Use of Contracts in Ecommerce - Assignment Example

Use of Contracts in Ecommerce INTRODUCTION With the advent of internet, the world has started to shrink and has transformed into a global village. Due to this shrinkage in communication gaps, the world is now more closely connected, which is the reason why industrial sectors faced a drastic revolutionary change. Doing business wasn’t as easy as it is now, before the invention of internet. The former methods of doing business are now discarded and new methodologies are now prevalent in the market. The idea of internet and the advent of globalization brought forward the idea of doing online/virtual business, which was the point when the term ‘Ecommerce’ was first coined. Ecommerce or Electronic Commerce is a term used to refer online business. The industry of ecommerce has been growing rapidly from the past few years, as many MNC’s and FMCG’s are shifting their businesses online for some obvious reasons. With a bunch of more advantages than doing physical business, these online businesses are more lucrative for the investors from many aspects. Although, targeting the online audience and compelling them to purchase the products virtually is rather difficult, however, because of the ease and benefits, people are more inclined towards it. The trend of ecommerce industry is prevailing all over the world. Everywhere, round the globe, where people are using internet, are also involved in ecommerce transactions. This is a self-explaining proof of how rapidly and beneficial ecommerce industry is. From the past few years, hefty sum of transactions are being monitored in the ecommerce industry. With such large scale expansion of the ecommerce industry, more constraints are being developed in order to run online business smoothly. One of the key issues in ecommerce business that I am going to address today is the ‘Use of Contracts in Ecommerce’(Kennedy, 2000). A contract is indeed an integral part of any business. Monetary transactions that are being done for business purposes, requires some contractual agreements, between the parties. These contracts act as a binding force that binds the parties to act accordingly and also penalizes, in case of any breach. The importance of contract is equal in both bricks and clicks. Although, it is difficult to notice the widespread use of contracts in ecommerce, however, its importance can still not be neglected. Therefore, in this report, I am going to highlight the key issues and difficulties that are being faced by the ecommerce industry in regard, with the use of contracts. USE OF CONTRACTS As mentioned above, the main issue that is going to be highlighted throughout this report is the use of contracts in ecommerce. A contract is an important thing which is signed before the sealing of any business deal. It ensures that both the parties i.e. Offeror and Offeree are bound to act according to the pre-decided terms and conditions and in case of any deviation from any party, penalty will be enforced according to the clauses mentioned in the agreement. Therefore, it won’t be wrong to say that a contract is actually the base of any business deal. The importance of contracts is significant and it is seen that severe losses were bore by the parties in those business deals, where there was an absence of a formal written contract. It is pertinent to mention here that oral agreements and contracts are of no use in case of any discrepancy, as oral and informal contracts are unacceptable in the court of law (Abrahams & Bacon, 2001). Although, the use of contacts in business deals is inevitable, however, ecommerce industry still doesn’t have the widespread usage of contracts. This is because of several reasons, like some countries don’t have proper laws governing these ecommerce transactions, while some countries don’t have enforcement of law in case of contract breach. Thus, because of these reasons, the use of contracts in ecommerce is still not widespread. The absence of contracts in ecommerce transactions make them risky, hence people who make hefty transactions are reluctant in making ecommerce transactions when they don’t find an agreement. The example of Kuwait is the best one to illustrate this position. There are no laws governing ecommerce transactions, therefore, there are no contracts signed between the parties while doing ecommerce transactions. Looking at the statistics of ecommerce transactions in Kuwait reveals that the turnover of ecommerce transactions in Kuwait is a lot less than what the statistics of any other country show. Although, Kuwait is an established economy and people there have a high buying power, but still the people are reluctant in making online transactions, just because of the fact that there are no laws relating specifically to e-commerce. On the other hand, countries like Australia, US, Canada and UK have specified laws governing these ecommerce transactions, and thus the ecommerce industry is enjoying millions of dollars transactions every month. CONTROVERSIAL ISSUES IN THE TOPIC When it comes about the use of contracts in ecommerce, there are number of controversial issues that are associated with it. The biggest controversial issue in this topic is the cross border ecommerce transactions. This has been a burning question since 2001 and has already been the subject of heated debates; nevertheless, no worthwhile conclusion is being deduced from these discussions. In case of cross border ecommerce transactions there are several issues that are causing hindrances in the successful completion of the transaction. Though partial solutions have allowed completing the transactions, but there still remains a lack of contractual laws governing these cross border ecommerce transactions(Cameron, 2001). A person buying something from US to a supplier regulating in Europe, How would the contract successfully cover the reservation of both the parties according to the laws of their respective countries? Countries that do not have stringent laws governing ecommerce transactions or there are no laws at all, how can a person of that country indulge in a cross border ecommerce transaction? Moreover, in case of any breach from any side, under what laws and regulations will that contract evaluated? There is no binding force even though there is a contract between the parties. Since there is no force that can compel the parties to act according to the agreement, these cross-border ecommerce transactions are governed by Civil Codes and ethics, which makes it less attractive for the people to make