MERCANTILE LAW 447 – INTERNET LAW
Advantages and Disadvantages of Internet Law
Advantages
o Makes life easier – quick and easy access
o Saves time – saves money
Disadvantages
o Reduces privacy and can infringe privacy, thus infringing your fundamental constitutional
human right
Therefore, we need the use of the internet to be regulated
Which existing branches/fields of the law will intersect with these issues:
Law of Contract
o Consumer protection issues in terms of online shopping privacy issues
Constitutional Law
o Privacy
Law of Delict
Intellectual Property
o Online downloads for textbooks for example
Main interests that require protection through legal regulation
• Consumer interests
o The individual
• Commerce – businesses
o Provides for a global economy
Economic growth and poverty alleviation
• Need to weigh up interests to evaluate the impact of a regulation
Optimal form of legal regulation
• Common law
• Legislation
o ECTA
• Parties to a contract regulating these issues themselves vs private associations can make use of
regulations
• Dispute resolution: litigation, arbitration and mediation as well as online dispute resolution
SESSION 1 - WHAT IS THE INTERNET OR ELECTRONIC COMMERCE?
ECTA: S1
Originated from the US military. Armed forces installed a system of ground-to-air forces. They were concerned
that the cables controlling the missiles could be severed and that missiles could be fired abnormally or
resulting in missiles not being launched. They created a distributive network to be able to share information
over distances.
Eventually we created a network of connected computers (storage devices) on top of which the internet is
built. The internet and the world wide web are two different things.
Web cache server: a holding system for a group of processing computers that power websites.
1
,Definitions
• Para 7 of Guide to1996 UNCITRAL (United Nations Commission for international trade law) Model
Law on Electronic Commerce: “The title of the Model Law refers to “electronic commerce”. While a
definition of “electronic data interchange (EDI)” is provided in article 2, the Model Law does not
specify the meaning of “electronic commerce”.”
o Problem with transactions facilitated by international trade.
Different legal systems = legal uncertainty
UNCITRAL tries to find a way to ensure legal certainty when there are these issues.
o Electronic data interchange is used in closed environments
o E.g. PNP ordering something from a supplier – computers talk to one another when the stock
is depleted – automatic order from supplier
• Para 9. “The objectives of the Model Law are best served by the widest possible application of the
Model Law. “
o If you try to define electronic commerce, you must do so in the widest way possible
o Definitions of electronic commerce:
“electronic commerce consists of commercial activity that is accomplished with
some substantial involvement of the Internet.” Rothchild John A Research
Handbook on Electronic Commerce Law (Elgar 2016) 1.
“commerce conducted in a digital form or on an electronic platform” or “selling or
buying goods and services on the Internet.” European Commission Working Paper E-
Europe, an Information Society for All
Best definition for our purposes:
“Any form of business transaction in which the parties interact
electronically rather than by physical exchanges. It covers mainly two types
of activity: one is the electronic ordering of tangible goods, delivered
physically using traditional channels such as postal services or commercial
couriers; and the other is direct electronic commerce including the online
ordering, payment and delivery of intangible goods and services such as
computer software, entertainment content, or information services on a
global scale.” The European Initiative in Electronic Commerce (1997).
• Key Characteristics of Electronic Commerce
o Commercial transactions:
buying and selling or exchanging of goods or services
can take place domestically or in an international context
For personal (B2C / electronic retail) or non-personal usage (B2B)
E.g. study from textbook, buying a dress online = Business 2 Consumer =
electronic retail
E.g. PNP wants to on sell goods, buys from manufacturer to sell to supplier.
Business 2 Business
Tangible goods (indirect electronic commerce – use internet as means of
communication/transaction) or intangibles (direct electronic commerce – delivery of
digital content)
Performed against payment / performance
Or paying through personal information = giving data (performance)
• Legal Regulation
o National/Domestic Level:
Electronic Communications and Transactions Act 25 of 2002
2
, Consumer Protection Act 68 of 2008
o International/Regional Level:
1996 UNCITRAL Model Law on Electronic Commerce (as amended in 1998)
2001 UNCITRAL Model Law on Digital Signatures
2005 UN Convention on the Use of Electronic Communications in International
Contracts
EU Directive on Electronic commerce
SADC Model Law on Electronic Transactions and Electronic Commerce
Difference between Model Law and a Convention:
When signing an international convention, sometimes the convention will
have automatic effect, or the convention will require legislation first to
make it part of the national law. International convention is automatically
law once applied as part of the national law.
