CREATING ENFORCEABLE ELECTRONIC CONTRACT

CREATING ENFORCEABLE ELECTRONIC CONTRACT

INTRODUCTION

Commercial transactions have evolved over the years from the traditional methods of business to the electronical methods in order to meet with modern trends and demands. The emergence of internet has proved to be a vital communication and business tool. Sadly, many legal practitioners are still held down by the paper-based contractual relationships. It is said, he who fears the sun will not become chief, hence, the need for legal practitioners to be at par with modern trends.

The traditional paper-based transactions, with their hurdles, are gradually paving the way for Internet's revolutionary ease of doing business, and the need for contract law to keep pace with technological change. This necessitated legislations to throw their weight behind it in the form of legal bindingness and enforceability.

As the Internet becomes an inherent part of business, there is an ever-increasing desire to conduct these transactions via the electronic medium. According to Robert L. Percival, "the Internet has introduced some uncertainty into many aspects of commercial transactions conducted via electronic means, such as, in the areas of the formation of enforceable electronic contracts, jurisdiction, and statutory issues relating to evidence and signature requirements." (ROBERT L. PERCIVAL, CREATING ENFORCEABLE ELECTRONIC CONTRACTS, presented at, The Fourth Annual IT Law Spring Training Program: Legal & Business Issues For IT Transactions, on 19th & 20th May, 2004, at Osgoode Hall, Toronto).

These uncertainties may have influenced the reluctance of full adoption of electronic contracts in Nigeria and by extension, Africa. Since only a fool tests the depth of a river with both feet, a clue of the success or otherwise of electronic contracts in other jurisdictions may be necessary.

Notwithstanding these uncertainties, Maryland and Virginia have adopted the Uniform Computer Information Transactions Act. A similar trend is found in related U.S. Federal laws such as the Electronic Signatures in Global and National Commerce Act, thereby making electronic contracts attain some level of certainty. Necessity, they say, is the mother of invention, hence the need for legislative reforms, and judicial activism.

Therefore, this article focuses on the concept of electronic contracts, legal issues arisen by the process of entering into a transaction using electronic means, with reference to other jurisdictions championing the course and the advancement of same.

DEFINITION OF TERMS

CONTRACT

A contract is defined as an agreement which the law will enforce or recognize as affecting the legal rights and duties of the parties. Treitel puts it as, "a promise or a set of promises the law will enforce". A contract is enforceable when the elements of a valid contract exist. In Nigeria, the elements of a valid contract are offer, acceptance and consideration. Question therefore arises as to whether agreements will be legally valid and enforceable if done in electronic form? And if yes, how can these electronic contracts be created?

ELECTRONIC CONTRACTS

According to USlegal.com, E-contract is any kind of contract formed in the course of e-commerce by the interaction of two or more individuals using electronic means, such as e-mail, the interaction of an individual with an electronic agent, such as a computer program, or the interaction of at least two electronic agents that are programmed to recognize the existence of a contract.

"Click-Wrap” or “Click-Through” or “Web-Wrap”or "Browse-Wrap" are some of the common forms of electronic contracts, with legal authorities affirming the enforceability of these forms of contracts. A typical example is the Canadian case of Rudder v. Microsoft Corporation (1999), 2 C.P.R. (4th) 474 (Ont. S.C.J.), where the court determined that the Member Agreement was enforceable, stating that scrolling through several pages was akin to having to turn through several pages of a multi-page paper contract.

Requirements Imposed by E-Transaction Laws Based on the current legislation enacted in the U.S. and internationally, relating to electronic transactions to ensure enforceability, requires that the parties focus on the following questions:

a.    Notice and Consent

b.    Signature (and security procedures to ensure authenticity of electronic signatures)

c.     Record Accessibility

d.    Record keeping.

ELECTRONIC SIGNATURE

Electronic signature, which is a vital part of electronic contracts, has been defined as an electronic symbol or process attached to an agreement and executed or accepted by a person with intent to sign the agreement or record. Thus, electronic signatures have the same legal effect as ink signatures.

 Examples of Electronic Signature include, clicking an Accept button online, signing on a touch pad to approve a credit card purchase or typing one's name on a signature line.

COUNTRIES WITH ELECTRONIC SIGNATURE LAW

The following are countries with Electronic Signature Law:

1.    Argentina - Electronic Signature Law 25, 506

2.    Australia - Electronic Transactions Act 1999

3.    Bermuda - Electronic Transactions Act 1999

4.    Brazil - Provisional Measure 2200-2, August 24 2001 (unofficial translation)

5.    Canada - Personal Information Protection and Electronic Document Act, SC 2000, c5

6.    Chile - Law 19.799 and Decree 181

7.    China - Electronic Signature Law of the peoples of the republic of China

8.    Colombia (several laws including Law 527 of 1999)

9.    The European Union member states (28 countries)

Other countries with Electronic Signature Laws across the globe are: Hong Kong, India, Indonesia, Israel, Japan, Malaysia, Mexico, New Zealand, Norway, Peru, Philistines, Republic of Korea, Russian Federation, Singapore, South Africa, Switzerland, Taiwan, Thailand, Turkey, United States and Uruguay.

However, it’s vital to state that these varying electronic signature laws have one form of restriction or the other. For example, the ESIGN Act of the United States and most state laws, exclude real property transfers, wills, and some legally required notices to consumers. Thus, lawyers, business organizations, etc, have to get themselves acquainted with the applicable laws.

CREATING ENFORCEABLE ELECTRONIC CONTRACTS

To create enforceable electronic contracts, traditional contract principles must be applied to online contracts. The customary requirements of offer, acceptance, consideration and intention to create legal relation therefore become necessary. Thus, a counsel, when creating online agreements, should properly consider and address these issues.

Firstly, the counsel should make an offer in a clear and unambiguous term, which essential terms must be sufficiently communicated to the offeree.

Secondly, the acceptance of offer should be required by electronic signature as the later has the same legal effect as ink signatures. A.J. Zottola and Robert ParrParr in their article, Guidelines for Creating Enforceable Contracts Online -“The New Way is the Same as the Old Way”, defined electronic signatures as "electronic sound, symbol, or process attached to or logically associated with an electronic document, and executed or adopted by a person with the intent to sign the electronic document."            They suggested that Acceptance may take any of the following forms: Click-through processes, Typed signature at electronic document/mail end, Automated electronic signature processes, Expressly affirms to contractual relationship, etc.

Thirdly, a counsel when creating online agreements should also look into, consideration, record retention requirement, verification of identity of contracting parties, and other necessary forms of verifications.  There is also the need to be versed with the variety of electronic signatures laws of various countries when designing Be-contracts for clients across the globe.

It is suggested that an electronic contract be designed to be flexible to amending an existing electronic agreement for any revision of terms that may arise.

CONCLUSION

"Even though the old man is strong and hearty, he will not live forever." Thus the traditional paper-form contract is gradually paving the way. Businesses have been largely transformed by information communication technology (ICT) with the ease at which parties from different jurisdictions carry on their trade online. This trend has necessitated the need to enter into business agreements in the same way businesses are transacted offline. Therefore, sticking to the traditional paper-based system of contract may spell doom for any jurisdiction doing so in this ever competitive world.

However, the traditional principles guiding contractual relationships remain the same although some legislation that addresses online contracts has specifically been passed.                    

As you can tell a ripe corn by its look, it’s no more in doubt that electronic contracts have come to stay, as even companies of all sizes worldwide now rely on e-signature technology to get major deals done every day. Reluctance or failure of the legislature to guaranteeing the legality and enforceability of these electronic alternatives should therefore be maximized.