosens the re"uirements of traditional

contract formation such that a contract may be formed in any manner sufficient to show

agreement or assent.44A t can be deduced from the argument that when a party signs an

agreement, that party is deemed to have assented to its terms. n integral component of the

obective theory of contracts is the duty to read, which simply means an understanding of

the terms agreed to, but according to the obective theory of contracts , a person can be bound

to contract terms whether he reads them or not.444This duty to read is what the offeree owes

to himself, because if an offeree signs a contract agreement, he is bound by the terms whether

he has read them or not. On the other hand, while an offeror has no duty to verbally explain

the terms to the offeree, the courts have imposed a duty to explain terms, or at least explain

the fact that contract terms exist.44


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answering the above "ueries, this part of this wor$ will analy'e types of online agreements

and see how the courts have interpreted the obective theory when applied to online

agreements.

64> SHRIN, WRAP AGREEMENTS

Online agreements are an adaptation of the shrin$ wrap agreements which have been in use

since the early 45;ALs in the sale of pac$aged software. They were introduced specifically for

the mass#mar$et#sale of pac$aged software. 1rior to this, software vendors used traditional

common law contract methods 3e.g. duty to read8. @ith the mass mar$et of the 1C,

companies such as pple and /% found it was virtually impossible to still maintain the

traditional type of contracting. n the early cases of shrin$ wrap agreements, they were held

invalid and unenforceable on the ground that at the time of the purchase, terms and conditions

were not $nown and the courts considered the terms and conditions added at the time of the

purchase, rendering the contract void44>.This decision was, however, upturned in ProC$ vs

2ieden-erg,44Bwhere it was held that shrin$ wrap licenses are enforceable, unless their terms

are obectionable on grounds applicable to contracts in general. /ecause no one agrees that

the terms of the license at issue are troublesome, we remand with instructions to enter

udgment in favor of the plaintiff.

lthough the -eventh Circuit recogni'ed that shrin$#wrap agreements have a substantial

effect on the efficiency of the computer software industry, the udgment has been heavily

critici'ed.44;%uch of the criticism has been directed at the following issues)

a8 Classification of the transaction as a sale of goods,

b8 %oney now, terms later transactions and the Fniform Commercial Code,

c8 endorLs method of acceptance as master of the offer and

d8 1rominence of notice of terms.445

116 !att, . +lectronic Commerce# Clic$ @rap greements, The +nforceability of Clic$ Q@rap

greements, 3 (.7d, 4::B, 3BthCircuit 455>8

118 /atya, !. ?oney, -hrin$ @rapped the Consumer) The -hrin$ wrap agreement as an adhesion

Contract, 3


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@hile proffering solutions to the above criticisms, !oodman /atya, suggested that to avoid

the ine"uitable and unfair results created by the decision in 1roCD, challenges to the

enforceability of shrin$ wrap agreements covering consumer products should be analy'ed

under the law of adhesion contracts.4

124i'id

28


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The Fnited -tates -upreme Court, in the case ofBremen vs. 2a!ata )shore co16>held that

contracts that are freely negotiated, unaffected by fraud, undue influence, or overwhelming

bargaining power, should be given full effect. s noted earlier, clic$ wrap agreements being

contracts of adhesion not freely negotiated, will cause a "uestion to arise, whether terms in

clic$ wrap agreements are enforceable*4 This "uestion has been answered earlier in this

chapter while analy'ing the Gudgment inProC$ Inc. vs. 2ienden-erg3supra8 where it was

held that such terms contained in non# negotiated contracts are enforceable, unless there is

fraud or duress. Does this answer now ma$e all Clic$ wrap agreements enforceable*

further analysis of court decisions will answer this begging "uestion.

n Forest vs. 1eri3on Communications!=4:%r. (orrest signed up for D-&service in ugust


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On appeal, the Court of ppeals noted that the absence of fraud,duressor misrepresentation,

a binding forum selection clauseis not inherently unfair if reasonably communicated to the

plaintiff. &i$ewise, the use of anelectronic service agreementcontained in a scroll boxdoes

not amount to inade"uate notice. The ppellate court reasoned that many contractscontain

forum selection clauses and do not specify every nuance of the specified forumMs law.

