Developments in the Law of Electronic Commerce

By Montana, John C. | Information Management, January 2000 | Go to article overview

Developments in the Law of Electronic Commerce


Montana, John C., Information Management


Parties increasingly engage in transactions of legal significance via electronic means, and inevitably, some of those transactions end up disputed and litigated. Equally inevitably, courts are being forced to examine many questions of law, and legislatures and other legal authorities are being forced to address them proactively through statutes and regulations as well. This article will examine some recent developments in this area.

The Uniform Commercial Code

In the United States, legal development is hampered by a federal system that makes each of the 50 states an independent jurisdiction for many purposes. Over the years, this system has created considerable confusion and difficulty when different states have differing statutes or doctrines on matters that cross state boundaries. Commercial law is one of these areas. The likelihood that a contractual matter will have a different legal significance or different outcome based upon the state where it is litigated creates a great deal of uncertainty for the parties, and thereby inhibits commerce.

An increasingly popular solution to the difficulties posed by a large number of independent jurisdictions has been the development and adoption of model uniform laws throughout the 50 states. The National Conference of Commissioners on Uniform State Laws considers and drafts such laws and has promulgated a number of them over the years. Examples of widely adopted uniform laws include:

* The Uniform Rules of Evidence

* The Uniform Child Custody Jurisdiction Act

* The Uniform Photographic Copies of Business Records as Evidence Act

* The Uniform Commercial Code

The Uniform Commercial Code (UCC) is a wide-ranging body of law governing commercial transactions of many types, from contracts to checks, drafts, and other banking law. It is intended to provide a high degree of uniformity and certainty in commercial areas, and its widespread adoption has ensured just that.

The UCC does not, at present, address questions of electronic commerce explicitly. However, a new article, currently in draft stage, addresses a number of gray areas created by electronic commerce. Whether these solutions will survive the drafting process in current form and ultimately be applied to other areas remains to be seen. In present form, they are restricted to a very narrow area of commerce, but the draft solutions provide the first glimpses of the legal system's attempts to address some of the issues, and some insight into the current mind-set of those who decide such things.

UCC Article 2B

The UCC is divided into a number of articles dealing with different areas of the law. The new article deals with the commercial sale and licensing of software and similar products; its provisions, if enacted, would only be binding upon transactions of that sort. Nonetheless, the provisions state general legal principles, and because they assume that many software transactions will be entirely electronic in nature, the legal principles are stated in terms of electronic communication and technology. (UCC Article 2B can be accessed at www.law.uh.edu/ucc2b/080198/080198. html.)

Choice of Law

In the absence of a contract provision otherwise, contracts signed face to face are governed by the law of the jurisdiction where the signing took place. For electronic contracts, where the parties are in different jurisdictions and may never even meet, this default is obviously inadequate. Article 2B provides for this:

(b) In the absence of an enforceable choice-of-law term, the following rules apply:

(1) An access contract or a contract providing for electronic delivery of a copy is governed by the law of the jurisdiction in which the licensor is located when the agreement is made.

(2) A consumer transaction that requires delivery of a copy on a physical medium to the consumer is governed by the law of the jurisdiction in which the copy is delivered or, in the event of non-delivery, the jurisdiction in which delivery was agreed to have occurred. …

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