Law & Emerging Technology - The Model Law on E-Commerce (Unit 2).pptx

Law, LET, Law & Emerging Technology Law, Notes, Ppt

1. Chanderprabhu Jain College of Higher Studies & School of Law Plot No. OCF, Sector A-8, Narela , New Delhi – 110040 (Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India) SEMESTER: NINTH SEMESTER BA LLB/BBA LLB NAME OF THE SUBJECT: LAND & REAL ESTATE LAWS UNIT-2 (A) THE MODEL LAW ON E-COMMERCE FACULTY NAME: Ms . Shivali Rawat Assistant Professor (SOL)

2. The Model Law on E-Commerce, 1996 In today’s world, a large number of international trade transactions are carried out by electronic data interchange and other means of communication, commonly known as “electronic commerce”. It uses alternatives to paper-based methods of communication and storage of information. The United Nations Commission on International Trade Law (UNCITRAL), by the means of Model Law on Electronic Commerce (MLEC ), sought to provide a set of internationally acceptable rules with an aim to remove legal obstacles and increase legal predictability for e-commerce. It has further improved the efficiency in international trade by providing equal treatment to paper based and electronic information, thus enabling the use of paperless communication . UNCITRAL Model Law of E-commerce was adopted by the United Nations Commission on International Trade Law in 1996. The model law is not a comprehensive, code-like articulation of the rules for the electronic transactions. It does not intend to govern every aspect of electronic contracting. It adopts a limited framework approach and enables and facilitates e-commerce.

3. It has adopted the following fundamental principles of the modern electronic-commerce law: The principle of non-discrimination – It ensures that any document would not be denied legal validity, effect, and enforceability solely on the basis that it is in electronic form.  The principle of technological neutrality – It mandates the adoption of such provisions which are neutral with respect to technology used. This aims at accommodating any future developments without any further legislative work. The functional equivalence principle – It sets out the specific requirements that e-communication ought to meet in order to fulfil the same functions that certain notions ,in traditional paper based system, seek to achieve, for example, “writing”, “original”, “signed”, and “record”. 

4. The Model Law has been divided into two parts. The Part I relates to the general provisions relating to e-commerce, it legislates the three principles of non-discrimination, technological neutrality, and functional equivalence . Besides establishing uniformity in the laws regarding e-commerce and legal relevance for data communicated through electronic mode, MLEC also establishes rules for formation and validity of e-contracts, for data message attribution, for receipt acknowledgement and for determining receipt of data messages, etc.  The Part II of the Model Law deals with specific provisions for e-commerce in certain areas.

5. General Provisions Article 2 of the Law provides six definitions, the most important one is of “Data message”. It is defined as information generated, sent, received, or stored by electronic, optical, or similar means.This definition has been attributed after taking into consideration the future technological developments as well, which is the reason for inclusion of the term similar means. This wide definition includes the notion of a record and even revocation and amendment. The sphere of application that Article 1 talks about, is for the information in the form of data messages, in the context of commercial activities.  The Model Laws give the interpretational tools(Article 3) which call for a standard of international origin and uniformity in application of general principles of law. There can be variation in the communication of data messages by the agreement of the parties(Article 4).

6. Application of legal requirement to data messages The principle of non-discrimination has been enforced by the means of Article 5 which specifies that the information communicated via electronic mode, i.e., in the form of data messages cannot be denied legal validity and effect. Information by the way of reference has also been given legal validity(Article 5 bis ) and thus, the application of this law has been considerably widened. This is of utmost importance in the context of international law. The nations required the documents to be in writing and validation was only given to the hand written signature as a form of authentication. By the means of provisions in Articles 6 & 7, the Model has done away with both of the above obstacles. Accessibility of data messages does not require the document to be in writing, and recognition of digital signature marks the approval of the full structure of the contract. This provision is termed relevant for every circumstance including a relevant agreement .