Therefore, the forum clausewas reasonably communicated and is thus enforceable.

s to appellantSs claim that enforcement would be unreasonable in the present case, the court

noted that appellant would need to prove that 3i8 the clause was induced by fraud or

overreaching, 3ii8 the contractually selected forum is so unfair and inconvenient as, for all

practical purposes, to deprive the plaintiff of a remedy or of its day in court, or 3iii8

enforcement would contravene a strong public policy of the forum where the action is filed.

ppellant could neither point to any fraud, nor claim that the forumwas inconvenient 3the

court noted that (orrest need only cross the 1otomac 9iver8, and li$ewise, public policy

dictates a strong need to uphold forum selection clauseswherever possible.

Thus, the Court affirmed the trial courtMs granting of CMs motion to dismiss the claims

stating that a contract +s no !"ss a contract s+%(!- b"ca*s" +t +s "nt"r"# +nto 8+a a

co%(*t"r.

-everal other decisions have followed the decision in %r. (orestLs case. n Hughes vs.

cenamon!=4? it was held that forum selection clauses in clic$ wrap agreements are

enforceable. lso in i.LA' S%stems Inc. vs. 'etScout Service Level Cor!.=4! clic$ wrap

agreements were held to be enforceable.

t can be seen from the above cases that clic$ wrap agreements were enforced because

consumers have manifested assent to the terms of the agreement by clic$ing the !9++

button. The prospective consumer does not need to be given reasonable notice of contract

terms, but as long as the vendor does not hide the terms, courts are li$ely to find that

reasonable notice was given. ny violation of the terms may be treated as breach of

contract.47A

128?ughes vs. %c%enamon


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64>46 DECISIONS WHERE CLIC, WRAP AGREEMENTS WERE NOT ENFORCED

lthough courts have enforced all the clic$ wrap agreements analy'ed above, on the other

hand, they have also shown willingness to consider other doctrines that can mitigate the

harshness of unfair terms and compensate, at least to some degree, for the fact that many

users may not truly wish to agree.474These doctrines include unconscionability, violations of

public policy, analysis of forum selection clauses, and federal copyright preemption. These

doctrines have provided a wor$able framewor$ for determining the enforceability of clic$

wrap agreements as will be further analy'ed with the aid of some decided cases. 4745 BROWSE WRAP AGREEMENTS

/rowse wrap agreements are proved by the simple fact that one party browsed the otherLs

site.47;These agreements are usually displayed on a websiteLs homepage or are accessible

through a lin$.475The usual scenario is that the site owner puts up a prominent notice saying

browsing this site will be ta$en as agreement to terms and conditions as follows......, hence

the argument that continuing to browse in the face of the notice amounts to consent and a

valid agreement.4:AThe lac$ of mutual assent in browse#wrap agreements is evident in the

fact that the user is not re"uired to actually view the terms of the agreement before

proceeding beyond the homepage, at which point the agreement is said to become valid.4:4

136 Comb vs. 1ay 1al nc.


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This was the issue in Pollstar vs. Gigmania.4:


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n conclusion, it has been seen that of the three types of agreements discussed, browse wrap

agreements demand the least consumer interaction because they need not even be viewed.

/oth clic$ wrap and shrin$ wrap agreements purport to demand notice of terms, whether or

not the consumer in fact reads them, and thus they are more li$ely to be held enforceable.

