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Reproduced with permission of 7 Vindobona Journal of International Commercial Law & Arbitration (2003) 121-150.

The Application of the United Nations Convention on Contracts for the International Sale of Goods to E-Commerce Transactions: The Implications for Asia

Jacqueline Mowbray [a1]

  1. Introduction
  2. Application of the CISG to E-commerce
  3. Impact on the Significance of the CISG
  4. The Implications for Asia
  5. Conclusion

1. INTRODUCTION

The United Nations Convention on Contracts for the International Sale of Goods ('CISG' or 'the Convention') has played a major role in creating uniformity in international sales law. It has been ratified by over 60 countries [1] and has become the de facto sales law of many regional trading areas, including the major economies of North America and Western Europe.[2] However, there are also regions where participation in the CISG is noticeably lacking. One of these regions is Asia. Only two countries in the Asian region, Singapore and China, have ratified the CISG.[3] The international community has generally encouraged all countries, including Asian nations, to become parties to the CISG. But should ratification of the CISG be a priority for Asia?

This paper analyses the significance of the CISG from an Asian perspective. It argues that the development of e-commerce significantly diminishes the value of the CISG as a tool for regulating international sales contracts: it is unclear whether the CISG applies to certain electronic transactions at all, and in cases where the CISG does apply, its application to electronic contracts is problematic. In view of the importance of [page 121] e-commerce to Asian countries, which have repeatedly emphasised their commitment to developing e-commerce in the region, ratification of the CISG should not be a priority for Asia. Rather, Asian countries should focus on establishing a stable legal and regulatory framework for the development of e-commerce.

The first part of this paper examines the application of the CISG to e-commerce transactions. It firstly considers whether the CISG applies to e-commerce transactions at all, and then secondly examines the difficulties involved in applying the CISG to electronic contracting. The second part of the paper examines the way in which the problems associated with applying the CISG to e-commerce impact on the significance of the CISG at an international level. It also considers how the international community is responding to the challenges e-commerce creates for traditional contract laws. The final part of the paper examines the specific situation of Asia, and concludes that Asian countries should give greater priority to establishing a legal and regulatory framework for e-commerce than to becoming party to the CISG.

2. APPLICATION OF THE CISG TO E-COMMERCE

2.1 Does the CISG apply to e-commerce transactions?

Article 1(1) of the CISG provides that 'this Convention applies to contracts of sale of goods between parties whose places of business are in different States.'

Therefore the CISG will only apply to a particular transaction if it involves:

  1. a contract of sale;
  2. of goods;
  3. between parties whose places of business are in different States.

2.1.1 'Contract of sale'

The CISG does not expressly define the term 'contract of sale.' However, as the UNCITRAL Working Group on Electronic Commerce (the UNCITRAL Working [page 122] Group) has noted,[4] it is possible to infer the meaning of a 'sales contract' from the different rights and obligations of the parties provided by the CISG. Under Art. 30, the main obligations of the seller are to deliver the goods, hand over any documents relating to them and transfer property in the goods. Under Art. 53, the main obligations of the buyer are to pay the price and take delivery of the goods. Accordingly, a 'sales contract' under the CISG can be defined as:

"A contract by virtue of which the seller must deliver the goods, hand over any documents relating to them and transfer the property in the goods sold, whereas the buyer is bound to pay the price for the goods and take delivery of them."[5]

In the case of e-commerce transactions, this requirement will usually be uncontroversial. Sales contracts formed by electronic means are still sales contracts; they are no different from contracts formed by more traditional methods. However, one of the most significant areas of e-commerce is online software sales, and in the case of software, a 'sales contract' may in fact not be a sales contract, but rather a licensing agreement. For example, when a customer purchases a Microsoft product, the product is accompanied by a licence agreement which states 'this software product is licensed, not sold.'[6] The reason for this is that a significant part of the software is the intellectual property rights which attach to it, and while the software manufacturer may sell the buyer the physical disk containing the software, he or she does not sell the intellectual property rights in the program. Instead, he or she grants the buyer a licence to use the program.

Licence agreements of this sort do not involve the transfer of property in the goods 'sold', as required by Art. 30. The seller retains title to the software and merely grants the buyer a licence to use it. It would therefore seem that such agreements, which are common in an e-commerce context, are not contracts of sale, and fall outside the sphere of application of the CISG.

It is possible to formulate arguments that licensing agreements are nonetheless sales contracts. Article 41 provides that 'the seller must deliver goods which are free from any right or claim of a third party, unless the buyer agreed to take the goods subject to that right or claim.' It can therefore be argued that the CISG allows for a 'sales [page 123] contract' in which a buyer who 'purchases' software pursuant to a licence agreement has agreed to take the goods subject to the seller retaining title.[7] This argument is supported, to some extent, by the fact that Art. 4 proclaims that the CISG is not concerned with 'the effect which the contract may have on the property in the goods sold.'

