E-Commerce Outline
Prof. Spanogle, Fall 2001
E-Commerce Outline
Prof. Spanogle – Fall, 2001
Doing Business Electronically
Chapter 2A – The Domestic Scene
Ø Trading Partner Agreements (a.k.a. Electronic Data Interchange Agreements (EDI)) – two businesses set up an interactive system where orders are exchanged electronically
o a writing is required - §3.3.2 of the Model TPA has a liberal def. of “writing” such that electronic messages qualify
o parties might permit equitable estoppel so that if they have EDI they inherently agree that a writing is present and will not defend a suit on those grounds [see § 3.3.4 – “the parties agree not to contest the validity or enforceability of signed documents under the provisions of any applicable law relating to whether certain agreements are to be in writing or signed by the party to be bound thereby”]
o electronic signatures - § 1.5 of Model TPA – there must be “present intention to authenticate”
o mailbox rule – there must be proper receipt of the message, and the computer where receipt is intended must be identified. The message becomes effective when the identified computer receives the message, NOT when the user has read it
o verification - § 2.3 – receiver must affirmatively verify that an acceptance was received
Ø Model TPA Agreement was not embraced by European countries.
o no SOF in Europe so the Model Act goes beyond what they want or need
o equitable estoppel is a non-issue b/c the judges try the cases themselves
Chapter 2B – International Variations
Ø European Model EDI Agreement
o § 2.5 – acknowledgement of receipt of a message is the procedure by which, on receipt of the message, the syntax and semantics are checked, and a corresponding acknowledgment is sent by the receiver
o § 3.1 – despite above, seems to be equitable estoppel provision – the parties expressly waive any rights to contest the validity of a contract effected by the use of EDI in accordance w/ the terms and conditions of the Agreement on the grounds that it was effected by EDI
o § 3.3 – a contract effected by the use of EDI shall be concluded at the time and place where the message constituting acceptance of an offer reaches the computer system of the offeror.
o § 5.2 – an acknowledgment of receipt is not required unless requested
o § 5.3 – where an acknowledgment is requested and thus required, the receiver shall ensure that the acknowledgment is sent w/in one business day
o § 6.2 – security procedures include the verification of the origin, the verification of integrity, the non-repudiation of origin and receipt and confidentiality of messages
o § 8.1 – complete record of all messages exchanged during a transaction shall be stored for a minimum of three years following the transaction
Contract Formation in Cyberspace
Chapter 3A – Writings and Signatures - The Domestic Scene
Ø The overarching theme is security in e-commerce
Ø UCC def. of writing not helpful in E-Commerce world (§ 2-201 requires “reduction to tangible form”)
Ø SOF – writing required if K is for more than $500
o both requirements show the need to look at forensic attributes to determine whether there is a writing/contract
o this is important b/c in commercial transactions you need to be able to assure yourself that the transaction is genuine – specifically, there are three areas of security risks:
o authenticity – problem of identifying the source or sender of a message and authenticating that it did indeed come from that sender
o integrity – the problem of proving that the message is complete and has not been altered since it was sent
o non-repudiation – the risk that the sender may repudiate after the message is sent
o Digital Signatures
o not really signatures at all – rather, it is a dual key encryption method. Each key pair consists of two keys: a person’s private key, which is not revealed, and a public key, which is. When the private key is attached to the message, the message becomes encrypted, creating the “digital signature.” The recipient can then use the public key to determine that the message was sent by the appropriate person.
o One problem is assuring the other half of the key pair that you’ve got the right person. Thus public key infrastructure was developed, whereby a third party is employed to identify the parties to one another [VeriSign does this].
Uniform Electronic Transactions Act (UETA)
Ø deals w/ electronic signatures and writings
o applies to electronic records and signatures relating to a transaction
o must be a transaction b/w two willing parties; thus, there must be some form of acquiescence on the part of the person to conduct the transaction before UETA can be invoked
Ø § 2 – Definitions
o § 2.7 – electronic record – any record used or stored in non-paper medium. [Pretty broadly defined]
o § 2.8 – electronic signature – broad def. – no specific technology must be used to create a valid signature. However, intent to execute or adopt a particular method of signature must be shown. The effect of an electronic signature will be determined by the surrounding circumstances.
o § 2.13 – record – includes any method for storing or communicating information; a record need not be indestructible or permanent
o § 2.14 – security procedures – may be applied to verify an electronic signature, verify identity of the sender, or assure informational integrity of an electronic record
o § 2.16 – transaction – an action or set of actions occurring b/w 2 or more persons relating to conduct of business, commerce or govt. affairs
Ø § 5 – Use of Electronic Records and Electronic Signatures
o § 5(b) – UETA applies only to transactions b/w parties each of whom has agreed to conduct transactions by electronic means
o thus, in Chapter 3 hypo, there is a better arg. that the Act could be invoked in the situation re the purchase of auto parts online, rather than the real estate contract or e-mail suggesting a large charitable donation. [see Ch. 3, p. 20, q. 6]
Ø § 7 – Legal Recognition of Electronic Records, Electronic Signatures and Electronic Ks
o § 7(a) – a record or signature may not be denied legal effect b/c it is in electronic form
o § 7(b) – a contract may not be denied legal effect or enforceability solely b/c an electronic record was used in its formation
o § 7(c) – if a law requires a record to be in writing, an electronic record satisfies the law.
