Download - Electronic Commerce 1. Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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Page 1: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

Electronic Commerce

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Page 2: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Page 3: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Page 4: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Page 5: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Page 6: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Page 7: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Page 8: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Page 9: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Page 10: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Page 11: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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

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Page 12: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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?

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Page 13: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

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.

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Automated transactions will not be limited to business-to-business transactions. According to Colin Crook, head of

technology at Citibank, in the future "You're going to hand off your personal affairs in cyberspace to automatic agents who represent you."

In a fully automated system, human decisions are involved in creating the system and making it accessible; humans assent to the system, not specific transactions.

Traditional contract doctrine looks at the intention of the parties surrounding the offer and acceptance of the specific agreement in dispute.

As such, it is not clear whether people can be bound by offers or acceptances made by their computer on their behalf. They may have had no knowledge of, let alone intention to enter, a given transaction.

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Page 15: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

The main issue is attribution -- when do the actions of an agent become attributed to the principal?

While agency law plays a role in attribution when using human agents. Therefore, the existing law of agency may not be very helpful in determining attribution with automated agents.

With automated transactions, another challenge for the courts is determining where the communication system ends and the legal agent begins. The challenge is separating responses that are part of the functional communication process, such acknowledging receipt of a message, from responses that are part of the contract formation process, such as an acceptance of an offer.

In a recent U.S. case, the court dealt with holding an order tracking as merely a functional acknowledgement of the order, the court stated "Such an automated, ministerial act cannot constitute an acceptance." However, one can envision a more sophisticated system that verifies the identity of the orderer, checks the inventory level, allocates a portion of the inventory to fulfilling the order, and then issues the order tracking number. This is no less automated, yet it may be in both parties' interests to consider it a legal acceptance.

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Page 16: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

As this is an emerging issue, legal response has been limited. Standard trading partner agreements still assume human involvement in the process.

In addressing the attribution issue in electronic contracting, the proposal focuses not on humans who make decisions on specific transactions, but on how risk should be structured in an automated environment.

The object is to create default rules for attributing a message to a party. The party described in the message as the originator will be bound by the terms of the message if the message was authenticated using a procedure previously agreed to by the parties.

This provision gives primacy to authentication procedures in trading partner agreements. In addition, a fault provision attributes the message to a party if the relationship between the wrongdoer and that party enabled the wrongdoer to gain access to and use the authenticating method.

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Page 17: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

Few differences between traditional and electronic contracts. Aside from the means of delivering legal requirements, the

specific aspects of a contract remain the same whether on paper or online.

There are numerous steps you can take to create an electronic contract that is legally binding and well edited.

Step1: Shop around for electronic contract software that you can use for all of your online legal forms. You should only purchase this type of software if you will be creating a number of different contracts and legal documents that need to be adjusted for each recipient.

Step2: Include updated contact information for all parties involved in your electronic contract. When you create a contract online, you should place addresses and phone numbers at the top of the first page, as well as following the signature page.

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Page 18: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

Step3: Manipulate aspects of your standard contract that are variable based on your customers. Whether you use a word processing software or contract generator, you should be able to create custom contracts by adjusting deadlines and sales numbers. The adjustment of terms is easier in electronic contracts than traditional documents because they can be done without wasting paper or crossing out lines.

Step4: Add an electronic signature section to your contract for each party involved. In order to verify agreement by all parties, include lines for name, job title and Social Security numbers. This identifying information helps bind each party to the guidelines of the contract.

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Step5: Request a hard copy of every electronic contract you send out. In addition to the electronic signature section, you should include a standard signature line for every group involved in the actions bound by the contract. The electronic and hard copies of the contract can be stored for use in future dealings or litigation.

Step6: Lock out editing options on electronic contracts before you send them out for use by clients or vendors. It is important to avoid confusion caused by accidental adjustments of any numbers, product names and other details on an electronic contract. Search through your contract software's tool bar for security functions and enable them after performing a final edit.

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Page 20: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

A signature is a stylised script associated with a person. In commerce and the law, a signature on a document is an indication that the person adopts the intentions recorded in the document.

An electronic signature is any legally recognised electronic means that indicates that a person adopts the contents of an electronic message.

Increasingly, digital signatures are used in e-commerce. The concept itself is not new, with common law jurisdictions having recognising telegraph signatures as far back as the mid-19th century and faxed signatures since the 1980s.

In many countries, including the US and the EU, electronic signatures have the same legal consequences as the more traditional forms of executing of documents.

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Page 21: Electronic Commerce 1.  Electronic marketplaces are e-commerce infrastructures that aggregate potentially large numbers of buyers and sellers and allow.

What is an electronic signature? An electronic signature is essentially something in

electronic form which: (a) is incorporated in an electronic communication or electronic data; and

(b) implies to be used to establish the authenticity and/or the integrity of that communication or data.

Are there different types of electronic signature? Yes, the term ‘electronic signature’ is intended to be

technology neutral and electronic signatures come in a variety of forms. Indeed a large number of people may be using electronic signatures every day without even being aware that they are doing so. For example, an ‘I accept’ button used when buying goods or services on-line, a PIN number and digital signatures are all forms of electronic signature.

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What is a digital signature? A digital signature is a particular type of electronic signature.

Digital signatures rely on a form of encryption to authenticate messages. In this type of encryption two 'keys' are used: (i) the private key, which is known only to the signatory and is used to create the digital signature and change the message into encrypted form; and (ii) the public key, which is used by a relying party to verify the digital signature and decrypt the message.

What are the common uses of electronic signatures? Electronic signatures have a variety of uses, and common

ones relate to their use in e-government and on-line banking. Many countries have launched e-government applications,

often through the use of an electronic ID card, which give users access to a range of public services. Equally personal e-banking is now extremely common, often based on simple forms of electronic signature (one-time passwords).

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Are electronic signatures admissible as court evidence? Yes they can be admissible. This is clear both from the

Electronic Communications Act 2000 in the UK. However, certain types of electronic signature (for example those with particular security requirements around their use) may be regarded as being more reliable evidence than others. This is where certification service providers (CSPs) may have a role.

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What is the role of certification service providers? CSPs issue certificates relating to electronic signatures

which can be relevant to the admissibility of the signature and potentially also the reliability of that signature.

In addition, it may be that advanced electronic signatures with associated qualified certificates will be treated as a more reliable form of signature than other types of electronic signature. This is because a qualified certificate meets all necessary legal requirements.

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How commonly used are electronic signatures? In 2006 the European Commission issued a report

referred to the wide-ranging use of electronic signatures generally, but noted that the use of advanced electronic signatures combined with qualified certificates (as mentioned above) had been lower than expected.

The Commission highlighted certain technological and economic reasons for this. In particular, service providers were often only developing authentication devices for use with their own services, slowing down the process of developing multi-purpose e-signatures.

The Commission did highlight the increasing use of e-government applications which could help trigger market growth.

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