/rowse wrap agreements have become the most difficult type of agreement to be enforced by

the courts because of the problem of lac$ of mutual assent, an important element to prove a

valid traditional contract. Therefore, the next logical progression in the urisprudence

concerning browse wrap agreements is that they will increasingly be held to be invalid. 4:B

1rofessor 2immer,4:; however, holds a contrary opinion, and ma$es a case for the

enforceability of browse wrap agreements. ?e reasoned that trying to distinguish between

browse wrap and other types of licensing agreements is illogical, unnecessary and potentially

detrimental to the future development of internet commerce. ?e argued that browse wrap

agreements is not unli$e other types of contracts and should not be limited without first

finding some fundamental reason for doing so. ?e said that limitations on browse wrap

agreements are also misguided because consumers can be protected from unfair licensing

terms in many ways, ways that do not chill the possibilities of contracting on the internet. n

example of a consumer protection measure is the consumer reliance on unconscionability of

contract terms and mar$et forces. will align my reasoning with 2immerLs argument, as

ma$ing browse wrap contracts invalid will affect the general growth of electronic commerce.

146/loc$, D. op cit, n 4:4, pg


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CAHPTER THREE

DETERMINATION OF 3URISDICTION AND CHOICE OF LAW IN ELECTRONIC

CONTRACTS

549 3URISDICTION

s a general rule, physical presence or location, either actual or constructive determines

urisdiction. This means that the plaintiff in any case may sue its counterparty in the place of

its domicile.4:5

(rom the above it can be said that the body of the individual action may be

located in the urisdiction, an action may be performed in within a urisdiction, or individual

boundaries of the urisdiction itself can be determined by geographical means.46A

pplying the above rule while trying to determine urisdiction in electronic contracts will

face some difficulties as it is agreed that the demateriali'ed nature of online commercial

activities renders the location of the parties and the place where those activities ta$e place

difficult to determine.464s a general rule, in order to determine the urisdiction of a dispute

between parties in different urisdictions, 1rivate nternational &aw have used geography orlocation of the parties or the place where their commercial activities ta$e place as fixed

factors connecting parties.46


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different urisdictions on the determination of urisdiction and the choice of law that govern

electronic contracts.

541 THE EUROPEAN UNIONS APPROACH IN THE DETERMINATION OF

3URISDCISTION OF ONLINE CONTRACTS

n the +uropean Fnion, the Br*ss"!s Con8"nt+on ;125was a double convention that

provided rules for both urisdictions and automatic recognition and enforcement of foreign

udgments. This convention created new 1rivate nternational &aw rules for member states

that ratified the convention. n matters between member states, the convention replaced rules

of urisdiction including those contained in any bilateral agreements that member states

entered with each other. %atters involving states outside the +uropean Community were

however still to be determined by private international law.46: rticle < of the /russels

convention enables a person domiciled in a member state to be sued in that state. 466

Over the years, on#line trading in the +uropean Fnion, between businesses and consumers

3/9egardless of this growth in /usiness to Consumer 3/


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new regulation called the Br*ss"!s 1 R"$*!at+on1> is a new +uropean Community

instrument that is set to replace the /russels convention on Gurisdiction and recognition of

foreign udgments. This regulation has afforded to the consumers some form of protection

and attempts to address some of the ine"ualities that may have arisen as a result of consumers

and professionals being geographically located in different urisdictions under the

ConventionMs regime.465-ince 7

rticle 4> of the regulation, maintains the rule that consumers are entitled to sue businesses

either in the businessL or consumerLs urisdiction. (or online contracts, this section may alsoapply as rticle 46378 ma$es the section not applicable only to contracts of transport other

than a contract which for an inclusive price, provides for a combination of travel and

accommodation.4>: rticle 46348 3c8 provides that urisdiction which includes that of online

contracts, can be established if by any means, businesses direct their professional or

1589egulation 3+C8 2o. ::H


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commercial activities to the consumerLs domicile or other states including individual member

states.4>6(rom the provisions of rticle 46348 3C8 it can now be deduced that any business

that uses the @orld @ide @eb to promote and provide their goods and services to consumers

in the +uropean Fnion will have to consider the implications of the new /russels 4