Further, some commentators argue that the CISG should apply to software licence agreements because, although the manufacturer retains title to the goods, the transaction in all other respects is similar to a sale. The customer pays a one-off fee for the licence, and the licence is granted for an indefinite period of time.[8] As far as the customer is concerned, he or she has 'bought' the software. This approach was taken by a United States court when applying the United States Uniform Commercial Code ('UCC'), which, like the CISG, applies to sales of goods across state boundaries. In that case, which concerned the licence of a computer software package, it was held that 'where the contract price of a lease is as large as the sales price of the same item, the transaction is analogous to a sale and will be covered by the UCC.'[9] On this basis, it has been suggested that the CISG would support a finding that licence agreements can constitute sales contracts provided that the price of the licence is the same as the price for purchase of the software.[10] However, there is no direct support for the application of such a test in the CISG itself.

Ultimately, although it is possible to develop arguments as to why software licence agreements should be covered by the CISG, there is a definite possibility that a court asked to determine the issue will find that they are not. This is particularly the case given the trend on the part of software manufacturers to use licence agreements to limit the way in which customers may use software.[11] The use of increasingly restrictive conditions in licence agreements suggests that the customer merely acquires limited rights in the software and that the transaction cannot truly be described as a 'sale.' [page 124]

2.1.2 'Goods'

There is no definition of 'goods' in the CISG. Nor is it possible to deduce the meaning of the term by analysing different language versions of the Convention, or by studying the travaux préparatoires produced at the time of negotiation of the Convention.[12]

However, as noted by the UNCITRAL Working Group:

"The Convention seems to embody a rather conservative concept of 'goods', as it is considered both in legal writings and case law to apply basically to moveable tangible goods. Thus, according to most commentators intangible rights, such as patent rights, trademarks, copyrights, a quota of a limited liability company, as well as know-how, are not to be considered 'goods.' The same is true for immoveable property."[13]

An analysis of the case law demonstrates that this is indeed the case. In a case before the Oberlandesgericht of Cologne in Germany, the Court found that the CISG was not applicable to a sale of market research and analysis.[14] The Court found that although the information was embodied in a physical report, the main purpose of the contract was the transfer of the right to use the information in the report, and this did not constitute a 'good.' Similarly, in a case before the Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, the arbitral court held that the CISG did not apply to the sale of shares in a limited liability company, because such a sale was a sale of rights and not of goods.[15]

It therefore seems that the CISG does not generally apply to contracts for the sale of intangible goods. This position is supported by the fact that Art. 2 of the CISG expressly excludes the application of the Convention to sales of stocks, shares, investment securities, negotiable instruments or money,[16] and to sales of electricity.[17] [page 125]

Further, Art. 3 indicates that the CISG does not apply to contracts that substantially involve the provision of services. Article 3(1) provides that:

"Contracts for the supply of goods to be manufactured or produced are to be considered sales unless the party who orders the goods undertakes to supply a substantial part of the materials necessary for such manufacture or production."

Article 3(2) provides that:

"This Convention does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services."

In the case of a contract formed electronically for the delivery of a tangible good, this poses no particular problems. However, as discussed above, a large proportion of electronic contracts involve the sale of software. And the nature of software is such that it does not fit easily into the category of a 'good', as it has characteristics of goods, services, intangibles and intellectual property.[18] Given the fact that the CISG does not apply to services, intangibles or intellectual property, a real question arises as to whether the CISG applies to software. The following discussion considers the most common forms of software and analyses whether they fall within the concept of 'goods' for the purposes of the CISG.

(a) Software on a Disk

Software supplied on a disk looks similar to any other goods to which the CISG applies.[19] A tangible object is transferred from seller to buyer. However, the disk also contains the intangible software program, which is separated from the disk after delivery, by being downloaded onto the hard drive of the buyer's computer. Does the CISG apply to the program as distinct from the disk which contains the program?

In 1993, the Oberlandesgericht of Koblenz, Germany, held that the CISG would apply to the sale of a computer chip, as under the CISG 'goods' included all tangibles which might be the subject of an international sales contract, and this would include computer [page 126] software.[20] It is implicit in the decision that the CISG applies to the software program as well as to the tangible item containing the program. This approach has been endorsed by numerous commentators,[21] on the grounds that computer software delivered on a disk is no different to other goods, such as books, where intellectual activity is incorporated in tangible goods.[22] Books are clearly goods, although their value lies in the copyright material embodied in the book, rather than the ink and paper on which it is printed. Commentators also support the characterisation of software as a 'good' because this interpretation will further the purpose of the CISG,[23] which is to promote uniformity in international trade.[24]

Sufficient consensus has been achieved on this point that 'there is currently no real controversy in international contract law that the CISG applies to software delivered on a disk.'[25]

