Electronic commerce – B2B contracts

Introduction E-Commerce is sharing business information, maintaining business relationships and conducting business transaction by means of telecommunications network It is conducting the exchange of information using a combination of structures and unstructured messages across the entire range of networking technologies The Internet’s WWW has been the prime driver of contemporary E-commerce E-commerce enables organizations of all sizes and in all market sectors to improve their competitiveness

Traditional vs. electronic Traditional commerce: Firms engages in many other activities in addition to buying and selling their product Traditional commerce include: buyers and sellers using old fashion method to do business Electronic Commerce: Firms has used various electronic communications tools to conduct different kinds of business transactions. Electronic Commerce use technology to moves people around the world

Online/E-commerce E-commerce is the paperless exchange of business information using electronic data interchange (EDI), e- mail, electronic bulletin boards, fax transmission, electronic funds transfer Internet shopping, online stock and bond transactions, downloading and selling of „soft merchandise“ (software, documents, graphics, music etc.) The concept of e-commerce is all about using the Internet to do business better and faster

Pros for consumer Price Quick, convenient, easy In depth product overview Consumer reviews Find products online that you cannot find at a local, real store Doors are always opened to customers, 24/7 No sale pitches (store empoyees)

Cons for consumer Unable to examine products personally New way for cyber-criminals to steal personal, financial info and even your identity Product overload Do not always know what you are getting Shipping delays (purchases and returns) Slower product verification and problem resolutions Loss of emotional fulfillment

Pros for businesses Increased market share (global) Provide for niche markets Operation costs Increased productivity Survey of customers Less likely to make returns

Cons for businesses Elimination fo face to face interaction Distribution (in-stock) Competition (prices down=profit margin down) 24/7 (updating, responding etc.)

Barriers to e-commerce 1. Access and Connectivity 2. Authentication and Standardization 3. Cyber Laws 4. Technology

E-commerce Information exchange product/service exchange

E-commerce Information exchange Partner/product search Negotiation, market, auction Contract Contract fulfilment Legal information Etc.

E-commerce Product/service exchange (micro)payment (intangible) products Logistics of products and services Subscription mechanisms

Types of e-commerce B2B – examples Internet bookshop, shopping malls, auctions, collective buying B2C – examples Finance – stock market, electronic banking B2B support, marketsE-commerce C2C – examples G2B/B2G – information, procurement, tax administration, medicine, education, weather

Role of institutions Facilitate the transactions Provide efficient price discovery mechanism, standard transaction protocols, settlement mechanisms Enhance trust through Provision of info on potential partners Legal provisions to back up contracts Provide securities/guaranties

Practical concerns for e-commerce deals Identity and capacity of seller or buyer Authenticity of offer and acceptance (digital signatures) When and where contract formed Governing law Terms and conditions (click through)

Practical concerns for e-commerce deals Agreement on electronic payment system Security of information exchanges Consequences on breach Storing electronic data to prevent alteration Technical and legal barriers

Contracts – the basics Offer Acceptance Intention to enter legal relations Consideration Legal capacity Genuine consent

Contract formation Computers are not the first human actors to be involved in contract formation – vending machines, tickets Thorton v Shoe Lane Parking Ticket Ltd. - a contractual term displayed or communicated to contractual party after consensus ad idem is reached is not incorporated into the contractual terms

Contract formation E-commerce directive Electronic contracting, SPAM s, protection of ISPs and other third parties carriers E-commerce directive – Arts. 9 – 11

International organizations Hague Conference on Private International Law The EU Inter-American Specialized Conference on PIL UNCITRAL

International instruments The EU Brussels I Regulation Rome I Regulation E-commerce directive International conventions The Hague Convention 2005 on choice of court agreements CISG

International instruments United Nations Convention on the Use of Electronic Communications in International Contracts, 2005 Rotterdam Rules – the UN Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea 2008 International substantive law, electronic transport documents Deemed to be one the greatest steps towards harmonization of international business

International instruments UNCITRAL Model Law on Electronic Commerce United Nations Convention on the Use of Electronic Communications in International Contracts, 2005 Do not contain rules on jurisdiction, time and place of sending and receiving data messages/infomation - > interpretation of place of business, place of dimicile etc. Valuable for analyzing parties location in cyberspace

International instruments The Hague Convention 2005 on choice of court agreements 1st – U.S. Only to B2B Exclusive choice of courts agreements Expressly aims at applicability to the digital age (Arts. 1, 3c)

In preparation, pending Draft Hague Principles on the Choice of Law in International Contracts Proposal for Regulation on Common European Sales Law