9egulation.4>>The addition of the phrase Xby any meansX to rticle 46 348 3c8 was specifically

intended to cover e#commerce transactions and websites and to give consumers the ability to

bring a lawsuit relating to any contracts executed through the nternet in their own country of

domicile.4>B

n a recent reference by the -upreme Court of ustria concerning two separate cases, the

+uropean Court of Gustice 3+CG8 has considered the circumstances which a trader directs itMs

activities to another member state within the meaning of rticle 46348 3c8 of the /russels 4

9egulation, when trading online such that the rule in contract cases that disputes may be

determined in the place of performance of the contractual obligation is displaced. The +CG

has ruled that this extra protection for consumers contracting cross#border is not triggered by

the mere use of a website by a trader but by evidence of an intention to establish commercial

relations with consumers from other member states. The +CG has also provided a non#

exhaustive list of matters which are capable of constituting evidence from which it may be

concluded that a traderLs activity is directed to the %ember -tate of the consumerLsdomicile4>;. The above legal issues were the facts of two ustrian cases Peter Pammer vs.

(eederei #arl Schluter Gm-H 4Co. #G567 and Hotel Al!enho Gesm-H vs. )liver

164rticle 46378 of /russels 4 9egulation,


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Heller.4BA(or greater understanding of this present topic and this wor$ as a whole the facts of

the two cases will be stated.

n the first case, %r. 1ammer, an ustrian resident, wished to travel by a freighter from

Trieste in taly to the (ar +ast. ?e boo$ed a voyage with the !erman company 9eedei Earl

-chulter through a !erman Travel agency speciali'ing in the sale on the internet, of voyages

by freighter. %r 1ammer, however refused to embar$ on the ground that the conditions on the

vessel did not, in his view, correspond to the description which he had received from the

agency. ?e duly sought reimbursement of the sum that he had paid for the voyage and when

the defendant reimbursed only half, %r. 1ammer issued proceedings in the ustrian Courts.

The defendants contended that the ustrian Courts lac$ed urisdiction on the ground that it

did not pursue any personal or professional activity in that country according to rticle 46348

3c8 of /russels 4 regulation.

n the second case, Oliver ?eller, a !erman resident, reserved a number of rooms in ?otel

lpenhof in ustria. The reservation was made by email which %r. ?eller obtained from the

?otelLs website. ?is reservation and confirmation were effected by email. %r. ?eller found

fault with the ?otelLs services and left without paying his bills. The hotel issued proceedings

in ustria and %r. ?eller raised a plead of lac$ of urisdiction on the basis that as a consumer

resident in !ermany, he could only be sued in his Country according to according to rticle

4>3


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The +CG stressed, however, that other items of evidence, possibly in combination with one

another, were also capable of demonstrating the existence of an activity directed to a

%ember -tate of the consumerSs domicile. These would include) the international nature of

the activity at issue, such as certain tourist activitiesP mention of telephone numbers with the

international codeP use of a top level domain name other than the ccT&D for the state in

which the trader is established or use of a generic top level domain name such as .com or .euP

the description of itineraries from one or more other %ember -tates to the place where the

service is providedP and mention of an international clientele composed of customers

domiciled in various %ember -tates, in particular by presentation of accounts written by such

customers. &i$ewise, if a website permits consumers to use a language or currency other than

that generally used in the traderSs %ember -tate, this could also constitute evidence

demonstrating cross#border activity.