Model law provides standards and something to strive towards – example
for countries to work with
o Can be used if the country doesn’t have legislation which deals
with an aspect or as parties you can agree to have the model law
regulate a contract as contract terms.
o Does not apply automatically
o Soft law
• 1996 UNCITRAL Model Law on Electronic Commerce (as amended in 1998)
o Guide to 1996 UNCITRAL Model Law on Electronic Commerce (as amended in 1998)
o Para 2: “However, the communication of legally significant information in the form of
paperless messages may be hindered by legal obstacles to the use of such messages, or by
uncertainty as to their legal effect or validity. The purpose of the Model Law is to offer
national legislators a set of internationally acceptable rules as to how a number of such legal
obstacles may be removed, and how a more secure legal environment may be created for
what has become known as “electronic commerce.” The principles expressed in the Model
Law are also intended to be of use to individual users of electronic commerce in the drafting
of some of the contractual solutions that might be needed to overcome the legal obstacles to
the increased use of electronic commerce.”
Issues in red:
E.g. contract must be written, signed by parties = hindered by legal
obstacles
o “The decision by UNCITRAL to formulate model legislation on electronic commerce was
taken in response to the fact that in a number of countries the existing legislation governing
communication and storage of information is inadequate or outdated because it does not
contemplate the use of electronic commerce. In certain cases, existing legislation imposes or
implies restrictions on the use of modern means of communication, for example by
prescribing the use of “written”, “signed” or “original” documents. …This may result in
uncertainty as to the legal nature and validity of information presented in a form other than
a traditional paper document.”
Modern law is based on the following principles
1. Principle of media neutrality
o Para 6: “The objectives of the Model Law, which include enabling or facilitating the use of
electronic commerce and providing equal treatment to users of paper-based documentation
and to users of computer-based information, are essential for fostering economy and
3
, efficiency in international trade. By incorporating the procedures prescribed in the Model
Law in its national legislation for those situations where parties opt to use electronic means
of communication, an enacting State would create a media-neutral environment.”
o Para 24. The approach used in the Model Law is to provide in principle for the coverage of all
factual situations where information is generated, stored or communicated, irrespective of
the medium on which such information may be affixed. It was felt during the preparation of
the Model Law that exclusion of any form or medium by way of a limitation in the scope of
the Model Law might result in practical difficulties and would run counter to the purpose of
providing truly “media-neutral” rules.
In essence this principle says should not discriminate electronic against paper
2. Principle of Functional equivalency
o Para 15. “The Model Law is based on the recognition that legal requirements prescribing the
use of traditional paper-based documentation constitute the main obstacle to the
development of modern means of communication. In the preparation of the Model Law,
consideration was given to the possibility of dealing with impediments to the use of
electronic commerce posed by such requirements in national laws by way of an extension of
the scope of such notions as “writing”, “signature” and “original”, with a view to
encompassing computer-based techniques.
o Para 16. The Model Law thus relies on a new approach, sometimes referred to as the
“functional equivalent approach”, which is based on an analysis of the purposes and
functions of the traditional paper-based requirement with a view to determining how those
purposes or functions could be fulfilled through electronic-commerce techniques. For
example, among the functions served by a paper document are the following: to provide that
a document would be legible by all; to provide that a document would remain unaltered over
time; to allow for the reproduction of a document so that each party would hold a copy of
the same data; to allow for the authentication of data by means of a signature; and to
provide that a document would be in a form acceptable to public authorities and courts. It
should be noted that in respect of all of the above-mentioned functions of paper, electronic
records can provide the same level of security as paper and, in most cases, a much higher
degree of reliability and speed, especially with respect to the identification of the source and
content of the data, provided that a number of technical and legal requirements are met.
However, the adoption of the functional-equivalent approach should not result in imposing
on users of electronic commerce more stringent standards of security (and the related costs)
than in a paper-based environment.
