18: E-Contracts

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Ch. 18: E
-
Contracts
-

No.
1

West’s Business
Law (9th ed.)

E
-
CONTRACT ESSENTIALS





Any offer to form a contract electronically should include:


(1)

a clear statement of the offeree’s
remedies

(and limits
thereon),


(2)

the applicable statute of
limitations
,


(3)

a description of what action on the part of the of
feree
will constitute
acceptance
,


(4)

a provision specifying acceptable forms of
payment
,
including applicable taxes and shipping costs,


(5)

the offeror’s
return and refund

policy (if applicable),


(6)

any
disclaimers of liability

the offeror wants inclu
ded
in the contract, and


(7)

a statement about the offeror’s handling of
information
provided by the offeree, or gathered by the offeror,
before and after acceptance.




Pre
-
Dispute Planning:

The offeror may also want to include
provisions dealing with
go
verning law
,
choice of forum
, and
alternative dispute resolution
.


Ch. 18: E
-
Contracts
-

No.
2

West’s Business
Law (9th ed.)

SHRINK
-
WRAP AGREEMENTS





Shrink
-
Wrap Agreement:
An agreement whose terms are
expressed inside the box containing the goods, such that a
buyer cannot make herself fully aware of the terms
of her
purchase until
after

she has purchased/leased the goods and
opened the box.




Typically, shrink
-
wrap agreements indicate that the
buyer/lessee/licensee must return the goods if she does
not consent to be bound by the terms contained inside
the box.




Courts are generally receptive to shrink
-
wrap
agreements


(1)

as long as the seller/lessor/licensor gives the
buyer/lessee/licensee
adequate time to review

the
terms, inspect the goods, and decide whether to
keep the goods and be bound, and


(2)

partic
ularly where the
exterior of the box

or some
other information

provided to the buyer/lessor/
licensee before she takes delivery
clearly indicates

that the purchase/lease/license is
subject to
additional terms

contained in the box or to be
delivered with th
e goods.


Ch. 18: E
-
Contracts
-

No.
3

West’s Business
Law (9th ed.)

ONLINE ACCEPTANCES





Click
-
On Agreement:

An agreement that arises when a
buyer/lessee/licensee completing a transaction online
indicates her assent to be bound by the terms of an offer by
clicking on a button or checking a box that says,
e.g.
,
“I
accept” or “I agree.” The terms of the agreement may appear
on the screen or on a related Web page or site.




Browse
-
Wrap Terms:

Terms and conditions of use
presented to an Internet user at the time she is using or
downloading a product, to which she
need not actively assent
before she can use or download the product.


Ch. 18: E
-
Contracts
-

No.
4

West’s Business
Law (9th ed.)

E
-
SIGNATURES





In many instances, a contract is unenforceable unless there is
some writing, signed by the party against whom enforcement
is sought, evidencing the contract. But, what
does “signed”
mean when a contract is formed electronically?




Electronic Signature:

An “electronic sound, symbol, or
process attached to or logically associated with an
electronic record and executed or adopted by a person
with the intent to sign the ele
ctronic record.”




Electronic Signature Technologies

include:




Digital Signature:

An
asymmetric cryptosystem

that creates a digital signature using two different
“keys”


one of which is private to the signer, and
the other of which may be used by a rec
ipient, with
the aid of a third party
cybernotary
, to verify the
source of the digital signature.




Signature Dynamic:

An encrypted
biometric
token

that allows a recipient to compare a signature
created with a stylus and an electronic digitizer pad
to a s
tored exemplar.


Ch. 18: E
-
Contracts
-

No.
5

West’s Business
Law (9th ed.)

PARTNERING AGREEMENTS





Partnering Agreement:

An agreement between a seller and a
buyer who frequently do business with each other on the
terms and conditions that will apply to all subsequently
formed electronic contracts.




The partne
ring agreement can also establish special
access
and
identification codes

to reduce the risk of
fraud or other unauthorized activity.


Ch. 18: E
-
Contracts
-

No.
6

West’s Business
Law (9th ed.)

UETA





Uniform Electronic Transactions Act (UETA):

Model state
legislation supporting the enforceability of electronic
contracts by


(1)

presuming that contracts entered into online, as well as
other electronic documents, are valid


i.e.
, that they do
not violate any applicable
statute of frauds
; and


(2)

recognizing and validating various forms of electronic
signatures r
elating to a transaction, including
encrypted
digital signatures
, names (intended as signatures) at the
end of e
-
mail messages, and clicks on a Web page
intended to identify the person making the click.




