UCITA Brings New Legal Realities
According to the publication e-marketer, New York, domestic e-commerce revenues totaled $71.4 billion in 1999; and Forrester Research, Cambridge, MA, predicts that hypergrowth in the Internet economy will not begin until later this year. Therefore, it's not difficult to understand why virtually all companies, large and small, have given serious consideration to launching an e-commerce program.
Nowadays, we face an environment hallmarked by fiercer, more fluid competition and increased globalization pushing entire industries forward in a technological shift of a scale and magnitude perhaps never seen before.
Substantive contract law is struggling to keep pace as even basic concepts such as offer and acceptance take on a new connotation in the context of e-commerce transactions in cyberspace. The importance of coming to terms with these issues cannot be ignored. Given the commerce explosion via this new medium, it is not at all surprising that companies see the Internet as an opportunity to tap into what is quickly becoming a huge market accessible at relatively low costs.
But a move in this direction raises several legal issues, one of the most significant being the potential applicability of the Uniform Computer Information Transactions Act. This act was approved in July 1999 by the National Conference of Commissioners on Uniform State Laws.
Scope. UCITA applies to transactions where the subject matter includes information that is in a form directly capable of being processed in or received from a computer. It does not apply to sales of books, magazines, newspapers or transactions in traditional records or motion pictures. Nor does it apply to television sets, cars, desks or computers, or the creation or distribution of motion pictures, broadcast television, radio, cable television or records, even if they are in the form of digital information. The act focuses exclusively on computer information transactions under a medium resembling the Internet.
In the tradition of contractual freedom, UCITA allows parties by agreement to opt in to or opt out of coverage by UCITA. However, such agreements cannot alter certain rules, such as the obligation of good faith, the application of consumer protection laws and other basic rules.
E-commerce contracting. UCITA provides a balanced, clear structure for contracting electronically, clarifying the law dramatically in this area. Basically, under UCITA a record or authentication may not be denied legal effect or enforceability solely because it is in electronic form. In other words, there's no longer a need to see a person's signature on paper. Now, a mere click authenticates an intent to contract to buy a product.
Conduct by an individual indicates assent if the individual had reason to know that the other person would view the conduct as manifesting assent. In plain English, a click in a box next to or under language indicating that the user accepts the product should suffice. Increasingly, parties involved in electronic commerce are using computer programs to create and perform contracts. This development is a potentially significant breakthrough for consumers. They can combine the scope of the Internet with the search power of computer programs to shop worldwide for the most favorable terms and prices. UCITA provides basic, clarifying rules that validate the use of electronic agents and indicate under what limitations the operations of such electronic agents create binding obligations.
The fact that a contract exists does not, in itself, determine the terms of that contract. The standards set out in UCITA give clear guidance to the party proposing terms and set requirements that prevent the other party from being unfairly bound by hidden terms. In UCITA, for assent to occur, a person must be given an opportunity to review the contract terms. In essence, the terms must be available, and their existence must be made apparent to a reasonable person. Now, clicking on a button clearly indicating agreement to the terms ordinarily suffices. UCITA also provides safe harbor rules that give guidance on how online availability of terms and proof of assent can be established.
UCITA establishes various consumer protection rules focused on computer information transactions that do not exist under current law. These include:
• A consumer has a right to get out of an online contract if he acts promptly to avoid the effect of an electronic mistake.
• The statute of limitations cannot be scaled down by agreement.
• A term changing the application of UCITA to the transaction must be
• A term that prohibits transfer of a contract right must also be conspicuous.
Site design and creation. Most companies may lack a full-time, inhouse HTML programmer to fully develop its Web site. Some Internet service providers will offer off-the-shelf Web designs ideal for individual home pages, but they are not often unique or attractive for effective marketing via e-commerce. An effective, complex e-commerce Web site can cost tens of thousands, if not millions, of dollars to design and program effectively. Given the dollars we are talking about, as a first step, at the very least, it would pay to check out the designer's reputation and prior work for quality and professionalism.
Next, it also would probably prove worthwhile to have a written "work-for-hire" contract drawn up with the designer, spelling out that you, not the designer, own all intellectual property on your site, including copyrights. Finally, it would make sense to get the designer to indemnify you if his work infringes upon a third party's rights. If need be, the designer should obtain necessary third-party licenses.
Copyrights. Finally, it's worth considering copyrighting valuable creative work affixed or posted on your Web site, particularly if it is of a unique nature you don't wish your competitors to clone. You can register such work with the U.S. Copyright Office relatively inexpensively.
As an endnote, there are other significant issues relating to e-commerce, but in the interest of brevity, I focused here on the main concepts companies should keep in mind regarding this new, emerging development for transacting business.
Many of the issues are novel and in constant flux, so care needs to be exercised when venturing into this realm and in selecting counsel experienced in this emerging field.