(b) Custom-made software

Custom-made software is software which is developed or adapted specifically for a particular buyer. As the UNCITRAL Working Group has noted:

"The sale of 'custom-made software' would probably have to be excluded from the current sphere of application of the Convention since, according to article 3(2), the Convention 'does not apply to contracts in which the preponderant part of the obligations of the party who furnishes the goods consists in the supply of labour or other services'."[26] [page 127]

The only question which arises in this context is how one determines whether the 'preponderant part' of the seller's obligation is the supply of services as opposed to the supply of goods. Honnold has indicated that the monetary value of the services and of the goods is an appropriate indicator.[27] It is therefore necessary to place a monetary value on the goods supplied, for example, the software disk, and on the services supplied, that is, the specific programming necessary to tailor the product to the needs of the buyer. If the monetary value of the services is greater than the monetary value of the goods, then the CISG will not apply.

It would seem likely that in most cases of custom-made software, the value of the services supplied will far exceed the value of any goods supplied, and accordingly the CISG will not apply. However, it is interesting to note that US courts, when applying an equivalent provision of US law,[28] have found contracts for custom-made software to be contracts for the sale of goods. In the case of Analysts International Corporation v Recycled Paper Products Inc,[29] a US District Court found that a contract for the manufacture and installation of a custom-designed computer program was a contract for the sale of goods, as the extensive services involved were necessary for achieving the final 'product', which was the ready-to-use program. Similarly, in Advent Systems Ltd v Unisys Corporation,[30] a US Court of Appeals found that the 'sale' was the prevailing factor in the manufacture of a custom-designed computer program and that accordingly the contract was for the sale of goods.

However, the approach taken by these US courts in relation to the UCC will not necessarily be followed by a court applying the CISG, particularly as other jurisdictions do not consider contracts for custom-made software to be contracts for the sale of goods.[31] Further, the consensus of commentators on the issue is that the CISG will not apply to custom-made software. [32] [page 128]

A further issue which can arise in respect of some custom-designed software is whether the application of the CISG is excluded on the grounds that the contract falls within Art. 3(1). Article 3(1) provides that the CISG will not apply where the party who orders the goods undertakes to supply a substantial part of the materials necessary for their manufacture. This could create problems, for example, where a seller supplies a database to organise the buyer's data, in which case the content of the database is supplied by the buyer.[33] Larson [34] suggests that the correct analysis of this situation is to note that although the software is customised by the introduction of the buyer's data, that data is not so fundamental to the product that the seller would not be able to sell the product without that data. Therefore the materials supplied by the buyer are not a 'substantial part' of the materials necessary for the manufacture of the goods. Perhaps an alternative approach would be to adopt Honnold's 'monetary value' test and consider the value of the materials contributed by the buyer and those contributed by the seller. Ultimately, however, this analysis is probably of little consequence as it seems likely that the CISG will not apply to custom-made software in any event, as a result of the application of Art. 3(2).

(c) Electronic Software

Electronic software is software that is not delivered on a disk or other physical medium, but is transmitted electronically, for example, via the Internet. Electronic software is therefore totally intangible; it does not take on a physical form, even when it is delivered to the buyer. Since the CISG has generally been held not to apply to intangible goods, it seems likely that electronic software will fall outside the scope of the CISG.[35]

It has been argued that the CISG could apply to electronic software because software programs must be embodied in some physical medium, for example, a computer, before they can be used. There is therefore always some tangible good associated with the software.[36] However, this approach seems artificial. Further, the 'tangible medium' which contains the software when it leaves the possession of the seller, namely the seller's computer, is not the same as the 'tangible medium' which contains the software when it is delivered to the buyer, namely the buyer's computer. No tangible goods are [page 129] passed from buyer to seller. This seems contrary to the scheme of the CISG which clearly contemplates the transfer of tangible goods from one party to the other.[37]

A further barrier to the application of the CISG to electronic software is that the CISG expressly excludes contracts for the sale of electricity from its sphere of application.[38] The provision of electronic software is, in effect, the provision of a 'stream of electrons',[39] which is, of course, electricity. Accordingly, it can be argued that electronic software is expressly excluded from the scope of the CISG. However, electronic software can probably be distinguished from electricity. The electronic software itself, the product, is quite distinct from the electricity, the means by which the product is transmitted to the buyer. The Commentary to the CISG indicates that electricity was excluded from the scope of the Convention because of unique problems associated with the supply of electricity. This would suggest that the exclusion should not extend to products which are transmitted by means of electricity, but which do not involve the supply of electricity itself. In any event, the increasing use of fibre optics, which allows the transmission of software by means other than electricity, may render this issue largely academic. [40]

Ultimately, it is at best doubtful whether the CISG will apply to electronic software. Although the inclusion of electronic software within the sphere of application of the CISG may achieve the CISG's purpose of developing uniformity and certainty in international trade, it is probable that courts, which have emphasised the need for 'goods' to be tangible, may find that electronic software transactions are contracts for services, particularly if that is the approach which has been adopted at a national level. [41]

2.1.3 'Between parties whose places of business are in different States'

Article 1(1) indicates that the CISG applies 'where the parties' places of business are in different States and: [page 130]

"(a) the States are Contracting States; or
(b) the rules of private international law lead to the application of the law of a Contracting State."