7. The notion of originality is defined in Article 8 which provides that data messages can fulfill the legal requirement of presentation and retention of information in its original form subject to the assurance of integrity and presentability of data messages. Presentability meaning the ability to display the information where required. Article 9 specifies that the data messages cannot be denied admissibility in the court of law solely on the basis that the information is in the form of a data message. Thus, evidentiary value has been granted to data messages. The requirement of retention of information is also met by retention of information in the form of data messages subject to the accessibility, accuracy and originality of format and identity of origin(Article 10). 

8. Communication of data messages Offer and acceptance of offer , when communicated in the form of data messages, cannot be denied legal validity and enforceability solely on the grounds that they are in the form of data messages. Thus, the formation of a valid contract was made possible through the means of data messages.(Article 11) Acknowledgement in the form of receipt of data messages has also been granted legal validity.(Article 12) The data message is attributed to the originator if it is sent by him or by a person authorised by him(Article 13). Article 14 provides that the receipt of the data message and its acknowledgement can also be agreed upon by the parties beforehand. The transaction ensues when the information goes out of control of the sender. The place of dispatch is the place of business and the time is when the acceptance enters the system of the addressee(Article 15).

9. Case Laws Different states enacted laws based on the principles of this Model Law. Thus, the courts have interpreted the provisions of their domestic laws according to the Model Law.  Khoury v. Tomlinson  is a landmark case decided by the Texas Court of Appeal. The facts of this case are such that an agreement was entered via e-mail which was not signed but only the name of the originator appeared in the ‘from’ section. Referring to the principles in Article 7 of the Model Law, the court found sufficient evidence that the name in the ‘from’ section establishes the identity of the sender.  Chwee Kin Keong and others  is a case dealt with by the Singapore High Court . There was the issue of unilateral mistake in this case as the wrong price was quoted on the seller’s website for a product. The server of the seller automatically sent a confirmation mail when the buyers placed an order. All the elements of the contract were established but with a mistake which eliminated  consensus ad idem . Referring to the Singapore Electronic Transactions Act based on Model Laws, the court found that human errors, system errors, and transmission errors could vitiate a contract.

10. Thus , the Model Laws became the basis for a number of legislative texts enacted by various governments across the globe and it gave a uniformity to the laws concerning the information communicated by the electronic mode of communication.  Besides formulating the legal notions of non-discrimination, technological neutrality and functional equivalence, the MLEC establishes rules for the formation and validity of contracts concluded by electronic means, for the attribution of data messages, for the acknowledgement of receipt and for determining the time and place of dispatch and receipt of data messages. It should be noted that certain provisions of the MLEC were amended by the Electronic Communications Convention in light of recent electronic commerce practice. The Model Law is accompanied by a Guide to Enactment , which provides background and explanatory information to assist States in preparing the necessary legislative provisions and may guide other users of the text.

11. Why Is It Relevant? The MLEC was the first legislative text to adopt the fundamental principles of non-discrimination , technological neutrality and functional equivalence that are widely regarded as the founding elements of modern electronic commerce law. The principle of non-discrimination ensures that a document would not be denied legal effect, validity or enforceability solely on the grounds that it is in electronic form. The principle of technological neutrality mandates the adoption of provisions that are neutral with respect to technology used. In light of the rapid technological advances, neutral rules aim at accommodating any future development without further legislative work. The functional equivalence principle lays out criteria under which electronic communications may be considered equivalent to paper-based communications. In particular, it sets out the specific requirements that electronic communications need to meet in order to fulfill the same purposes and functions that certain notions in the traditional paper-based system - for example, "writing," "original," "signed," and "record"- seek to achieve.

