Document Type

Article

Disciplines

International Law

Abstract

E-commerce is growing at a staggering pace.' By the end of 2002, over 600 million people will have Internet access2 and e-commerce will exceed $1 trillion.3 The 2004 estimates for business-to-consumer e-commerce are $3.2 trillion in the United States and $1.7 trillion in Europe.

The Internet allows the instantaneous communication of digitized information, which makes it the ideal medium for the negotiation and closing of contracts between distant parties. The Internet provides economic benefits, like time efficiency and storage savings, for businesses all over the world. Due to these incentives more and more transactions will be handled over the Internet between parties from different countries. In many cases, the contract is not only closed, but also performed via the Internet. The most important example is the electronic transfer of a computer program.

Electronic transaction contracts raise several questions: What is the applicable law? What is the governing jurisdiction? Where and when was the electronic contract concluded? Does the electronic contract constitute a writing? Is an electronic signature legally recognized and enforceable? And what constitutes an offer or an acceptance when utilizing the Internet? In answering these questions this paper will decipher what businesses or persons that want to enter into such contracts should bear in mind.

The following hypothetical will illustrate typical problems with international electronic transaction contracts: Tim Rose, a computer programmer who lives in Phoenix, Arizona, designed a virus detection and removal program. He made it available exclusively on the Internet through a website for $39.95, where he guaranteed that the software detects and eradicates 25 specific internet-based viruses, which are precisely described. The website provides a fully-automated ordering system with an electronic order form. Orders are routed to a central processor where the customer's credit card is processed. Upon approval, customers may download the program directly onto their computers. The website does not contain a choice of law or a jurisdiction provision. Rose is not notified of each individual purchase.

The program is an enormous success. However, after a few months Rose receives a letter from an Italian company that purchased the program. The company is located in Milan, Italy. The letter contains a summons and an English translation to appear in an action filed in Milan for breach of contract. Rose is being asked to defend the suit in Milan. A few days later, Rose receives a letter from another customer. This customer lives in Lyon, France, and in contrast to the Italian company, this customer used the program only for private purposes. The second letter also contains a summons and an English translation to appear in an action filed in Lyon for breach of contract. Rose has never been in Europe and has never had any contact with anyone in Europe, with one exception. Almost a year ago he ordered a specified data organization program from a German software designing company based in Munich. The Munich company designed the program according to Rose's specifications and transmitted it electronically. However, it does not work. The company's website did not contain a consent to jurisdiction or a choice of law provision. The German company does not acknowledge that the program does not work and refuses to refund the money.

Rose is confused. He believes that because he lives and developed his program in Arizona, only Arizona law applies to these transactions, and, therefore, he can only be sued before an Arizona court. Also, he would like to sue the German company before an Arizona court, because he does not speak German. He wonders whether he should really be subject to suits in Milan and Lyon, and, if so, whether the courts would apply Italian, French, or Arizona substantive law, or the substantive law of another jurisdiction.

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