E-contract Formation: U.s. and Eu Perspective
| Jurisdiction | United States,Federal,European Union |
| Publication year | 2007 |
| Citation | Vol. 3 No. 3 |
Abstract
The United States ("U.S.") and the European Union ("EU") offer contrasting approaches to contract formation in Cyberspace. Two foci can be identified with EU law: (1) consumer protection and (2) market harmonisation. The American approach, however, is characterized by self-regulation and economic rationale. This Article examines and compares the EU and U.S. regulatory approaches to electronic contracting.
Introduction
[1] The Internet has dramatically boosted the number of potential buyers for American goods. According to trade publication eMarketer, there are over 190 million Internet users in Europe. [fn1] The U.S. has built a substantial lead over Europe with the EU generally lagging behind the U.S. in e-commerce initiatives and Internet use in the late 1990s. But based on today's growth rate, Europe is quickly catching up. The U.S. share of the world Information Communication Technology ("ICT") market was 32.4% in 2004 with Europe (including Eastern Europe) accounting for 30.5%. [fn2] Forrester Research predicted that online sales in Western Europe, including business-to-business transactions, would have reached between USD $2.1 and $2.5 trillion in 2006. [fn3]
[2] Although the Internet is more or less an American affair, the EU is wielding incredible influence when it comes to regulating the Internet. With the addition of 10 new Member States, the EU aspires to shape global e-commerce law and to remove obstacles to the functioning of the European internal market through a coherent legal and regulatory framework. This framework is based on the application of key internal market principles and human rights protections. In contrast, the U.S. approach is often associated with a purely economic rationale.
[3] It is critical for U.S. businesses seeking to increase revenue from European customers to be aware of the strict EU regulations governing Internet sales. For example, EU laws afford consumers significant protections and allow them to sue foreign businesses in a consumer's domicile or place of habitual residence.
[4] The purpose of this Article is to illustrate the regulatory approach taken by the EU on the formation of electronic contracts and to juxtapose it with U.S. regulations. This Article will focus on key themes of direct relevance to electronic contracting.Overview of U.S. and EU Approaches To E-Commerce Regulation
Overview of U.S. and EU Approaches To E-Commerce Regulation
[5] In the U.S., the National Conference of Commissioners on Uniform State Laws ("NCCUSL") has developed two uniform state acts designed to bring legal certainty to electronic transactions. The two uniform acts are the Uniform Computer Information Transaction Act ("UCITA") [fn4] and the Uniform Electronic Transaction Act ("UETA"). [fn5] UCITA deals with contracts or transactions in "computer information". [fn6] A contract involving computer information (for example a software license) may be concluded electronically or may be concluded in person or by other means. Thus, while UCITA deals with information technology it does not solely deal with electronic contracting. UETA, by contrast, is a statute with broader reach - focusing on all types of electronic transactions.
[6] These uniform acts are not binding law in a particular state until the state chooses to adopt the act through its respective legislative process; however, uniform acts authored by NCCUSL are often adopted by all or many states and are generally representative of current and future trends. [fn7] For instance, 48 states have adopted UETA. [fn8] On the other hand, only two states have adopted UCITA. This may be due to the uniform act being amended twice (in 2000 and 2002) since it was first introduced in 1999. [fn9] Maryland and Virginia however have adopted UCITA - two states where software and Internet related businesses are located. Companies with establishments in those states may choose to have their software license contracts governed by UCITA. In this way, it may still have a significant effect on software licensing and electronic contracting.
[7] Congress has also entered the fray of electronic contracting when it passed the Electronic Signatures in Global and National Commerce Act ("E-Sign") in 2000. [fn10] Fundamentally, E-Sign adopts the most significant UETA provisions. E-Sign as a federal statute, and only preempts state law if a jurisdiction has not adopted UETA in an unrevised form. If a State has enacted UETA, then UETA may serve as the governing law for a contract between parties (even if it involves parties from different states). To the extent that a state has not enacted UETA, E-Sign would apply.
[8] Both the E-sign Act and the UETA prevent a rule of law from denying the legal effect of certain transactions in interstate or foreign commerce on the ground that the signature, contract, or record of such transaction is in electronic form or if an electronic signature or electronic record was used in the formation of a particular contract. Both provide that if a law requires a record to be in writing or retained in its original form, then an electronic record satisfies the law. Finally, both provide that if a law requires a signature, then an electronic signature satisfies that law. E-Sign does not, however, prevent states from altering or superceding this general rule of validity provided it is based on the enactment of UETA and so long as the state law does not contain an exception to the scope of UETA that would be inconsistent with E-Sign.
[9] The EU has created a coherent regulatory framework for electronic commerce. This framework includes the following Directives: Electronic Commerce Directive (hereinafter "E-Commerce Directive"), [fn11] the "Distance Contracts Directives," [fn12] Unfair Terms in Consumer Contracts Directive (hereinafter "Unfair Contract Terms Directive"), [fn13] and the Community Framework for Electronic Signatures (hereinafter "E-Signature Directive"). [fn14] In addition, a number of horizontal directives have been adopted, such as Privacy [fn15] and Intellectual Property Rights in Cyberspace. [fn16] A horizontal directive is EU legislation designed to cover all types of sectors. It is not designed to meet all the requirements of a particular sector. A horizontal directive complements specialized vertical sectoral legislation or a "vertical" directive.
[10] Finally, several sectoral directives have been adopted. These include the Directives on Consumer Credit, [fn17] the Directive on Package Travel, Package Holidays and Package Tours (hereinafter "Travel Packages Directive"), [fn18] and the Timeshare Directive. [fn19]Legality of Online Contracts
Legality of Online Contracts
[11] The E-Commerce Directive is designed to facilitate the provision of electronic commerce services. [fn20] Articles 9, 10 and 11 deal with electronic contracts in business-to-consumer ("B2C") transactions. The E-Commerce Directive adopts a minimalist approach, requiring a service provider to set out all the necessary steps so that consumers can have no doubt as to the point at which they are committed to an electronic contract. [fn21] Article 2(b) of the Directive defines a service provider as "any natural or legal person providing an information service."
[12] Electronic contracts are just as legal and enforceable as traditional paper contracts that are signed in ink within the EU. [fn22] Article 9 of the E-Commerce Directive requires Member States to ensure that electronic contracts are rendered valid and to remove any prohibition or restriction on the use of electronic contracts, with certain permitted exceptions. Permissible derogations from the E-Commerce Directive include the following:
Contracts that create or transfer real estate property rights, except rental rights;
Contracts requiring, in order to be valid, registration with public authority;
Contracts of suretyship; and
Contracts falling within the scope of the law of succession and family law. [fn23]
[13] In the U.S., UETA plays a similar role to the E-Commerce Directive in that it seeks to "remove barriers to electronic commerce." Unlike the E-Commerce Directive, however, UETA is "not a general contracting statute" and it does not require the recognition of electronic contracts. [fn24] Instead, it approaches its goal "by validating and effectuating electronic records and signatures" on which contracts may be based. [fn25] UETA provides:
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