Academic journal article Santa Clara High Technology Law Journal

Electronic Contracting under the 2003 Revisions to Article 2 of the Uniform Commercial Code: Clarification or Chaos?

Academic journal article Santa Clara High Technology Law Journal

Electronic Contracting under the 2003 Revisions to Article 2 of the Uniform Commercial Code: Clarification or Chaos?

Article excerpt


In May 2003, Article 2 of the Uniform Commercial Code was revised to facilitate electronic contracting for the sale of goods. It now allows a contract to be formed by the interaction of two preprogrammed computers, even though no individual was aware of it. This article will examine apparent anomalies created by combining the new electronic contracting provisions with the surviving provisions of Article 2 and emphasize the need to provide contracting parties with the opportunity for human intervention before the contract is formed. After introducing the new provisions and the potential problems it creates, the article proceeds to analyze whether allowing contracting between computers comports with the longstanding notion of contractual intent. In addition, the new provisions are analyzed under Article 2's provisions relating to parol evidence, output and requirements contracts, and waivers and modifications. The focus then turns to whether the current common law doctrines of fraud and mistake afford any relief from contracts formed between preprogrammed computers. Lastly, the conclusion offers remedial measures in order to avoid the seemingly unintentional effects predicted by this article.


I.   Synopsis
II.  Introduction
III. Legal Framework For Electronic Contracting
IV.  Common Law Requirement Of Objective Manifestation Of
     Contractual Intent
V.   Electronic Agents And The Parol Evidence Rule
   A.   The Framework of the Parol Evidence Rule
   B.   The Parol Evidence Rule Meets the Electronic Agents
VI.  Electronic Agents And Output/Requirements Contracts
VII. Electronic Agents And Waivers/Modifications
VIII.   Electronic Agents And Avoidance Doctrines
   A.   Fraud
   B.   Mistake
   C.   Guidelines for Tailoring Avoidance Doctrines to Electronic
IX.  Conclusion


"It was the best of times, it was the worst of times ... " (1)

At last, the Uniform Commercial Code ("U.C.C."), Article 2, (2) has been revised in order to recognize electronic contract formation for the sale of goods. (3) Unfortunately, in doing so, the drafters simultaneously created a situation wherein parties utilizing the new electronic contracting provisions may find themselves bound by contracts they did not know about and/or subject to contractual terms which they did not have any ability to review or approve. Moreover, such parties may find themselves unable to extract themselves from such contractual relationships under current contract law. Accordingly, the new electronic contracting provisions tend to leave one wondering whether the long-awaited revisions to Article 2 created more problems than they solved.

Until the most recent amendments, courts frequently were called upon to determine whether electronic transmissions were "writings" (4) within the ambit of Article 2. How was one to satisfy the Statute of Frauds' (5) previous requirement of a sufficient writing where the parties only corresponded electronically? Was the battle of the forms (6) rendered inapplicable to mutual agreements consummated by computer transmission not evidenced by a writing sent within the definition of U.C.C. section 1-201(36)? (7) Despite the plain language of the relevant code sections, the U.C.C. was frequently stretched, twisted and sometimes ignored as judges attempted to bridge the technology gap between 1951 (8) and the modern era in which the use of computers and similar electronic transmitting implements have become commonplace in commercial dealings. The decisions rendered under the referenced code sections, as adopted by the respective states, are as varied on these issues as the men and women who don the black robes in an attempt to make sense of such matters.

For example, the consensus had been to assume that an email transmission met the definition of "a writing" under the U.C.C. for the purpose of satisfying the Statute of Frauds and to focus on whether the email sufficiently points to the existence of an agreement between the parties. …

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