o all the above imply that under UETA SOF may be satisfied by electronic record [see Ch. 3, p. 20, q. 5]
o § 7(d) – if a law requires a signature, an electronic signature satisfies the law
Ø § 9 - Attribution and Effect of Electronic Record and Electronic Signature
o §9(a)- an electronic record or signature is attributable to a person if it was the act of the person. The act of the person may be shown in any manner, including a showing of efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.
Electronic Records and Signatures in Commerce Act (E-SIGN Act)
Ø § 101 – signature, K, or other record relating to a transaction in interstate or foreign commerce may not be denied legal effect, validity or enforceability solely b/c it is in electronic form; and a K relating to such transaction may not be denied legal effect, validity or enforceability solely b/c an e-signature or e-record was used in its formation
Ø § 102 – a state may limit or supercede the provisions of the Act it the state has adopted UETA, or, in the alternative, if it has specified other procedures for the use of electronic records which are consistent w/ the Act
Ø § 106 – Definitions
o (4) electronic record – a K or other record created, generated, sent, communicated, received or stored by electronic means
o (5) electronic signature – an electronic sound, symbol or process, attached to or logically associated w/ a contract or other record and executed or adopted by a person w/ the intent to sign the record
o (13) transaction – an action or set of actions relating to the conduct of business, consumer or commercial affairs b/w two or more persons, including:
o (a) the sale, lease, exchange, licensing, or other disposition of personal property, including goods and intangibles, services, or any combination thereof; and
o (b) the sale, lease, exchange or other disposition of an interest in real property, or any combination thereof.
§ thus, in Chapter 2 hypo [p. 20, q. 4], the charitable donation may again not be covered and our client may have an out. Keep in mind if the state where our client is principally located has enacted UETA, it trumps this anyway.
Ø Validity and enforceability of an electronic K is still evaluated under existing substantive contract law. Therefore, if a statute, reg. or other rule of law requires a K to be in writing, then an electronic K must be in a form that is capable of being retained and accurately reproduced at the time of entering into the K.
Chapter 3B – Writings and Signatures – International Variations
Ø German Civil Law Approach to Electronic Signatures
o there are no formal requirements for a K to be valid, unless explicitly provided for by law, and it is possible for the parties to agree that a signature will have a particular evidentiary value. There is no requirement for a particular type of handwritten signature in general commercial law, but there are some requirements in electronic transactions. There are 5 types of signature requirements in German law:
o those provided by statute
o agreement by parties to apply statutory signature requirements
o notarial certification (these are highly-trained professionals, not like U.S. notaries. Thus, presence of a notary introduces authority, b/c he is licensed by the state, and process, b/c he will assure that all pages are signed, sealed, etc.)
o authentication (by notary)
o recordation in a protocol of declarations concerning court settlement
o German Digital Signature Law
o established general conditions under which digital signatures are to be deemed secure, and sets forth a voluntary technical standard which is intended to be secure for all applications.
o the main legal innovation of the Law is that it provides that use of the technical standard provided by the law will cause a digital signature to be “deemed secure”
UNCITRAL Model Law on E-Commerce
Ø Art. 1 – the Law applies to any kind of information in the form of a data message used in the context of commercial activities (any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment, financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business cooperation; and carriage of goods or passengers by air, sea, rail or road.)
Ø Art. 5 – information shall not be denied legal effect, validity or enforceability solely on the grounds that is it in the form of a data message
Ø Art. 6 – Writing – 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
Ø Art. 7 – Signature – where the law requires a signature of a person, that requirement is met in relation to a data message if:
o (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
o (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
Ø Art. 13 – Attribution of Data Messages
o (1) a data message is that of the originator if it was sent by the originator itself
o (2) as b/w the originator and the addressee, a data message is deemed to be that of the originator if it was sent:
o by a person who had the authority to act on behalf of the originator in respect of that data message; or
o by an information system, programmed by or on behalf of originator to operate automatically.
Chapter 4A – Click Wrap Agreements; Choice of Law and Forum – the Domestic Scene
Ø Caspi v. MSN (NJ 1999) – p brought suit against MSN under a contract for Internet services. At formation of the K, p had been prompted to view and assent to a membership agreement – which contains a forum selection clause – by clicking “I agree.” Registration for the service can only be completed once a prospective user has assented to all provisions of the membership agreement.
o Held: Under NJ law, a forum-selection clause will be enforced UNLESS:
o (a) the clause is a result of fraud or overweening bargaining power;