Integrating Electronic
Contracts into Negotiated Deals
Courtney Stopp
May 29, 2007
University of Connecticut
School of Law
Integrating Electronic
Contracts into Negotiated Deals
Introduction
Internet Business
Legal Regimes
Putting it into Practice
Conclusion
Doing Business on the
Internet
Internet Transactions
The Appeal: Powerful & Efficient Communication, Speed, Knowledge, Accuracy, GlobalizedConsumers have been experiencing the benefits of the internet for over a decade
Large scale corporations are building strategies around a new way of doing business
Doing Business on the
Internet
Economics of the Internet
Traditional notions of internet business account for only 9.6% of the total revenue generated on the internetPredicted by 2010 0010 Trillion Dollars flowing through the internet economy What will be driving the internet economy? Business to Business (B2B) Transactions 00eBusiness
What is eBusiness?
00lectronic Business (eBusiness)
involves the total digitalization of value chains and business
processes, and holds the promise of helping traditional organizations
create new value and reach previously unattainable height of operational
excellence.00/b>
Internal
Value Chain
External
Value Chain
Source: 00anaging E-Business
Transformation: Opportunities and Value Assessment* Revised and forthcoming
in Sloan Management Review00 Barua, Anitesh, Konana Prabhudev, Whinston,
Andrew, Yin, Fang; Center for Research in Electronic Commerce McCombs
School of Business The University of Texas at Austin 2001.
Source: www.themanager.org
Creating an eBusiness
Value Chain Alignment
Electronic alignment from the Raw material supplier to end userCompatible internet based software throughout all organizations Customized purchases, placing and filling purchase orders, tracking, shipping, financing, etc Automated transactions launched with a push of a button
Transitioning to an eBusiness
Model
Complete eBusiness transformation is not for everyone
Ideal circumstance where transactions are: Highly standardized Low cost Readily available materials Minimal personal collaboration required Challenging circumstances where transactions contain: Complex supply chains High costs and high dollar products Personal collaboration and trust requirements Raw material shortagesTransitioning to an eBusiness
Model
Essentially, the difference between the Ideal Circumstance and the Challenging Circumstance is Risk
Ideal Circumstances for eBusiness 00known, predictable, low risk exposureChallenging Circumstances for eBusiness Usually found in industries with few competitors and intense competition Unpredictable, high dollar, high risk exposure Must find the nexus between traditional operational modes and eBusiness models
Managing eBusiness Risk
Business Risk is mitigated through Legal Contracts.
Creating the nexus between eBusiness and traditional business requires the interplay of two separate contracts and an understanding of how they interact Traditional business practices capture risk in the form of a negotiated contract Complexity will drive the need for continued use of long term, highly concessionary, negotiated deals eBusiness provides a new set of rules Competition and efficiency will drive the need for internet transactions governed by electronic contractsUnderstanding Electronic
Contracting in the United States
The United States has validated the use of electronic contracts in both the court system as well as through Federal and State Legislation
Doctrines of electronic contracting were derived from areas such as: Licensing and Contracts Uniform Commercial Code (00CC00 Legislation developed to validate electronic contracts Uniform Electronic Transaction Act (00.E.T.A00 Electronic Signatures in Global and National Commerce Act (00-Sign00Understanding Electronic
Contracting in the United States
Legal concepts and practices:
Electronic contracts are valid and may modify existing agreements as long as: Each party has adequate notice of the additional terms Each party has unambiguously assented to the additional terms Electronic contracts can be non negotiable Legal precedent in US has established that the fact that a contract is non negotiable does not prohibit the use of such instrument The terms of electronic contracts cannot be unconscionableUnderstanding Electronic
Contracting in the United States
Federal and State Statutes:
Uniform Electronic Transaction Act (00.E.T.A00 & Electronic Signatures in Global and National Commerce Act (00-Sign00 Codify that electronic contracts are valid and that assent to a contract may be provided by 00n electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record00/b> This has been interpreted to include clicking certain links and specific buttons as well as signing emailsUnderstanding Electronic
Contracting in the European Union
Statutory Doctrines:
EU Directive 2000/31/EC passed in 2000 established the framework for conducting eBusiness within the community Article 9: Allows contracts to be included by electronic means by systematically eliminating any legal requirements imposed on the contracting process that would impede the conclusion of binding electronic contracts or that would deny such contracts legal effectiveness or validity on account of the electronic method or creationUnderstanding Electronic
Contracting in the European Union
2006 the EU developed a commission to report out on the 00egal barriers to the use of electronic documents in eCommerce transactions, and to identify potential solutions to any such barriers, particularly on the cross border level, where the validity and acceptability of electronic documents generally possess the greatest difficulties.00/b>
Results of study: Many similarities between the Member States treatment of electronic contracts General acceptance of electronic contracting means General emphasis on the expressed will of the parties as opposed to the official form taken Major Challenge Electronic SignaturesSource: 00Legal Study and Administrative Practices Regarding the Validity and Mutual Recognition of Electronic Documents00/font>
http://ec.europa.eu/enterprise/ict/policy/legal/index.htm
Understanding Electronic
Contracting in the European Union
Electronic Signatures
EU has established a qualifying system for electronic signatures that has not proven convenient for transactions: The technology to support the most secure signatures is not readily available and not used This leaves the 00ill of the parties00subject to interpretation and legal ambiguity Member States will defer to established framework agreements Paper document between the parties establishing how they will interact electronically Validates Signatures Determines if/when an electronic file is meant to be a binding contractWhat is an Electronic
Contract?
Any electronic file, communication, email may be used as a binding agreement if it is intended by the parties. Most common however because of their ease of application are:
Clickwrap Agreements Standard terms and conditions are presented through a pop up box that requires an acceptance prior to the completion of the transaction Browsewrap Agreements Alternatively there may be a link to the terms and conditions on the website that dictates that the use of the site and completion of any transaction will be deemed acceptance of the terms and conditionsCorrelating the Negotiated
Deal with the Electronic Contract
In order for a corporation to realize the benefits of an efficient eBusiness, it must be able adeptly correlate the electronic contract with the negotiated contract and mitigate the risk exposure of both worlds.
As a corporation transitions to an eBusiness operational model - the risks must be mitigated Corporations must acknowledge and prepare for electronic contracts to govern transactions Use negotiation opportunities to address electronic contracting issues and develop framework agreements Establish internal mechanisms for handling the correlation.Correlating the Negotiated
Deal with the Electronic Contract
Legal mechanisms for integrating electronic contracts include elements such as:
Creating, incorporating, and coordinating electronic contracts/Clickwrap Agreements into paper contractsAcknowledging others00electronic contracts and their applicability
Understanding the business and the terms of the transactions will take place on the internet
Conclusion
The bottom-line is dictating that business transforms into eBusiness
B2B eCommerce is a multi-trillion dollar enterprise because it creates efficiency in transactions and resources Without sufficient understanding of electronic transactions corporations may be exposed to unpredictable risk Attorneys traditionally charged with risk mitigation must understand how and when negotiated deals will interact with electronic contracts in order to provide adequate protection for the corporationValue chain analysis evaluates the value
each particular activity adds to the organization00 products or services
Idea: the organization is more than a
random compilation of machinery, equipment, people, customers, and money.
Advantages: Only if these things are
arranged into systems and systematic activities will it become possible
to produce something that customers will pay for.
Managing activities within specified orgs and the flow of information, products, and money between links is the crucial point of achieving a competitive edge
Links must incorporate seamless cooperation
and information flow between value chain activities