12. Online contracts Online contracts refer to contracts that are created and signed over the Internet. Also referred to as electronic contracts or e-contracts, these contracts provide a fast and convenient way for individuals and organizations to enter into legally-binding agreements with other parties. They are now being used for a wide range of purposes, from consumer and business agreements to government filings . What is an Electronic Contract? An electronic contract refers to an agreement that is made and signed electronically, meaning that it does not involve the use of paper or hard copy. For instance, you create a contract on a computer and send it to a business associate via email. Then, the business associate sends it back to you with an electronic signature to indicate acceptance

13. In case of an online contract, the seller who intends to sell their products, present their products, prices and terms for buying such products to the prospective buyers. In turn, the buyers who are interested in buying the products either consider or click on the ‘I Agree’ or ‘Click to Agree’ option for indicating the acceptance of the terms presented by the seller or they can sign electronically. Electronic signatures can be done in different ways like typing the name of the signer’s in the specific signature space, copying and pasting the scanned version of the signature or clicking an option meant for that purpose. Once the terms are accepted and the payment is made, the transaction can be completed. The communication is basically made between two computers through servers. The online contract is brought to the scenario to help people in the way of formulating and implementing policies of commercial contracts within business directed over internet. Online Contract is modeled for the sale, purchase and supply of products and services to both consumers and business associates.

14. Types of E-contracts Shrink-wrap agreements are usually the licensed agreement applicable in case of software products buying. In case of shrink-wrap agreements, with opening of the packaging of the software product , the terms and conditions to access such software product are enforced upon the person who buys it.  Eg : Anti virus . Click- wrap agreements are web based agreements which require the assent or consent of the user by way of clicking “I Agree’ or “I Accept” or “Ok” button on the dialog box. In click –wrap agreements, the user basically have to agree to the terms and conditions for usage of the particular software . n agreement made intended to be binding on two or more parties by the use of website can be called a browse wrap agreement . In case of browse wrap agreement a regular user of a particular website deemed to accept the terms of use and other policies of the website for continuous use.

15. In case of browse wrap contracts, we usually accept the terms and conditions of the contract by clicking the button that indicates ‘ I Agree’ and in case of  shrink wrap contract or purchase of a software product, assent is given by the consumer or the purchaser with tearing of the wrapper and using it. Many of us have the tendency of not reading the terms and conditions carefully before agreeing to such. But these actions should be taken consciously and carefully only after reading the terms of the contract properly as it leads to a valid contract and the terms can be strictly enforced against them.

16. The Information Technology Act, 2000 The Information Technology Act, 2000 has made certain provisions for the validity and the formation of online contracts but no specific legislation has been incorporated for the validity of online contracts in India. Even if no specific provision is made for the validity of online contracts, it cannot be challenged based on technical grounds . The Information Technology Act, 2000 provides various procedural, administrative guidelines and regulates the provisions relating to all kinds of electronic transactions. These include computer data protection, authentication of documents by way of digital or electronic signature. Though electronic contracts have been given recognition by the IT Act, 2000, but majority feels it less secured to get into any kind of online contracts as there are no concrete judicial precedents for the validity and enforceability of online contracts in India.

17. E videntiary value of electronic contracts T he evidentiary value of electronic contracts has been given recognition and can be understood in the light of various sections of Indian Evidence Act. Sec 65B of the Indian Evidence Act deals with the admissibility of electronic records . As per Sec 65B of the Indian Evidence Act any information contained in an electronic record produced by the computer in printed, stored or copied form shall deemed to be a document and it can be admissible as an evidence in any proceeding without further proof of the original subject to following conditions are satisfied such as the computer(Electronic device) from where it was produced was in regular use by a person having lawful control over the system at the time of producing it, during the ordinary course of activities the information was fed into the system on a regular basis, the output computer was in a proper operating condition and have not affected the accuracy of the data entered.

18. Electronic Signature Electronic Signature has been defined under  Section 2(1)( ta )  of the Information Technology Act, 2000. Electronic Signature means the authentication of any electronic record by a subscriber by means of the electronic technique as specified under the Second Schedule and also includes a digital signature. Types of electronic signature: Unsecured Signature Email Signature : Just typing one’s name at the end of an email or sending a message on letterhead. They can be easily forged. Web Signature:   Web-based clickwrap contracts create a lot of difficulties in E-Commerce. The acceptance is made by clicking a single button. Such a signature doesn’t do anything about the identity of the sender . Secured Signature This includes the signatures which are digitally secured and also which have more legal weightage .

