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Electronic Commerce 1

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Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow them to interact according to a variety of market mechanisms. They rapidly evolve towards trading of web services rather than commodity goods. Conflicts of interests are certain to appear. Possible concerns range from: security of transactions, fairness of the market mechanism, anonymity, and identity of business partners to service performance. Adequate solutions can be provided for most of the technology related concerns. However, a technology gap exists in addressing concerns in societal aspects of business interactions. 2

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Commonly known as e-commerce, consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. The amount of trade conducted electronically has grown extraordinarily since the spread of the Internet. A wide variety of commerce is conducted in this way:..prompting and drawing on innovations in electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), record management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at some point in the transaction's lifecycle, although it can encompass a wider range of technologies such as e-mail as well. 3

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A large percentage of electronic commerce is conducted entirely electronically. Almost all big retailers have electronic commerce presence on the World Wide Web. Electronic commerce that is conducted between businesses is referred to as business-to-business or B2B. B2B can be open to all interested parties (e.g. commodity exchange) or limited to specific, pre-qualified participants (private electronic market). Electronic commerce that is conducted between businesses and consumers is referred to as business-to- consumer or B2C. This is the type of electronic commerce conducted by companies such as Amazon.com. Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of the business transactions. 4

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In the U.S., some electronic commerce activities are regulated by the Federal Trade Commission (FTC). These activities include the use of commercial e-mails, online advertising and consumer privacy. The Federal Trade Commission Act regulates all forms of advertising, including online advertising, and states that advertising must be truthful and non-deceptive. The authority under Section 5 of the FTC Act, prohibits unfair or deceptive practices. The FTC has brought a number of cases to enforce the promises in corporate privacy statements, including promises about the security of consumers personal information. As result, any corporate privacy policy related to e- commerce activity may be subject to enforcement by the FTC. 5

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Contemporary electronic commerce involves everything from ordering digital content for immediate online consumption, to ordering conventional goods and services, to facilitate other types of electronic commerce. On the consumer level, electronic commerce is mostly conducted on the World Wide Web. An individual can go online to purchase anything from books or groceries, to expensive items like real estate. Another example would be online banking, i.e. online bill payments, buying stocks, transferring funds from one account to another, and initiating wire payment to another country. All of these activities can be done with a few strokes of the keyboard. On the institutional level, big corporations and financial institutions use the internet to exchange financial data to facilitate domestic and international business. Data integrity and security are very hot and pressing issues for electronic commerce today. 6

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A contract is a statement of intent that regulates behaviour among organisations and individuals. Its reification (making a data model for a previously abstract concept) are fulfilled between parties, refused or waived as future events occur. Because the contract parties are assumed to be autonomous and self- interested, conflicts will occur, and an appropriate resolution mechanism is required. An electronic contract can be viewed through transformations that are applied to it during its lifecycle in the electronic marketplace. Conceptually, the lifecycle can be split into the three stages of contract drafting, formation, and execution. First : contract drafting phase The drafter constructs an instance of the template. In this phase the contractual roles, abstract business interactions and contractual situations are specified. If the drafter acts as a regulator, rules and constraints can be added. This should be adhered to during the contract execution phase. The template typically has a number of free variables that are agreed upon in the next phase. 7

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Second : Contract formation phase - Participants assume contract roles and negotiate the details of their responsibilities. The negotiable variables of the contract (deadlines, order of actions) become fixed, and concrete business interactions are bound to the abstract ones defined in the template. The relationships between contract parties are created and are captured in the contract statements that imply obligations and rights of parties. Third : Contract execution phase Actual delivery of contract consideration happens. Typically this phase constitutes service or goods delivery, invoicing, bill calculation, presentment and payment. The interactions between the parties may be monitored for their conformance to the terms of the contract. 8

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Generally, a contract is formed when acceptance is communicated to the offeree. The reliability problem often arises when the offeree has dispatched an acceptance which either is never received by the offeror or arrives after the expiry of the offer. Case law tends to distinguish between delayed forms of communication, such as mail and telegrams, and virtually instantaneous forms of communication, such as the telephone and fax machine. Early case law saw the development of the "mailbox rule" for ordinary mail, wherein acceptance is deemed to be communicated to the offeree when it enters the postal system. This rule has been extended to telegrams and even couriers. The offeror, however, is free to put conditions on the communication of the acceptance (e.g., offer must be received; must be by telephone). Mail box rule n. in contract law, making a written offer or acceptance of offer valid if sent in the mail, with postage, within the time in which the offer must be accepted, unless the offer requires acceptance by personal delivery on or before the specified date. However, relying on this so-called "rule" can be dangerous, since the party awaiting the acceptance or payment may cancel the offer if there is no response in hand when the time runs out. 9

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In contrast to the "mailbox rule", acceptances communicated using instantaneous (immediate) means, such as the telephone and fax, are formed when the offeror receives the acceptance. These means are analogous to face- to-face communications; presumably both parties will be aware of any break in the connection and be able to take corrective action. There is little case law on acceptance by electronic message. 1. Some cases suggest the general rule is that the acceptance must be received by the offeror and that the mailbox rule is only a narrow exception. 2. Receipt of electronic messages may not be immediate and since the mailbox rule, it could be argued that it should be extended to electronic mail. Although some electronic message systems provide almost immediate transmission, suggests that Internet e-mail is inconsistent and could take minutes, hours or even days to reach its destination. 10

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Another justification for a mailbox-like rule for electronic mail is the offeror's role in delivery. While telexes and faxes are received at the recipient's location almost immediately after they are sent, some electronic mail systems use mail servers operated by third parties, the recipient has to take steps to connect to their `mailbox' on the mail server before the communication is complete. Since the offeror is partially responsible for ensuring delivery, it may not be appropriate to allocate the entire risk in the delivery of electronic mail to the offeree. It is also quite possible that no simple rule will govern electronic messages. In a recent case involving telex communication, England's House of Lords seemed to be backing away from the application of a general rule: The message may not reach, or be intended to reach, the designated recipient immediately: messages may be sent out of office hours, or at night, with the intention, or on the assumption, that they will be read at a later time. There may be some error or default at the recipient's end which prevents receipt at the time contemplated and believed in by the sender. No universal rule can cover all such cases; they must be resolved by reference to the intentions of the parties, by sound business practice 11

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Traditional contract doctrine centres around the requirement of a `meeting of the minds'. The involvement of two or more people, negotiating either face-to-face or through some means of communication. The contract formation discussion revolves around the use of computer technology as a means of communication by contracting parties, a far more difficult issue is beginning to emerge with the automation of the contracting process. However, modern technology is evolving with a goal of eliminating human involvement in transactions. How traditional contract doctrine will accommodate situations where the only `minds' that meet are programmed computer systems is uncertain? 12

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Interactive electronic data interchange (EDI) is already beginning to emerge in business transactions, as follow: Example: A sending computer, on its own initiative, will make an offer to a recipient computer for the purchase of goods based on the sender's inventory needs. The recipient computer will accept the offer if the recipient has the quantity of product in stock. This two-way conversation between computers will further culminate in negotiations. One computer will make an offer to buy 100 items, and the other will respond with a counteroffer of 50 items due to a shortage in stock. The computer that made the original offer will thereafter decide on its own whether to accept the 50 items or reject the counteroffer and search for another vendor. 13

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