On the other hand, the +CG stressed that the mention on a website of a traderSs email address

or geographical address, or of its telephone number without an international code, would not

constitute such evidence and that information would not indicate whether the trader was

directing its activity to one or more %ember -tates. n conclusion, having regard to such

evidence, it was for the ustrian court in the current cases to determine whether it was

apparent from the tradersS websites and overall activity that they were envisaging doing

business with ustrian consumers in the first case, or !erman consumers in the second case,

in the sense that they were minded to conclude contracts with them. ?owever, in the second

case the +CG reected ?otel lpenhofSs comment that the contract for accommodation was

concluded in ustria because that was where the hotel room $eys were handed over and

payment was to be made as %r. ?eller became contractually bound when the reservation was

made and confirmed online.4B4

Despite the lovely nature and purpose of assuming urisdiction under the /ruseels 4

9egulation, it can be argued that there still remains a problem of determining the urisdiction

with regards to contracts conducted and concluded electronically. Desiree fields argued that

the increase in global distribution of goods and services via the internet gives rise to

significant uncertainty with respect to matters concerning the choice of urisdiction in online

consumer contract disputes because internet communication ma$es it more difficult to

171 (ields, D. op cit! n =8?

40


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determine the place where the steps necessary for the conclusion of a contract have ta$en

place.4Bs &oc$erby put it)

)%ust how much of a ne7us is reFuired 'etween the electronic transaction and

forum see*in to e7ercise urisdiction.=::

172I'id.

173?utchings, . Determining Gurisdiction in e#consumer contracts) re Consumers being abandoned in

cyberspace* available on http)HHwww.nuigalway.ieHlawH!-&9H


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n the early days of the internet, a case was decided by the Fnited -tates courts that have

been widely critici'ed. nInset S%stem Inc. vs. Institution Set!=:?the defendant based in -tate

, was sued for trademar$ infringement in -tate /. The defendant had no offices or

employees in state /, nor did it regularly carry on business in -tate /. The defendant had

internet adverts and a toll free phone number which could be accessed by all internet users.

9esidents of -tate / had accessed the advertising and used the toll free line. The court of

-tate / decided that it had urisdiction and the case proceeded against the defendants.

ustifiable criticism of the above decision was that the courts applied strictly the rules of

personal urisdiction to cases involving websites and this demonstrated the inconsistency and

lac$ of understanding at that time regarding the effect and accessibility of a website. ?ere the

court e"uated the creation of a website with the placement of adverts in the print media

circulated in state /. t did not address the fact that, unli$e print publications, defendantLs

website only appeared on /Ls citi'ens computer screens if accessed by a / state resident. This

"uestion was however addressed s"uarely in the case ofarti3 Inc. vs. C%-erGold Inc.587,

where a %issouri corporation, sued Californian based Cyber#!old for trademar$

infringement. Cyber#!old moved to dismiss the suit for lac$ of personal urisdiction because

it claimed its only contact with %issouri was the accessibility of its website there. The

purpose of Cyber !oldLs site was to solicit e#mail addresses from internet users, including

those in %issouri in order to forward them to advertisements in their selected areas of

interests. The court noted that apart from its website being accessed 744 times by %issouri

users, Cyber#!old had no other contacts with the state of %issouri. The big "uestion was

whether the above facts constituted the necessary minimum contact to exercise personal

urisdiction*

The court focused on Cyber#!oldLs intent and content. f a %issouri resident re"uested

information from Cyber#!oldLs website, it was automatically and indiscriminately sent.

CyberQ!old sought to gain customers wherever they might reside. The fact that Cyber#!old

transmitted information to %issouri users approximately 744 times was viewed by the court

as evidence that Cyber#!old purposefully availed itself of the privilege of conducting

177&oc$erby, %. 2on#Contractual &egal 1roblems, 345558,IBL!8 57B, (. -upp. 4>4

179%arti' nc. s. Cyber!old 3455>8 5:B, (. -upp, 47


55/83

business in %issouri. Therefore the court concluded it was not unreasonable for a %issouri to

assume urisdiction.

n the above two cases, states have either assumed or refused urisdiction based on the level,

extent and purpose of website accessibility and activity directed to persons in those states in

accordance with existing specific personal urisdiction tests, derived from the fourteenth

amendment of the Fnited -tates Constitution. The active#passive website distinction 3well

$nown as the sliding scale approach8 while useful is now the only factor used to determine

urisdiction over businesses situated in another state or out of the Fnited -tates.

