Paper Example: Applicable Law to Electronic Contracts

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 consumers 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.

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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 agreements 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.

Organization for Economic Co-operation and Development (OECD)

With its Working Party on Information Security and Privacy, OECD has focused on investigating numerous issues concerning electronic signatures and authentication. In 2005, a report was published by OECD on the cross-border usage of authentication, as well as defining the potential and actual barriers to the use of digital signatures across the border.

UN Convention on Contracts for the International Sale of Goods (CISG)

In 1980, CISG was espoused and in 1988, it was established as a uniform force for sale of goods globally. CISG operates on the concepts of uniformity as reflected in its preamble, which states that the Convention aims to espouse a uniform set of rules to govern contracts for the worldwide sale of goods. It was aimed at promoting the development of transnational sale and eliminating the legal hurdles in international trade. When the convention was being drafted in 1970s, the drafters did not foresee the sharp development of e-commerce currently experienced. As a matter of fact, there are no provisions in the Convention that cater for e-commerce or e-contracting. Currently, the bigger percentage of international trade is through e-commerce, which begs the question, will the Convention be amended to cater for the new reality? In the same regard, can a contract entered into via electronic means operate under the legal provisions of CISG? If the Convention lacks provisions for e-commerce, then what solutions has it established in the event of legal disputes resulting from e-commerce? Thus, the General Assembly in an attempt to lessen particular official requirements observed in the international treaties, it adopted the United Nations Convention on the Use of Electronic Communications in International contracts, 2005. It included the CISG in the use of electronic communication and the New York Convention 1958.The Conventions objective is to extenuate the gap and promote e-commerce sale agreements by vouchsafing that ecommerce transaction are as enforceable and valid as their paper-based counterparts.

The Scope of e-contracting under CISG

With the swift growth of information and communication technology, there is a significant transformation in the way business is conducted, thus need for development of more relevant rules and regulations to administrate the new business relations. However, the challenge is, the development of new legislation is too slow and does not keep up with the fast evolution of ICT. In the same regard, any legal provision that is relevant at the moment would be obsolete in the near future and would be inoperative. CISG does not provide any requirements regarding the form in which the contract should be concluded. Drafters of the Convention in Article 13 stated that contracts under CISG can be in writing, expressed orally or supported by conduct but with a documented evidence such as video footage or witnesses (Assaduzamman, 2016). There is no mention of the form requirement in this article, which provides greater flexibility to the parties involved in international sales contracts. It also facilitates oral agreements, as well as agreements resulting from the use of the modern communication technology. Article 11 of the CISG recognizes two forms of electronic communication including telegram and telex, which were the fastest communication methods that existed in the late 1970s.

Currently, programme of standard forms that are software-based and facilitate international sale transaction fall under article 13 of the CISG. It provides that during the initial stages of contract development, the parties should determine the type of documents that should be exchanged electronically to facilitate their transactions. These pre-agreement communications are very important and should be printed in the event they are needed in future. The Principles of European Contract Law (PECL) also supports the application of electronic communication technology under Article 13.In the modern world, electronic communication technology is widespread and telex and telegram are almost obsolete thus, it should be covered under article 13 of the CISG. Moreover, clickwrap agreements should also fall under article 13 because communication in such agreement is made possible when the user clicks on to confirm the contract of sale. Therefore, the parties have the option of printing their records of transactions and referring to them when need arises....