19. Digital Signature According to  section 2(1)(p)  of the Information Technology Act, 2000 digital signature means the authentication of any electronic record by a person who has subscribed for the digital signature in accordance to the procedure mentioned under  section 3   of the same act. Section 5  of the Information Technology Act, 2000 gives legal recognition to digital signatures. Digital Signatures cryptographically bind an electronic identity to an electronic document and the digital signature cannot be copied to another document .

20. Eg : Digital Signature is not like our handwritten signature. It is a jumble of letters and digits. It looks something like this. —– BEGIN SIGNATURE—- Uz5xHz7DxFwvBAh24zPAQCmOYhT47gvuvzO0YbDA5txg5bN1Ni3hgPgnRz8Fw xGU oDnj7awl7BwSBeW4MSG7/3NS7oZyD/AWO1Uy2ydYD4UQt/w3d6D2Ilv3L8EOr5K8Gpe5Z K5CL END SIGNATURE ——

21. DIGITAL SIGNATURE ELECTRONIC SIGNATURE Being unique to an individual, Digital certificate is required in case of digitally signing a document. The certificate has public and private key called a 'key pair '. An electronic signature is a method to represent signature on a document that is computerized. In multiple different ways a signature either on a document or a device can be captured. In case of digital signatures online, if any change is done in the document after the signature is applied, it will refer the signature as invalid signature. Alterations can easily take place in case of electronic signature. Encryption done by using a digital certificate is very secure. . Electronic signatures as not based on standards are inclined towards using methods based on proprietary aspects so are comparatively less secure.

22. As a digital signature online is linked with the private key of an individual, it is unique and hard to deny Verification of electronic signatures is comparatively tough. As Digital signatures are without fail time stamped hence are useful in a court of law to link a person to signature at a particular time and date. Although a date and time is associated with the electronic signature but as separately held, open to misuse.

23. Holding a log of multiple events, digital signature can verify when any signature was applied. Advanced digital signature products such as Approveme , send out notifications in case if a log is altered. Audit logs are not applied in an easy way to electronic signatures. The digital certificates represent individual signatories by giving details of the individual signing the document. To say full name, email address and company . Details of an individual placing an electronic signature are not held with the signature itself therefore are more prone to get tampered.

24. JURISDICTION ISSUE IN E-COMMERCE E- commerce plays a vital role in nearly every sphere of life- with simply just a click of the mouse we can pay our electricity/telephone bills, do online shopping, transfer money to persons in different parts of the globe, conduct business deals etc. An online transaction may be explained as a way of conducting business by utilizing computer and telecommunication technology to exchange data or conduct business. However, this boom in internet transactions has brought a host of issues regarding jurisdiction of such transactions to the forefront. The primary question that needs to be addressed is “when a transaction takes place online, where is the contract concluded?” Justice S. Muralidhar  has stated that the traditional approach to jurisdiction invites a court to ask whether it has the territorial, pecuniary, or subject matter jurisdiction to entertain the case brought before it. With the internet, the question of ‘territorial’ jurisdiction gets complicated largely on account of the fact that the internet is borderless.

25. The Indian position theoretically matches with the US rule of minimum contracts. For civil matters, the Code of Civil Procedure, 1908 governs the jurisdiction aspect.  Section 19  of the Act states that where a suit is instituted for compensation on account of wrong done, if such a wrong was committed within the local limits of the jurisdiction on one court and the defendant resides in or carries on business, within the local limits of the jurisdiction of another court, the suit may be instituted at the option of the plaintiff in either of the courts.  Thus , for instance, if Mr. X residing in Bangalore publishes on his website in Chennai defamatory statements against Mr. Y. Mr. Y may sue Mr. X either in Bangalore or Chennai .