In order to determine the applicability of the CISG, it is therefore necessary to determine the places of business of the parties. This can raise particular problems in the context of e-commerce, in which orders can be placed, received and processed in 'cyberspace', with little connection to a particular location. It is possible for individuals or companies to do business entirely online without an established 'place of business' in the traditional sense. In the absence of such a traditional 'place of business', it can be difficult to establish the place of business of a party for the purposes of the CISG. For example, imagine a buyer places an order for software online, via a website. The domain name, or website address, may end in .'au', which indicates that the domain name is registered in Australia. However, the server which hosts the website and which initially receives the order may be located in New Zealand. The particular software delivered to the buyer may be transmitted from an employee of the seller who is resident in Hong Kong. Where is the seller's place of business for the purposes of this contract? While different approaches can be adopted, in the absence of a definition of 'place of business' specifically applicable to e-commerce situations, the answer is unclear.

Further, Art. 1(2) provides that:

"The fact that the parties have their places of business in different States is to be disregarded whenever this fact does not appear either from the contract or from any dealings between or from information disclosed by, the parties at any time before or at the conclusion of the contract."

It is therefore not only necessary that the parties have their places of business in different States, but that they are aware of this fact. Determining whether the parties were aware of the international character of their transaction poses particular difficulties in the context of e-commerce. E-commerce allows parties to do business without ever having direct contact or knowledge of the other party. It is possible for a buyer to order a product via a website without having any idea of the identity or location of the seller. Given the international nature of the Internet, should it be assumed that any party contracting on the Internet is aware that their transaction may have an international character? Or is some actual knowledge of the location of the other party required? [page 131]

The UNCITRAL Working Group has suggested [42] that it may be appropriate to consider the effect of country indicators in domain names and e-mail addresses in this context. So, for example, if an Australian buyer purchases products via a website <www.seller.co.uk>, the Australian buyer can be presumed to be aware that the seller does not have its place of business in Australia, but rather in the UK. The same approach would apply if the contract was concluded via e-mail with a seller whose address was 'jbloggs @seller.co.uk.' The problem with this approach, however, is that the domain name or e-mail address is not a true indication of the location of the seller. It is possible for the seller to have a domain name or e-mail address ending in .'au' without necessarily having its principal place of business in Australia. A further problem is that some domain names and e-mail addresses do not have a country indicator, but end, for example, in .'com', .'net' or .'org.' The UNCITRAL Working Group suggests [43] that one approach is to presume that in such cases the contract is recognised to be international as the use of such an address 'is presumably due to the fact that the party does not want to be located in any specific country or may want to be accessible universally.'[44] However, such an address can be chosen for many other reasons, for example, because other domain names were not able to be registered. Further, given the international character of the Internet, it seems inappropriate to assume that businesses with these domain names want to be accessible universally but those with other domain names do not.

The UNCITRAL Working Group is clearly aware of the problems associated with determining the parties' 'places of business' where contracts are concluded electronically, and has indicated that consideration is to be given to a new definition of 'place of business' to be applied where contracts are concluded electronically.[45] In the absence of such a definition, however, determining the parties' 'places of business', and therefore the applicability of the CISG, will be problematic.

A further issue arises in relation to Art. 1(1)(b), which requires a determination of whether the principles of private international law lead to the application of the law of a Contracting State. It is possible that the rules of private international law of the relevant forum may provide that the contract is to be governed by the law of the country in which the contract was formed. However, as discussed in greater detail below, it can be [page 132] extremely difficult to determine when, and therefore where, an electronic contract is formed. As a result, it can be difficult to determine whether the CISG applies.

2.1.4 Exclusion of consumer contracts

Article 2(a) expressly excludes consumer contracts from the scope of the CISG:

"This Convention does not apply to sales [ ... ] of goods bought for personal, family or household use, unless the seller, at any time before or at the conclusion of the contract, neither knew or ought to have known that the goods were bought for any such use."

This significantly limits the application of the CISG in an e-commerce context, as one of the significant characteristics of e-commerce in general, and the Internet in particular, is that it gives consumers previously unimaginable access to manufacturers and suppliers overseas, and allows consumers to contract directly with them. The widespread use of the Internet for consumer transactions, and in particular international consumer transactions, means that the inapplicability of the CISG to consumer contracts is a significant limitation.

