MICHAEL GEIST
Friday, June 9, 2000
New legislation aimed at easing the legal uncertainties of electronic commerce is beginning to gain acceptance in Canada.
And it's happening none too soon: Without the ability to create an enforceable contract on-line, e-commerce would soon grind to a halt.
Recognizing this, along with the need for an e-commerce law that conforms with international standards, Canada has quietly developed the Uniform Electronic Commerce Act (UECA), a Canadian version of a United Nations e-commerce model code. Other versions have received approval in nearly a dozen U.S. states, several Australian states and some countries in Europe, Asia and South America.
In the wake of the UECA, some provinces have also begun to put their own laws together. Saskatchewan was the first, when it introduced the Electronic Documents and Information Act (Bill 11) last December. The bill, virtually identical to the UECA, was greeted with enthusiasm from both the technology and legal communities. It was subsequently updated and broadened in new legislation.
Ontario has also introduced e-commerce legislation. Its initiative has its origins in the E-commerce Act 2000 (Bill 70), a private-member's bill introduced by John Hastings (PC -- Etobicoke North). The bill has had its second reading and has been sent to the standing committee on general government for review.
And just this week, Manitoba joined in, introducing Bill 31, an E-commerce law of its own. The Manitoba law also follows the UECA model.
Meanwhile, the courts are also contributing to the emerging e-commerce legal framework, with one landmark case upholding the validity of what's become known as a "clickwrap agreement."
The UECA was negotiated over a two-year period by the Uniform Law Conference of Canada, an organization dedicated to the creation of harmonized Canadian laws. It forwarded the draft model to all provincial and territorial governments with a recommendation that it be enacted to provide Canada with a harmonized approach to e-commerce.
The principle underlying the UECA is the concept of "electronic equivalence." Although the model law does not deem electronic communications valid (just as with paper documents, legal validity depends upon more than a document's form), it promises that information will not be denied legal effect or enforceability solely because it is in electronic form.
The model is also careful not to compel parties to use electronic communications. In an important deviation from the UN model, the Canadian version contains nothing that requires a person to use or accept information in electronic form without his or her consent.
Consent to use electronic communication, however, may be inferred from a person's behaviour. For example, providing a business card with an e-mail address could be construed as consent to receive e-mail. Similarly, placing an order on the Web could be treated as consent to deal with a seller electronically.
The most interesting section of the model focuses on on-line contracts. Although thousands of contracts are entered into daily through e-commerce, some sellers and consumers remain uncertain of the legal implications of clicking the "I agree" button on a Web site. The model removes any doubt that this popular form of on-line consent is valid by stipulating that unless the parties agree otherwise, an offer or acceptance of an offer can be expressed in electronic form by clicking on an appropriate icon.
Contracts between an individual and a computer or between two computers also attracted the attention of the model's drafters. This issue has become particularly relevant with the growing popularity of on-line stock trading, as well as with other forms of e-commerce with which a person deals solely with a computer on the other end of a transaction.
The concern in this situation lies with the difficulty of correcting a mistake. For example, if I have a sticky "1" key on my computer and inadvertently order 11 copies of a book rather than just a single copy, can I get out of the contract?
The model creates an appropriate compromise by ensuring that consumers have an opportunity to review the terms of their contract before it becomes binding. Under the UECA, computer-based contracts are not enforceable where an individual alleges that a mistake has occurred and he or she was not provided with an opportunity to prevent or correct the error (as long as the individual notifies the other party of the mistake and does not profit from it).
As for court contribution to the emerging legal framework, there's the landmark case of Rudder v. Microsoft decided late last year, in which an Ontario court considered the validity of a "clickwrap agreement," a common form of Web-based contract.
Clickwrap agreements originate with the old software licensing agreements printed on the outside of software boxes, often referred to as "shrinkwrap agreements." Users were deemed to accept the terms of the licensing agreements once they unwrapped the shrinkwrap surrounding the box, hence the term.
With the popularity of downloading software from the Internet, the shrinkwrap agreement is rapidly being replaced by the clickwrap agreement, with users clicking on the "I agree" button rather than removing shrinkwrap packaging.
At issue in Rudder v. Microsoft was whether this new form of contract is enforceable. The case involved an application by Microsoft Corp. to suspend a class-action lawsuit brought against the company in Ontario that arose from a dispute involving the Microsoft Network (MSN). Microsoft argued that all disputes were governed by the MSN clickwrap agreement, which stipulated that all disputes would be adjudicated in Washington state.
The Ontario court upheld the validity of the agreement, noting that new members of MSN were required to click the "I agree" button presented on the computer screen at the same time as the contract terms. The court added that to rule against the enforceability of the clause "would lead to chaos in the marketplace, render ineffectual electronic commerce and undermine the integrity of any agreement entered into through this medium."
These recent e-commerce legislative and court developments have important implications for Canadian businesses.
First, with only Saskatchewan fully committed thus far, the public should urge other provincial governments to enact the UECA because the effectiveness of an e-commerce legal framework depends upon it being adopted nationally.
Second, Canadian businesses should take note of the UECA provisions by providing consumers with the opportunity to review their purchases at least once before concluding a transaction. This additional step would ensure that their Web site conforms with the standard found in the UECA.
Finally, e-commerce businesses should keep the validity of clickwrap agreements in mind when constructing their Web sites. Placing the "I agree" button at the end of the agreement in close proximity to the contractual terms is one way to increase the likelihood that a court would rule that the on-line agreement is as enforceable as one concluded off-line.
Michael Geist is a professor at the University of Ottawa's Faculty of Law, specializing in Internet and electronic-commerce law. He can be reached by e-mail at mgeist@uottawa.ca and on the Web at http://www.lawbytes.com.
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