Freedom of Contract:

UETA only applies if all part
ies
to a transaction have explicitly or impliedly agreed to
conduct the transaction using electronic means.




UETA also provides statutory rules governing
attribution
, the
effects of procedural and substantive
errors

in an electronic
record, and the
effec
tive time

for sending and receiving
electronic records relating to a transaction.




As of April 15, 2003, 40 states and the District of Columbia
had adopted UETA.


Ch. 18: E
-
Contracts
-

No.
7

West’s Business
Law (9th ed.)

E
-
SIGN





Electronic Signatures in Global and National Commerce
Act (E
-
SIGN):

Federal legi
slation recognizing the validity of
electronic contracts, records, and signatures.




By its terms, E
-
SIGN yields to UETA if the state law
governing a contract includes UETA. Thus, E
-
SIGN
effectively puts states to a choice: enact UETA or have a
federal l
aw preempt your non
-
UETA contract law.


Ch. 18: E
-
Contracts
-

No.
8

West’s Business
Law (9th ed.)

UCITA





The Uniform Computer Information Transactions Act
(UCITA)

governs contracts for
computer information



that
is, electronic information obtained from or through the use of
a computer, or that is in a form ca
pable of being processed by
a computer


including contracts


(1)

to
license or purchase software

(whether reduced to
disk form or not),


(2)

to
create a computer program

or to
write an online
book or article
,


(3)

for
online access to databases
, and


(4)

to
distribute information via the Internet
.




As of April 15, 2003, only two states


Maryland and
Virginia


had enacted UCITA, and only a few other states’
legislatures had even considered enacting it.




UCITA “Shields”:

Opposition to UCITA is sufficie
ntly
strong that at least one state (Iowa) has enacted legislation to
“shield” its residents from the effects of UCITA if they
happen to enter into a contract that would otherwise be
governed by UCITA.


Ch. 18: E
-
Contracts
-

No.
9

West’s Business
Law (9th ed.)

AUTHENTICATION AND ATTRIBUTION





Authentication:

Si
gning a record or executing or adopting an
electronic sound, symbol, or the like with the intent of signing
the record.




Attribution:

To ensure that the person sending computer
information is the same person whose e
-
signature
accompanies the information,

UCITA sets forth
attribution
procedures

for identifying the sender.


Ch. 18: E
-
Contracts
-

No.
10

West’s Business
Law (9th ed.)

LICENSES AND ACCESS CONTRACTS





Mass
-
Market License:
An electronic form contract
presented


typically in either
shrink
-
wrap

or
click
-
wrap

form


along with a “package” of purchased or

downloaded
computer information.




Mass
-
market licenses arise in


(1)

consumer contracts,

and


(2)

transactions in which computer information is
directed to the general public and the end
-
user
licensee acquires the information in a
retail
transaction
.




Mass
-
market licenses are
automatically enforceable

as
long as


(1)

the terms of a license are
readily available

and


(2)

the licensee had an
opportunity to review

the
terms before accepting the license.




Access Contract:

A contract to obtain, by electro
nic means,
access to, or information from, another person’s information
processing system.


Ch. 18: E
-
Contracts
-

No.
11

West’s Business
Law (9th ed.)

ELECTRONIC SELF
-
HELP





Electronic Self
-
Help:

UCITA allows licensors to
cancel,
repossess, prevent continued use, and otherwise stop a
licensee from using

the lice
nsor’s computer information in
the event of a breach by the licensee of the license agreement,
subject to the following limitations:


(1)

a licensor
may

not

use electronic self
-
help against a
mass
-
market licensee
;


(2)

a licensor may not use electronic sel
f
-
help against a non
-
mass market licensee
unless

the
license agreement

or
some separate agreement between the parties
allows for
electronic self
-
help
;


(3)

a licensor who is otherwise authorized to use electronic
self
-
help may not do so without
fully discl
osing the
alleged breach

to the licensee and giving the licensee at
least 15 days’
prior notice
, in order to enable the
licensee to cure the breach prior to the licensor’s
exercise of electronic self
-
help; and


(4)

a licensor who is otherwise authorized to

use electronic
self
-
help may not do so if the licensor has reason to
know that its use will result in “substantial injury or
harm to the
public health or safety

or grave harms to
the
public interest
.”