Further, as discussed above, e-commerce allows parties to conclude transactions without having any knowledge of the other party. Sellers can receive orders placed via a website with no knowledge whatsoever of the person who placed them. It may therefore be difficult for the seller to determine whether the goods are being purchased by a consumer 'for personal, family or household use' or by a business. The traditional approach was to ask whether it was possible for the seller to recognise that the goods were being purchased for consumer use having regard to elements such as the number of items bought and the nature of the items bought.[46] However, many products sold online, for example, word processing software, can be used for both household and business applications. While an order for 100 copies of the software program would clearly suggest that the program was intended to be used in a business, an order for one copy does not necessarily mean that the program is intended for household use. [page 133]

Thus in many cases a seller will not be able to determine whether a particular electronic sale is for business or consumer purposes, and therefore will not know whether the particular sale is governed by the CISG or by some other law. Accordingly, sellers are tending to expressly exclude the application of the CISG in their sales contracts to avoid this uncertainty.[47]

2.2 Are the provisions of the CISG suited to the regulation of e-commerce?

2.2.1 Formation of contract issues

(a) Electronic agents

The most fundamental question which arises in relation to formation of electronic contracts is whether a computer or other electronic device can conclude a contract. E-commerce contracts are generally concluded by means of messages sent and received from computers, often with little or no human involvement. For example, a buyer may order goods by filling out an order form on a website. This order is then submitted to the supplier's web server, which will begin processing the order. At this stage there has been no human involvement in the transaction on the part of the seller, but arguably the contract has been concluded, as the seller, by means of its server, has begun to process the order. The situation is more extreme in the case of Electronic Data Interchange (EDI) arrangements.[48] EDI involves the computer-to-computer transmission of data without human intervention. For example, company A may have a direct computer connection with company B, which supplies food for company A's vending machines. Company A may have a computer program which monitors the supply of food in the machines and automatically places an order with company B's computer when the supply is low. Company B's computer receives the order and transmits a purchase order to company B's warehouse for shipment. It would seem that a contract for the supply of the food has been concluded, but there has been no human involvement.[49] [page 134]

Under the CISG a contract is not formed unless the parties have demonstrated an intention to enter into a binding agreement.[50] Are computers capable of having the relevant intention? If not, can a computer be deemed to act as agent for the human who programmed it, such that the actions of the computer serve to indicate the programmer's intention to be bound by the contract?

This issue was discussed by the UNCITRAL Working Group in the context of the preparation of the UNCITRAL Model Law on Electronic Commerce (Model Law). In that context, the Working Group emphasised that a computer could not be made the subject of rights and obligations.[51] It would therefore follow that, in the view of the Working Group, computers cannot evince an intention to be legally bound. However, the Working Group indicated that 'data messages that are generated automatically by computers without direct human intervention should be regarded as "originating" from the legal entity on behalf of which the computer is operated.' Applying this by analogy to the situation of the formation of contracts, it would seem that computers can act as 'electronic agents' for the purposes of concluding contracts.[52]

However, this approach, while logical, is not entirely without difficulty. What happens when there are bugs in the server causing errors in the computer's behaviour? Clearly the computer's behaviour is not a true reflection of the intention of the human principal. Similarly, a customer placing an order via a website could 'add' additional terms to the order, if there were any 'free-text' boxes in the standard order form, but the order would be automatically accepted and processed by the server, without the human principal ever scrutinising the additional terms.[53] Can an intention to be bound by the additional terms be attributed to the principal? These issues probably fall to be determined under the law [page 135] of agency. Agency issues are not covered by the CISG and must therefore be determined on the basis of applicable domestic law concepts. As a result, the CISG fails to provide a uniform solution in this situation.

(b) Offer

Under Art. 14, an offer must be addressed to one or more specific persons, must be sufficiently definite and must indicate the intention of the offeror to be bound in the case of acceptance.

Article 14 goes on to provide that:

A proposal is sufficiently definite if it indicates the goods and expressly or impliedly fixes or makes provision for determining the quantity and the price.

The requirement for an offer to be addressed to one or more specific persons means that websites, advertisements on bulletin boards and advertisements sent to electronic mailing lists will not constitute offers. Such 'invitations to treat' also lack the requisite indication of the intention of the offeror to be bound in the case of acceptance.

The requirement for the offer to be sufficiently definite will not usually create particular difficulties in an online context. It is difficult to imagine parties contracting with each other electronically without having agreed on the goods, the quantity required and the price.

Difficulties could arise, however, in determining the terms of the offer. Take for example a case where a customer places an order via a website. It has been demonstrated that the website itself cannot amount to an offer, therefore the offer must occur when the buyer places the order. But what are the terms of that offer? While the price and quantity of goods will be determined, what are the other terms of the contract? Often in such a case, the seller's standard terms are printed somewhere on the website, and by submitting the order the buyer is deemed to be submitting an order on those terms. However, if the buyer has not read those terms, for example, where the terms are in a different, often obscure, part of the seller's website, can the offer really be said to indicate the buyer's intention to contract on those terms? The issue is a difficult one and the CISG provides little guidance on the point. In the US it was held, in the case of [page 136] Ticketmaster Corporation v Tickets.com Inc,[54] that the plaintiff was not bound by terms and conditions which the defendant had merely displayed at the bottom of its website. However, it is unclear whether the same approach would be taken by a court applying the CISG.