ecommerce transactions. These are the questions that are still left unanswered, due to which these controversies are still prevailing, refraining the people to make ecommerce transactions freely without having being dubious about it. This doesn’t mean that no cross border ecommerce transactions are being made, but all the transactions are risky because of the absence of a binding force. CASES DISCUSSED IN SUCH TOPICS In regards with the topic of using contracts in ecommerce, there are two prime examples of how the provider and beneficiary both face a drawback of virtual agreement between them. It is a known fact that all the ecommerce websites provide a soft copy to other party to go through it and whether to agree with it or not. Since both the parties are virtually involved in the contract, hence there are many hidden clauses that become the bone of contention for all the troubles between both the parties. Since neither party is involved directly, hence, different disputes arise after some time of agreement. The prime example of this situation is the case of Hotmail Corporation v. Van$ Money Pie Inc. The brief conclusion of the case is that, according to the terms and conditions of Hotmail Corporation, any party using their services of email is not allowed to use their email service for the purpose of mailing spam messages and/or pornography. The defendant side in this matter was Van$ Money Pie Inc. who was alleged of creating multiple accounts on Hotmail and was also alleged to forward Spam Messages and /or Pornography, which is strictly prohibited according to Hotmail’s terms and conditions. The decision by Court favoured Hotmail Corporation and Van$ Money Pie Inc. lost the case (Net-Litigation, 2007). The best part of this example is that how many of us read those Terms and Conditions document, when we sign up on any ecommerce site or make any ecommerce transaction. This is the biggest irony of all ecommerce business that people who are involved in ecommerce transactions, do not have enough time to waste on reading Terms and Conditions’ documents. Therefore, many people face heavy losses due to the hidden terms and conditions that come surprisingly after agreeing to the contract. Another interesting case in regard with the use of contracts in ecommerce is of ProCD Inc. Vs. Zeidenberg. According to the summarised conclusion of the case, ProCD Inc. alleged that Zeidenberg is bound to fulfil the requirements of the shrink-wrap license which was not displayed outside the box, but was inside it. The Seventh Court ordered that a shrink-wrap license is enforceable, no matter whether the buyer has reviewed it before making transaction or not. Nevertheless, the appellate court rejected this analysis and passed the judgement that although the shrink-wrap licenses are enforceable unless their terms are objectionable, however, the appellate court also added that ‘transactions in which the exchange of money precedes the communication of detailed terms are common’. The appellate court also emphasized on the difficulties of how to let every buyer know about the hidden shrink-wrap license terms and conditions. Therefore, it was concluded that purchasers can prevent the contract by simply returning the goods if they do not agree to the terms and conditions (Net-Litigation, 2007). This case is another example of how risky the ecommerce transactions are. This case is an example of how a buyer can be trapped with the hidden terms and conditions. Therefore, it won’t be wrong to say that ecommerce transactions are bit riskier due to the fact that the contracts are vague and do not have any authority which can make both the parties to act according to the contract. This is the reason why cross border transactions are still the biggest controversies of this area that how two parties of different countries having different regulations and authorities can be involved in an ecommerce transaction. CONCLUSION With all the facts and figures discussed above, it can easily be deduced that use of contracts in ecommerce is not as easy as the contracts that are being used in other industries. The ambiguities and vagueness of the contracts that are being signed by the parties while involving in the ecommerce transactions, becomes a threat for both the parties. There are high probabilities of the breach of such contracts, as the offeree is unaware of all the terms and conditions and a simple mistake could lead him towards the breach of contract, resulting in paying hefty amount as the compensation for damages. Viewing these ecommerce transactions at macro level would illuminate another problem i.e. how to bound both the parties through contract, as they belong to different places where there exists different regulations/legislations and different regulatory authority. So is it possible to make them bound through a contract while making an ecommerce transaction? The answer is certainly a big no, because there are some countries like Kuwait where there are no laws relating specifically to ecommerce, so the point of binding anyone from a country like this through an online contract would be pointless. Therefore, after considering all the above facts and cases discussed, it is easy to deduce that proper usage of contracts in ecommerce transactions is very difficult. A centralized legislation should be passed by a central legislative body, mentioning the laws about the ecommerce transactions, taking place in all around the world. Since there exists no central legislative body, hence it is impossible to pass such legislation and to make everyone act accordingly. Therefore, the use of contracts in ecommerce industry is good until the transactions are being done within the country, because cross border transactions are very difficult to be secured with the help of such contracts. References Abrahams, A. S., & Bacon, J. M. (2001). Representing and enforcing E-commerce Contracts using Occurrences. (Master's thesis, University of Cambridge, Cambridge, UK)Retrieved from http://www.cl.cam.ac.uk/research/srg/opera/publications/papers/ab_icecr42001.pdf Cameron, S. (2001). ‘E-Comlaw comment: Contracts Controversy.’ E-Commerce Law & Policy, 3(8), 33-45. Retrieved from http://e-comlaw.com/e-commerce-law-and-policy/article_template.asp?Contents=Yes&from=eclp&ID=445 Kennedy, D. (2000). Features - Ten Key Legal Concerns in E-commerce Ventures and Contracts. Retrieved from http://www.llrx.com/features/ecommerce.htm Net-Litigation. (2007). E-Commerce. Retrieved from http://www.netlitigation.com/netlitigation/ecommerce.htm Read More