3. Principle of party autonomy
o Para 19, The Model Law embodies the principle of party autonomy in article 4 with respect
to the provisions contained in chapter III of part one. (= validity & formation issues)
o As a party, you can decide if you want to change
SESSION 2 – VALIDITY OF ELECTRONIC CONTRACTS
4
Advantages and Disadvantages of Internet Law
Advantages
o Makes life easier – quick and easy access
o Saves time – saves money
Disadvantages
o Reduces privacy and can infringe privacy, thus infringing your fundamental constitutional
human right
Therefore, we need the use of the internet to be regulated
Which existing branches/fields of the law will intersect with these issues:
Law of Contract
o Consumer protection issues in terms of online shopping privacy issues
Constitutional Law
o Privacy
Law of Delict
Intellectual Property
o Online downloads for textbooks for example
Main interests that require protection through legal regulation
• Consumer interests
o The individual
• Commerce – businesses
o Provides for a global economy
Economic growth and poverty alleviation
• Need to weigh up interests to evaluate the impact of a regulation
Optimal form of legal regulation
• Common law
• Legislation
o ECTA
• Parties to a contract regulating these issues themselves vs private associations can make use of
regulations
• Dispute resolution: litigation, arbitration and mediation as well as online dispute resolution
SESSION 1 - WHAT IS THE INTERNET OR ELECTRONIC COMMERCE?
ECTA: S1
Originated from the US military. Armed forces installed a system of ground-to-air forces. They were concerned
that the cables controlling the missiles could be severed and that missiles could be fired abnormally or
resulting in missiles not being launched. They created a distributive network to be able to share information
over distances.
Eventually we created a network of connected computers (storage devices) on top of which the internet is
built. The internet and the world wide web are two different things.
Web cache server: a holding system for a group of processing computers that power websites.
1
,Definitions
• Para 7 of Guide to1996 UNCITRAL (United Nations Commission for international trade law) Model
Law on Electronic Commerce: “The title of the Model Law refers to “electronic commerce”. While a
definition of “electronic data interchange (EDI)” is provided in article 2, the Model Law does not
specify the meaning of “electronic commerce”.”
o Problem with transactions facilitated by international trade.
Different legal systems = legal uncertainty
UNCITRAL tries to find a way to ensure legal certainty when there are these issues.
o Electronic data interchange is used in closed environments
o E.g. PNP ordering something from a supplier – computers talk to one another when the stock
is depleted – automatic order from supplier
• Para 9. “The objectives of the Model Law are best served by the widest possible application of the
Model Law. “
o If you try to define electronic commerce, you must do so in the widest way possible
o Definitions of electronic commerce:
“electronic commerce consists of commercial activity that is accomplished with
some substantial involvement of the Internet.” Rothchild John A Research
Handbook on Electronic Commerce Law (Elgar 2016) 1.
“commerce conducted in a digital form or on an electronic platform” or “selling or
buying goods and services on the Internet.” European Commission Working Paper E-
Europe, an Information Society for All
Best definition for our purposes:
“Any form of business transaction in which the parties interact
electronically rather than by physical exchanges. It covers mainly two types
of activity: one is the electronic ordering of tangible goods, delivered
physically using traditional channels such as postal services or commercial
couriers; and the other is direct electronic commerce including the online
ordering, payment and delivery of intangible goods and services such as
computer software, entertainment content, or information services on a
global scale.” The European Initiative in Electronic Commerce (1997).
• Key Characteristics of Electronic Commerce
o Commercial transactions:
buying and selling or exchanging of goods or services
can take place domestically or in an international context
For personal (B2C / electronic retail) or non-personal usage (B2B)
E.g. study from textbook, buying a dress online = Business 2 Consumer =
electronic retail
E.g. PNP wants to on sell goods, buys from manufacturer to sell to supplier.
Business 2 Business
Tangible goods (indirect electronic commerce – use internet as means of
communication/transaction) or intangibles (direct electronic commerce – delivery of
digital content)
Performed against payment / performance
Or paying through personal information = giving data (performance)
• Legal Regulation
o National/Domestic Level:
Electronic Communications and Transactions Act 25 of 2002
2
, Consumer Protection Act 68 of 2008
o International/Regional Level:
1996 UNCITRAL Model Law on Electronic Commerce (as amended in 1998)
2001 UNCITRAL Model Law on Digital Signatures
2005 UN Convention on the Use of Electronic Communications in International
Contracts
EU Directive on Electronic commerce
SADC Model Law on Electronic Transactions and Electronic Commerce
Difference between Model Law and a Convention:
When signing an international convention, sometimes the convention will
have automatic effect, or the convention will require legislation first to
make it part of the national law. International convention is automatically
law once applied as part of the national law.