Many website operators now use arrangements such as 'clickwrap' or 'shrinkwrap' agreements to ensure that their terms are brought to the attention of their customers. Clickwrap agreements involve customers being led through a set of screens containing the terms and conditions of the proposed contract before being presented with an opportunity to accept or reject the terms, for example, by clicking on an 'I accept' icon. Although there has been no decision on the point under the CISG, in the US case of Hotmail Corp v Van Money Pie Inc,[55] the Court held that clicking on an 'I accept' icon after scrolling through the relevant terms and conditions was sufficient to indicate that the defendant intended to be bound by those terms and conditions.

The fundamental problem with accepting that the effect of such devices is that the contract is made on the seller's terms is that the offer which the buyer can make is totally non-negotiable. If the buyer disagrees with just one of the terms proposed, he or she cannot make an offer at all. If the buyer truly wants the product advertised, he or she is forced to make an offer on terms dictated by the seller. This seems to contradict the scheme of the Convention, which requires a 'meeting of the minds', an indication of the intention of both parties of the terms on which they are prepared to be bound.[56] This 'meeting of the minds' is undermined somewhat if one of the parties is essentially forced into contracting on the other's terms. Nonetheless, there is at least a possibility that the CISG will apply in this way.

(c) Acceptance

Article 18 provides that:

"(1) A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance. [page 137]

(2) An acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror."

In the case of an offer made by a buyer via a website, the buyer will generally not receive any formal acceptance or confirmation from the seller. It has been argued that, in view of the fact that the order has to be made on the seller's standard terms and conditions, which the seller can be presumed to accept, silence on the part of the seller may amount to acceptance in this situation.[57] However, commentary and case law on Art. 18 suggest that silence will only amount to acceptance in circumstances where the parties can be presumed to have consented to this, for example, where such a practice had developed as between the parties.[58] Accordingly, it seems unlikely that a court would interpret a seller's silence in the face of an order received via a website from an unknown buyer as acceptance.

The alternative analysis is that the seller accepts the contract through conduct, by beginning to process the order. Since acceptance is not effective until it reaches the offeror, in many cases this would mean that acceptance is not effective until the buyer receives the goods. (The exception would be situations where, for example, the seller debits the buyer's credit card on receipt of the order, which would be sufficient to indicate to the buyer that the seller had accepted the offer.) If no contract is formed until the goods are delivered, the buyer can simply revoke the offer and walk away from the contract at any time before he or she receives the goods. From a seller's perspective, this result is clearly unsatisfactory.

Article 16(2)(b) provides that an offer cannot be revoked 'if it was reasonable for the offeree to rely on the offer as being irrevocable and the offeree has acted in reliance on the offer.' In view of the hardship which would otherwise be faced by the seller, it seems likely that courts will use Art. 16(2)(b) to find orders placed via a website to be irrevocable. However, the law is still uncertain on this point.

The fact that the seller's acceptance may be constituted by the delivery of the goods has particular significance for the use of 'shrinkwrap' or 'clickwrap' terms. Shrinkwrap terms are preprinted terms provided to the customer on the wrapping of the product. The terms provide that the customer accepts the terms by opening the wrapping. [page 138] Clickwrap terms appear on the screen when the customer loads the software and require the customer to click 'I agree' to the terms before the software can be used. If there is no acceptance of the buyer's order until the goods are delivered, and the goods are delivered with shrinkwrap or clickwrap terms different from those contained in the buyer's offer, the shrinkwrap or clickwrap terms could constitute a counter-offer.

Article 19 of the CISG provides:

"(1) A reply to an offer which purports to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer and constitutes a counter-offer.

"(2) However, a reply to an offer which purports to be an acceptance but contains additional or different terms which do not materially alter the terms of the offer constitutes an acceptance, unless the offeror, without undue delay, objects orally to the discrepancy or dispatches a notice to that effect. If he does not so object, the terms of the contract are the terms of the offer with the modifications contained in the acceptance."

Therefore, if the shrinkwrap or clickwrap terms do not materially alter the terms of the offer, they become terms of the contract. This is not of any particular concern, as if the terms of the offer are not altered materially, there is little detriment to the buyer. However, if the shrinkwrap or clickwrap terms do materially alter the terms of the offer, then those terms will constitute a counter-offer. In view of the fact that an offer can be accepted by conduct, it is possible that by breaking the seal on the wrapping, or clicking 'I agree' in order to access the software, the buyer will be accepting the shrinkwrap or clickwrap terms. An unsuspecting buyer may do this without bothering to read the terms and may find themselves bound by harsh conditions which are quite different from those in the original offer.

