Contract Issues in Online Business - Literature review Example

? Contract Issues in Online Business of the of the Introduction Central theme of this essay is to shed light on pertinent issues related to contracting in online business and challenges that are faced by business houses in conducting online business. There is no doubt that the researcher has taken significant help from the legal case “Specht v. Netscape Communications Corp., 2002 WL31166784 (2d Cir. Oct. 1, 2002)” Lawrence C. Waddington and the case was published in the year 2002. Case Overview The researcher has understood the fact that absence of legal framework to arbitrate online business contract issues was the major problem for judges while reviewing the Specht v. Netscape Communications Corp case. Confusion in the case was raised due to absence of customized legal architecture regarding the online contract between consumers and an Internet software provider (Waddington, 2002). In this case, plaintiff has used the defendant's web page in order to download software program and then they ran the program in their personal computers. Plaintiff was completely unknown to the fact that while downloading the software program from defendant's web page, they have signed the contract of activating the download option and also giving assent to defendant website to use their personal information (Waddington, 2002). Due to such involuntary contract defendant got the chance to distribute personal content of plaintiff to other users and also to SmartDownload which is a plug-in" software program. Although, plaintiffs filed legal complaint against defendant under the allegation of violation of the Electronic Communications Privacy Act and Computer Fraud and Abuse Act but the fact is that online contract violation issues were pretty much new arbitration clauses to judges at that time. It is believed that, a clearly stated licensing agreement between plaintiff and defendant can resolve many of the issues in the case. However, the court gave importance to factual allegations and came to the conclusion that only defendant’s action to give access of the personal information of plaintiffs to SmartDownload was actual violation of the federal act (Waddington, 2002). Court came to the conclusion that both side of an online transaction have to be sure about the existence of contract terms and one has to read the contract terms and agree to contract terms before downloading or using any software program. The case was all about credibility and integrity in electronic bargaining or better to say online business contract. Contract Issue in Online Business Research scholars such as Rijs and Schovsbo (2007), Helberger and Hugenholtz (2007) and Girot (2001) pointed out that key purpose of contract laws is to protect the interest of consumers. In modern world, downloading options, software, media files and applications etc., from a particular website has become common phenomenon. However, plenty of confusion still exists regarding ‘‘Consumer Rights Directive’’ in the field of contract law in digital markets. According to Girot (2001), contract regarding digital content sharing is always vulnerable to imperfection exist in the traditional law system and lack of clarity from both sides of the online contract. Careful analysis of the research work of research scholars such as Van Hoboken & Helberger (2008) and Schovsbo (2008) reveals the fact that there can be three characteristics of contract issues in online business such as, expectation of the consumer regarding normal functioning of the digital service provider, contractual fairness which can help consumers to read all the pertinent clause associated with accessing of digital content and legal action against the digital content service provider if there is any violation in the online contract. Hu, Wu and Wang (2004) pointed out there can be multiple aspects that can be related with contract issues of online business. Now, the essay will cite example of a real world case study Alibaba which had also faced issue regarding violation of online contract. Case Study- Alibaba.Com Hu, Wu and Wang (2004) gave the example of Alibaba.Com which is online business to business (B2B) website and also the biggest business-to-business (B2B) marketplace in the world. During initial years of 2000’s many of the B2B users complained that Alibaba is not providing the whole information regarding delivery of goods, payment, tax and charges, documentation flow etc. To address the complaints of customers, Alibaba had to establish separate contract architecture for all the above mentioned issues in online selling. Alibaba has more than 1,000,000 registered members who belong to 180 different countries hence online B2B website has to follow the legal norms of 180 different countries when creating online contract norms for users. The situation was tricky for the company because the company followed Chinese IT Communications Privacy Act and Computer Fraud Act to develop its website which was bound to be different from online contract acts of other countries. Subsequently, users from USA and European country had reported that Alibaba violated the privacy norms. Chissick and Kelman (1999) and Elkin-Koren and Salzberger (1999) also pointed out the same problems for electronic bargaining and online contract and have given the example of numerous cases where users unknowingly signed contract with digital content provider which is subject to argument. Internet is open source and access to online content is not restricted to geographic restrictions which create the confusion regarding country specific legal action against the digital content provider who has violated the contract. In such context of perplexity and legal uncertainty, online business and websites