E-Commerce Law

Sonam Kumari

INTRODUCTION

Electronic commerce (e-commerce) is relatively new, emerging and constantly changing area of business management and information technology. “Electronic commerce is sharing business information, maintaining business relationships and conducting business transactions by means of telecommunications networks”

[1]. The buying and selling of products and services by businesses and consumers through an electronic medium, without using any paper documents. It is a type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet.

Electronic commerce draws on such technologies as electronic funds transfer, supply chain management, Internet marketing, online transaction processing, electronic data interchange (EDI), inventory management systems, and automated data collection systems. E-commerce has allowed firms to establish a market presence, or to enhance an already larger market position, by allowing for a cheaper and more efficient distribution chain for their products or services.

With the advent of the Internet, the term e-commerce began to include:

A)  Electronic trading of physical goods and of intangibles such as information.

B)  All the steps involved in trade, such as on-line marketing, ordering payment and support for delivery.

C)  The electronic provision of services such as after sales support or on-line legal advice.

D)  Electronic support for collaboration between companies such as collaborative on-line design and engineering or virtual business consultancy teams.

Electronic data interchange (EDI):-

Electronic data interchange (EDI) is the structured transmission of data between organizations by electronic means. It is used to transfer electronic documents or business data from one computer system to another computer system, i.e. from one trading partner to another trading partner without human intervention. It is more than mere e-mail; for instance, organizations might replace bills of lading and even cheques with appropriate EDI messages.

EDI and other similar technologies save a company money by providing an alternative to, or replacing, information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc.   One very important advantage of EDI over paper documents is the speed in which the trading partner receives and incorporates the information into their system thus greatly reducing cycle times.

DISTINCTION BETWEEN E-COMMERCE & E-BUSINESS:

Electronic commerce can be broadly defined as the exchange of merchandise (whether tangible or intangible) on a large scale between different countries using an electronic medium – namely the Internet whereas E-business is the conduct of business on the Internet, not only buying and selling but also servicing customers and collaborating with business partners. [2]

 

KEY DRIVERS OF E-COMMERCE:

Key drivers of e-commerce are used to identify a comparison between technological advancement of e-commerce of different countries. It is often claimed that e-commerce is more advanced in the USA than in Europe. These drivers can be measured by a number of criteria that can highlight the stages of advancement of e-commerce. They are:

1 Technological factors – The degree of advancement of the telecommunications infrastructure which provides access to the new technology for business and consumers.

 

2 Political factors – including the role of government in creating government legislation,

Initiatives and funding to support the use and development of e-commerce and information technology.

 

3 Social factors – incorporating the level and advancement in IT education and training which will enable both potential buyers and the workforce to understand and use the new technology.

 

4 Economic factors – including the general wealth and commercial health of the nation and the elements that contribute to it.

 

SIX MAIN INSTRUMENTS BY WHICH E-COMMERCE IS CONDUCTED:-

 

1. Telephone: – The most important instrument of electronic commerce is the telephone. The telephone succeeded to achieve and maintain a leading role in commercial transactions because of its widespread availability, its versatility, low cost, user-friendliness of the instrument, necessity of a very little bandwidth i.e. capacity for data transmission and its cheap use for local calls and declining costs of long distance and international calls.

 

2. Television: – Television benefits from an even more widespread distribution than the telephone. The relatively low costs of a TV set and subscription charges for the viewer, as well as the user friendliness of TV, have contributed to its success as a means of commerce.[3]

 

3. Electronic payment and money transfer: – Electronic payment and money transfer systems like automatic teller machines (ATM), credit cards, debit cards or smartcards are also part of electronic commerce. These instruments typically only serve to make or receive payments.

 

4. Electronic data interchange (EDI):- EDI typically entails the exchange of documents and information between the computers of two businesses without human intervention.

 

5.  Internet: – The Internet is an extremely versatile means of commerce. Strength of the Internet is its multimedia potential with simultaneous voice, image and text transmission. The Internet is not only more versatile than other instruments of electronic and “traditional” commerce, it is also more advantageous in terms of delivery time and user costs. It also has disadvantages, such as, necessity of moderate computer skills, uncertainty about technical standards, the jurisdiction of transactions, the validity of contracts, the security and privacy of information, and the future role of government in regulating and taxing Internet activities.

