Since the turn of the millennium, everyday consumer usage of the internet has increased dramatically, and e-commerce has grown with it. E-contracts can of course be made using older technologies like telephones and telex, but the number of e-contracts concluded has undoubtedly increased with the advent of e-commerce. The existing legislation governing conventional contracts could not have contemplated modern means of communication and how they can be used to reach agreements. Therefore, countries have enacted laws to recognise the validity of e-contracts. This chapter includes legislations from the US and the European Union, as well as model legislation drafted by the United Nations.
United Nations Commission on International Trade Law
In 1992, UNCITRAL noted that electronic means of communication were gaining significance in international trade, and a working group was established to begin preparing legal rules for e-commerce[1]. The UNCITRAL Model Law on Electronic Commerce was adopted on December 16, 1996, as an instrument that countries could use to enhance their national laws so they could be better applied to modern communication techniques[2]. Several countries, including the US, Australia, Canada, South Africa, and India have enacted national legislations influenced by the provisions of the Model Law[3].
Although the title of the Model Law refers to e-commerce, e-commerce has not been defined anywhere in the Law, and it has a broad scope that encompasses communication using electronic messages, transmission of text over the internet, telex and telecopy in certain circumstances, and communication through Electronic Data Interchange (EDI), which is computer to computer transmission of data[4]. The model law provides the basic legal framework required for recognising electronic communication as a means for recording and communicating information, and individual countries have to make their own procedural rules wherever necessary[5].
The fundamental principle behind the Model Law is its functional-equivalent approach, which recognises that the main obstacle to the use of modern technologies in trade are legal requirements prescribing paper-based documents[6]. The Model Law seeks to satisfy these requirements by expanding the scope of traditional notions like, “writing”, and “signatures” to include computer-based techniques[7]. The functional-equivalent approach focuses on the function of a paper-based requirement, and determines an equivalent way of carrying out that function in an electronic medium[8]. For instance, documents reduced in writing on a piece of paper can remain unaltered, can be reproduced, and can be presented in Courts. If certain technical and legal requirements are met, electronic records can perform the same functions[9]. However, it is emphasised that standards of security imposed on users of e-commerce should not be higher than those imposed in a paper-based-environment[10].
The Model Law applies to the use of data messages used in commercial activities, and it defines a data message as information generated, sent, received, or stored by electronic, optical, or similar means[11]. According to articles 5 and 5 bis of the Law, information shall not be denied any legal effect, validity, or enforceability solely on the grounds that it is in the form of a data message[12]. This provision makes electronic records as valid for legal purposes as their paper-based equivalents. Article 6 states that where information is legally required to be in writing, that requirement is met by a data message if the information contained therein is accessible and can be used for subsequent reference[13]. The information will be considered to be accessible if it is readable and interpretable, and if the software necessary to read it has been retained[14]. The Article also provides States the ability to list certain situations where data messages will not qualify as writing[15].
According to article 7, a legal requirement for a signature can be met in relation to a data message by any method which can be used to identify a person and to indicate that that person approved of the information, provided that the method is as reliable as is appropriate in a particular case[16]. It is apparent from this article that the Model Law focuses on the primary functions of a signature but does not prescribe a particular method for authenticating a data message. This is because the precise form of an electronic signature depends on the technology used by the correspondents[17].
Article 8 of the Model Law states that where a law requires information to be presented in its original form, that requirement is met by a data message if there is a reliable assurance to its integrity, and it is capable of being presented, if required[18]. Further, the integrity of a data message is assessed by seeing if the contained information has remained complete and unaltered[19]. Article 9 recognises the evidentiary value of data messages, stating that a data message cannot be denied admissibility as evidence in a legal proceeding solely on the ground that it is a data message[20]. The evidential weight of a data message is to be determined based on its reliability, integrity, and other relevant factors[21]. Article 10 states that where law requires any document to be retained, such a requirement can be met by retaining a data message[22]. Articles 5-10 demonstrate the functional-equivalent approach of the Model Law by providing for the use of data messages to perform different functions of paper-based documents.
Article 11 of the Model Law refers specifically to e-contracts and recognises their validity by stating that data messages can be used by parties for communicating offers and acceptances, and a contact cannot be denied validity solely on the ground that a data message was used in its formation[23]. However, countries have been left with an option to exclude certain situations from the application of this provision[24].
Article 13 applies in cases where there is doubt about whether a data message seemingly originating from a person was actually sent by that person. This is similar to the situation where the authenticity of a signature on a paper-based document is questionable. According to the Article, a data message is of the originator if it was sent by the originator[25]. A data message is deemed to be from the originator if it was sent by a person who had the authority to act on behalf of the originator, or by an information system programmed to automatically send messages on behalf of the originator[26]. Also, an addressee is entitled to assume that a data message is of the originator and act on that assumption in two cases: First, if the originator and addressee had previously agreed upon a method to ascertain whether the data message came from the originator, and the addressee used that method[27]. Second, if the data message resulted from the actions of a person who was able to gain access to the originator’s method to authenticate data messages due to his relationship with the originator or to an agent of the originator[28]. However, the addressee cannot act on such an assumption after he has received notice that the data message did not come from the originator, or if he knew or could have found out through reasonable effort that the message was not the originator’s[29].
Even though article 13(2) deems data messages sent on behalf of the originator to be messages from the originator, this provision is not intended to replace national laws on agency, and these laws must be used to determine whether an agent actually had the authority to send a particular data message[30]. Also, while article 13(4) provides the originator an opportunity to notify the addressee of a data message which was not actually sent by him, such notification is valid only if it actually relates to a data message not sent by the originator[31]. The originator cannot use this provision to avoid his obligations if a data message did indeed originate from him[32]. Also, such notices should give the addressee reasonable time to react[33]. The provisions of the model law about the time and place of dispatch of data messages have been described in the chapter on the differences between e-contracts and conventional contracts.
Tenth in the series of articles on E-contracts by Tanisha Agrawal and Aasil Singh, BA LLB students of Maharashtra National Law University, Mumbai
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[1] Glatt, supra note 111.
[2] Glatt, supra note 111.
[3] Tana Pistorius, Contract Formation: A Comparative Perspective on the Model Law on Electronic Commerce 35 The Comparative and International Law Journal of Southern Africa 129 (2002).
[4] UNCITRAL MLEC, Guide to Enactment, para 7.
[5] Id, para 13.
[6] Id, para 15.
[7] Id.
[8] Id.
[9] Id.
[10] Id.
[11] UNCITRAL MLEC, art. 2(a).
[12] Id, art. 5 & art. 5 bis.
[13] Id, art. 6.
[14] UNCITRAL MLEC, Guide to Enactment, para 50.
[15] UNCITRAL MLEC, art. 5(3).
[16] Id, art. 7.
[17] UNCITRAL MLEC, Guide to Enactment, para 53.
[18] UNCITRAL MLEC, art. 8(1).
[19] Id, art. 8(3).
[20] Id, art. 9.
[21] Id.
[22] Id, art. 10.
[23] Id, art. 11.
[24] Id.
[25] Id, art 13(1).
[26] Id, art. 13(2).
[27] Id, art. 13(3).
[28] Id.
[29] Id, art. 13(4).
[30] UNCITRAL MLEC, Guide to Enactment, para 84.
[31] Id, para 88.
[32] Id.
[33] Id.