generally use click-wrap agreement in order to enforce duties of both parties in the digital content transaction. For e-business, contract between buyer and seller include articles like quality of the goods, privacy of the users, payment issues, delivery time etc (Hu, Wu and Wang, 2004). However, there numerous cases reported about the ignorance from the software business website or online business website regarding license or contract agreement to users. Till now, challenges for online business regarding contract issue has been discussed in the paper in the light of two case studies of Alibaba and Specht v. Netscape Communications Corp case but the researcher will form a hypothetical case study in the next section in order to highlight particular problems regarding online contract. Hypothetical Case The researcher has taken the idea of the case from the work of Savirimuthu (2005) and the scholar has significantly helped the researcher to understand the problem of arbitrary usage, which is associated with online contract. Now, suppose a company X is an online seller of goods and gives and advertisement regarding sell of a high-performance computer at a price of $200. The price is printed wrong while the actual price should be printed as $2,000. Now, buyer Y has not knowledge about the pricing mistake and orders 10 computers at a price of $200 for each machine. The online business website X has two page long contract agreement and consumer making purchase need to scroll down the agreement in order to click the accept button which will show the assent of the consumer Y regarding all the terms and condition of company X. There are three parts in the contract agreement of website X, 1- company is not liable to ship wrongly priced merchandises, and 2- a person can purchase only 10 articles at a time and 3- availability of the stock of the goods. However, user Y scrolls down the agreement and click ok without reading the agreement carefully. As a result of pricing error, the contract between online business X and user Y is subject to controversy and the buyer can allege the business website for not providing accurate information. In such context, Yang, Lester and James (2007) rightly argued that majority of consumers face conflict while buying goods through online business websites mainly due to two reasons, 1- consumers can not experience the physical presence of the online seller and 2- consumers feel perplexed regarding the terms and condition of the business owners. There are cases, where online business companies right the contract norms in very congested manner within small space which creates problem for users to understand meaning of every element of the contract. In such cases, users sign the contract without reading the terms & conditions properly. Savirimuthu (2005) criticized the online contract as passive communication system which is full of jargons which are sufficient enough to create confusion among users. Conclusion The essay has tried to identify various challenges and legal problems that are facing by modern online business communities. However, the essay was not intended to find out solution to the challenges hence the researcher has only tried to identify the key challenges without getting into the solution part. It is evident from the above discussion that contract issues in online business are subject to honesty and integrity of the online business owner. Users also need to use their knowledge and commonsense to judge any offer made by online business because they also play important role in online contracts. Important thing to remember is that internet is a neutral medium hence use of internet shouldn’t be blamed for any kind of misappropriation or disrespect of privacy of consumers. References Chissick, M., & Kelman, A. (1999). Electronic commerce: Law and practice. London: Sweet & Maxwell. Elkin-Koren, N., & Salzberger, E. M. (1999). Law and economics in cyberspace. International Review of Law and Economics, 19, 553-81. Geiger, C. (2008). The answer to the machine should not be the machine: Safeguarding the private copy exception in the digital environment. European Intellectual Property Review, 30(4), 121-9. Girot, C. (2001). User protection in IT contracts: A comparative study on the protection of the user against defective performance in information technology. Den Haag: Kluwer Law International. Helberger, N., & Hugenholtz, P. B. (2007). No place like home for making a copy: Private copying in European copyright law and consumer law. Berkeley Technology Law Journal, 22(3), 1061-98. Hu, Q., Wu, X., & Wang, C .K. (2004). Lessons from Alibaba.com: Government’s role in electronic contracting. Info, 6(5), 298-307. Rijs, T., & Schovsbo, J. (2007). Users’ rights: Reconstructing copyright policy on utilitarian grounds. European Intellectual Property Review, 29, 1-5. Savirimuthu, J. (2005). Online Contract Formation: Taking Technological Infrastructure Seriously. Retrieved from http://www.uoltj.ca/articles/vol2.1/2005.2.1.uoltj.Savirimuthu.105-143.pdf. Schovsbo, J. (2008). Integrating consumer rights into copyright law: From a European perspective. Journal of Consumer Policy, 31(4), 393-408. Van Hoboken, J., & Helberger, N. (2008). Looking ahead – future issues when reflecting on the place of the iconsumer in consumer law and copyright law. Journal of Consumer Policy, 31(4), 489-96. Waddington, L. C. (2002). Court Relies on Traditional Contract Formation Rules in Cyberspace Case. Retrieved from http://www.jamsadr.com/court-relies-on-traditional-contract-formation-rules-in-cyberspace-case-11-04-2002/. Yang, B., Lester, D., & James, S. (2007). Attitudes toward buying online as predictors of shopping online for British and American respondents. Cyber Psychology & Behavior, 10(2), 198-203. Read More