Model law provides standards and something to strive towards – example
for countries to work with
o Can be used if the country doesn’t have legislation which deals
with an aspect or as parties you can agree to have the model law
regulate a contract as contract terms.
o Does not apply automatically
o Soft law
• 1996 UNCITRAL Model Law on Electronic Commerce (as amended in 1998)
o Guide to 1996 UNCITRAL Model Law on Electronic Commerce (as amended in 1998)
o Para 2: “However, the communication of legally significant information in the form of
paperless messages may be hindered by legal obstacles to the use of such messages, or by
uncertainty as to their legal effect or validity. The purpose of the Model Law is to offer
national legislators a set of internationally acceptable rules as to how a number of such legal
obstacles may be removed, and how a more secure legal environment may be created for
what has become known as “electronic commerce.” The principles expressed in the Model
Law are also intended to be of use to individual users of electronic commerce in the drafting
of some of the contractual solutions that might be needed to overcome the legal obstacles to
the increased use of electronic commerce.”
Issues in red:
E.g. contract must be written, signed by parties = hindered by legal
obstacles
o “The decision by UNCITRAL to formulate model legislation on electronic commerce was
taken in response to the fact that in a number of countries the existing legislation governing
communication and storage of information is inadequate or outdated because it does not
contemplate the use of electronic commerce. In certain cases, existing legislation imposes or
implies restrictions on the use of modern means of communication, for example by
prescribing the use of “written”, “signed” or “original” documents. …This may result in
uncertainty as to the legal nature and validity of information presented in a form other than
a traditional paper document.”
Modern law is based on the following principles
1. Principle of media neutrality
o Para 6: “The objectives of the Model Law, which include enabling or facilitating the use of
electronic commerce and providing equal treatment to users of paper-based documentation
and to users of computer-based information, are essential for fostering economy and
3
, efficiency in international trade. By incorporating the procedures prescribed in the Model
Law in its national legislation for those situations where parties opt to use electronic means
of communication, an enacting State would create a media-neutral environment.”
o Para 24. The approach used in the Model Law is to provide in principle for the coverage of all
factual situations where information is generated, stored or communicated, irrespective of
the medium on which such information may be affixed. It was felt during the preparation of
the Model Law that exclusion of any form or medium by way of a limitation in the scope of
the Model Law might result in practical difficulties and would run counter to the purpose of
providing truly “media-neutral” rules.
In essence this principle says should not discriminate electronic against paper
2. Principle of Functional equivalency
o Para 15. “The Model Law is based on the recognition that legal requirements prescribing the
use of traditional paper-based documentation constitute the main obstacle to the
development of modern means of communication. In the preparation of the Model Law,
consideration was given to the possibility of dealing with impediments to the use of
electronic commerce posed by such requirements in national laws by way of an extension of
the scope of such notions as “writing”, “signature” and “original”, with a view to
encompassing computer-based techniques.
o Para 16. The Model Law thus relies on a new approach, sometimes referred to as the
“functional equivalent approach”, which is based on an analysis of the purposes and
functions of the traditional paper-based requirement with a view to determining how those
purposes or functions could be fulfilled through electronic-commerce techniques. For
example, among the functions served by a paper document are the following: to provide that
a document would be legible by all; to provide that a document would remain unaltered over
time; to allow for the reproduction of a document so that each party would hold a copy of
the same data; to allow for the authentication of data by means of a signature; and to
provide that a document would be in a form acceptable to public authorities and courts. It
should be noted that in respect of all of the above-mentioned functions of paper, electronic
records can provide the same level of security as paper and, in most cases, a much higher
degree of reliability and speed, especially with respect to the identification of the source and
content of the data, provided that a number of technical and legal requirements are met.
However, the adoption of the functional-equivalent approach should not result in imposing
on users of electronic commerce more stringent standards of security (and the related costs)
than in a paper-based environment.
3. Principle of party autonomy
o Para 19, The Model Law embodies the principle of party autonomy in article 4 with respect
to the provisions contained in chapter III of part one. (= validity & formation issues)
o As a party, you can decide if you want to change
SESSION 2 – VALIDITY OF ELECTRONIC CONTRACTS
4