 

6. Fax:-  The main advantage of the fax, another of the e-commerce instruments, lies in replacing traditional mail services with speedier document transmission. But this instrument lacks the potential for the transmission of voice communication and sophisticated images. Fax machines are usually more expensive. These characteristics have made the fax important in communication and commerce mostly between businesses, and less important among individual consumers.

 REASONS FOR THE GROWTH OF E-COMMERCE:-

•  Rapidly increasing Internet user base.
•  Technology advancements have bridged the gap between buyers and sellers online.
•  The emergence of blogs as an avenue for information dissemination and two-way communication for online retailers and e-commerce vendors.
•  Improved fraud prevention technologies that offer a safe and secure business environment and help prevent credit card frauds, identity thefts and phishing.
•  The young population finds online transactions much easier.

• [4]

 MODES OF CONDUCTING E-COMMERCE

 

 

Electronic commerce operates in all four of the major market segments:

i)  Business to business,

ii) Business to consumer,

iii) Consumer to consumer and

iv) Consumer to business.

• BUSINESS TO BUSINESS:  On the Internet, B2B (business-to-business), also known as e-biz and is defined as the exchange of products, services, or information between businesses such as between a manufacturer and a wholesaler, or between a wholesaler and a retailer.
• BUSINESS TO CONSUMER:  A transaction that occurs between a company and a consumer[5]. The term may also describe a company that provides goods or services for consumers.
• CONSUMER TO CONSUMER: Consumer-to-consumer (C2C) electronic commerce involves the electronically facilitated transactions between consumers through some third party. A common example is the online auction, in which a consumer posts an item for sale and other consumers bid to purchase it; the third party generally charges a flat fee or commission.
• CONSUMER TO BUSINESS: In internet commerce, means through which consumers decide what they want to pay, and the vendors decide whether or not to accept.   When a consumer writes reviews, or when a consumer gives a useful idea for new product development, then this individual is creating value to the firm, if the firm adopts the input.

 

LEGAL RECOGNITION OF E-COMMERCE

As commerce on the Internet has grown, the inevitable fallout from failed transactions and business relationships has resulted in a developing body of case law. In some cases, the legal issues that govern the analysis of the electronic commercial transaction are no different from those applied in a more traditional commercial setting.

For example, a fraudulent scheme perpetrated through print media is still the same fraudulent scheme when perpetrated on a web-site. Indeed, in the area of consumer fraud, the emerging issues in e-commerce are less related to substantive legal principles, than they are to procedural issues, such as the courts’ jurisdiction over out-of-state defendants and discovering and stopping fraud from taking place online.

 

Overview of “UNCITRAL MODEL LAW”

United Nations Commission on International Trade Law (UNCITRAL) Model Law on E-Commerce, the Government of India enacted the Information Technology Act in June 2000. The Act facilitates E-commerce in the country.

The United Nations General Assembly adopted the United Nations Commission on International Trade Law (UNCITRAL) Model Law on E-Commerce through a Resolution[6]  passed on 30 January 1997.  The UNCITRAL Model Law on E-commerce was drafted in order to serve as a document that the various countries of the world could use and evaluate and amend their own laws and practices and by providing a common legal platform on which all countries could model their domestic legislations allow the countries of the world to move towards a uniform international law on E-commerce.

The main objective of UNCITRAL Model Law of E-commerce is to offer national legislators with a set of internationally acceptable rules as to how the legal obstacles in the communication of legal significant information through paperless messages, may be removed and how a more secure legal environment may be created for E-commerce.

Any legislation pertaining to E-commerce will be a futile exercise unless it fills up the lacunae in the existing law regarding the validity of online contracts. Recognizing this factor, the Model law has incorporated a provision in Article 11 relating to the formation and validity of contracts:

In the context of contract formation, unless otherwise agreed by the parties, an offer and the acceptance of an offer may be expressed by means of data messages. Where a data message is used in the formation of a contract that contract shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose.[7]

 

Overview of the Indian law

The Information Technology Act, 2000 (“IT Act”) deals with contractual aspects of use of electronic records.

The validity of electronic transactions is established under the IT Act. The act establishes that an ecommerce transaction is legal if the offer and acceptance are made through a ‘reasonable’ mode. The objectives of the Information Technology Act, as outlined in the preamble, are to provide legal recognition for E-commerce transactions. The Act lays down procedures for networking operations and for civil wrongs and offences. The Indian Information Technology Act does not have any express provision regarding the validity or formation of online contracts.