The situation may be different if the contract had already been concluded, for example, if the seller had indicated acceptance by charging the buyer's credit card. Certainly US courts have shown a tendency to deny the validity of shrinkwrap terms in situations where a contract has already been concluded between the parties.[59] However, where goods are delivered on an 'accept or return' basis, in other words, the buyer is given a choice as to whether to proceed with the contract on altered terms or abandon the [page 139] contract altogether, shrinkwrap terms may be enforceable, as proceeding to break the seal or failing to return the goods amounts to acceptance of a collateral contract to vary the terms of the original contract.[60]

The application of shrinkwrap and clickwrap terms is problematic, and has been criticised by many commentators,[61] because it has the potential to significantly erode the rights of buyers. However, although the law is uncertain on this point, such terms could be held to be enforceable under the CISG.

(d) Timing

One of the major difficulties with applying the CISG to e-commerce involves determining when communications are effective. This is most important in the case of acceptance, as when the acceptance is effective will determine when, and as a result where, the contract is concluded. This can be significant for many purposes, including determining whether the CISG is applicable, as discussed above.

Most of the provisions in Part II of the CISG, which deals with formation of contract, provide that communications are effective when they reach the intended recipient.[62] Article 24 provides that:

"An offer, declaration of acceptance or any other indication of intention 'reaches' the addressee when it is made orally to him or delivered by any other means to him personally, to his place of business or mailing address or, if he or she does not have a place of business or mailing address, to his habitual residence."

In the case of electronic communications, there is no physical acceptance, such as a letter or telegram, the delivery of which can be clearly observed. Rather, the communication takes place in 'cyberspace', which makes it difficult to pinpoint the time and place at which 'delivery' occurs. Electronic communications pass through various servers and other computers on their way to being read by the addressee, and often the parties themselves have no idea of the location of the servers processing their [page 140] communications.[63] When a buyer places an order via a website, this order is relayed to the seller's server. The server may then relay the order to the seller's computer. When can the order be said to have been delivered to the seller? Similarly, in the case of e-mail, the e-mail will leave the buyer's computer, whereupon it is relayed via various computers around the Internet to the seller's server and then to the seller's individual computer. When is the communication delivered?

The Model Law addresses some of these issues [64] and essentially provides that, where the addressee has designated an 'information system' for the purposes of receiving electronic communications, receipt occurs when the electronic communication enters that information system. If the addressee has not designated an information system, receipt occurs when the message enters an information system of the addressee.[65] 'Information system' is defined to mean 'a system for generating, sending, receiving, storing or otherwise processing data messages',[66] and the Commentary indicates that this could be a communications network, an electronic mailbox, or some other computer system.[67] Therefore, where the addressee designates a particular information system, for example, his or her electronic mailbox, receipt occurs when the message is delivered to that mailbox. Where the addressee does not designate a particular information system, receipt occurs when the message enters any information system of the addressee, for example, when it enters the addressee's network.

Another important concept in Part II of the CISG is that of 'dispatch.' Under Art. 16, for example, an offer may be revoked if it reaches the offeree before the offeree has dispatched an acceptance. In the same way as it is difficult to determine when an electronic communication is received, it can be difficult to determine when an electronic communication has been 'dispatched.' The Model Law deems a message to be dispatched when it enters an information system outside the control of the sender of the message.[68] This essentially means that the message has been dispatched once it has left the sender's computer network.

A specific timing problem is raised by Art. 20(1) which provides that: [page 141]

"A period of time for acceptance fixed by the offeror in a telegram or letter begins to run from the moment the telegram is handed in for dispatch or from the date shown on the letter [ ... ] A period of time for acceptance fixed by the offeror by telephone, telex or other means of instantaneous communication begins to run from the moment that the offer reaches the offeree."

It is therefore necessary to classify communications according to whether they are 'instantaneous' or not. This raises specific issues in an e-commerce context, particularly in relation to e-mail. While e-mail is generally assumed to be instantaneous, e-mail can in fact take minutes, hours or even days to be delivered to the recipient, during which time the sender loses control of the message as it is sent around various computers on the Internet. In this respect, therefore, it bears some similarity to forms of communication such as mail or telegrams, in which the communication takes some time to be delivered as it is entrusted to a third party for delivery. However, e-mail often is a virtually instantaneous form of communication, in the same way as a fax is. It is therefore difficult to classify e-mail as either instantaneous or not instantaneous.

Determining when and where electronic communications are 'sent' and 'received', and whether such communications are 'instantaneous', is problematic. It is true that the Model Law provides guidance in this area, however, it does not fully address all the issues which may arise when seeking to apply the CISG to electronic communications.

(e) Formalities

The formal requirements of writing and signature are not necessary for a valid contract to be formed under the CISG. Article 11 expressly states that:

"A contract for the international sale of goods need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses."