26. Section 20  of the CPC further provides that the suit shall be instituted within the local limits of whose jurisdiction the defendant resides or the cause of action arises. For example, A is a tradesman in Calcutta. B carries on business in Delhi. B buys goods of A online and requests A to deliver them to the East Indian Railway Company. A delivers the goods accordingly in Calcutta. A may sue B for the price of the goods either in Calcutta, where the cause of action has arisen, or in Delhi, where B carries on business. Further ,  Section 13  of CPC provides that a foreign judgment is to be conclusive as to any matter which has been directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title except under certain specified conditions. Talking about the presumption as to foreign judgments the provisions of the Act states that the Court shall presume upon the production of any document purporting to be a certified copy of a foreign judgment that such judgment was pronounced by a Court of competent jurisdiction, unless the contrary appears on the record; but such presumption may be displaced by proving want of jurisdiction.

27. Casio India Co. Ltd. vs Ashita Tele Systems Pvt. Ltd. [ 2003] The Hon’ble Delhi High Court has observed that once access to the Defendants website could be had from anywhere else, jurisdiction could not be confined to the territorial limits of the place where the Defendant resided and the fact that the Defendants website could be accessed from Delhi was sufficient to invoke the territorial jurisdiction of a court in Delhi . Another leading judgment is of  (India TV) Independent News vs India Broadcast Live [2007]. Here the Delhi High Court differed with its earlier judgment in Casio India. The Court holds that jurisdiction of the forum court does not get attracted merely on the basis of interactivity of the website which is accessible in the forum state but yet held that. if the Defendants website is interactive, permitting browsers not only to access the contents thereof but also to subscribe to the services provided by the owners/operators, then courts jurisdiction at the place where the website is accessed from is permissible.

28. The High Court of Delhi ruled that it did not have jurisdiction over the domain name www.indiatvlive.com, because the defendant was based in Arizona. The court relied on the US circuit case  Compuserve Inc. v. Patterson , which referred to a three-part test for deciding jurisdiction: -- The defendant must purposefully avail itself of acting in the forum state or causing a consequence in the forum state. -- The cause of action must arise from the defendant’s activities there -- The acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum to make exercise of jurisdiction over the defendant reasonable

29. In  Banyan Tree Holding (P) Ltd v. A. Murali Krishna Reddy and Anr , T he Delhi High Court stated that in order to establish the jurisdiction in forum court, even when a long arm statute exits, the Plaintiff would have to show that the Defendant purposefully availed of the jurisdiction of the forum state by specifically targeting customers within the forum state . A mere hosting of an interactive website without any commercial activity being shown as having been conducted within the forum state would not enable the forum court to have jurisdiction. The law as laid down in the case may be summarised as follows: -- Some commercial transaction must have taken place as a result of the site -- The defendant must have specifically targeted the forum state. -- Some injury must have resulted to the plaintiff due to the actions of the defendant -- The plaintiff must have a presence in the forum state, and not merely the possibility of a presence

30. In India's first case of cyber defamation,  SMC Pneumatics (India) Private Limited v. Jogesh Kwatra a Court of Delhi assumed jurisdiction over a matter where a corporate reputation was being defamed through emails and passed an injunction which restrained the employee from sending, publishing and transmitting emails which are defamatory or derogatory to the plaintiffs. Another important legislation to be considered for online transactions is the Information Technology Act, 2000. This legislation was enacted to change outdated laws and deal with cyber crimes. A section which becomes relevant from the IT Act in terms of online transactions is Section 13 (3) which provides that : “ Save as otherwise agreed between the originator and the addressee, an electronic record is deemed to be dispatched at the place where the originator has his place of business, and is deemed to be received at the place where the addressee has his place of business.” 