For instance, a communication sent by an offeror to an offeree through indirect means, such as an email that passes multiple servers and spam mails, is not regarded as a reasonable mode under the IT act. Reasonable modes of acceptance in an ecommerce transaction are:

Direct mail from the offeree to the offeror.

Acceptance by conduct, which is pressing an ‘Accept’ button to an offer.

The IT act governs the revocation of an ecommerce offer and acceptance. An ecommerce transaction is said to be complete when the offeror receives acknowledgment of the receipt of the offer. Besides, an offeror has the liberty to terminate an offer, provided its acceptance has not been communicated by the offeree.

The Information Technology (Amended) Act, ITAA, was amended in 2008 to increase security of e-commerce transactions, with special provisions for legal recognition of digital signatures and electronic documents. Section 43A of ITAA holds ecommerce companies accountable for protection of personal data.

When an ecommerce company fails to protect personal data of its customers or is negligent in maintaining and implementing reasonable security practices, and if this results in wrongful loss of an online buyer, the laws are clear that its body corporate is wholly liable to pay the damages by means of monetary compensation.

 

CASE STUDY ON E-COMMERCE:-

Hill v. Gateway 2000, Inc., 105 F.3d 1147 (7th Cir. 1997)

Facts: The facts of this case consider the situation of terms-in-the-box contracts. Mr. and Mrs. Hill ordered a Gateway 2000 computer system. When they received this computer system, along with the packet of warrantees was an arbitration agreement, which precluded Plaintiffs from bringing any action against Defendant, other than in the forum of arbitration.[8] Hill was dissatisfied with the purchase and he filed a suit in federal court. The district court refused Gateway’s request that it honor the arbitration clause, holding that the record did not support a finding of a valid arbitration agreement, or that Hill had adequate notice of the arbitration clause.[9]

This case follows the same logic as the “shrink-wrap license” cases. Shrink-wrap license agreements typically involve notice of the agreement on the product packaging, inclusion of the full terms of the agreement inside the packaging, and prohibit access to the product absent an express indication of acceptance. Under such cases the contract does not form at the time of purchase; generally it forms when the purchaser makes the express indication of acceptance, for example by declining to return the product within a specified period of time.[10]

 

People v. Lipsitz, 663 N.Y.S.2d 468 (N.Y. Sup. Ct. June 23, 1997)

FACTS:  In this case, a New York court held that the defendant was subject to personal jurisdiction and liable for violating New York consumer protection laws, even though the defendant conducted its magazine subscription business globally over the Internet.

ANALYSIS:  The complaint alleged that the defendant had engaged in fraudulent and deceptive trade practices on the Internet by using and mis-using e-mail under various assumed names to sell magazine subscriptions that never arrived or were only delivered for a portion of the paid subscription period. In granting relief, the court first ruled that it had personal jurisdiction over the defendant because the defendants were located in New York, did business in New York and the acts complained of occurred within the state, notwithstanding the fact that the magazine subscriptions were offered for sale to a far greater geographic basis. Nor did prosecution offend the Commerce Clause as the consumer protection statute under which relief was granted was neither designed nor aimed at regulating conduct outside New York’s borders. The court then analyzed the defendants’ conduct under traditional consumer protection law, and held that the conduct violated New York laws. [11]

 

 CONCLUSION:-

Today’s world is the generation of internet. The whole work whether it is small or big is done through the internet, online education to shopping everything is now a day’s easily accessible via internet. This internet is growing day by day.

E-commerce is an inseparable part of internet. Growing of internet has also lead to the growth of e-commerce. It has entered in the stage of its rapid development. Almost every kind of business is being conducted via the modes of e-commerce.

By the help of e-commerce we can have every kind of business without having any infrastructure, large number of employees, etc.

E.g. Flipcart is an online shopping website from where we can order the products what we want at the cheaper price than that of shops because these products are tax free and directly delivered to us.

But it is also a bitter truth that everything which is having a good part also has a bad part. E-commerce is very useful but it has also some worst or negative side. There are various cases of fraud, misrepresentation, etc through the use of internet.

E.g. if someone had brought some product from a particular website and he had already made the payment through cash before delivery, after all that he came to know that the particular site from which he had ordered and make the payment was forged.

These kinds of cases are common now a day’s throughout the world. Hence various legislations are made to control these frauds.

In USA the legislature made in regard to it is UNCITRAL model law and in India we are having a specific provision namely Information Technology Act which provides the enactments mainly regarding the e-commerce. It is a great piece of work done by the legislatures in order to control and regulate the e-commerce.