Jurisdiction „…for on-line contracts in general, in the matter of jurisdiction and applicable law, if the performance of the relevant obligation takes place off-line, the existing rules of private international law referring to the place of performance remain relevant. If the performance takes place on-line, the place of performance is not appropriate as a connecting factor. In that case, the relevant connecting factors are the location of each of the parties involved“. Geneva Round Table on Electronic Commerce and Private International Law

E-commerce directive No rules on PIL or jurisdiction

Brussels I Regulation General jurisdiction Art. 4 Special jurisdiction Art. 7/1 Prorogation Art. 25

Regulation Brussels I - Article 7 section 1 1. A person domiciled in a Member State may, in another Member State, be sued: a. in matters relating to a contract, in the courts for the place of performance of the obligation in question; b. for the purpose of this provision and unless otherwise agreed, the place of performance of the obligation in question shall be:  in the case of the sale of goods, the place in a Member State where, under the contract, the goods were delivered or should have been delivered,  in the case of the provision of services, the place in a Member State where, under the contract, the services were provided or should have been provided

Regulation Brussels I - Article 5 section 1 Special jurisdiction No real connection Multiple places of delivery of goods or provision of services Not within Article 7/1 Dispute concerns more than one obligation Several obligations but with one principal obligation Article 4 Each obligation has its own jurisdiction The principal obligation determines jurisdiction over the whole claim One obligation has been performed in a number of states Art. 7/1 n ot applicable?

B2B electronic contracting Is article 7/1 still applicable and how? Necessary to distinguish  Electronic contract for the sale of goods X for the provision of services  Physical goods/services X digitised goods/services  Physical performance X digitised performance

B2B electronic contracting Place of performance? 1. The place of dispatch/uploading (Art. 10/3 UN Convention) 2. The place of receipt/downloading 3. The place where either the seller or recipient has a closest connecting factor

B2B electronic contracting - conclusion The place of performance  At recipient‘s place of business indicated by the party  If not indicated or more than one – the one with the closest relationship to the relevant contract  If no place of business – recipient‘s domicile  Supported by:  Art. 60 Brussels I, Art. 2 e-commerce directive, Art. 31 CISG, Art. 15/4 Model Law, Art UN Convention

Brussels I Regulation Art. 25 Only provision that explicitly aknowledges agreements made via electronic means, which provide a durable record fo the agreement Choice of jursdiction clause in the standart conditions and terms on website Click-wrap agreement – „I agree“ + must be made available Problem – to prove contractual consensus + incorporation

Brussels I Regulation Art. 10/1b) – the concluded contract must be filed by the service providers and must be accessible Art. 10/3 – contract terms and general conditions must be made available in a way that allows to store and reproduce them No consequnces if not fulfiled

Jurisdiction over E-Commerce Transactions: United States Law The Uniform Computer Information Transactions Act

Personal jurisdiction Constitutional rule of due process Rule of fairness Requires sufficient contacts with forum state

Zippo criterion Three categories: Doing business with residents of forum jurisdiction Posting a passive website Middle category: depends on “the level of interactivity and commercial nature of the exchange of information”

Revision of the Zippo test Directs electronic activity into the state “With the manifested intent of engaging in business or other interactions within the State” Gives rise to a cause of action — ALS Scan v. Digital Svc. Consultants

Effects test Intentional actions “Expressly aimed at the forum state” “Causing harm, the brunt of which is suffered—and which the defendant knows is likely to be suffered—in the forum state”

Revision of the effects test Takes “expressly aimed” requirement more seriously “Mere foreseeability that the defendant’s conduct would have such an effect is not sufficient.” — Young v. New Haven Advocate

Convergence of Zippo and effects test Both require the defendant to take some action that indicates a specific intent to have contacts with people or businesses located in the territory where the court sits

International applications Application of Zippo: Graduate Management Admission Council v. Raju: targeting of US found based on providing ordering instructions Applications of the effects test: MGM v. Grokster: defendant charged with knowing of effect on California industries Yahoo! v. LICRA: no jurisdiction because no wrongful conduct

UCITA Like the Uniform Commercial Code But Unlike UNCITRAL Model Law on Electronic Commerce Unlike Uniform Electronic Transactions Act

UCITA is controversial Opposed by consumer protection advocates Adopted in only two states Banned by “bomb-shelter” legislation in four states

Links _Ebook.pdf _Ebook.pdf lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2001:012:00 01:0023:EN:PDF lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2000:178:00 01:0016:EN:PDF

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