31. If an air ticket is booked by a Complainant over the internet which is also sent by an Airline Company to the Complainant  through email, then these would be dispatches of electronic records. The request for booking of the air ticket would be an offer and the emailing of the ticket to the consumer would be the acceptance. In terms of Sec. 13 (3) of the I.T. Act, the ticket or, in other words, the acceptance of the offer for its purchase, would be deemed to have been received at the Complainant's place of business. Resultantly, the contract for purchase of the air ticket would be taken to have been made at the Complainant’s place of business. Acceptance of the contract would also be deemed to have been communicated there.

32. Electronic banking has many names like e banking, virtual banking, online banking, or internet banking. It is simply the use of electronic and telecommunications network for delivering various banking products and services. Through e-banking, a customer can access his account and conduct many transactions using his computer or mobile phone.  Internet banking is the system that provides the facility to the customer to conduct the financial and non-financial transactions from his net banking account. The user can transfer funds from his account to other accounts of the same bank/different bank using a website or an online application. The customer uses a resource and a medium to conduct financial transactions. The resource that a customer uses might be an electronic device like a computer, a laptop, or a mobile phone. The internet is the medium that makes the technology possible . The facility of internet banking  is provided through banks and the customer must be an account holder with any bank to get the facility available for him/her. E-Banking

33. Lesser transaction costs – electronic transactions are the cheapest modes of transaction. A reduced margin for human error – since the information is relayed electronically, there is no room for human error. Lesser paperwork – digital records reduce paperwork and make the process easier to handle. Also, it is environment-friendly . Reduced fixed costs – A lesser need for branches which translates into a lower fixed cost. More loyal customers – since e-banking services are customer-friendly, banks experience higher loyalty from its customers. Advantages

34. Convenience – a customer can access his account and transact from anywhere 24x7x365 . Lower cost per transaction – since the customer does not have to visit the branch for every transaction, it saves him both time and money . No geographical barriers – In traditional banking systems, geographical distances could hamper certain banking transactions. However, with e-banking, geographical barriers are reduced .

35. Internet banking is the system that provides the facility to the customer to conduct the financial and non-financial transactions from his net banking account. The user can transfer funds from his account to other accounts of the same bank/different bank using a website or an online application. The customer uses a resource and a medium to conduct financial transactions. The resource that a customer uses might be an electronic device like a computer, a laptop, or a mobile phone. The internet is the medium that makes the technology possible . The facility of internet banking is provided through banks and the customer must be an account holder with any bank to get the facility available for him/her. E- Payment

36. A  one-time customer-to-vendor payment  is commonly used when you shop online at an e- commmerce site, such as Amazon. You click on the shopping cart icon, type in your credit card information and click on the checkout button. The site processes your credit card information and sends you an e-mail notifiying you that your payment was received. You make a  recurring customer-to-vendor payment  when you pay a bill through a regularly scheduled direct debit from your checking account or an automatic charge to your credit card. This type of payment plan is commonly offered by car insurance companies, phone companies and loan management companies. this type of automated payment schedule . To use  automatic bank-to-vendor payment , your bank must offer a service called  online bill pay . Types of E-Payment

37. A dvantages of online payments Low labour costs Since online payments are usually automatic, they have lower labour costs than manual payment methods, such as cheque, money order, cash and EFTPOS. Convenience for online sales Online payment methods allow conveniently selling goods and services online. Automatic Online payments can be automatic, which can be convenient for you and your customers. Fast transaction speed Online transactions quickly provide feedback to you and your customers. Low risk of theft After processing delays, online payments generally go straight into your bank account, so they have a low risk of theft.

38. Disadvantages of online payments Online payment methods have several disadvantages. Check out these examples: Service fees Payment gateways and third-party payment processors charge service fees. Inconvenient for offline sales Online payment methods are inconvenient for offline sales. Vulnerability to cybercriminals Cybercriminals can disable online payment methods or exploit them to steal people’s money or information. Reliance on telecommunication infrastructure Internet and server problems can disable online payment methods. Technical problems Online payment methods can go down due to technical problems.

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