54641 THE SLIDING SCALE TEST AS APPLIED IN IPPOS CASE

n 2i!!o anuacturing Co. 1s. 2i!!o $otcom Inc.19 the courts have sought to

differentiate the different levels of web activity. t one end of the spectrum are situations

where a defendant clearly does business over the nternet. f the defendant enters into

contracts with residents of a foreign urisdiction that involve the $nowing and repeated

transmission of computer files over the nternet, personal urisdiction is proper. t the

opposite end are situations where a defendant has simply posted information on an nternet

web site which is accessible to users in foreign urisdictions. passive web site that does

little more than ma$e information available to those who are interested in it is not grounds for

the exercise personal urisdiction. The middle ground is occupied by interactive @eb sites

where a user can exchange information with the host computer. n these cases, the exercise of

urisdiction is determined by examining the level of interactivity and commercial nature of

the exchange of information that occurs on the website.

The merican /ar ssociation has cautioned that reliance alone on the nature of the website

to determine urisdiction is misplaced,4;4however, the introduction of the sliding scale test

to incorporate the threshold re"uirement that businesses intended to target consumers in

180Iippo %anufacturing Co. s. Iippo Dotcom nc.455B, :< F- 1=,

maor proof of the neutrality of the ct can be found in the +#-!2Ls definition of

electronic signature which includes, an electronic sound, symbol, or process, attached to or

logically associated with a contract or other record and executed or adopted by a person with

the intent to sign the record.


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/46 REGULATORY CLARIFICATION ON WHEN AN ELECTRONIC

COMMUNICATION OF ACCEPTANCE IS DEEMED TO HAVE BEEN RECEIVED

The receipt of electronic communications has been addressed in the F2CT9& model law,

the +lectronic Commerce Directive,


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c. f 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

d. f the addressee has not designated an information system, receipt occurs when the

data message enters an information system of the addressee.


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Once there is a delay by the service provider in ac$nowledging the receipt of the order, the

contract may not be enforced. t can be seen that rticle 44 prescribes the delivery rule for all

methods of electronic communication, which will go some way towards providing a degree

of harmoni'ation, but falls short of prescribing exactly when a contract will be concluded.


68/83

On when an electronic message is deemed to have been received, the ct states that an

electronic record is received when it enters the computer system designated by the recipient

in a form capable of being processed by that system, and the recipient is able to retrieve it

even if the recipient is not aware of its receipt.


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that an electronic record is effective when received, even if no individual is aware of its

receipt.


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of electronic agents to either initiate or accept contractual obligations. The model law states

that a message will be attributed to the sender if it is sent by an information system

programmed to operate automatically.


71/83

/4545 EUROPEAN UNION LAWS ON THE MANIFESTATION OF ASSENT IN

ELECTRONIC CONTRACTS

lso, li$e the F2CT9&, the +uropean Fnion laws do not answer the "uestion about what

conduct will suffice to demonstrate assent, nor did they address whether a contract may be

created by the interaction of electronic agents.A?owever, the +#commerce directive re"uires

member states to ensure that the legal re"uirements applicable to the contractual process

neither create obstacles for the use of electronic contracts nor result in such contracts being

deprived of legal effectiveness and validity on account of their having been made by

electronic means. 4 n carrying out this directive, member states have adopted different

rules to ensure the implementation of rticle 5348, hence creating a problem of uniformity in

regulation.

fter a careful analysis of different laws that try to regulate the $notty issues raised while

applying traditional contract rules to electronic contracts, there still seem to exist some

unsolved problems, li$e the need for international co#ordination in electronic commerce

regulation, as proposed by the Fnited -tates government and the +uropean Fnion.

final dissertation on electronic contracts

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