In this respect, therefore, there are no particular difficulties in applying the CISG to electronic transactions.

However, under Art. 96 of the CISG: [page 142]

"A Contracting State whose legislation requires contracts of sale to be concluded in or evidenced by writing may at any time make a declaration [ ... ] that any provision [ ... ] of this Convention, that allows a contract of sale [ ... ] to be made in any form other than in writing, does not apply where any party has his place of business in that State."

There will therefore remain cases in which writing will be necessary to establish a contract under the CISG.

Further, the concept of writing is applicable to other provisions of the CISG, for example, Art. 29(2), which provides that a contract in writing which requires any modification to the agreement to be in writing may not be otherwise modified. It is therefore necessary to consider whether 'writing' under the CISG extends to cover electronic communications.

'Writing' is defined in Art. 13 of the CISG, which provides that 'for the purposes of this Convention "writing" includes telegram and telex.' It must therefore be considered whether this definition, adopted some time ago, includes electronic communications. There is clearly a 'gap' in the CISG with respect to this issue. Article 7(2) indicates that:

"Questions concerning matters governed by this Convention which are not expressly settled in it are to be settled in conformity with the general principles on which it is based."

Having regard to the fact that Art. 11 expressly provides that there are no formal requirements for contracting, and Art. 6 upholds the freedom of contracting parties, it would seem that Art. 13 should be interpreted so as to include electronic communications.[69] However, this conclusion is by no means certain and the status of electronic communications under the CISG is unclear. Several commentators argue that Art. 13 does not include electronic communications, generally on the grounds that, in the case of electronic communications, no hard copy is received.[70] Such an approach [page 143] has also been taken by various national courts, when dealing with such issues in relation to their own domestic laws.[71]

Even if the law were to develop such that 'writing' in Art. 13 included electronic communications, this would not necessarily mean that electronic communications would always satisfy writing requirements wherever the CISG was applicable. This is because there are differing views as to whether the Art. 13 definition of 'writing' applies where the writing requirement is applied pursuant to domestic law, the application of which is reserved under Art. 96. It has been argued that the definition of 'writing' applies only where the word appears in the Convention itself and therefore does not apply with respect to a writing requirement essentially imposed under domestic law.[72] It is therefore possible that a writing requirement could be imposed by virtue of a reservation made under Art. 96 and that a domestic definition of 'writing' which excludes electronic communications could apply. Consequently, it is manifestly unclear whether electronic communications will satisfy any writing requirement in cases where a reservation pursuant to Art. 96 has been made.

2.2.2 Performance of contract issues

The language of the CISG was not designed to cover intangible goods, and its provisions are therefore not always particularly appropriate for electronic contracts involving the delivery of goods such as software (if, indeed, the CISG applies to contracts for such goods in the first place). For example, the requirement that the seller hand over any documents relating to the goods to a carrier [73] clearly creates difficulties in the case of electronic software transmitted to the buyer via the Internet. Similarly, the requirement that the buyer examine the goods [74] is difficult to apply in the context of software, where often the buyer will have no knowledge of the way in which the software is to work and will simply install it on his or her computer. However, although the language does not 'fit' the e-commerce context perfectly, the provisions of the CISG relating to performance are, for the most part, sufficiently general to be able to be applied to e-commerce transactions. [page 144]

The notable exception is the provisions in Art. 35 relating to conformity of the goods. These provisions were clearly drafted with tangible goods in mind. Article 35(1), for example, provides that 'the seller must deliver goods which are of the quantity, quality and description required by the contract and which are contained or packaged in the manner required by the contract.' While the provisions of Art. 35 are not unsuitable for intangible goods such as software, they do not go far enough. Specifically, while they address issues relating to the tangible aspects of the goods, they do not address issues relating to the intangible programming and intellectual property rights which also form part of the software product. So, while it is clear that if the disk on which the software was provided was cracked, the goods would not conform with the contract, it is less clear whether a fault in the software program itself would mean that the goods did not conform.[75] Although it would be possible to argue that flaws in the program are covered by some of the general warranties in Art. 35, such as the warranty that the goods are 'fit for the purposes for which goods of the same description would ordinarily be used',[76] the absence of specific provisions addressing these 'intangible aspects' of the product may cause international buyers to be concerned about their protection under the CISG.

Similarly, the CISG does not specifically address issues arising from the fact that the buyer under a software sale or licensing agreement is also acquiring intellectual property rights in the software. For example, a buyer would want some sort of warranty that his or her use of the software does not infringe any third party intellectual property rights. However, it would be difficult to imply this sort of warranty into the general provisions of the CISG. Similarly, the seller is not required to warrant that it will not, during the term of the licence, grant any rights in the intellectual property that would interfere with the licensee's enjoyment of those rights.

In the US, the Uniform Computer Information Transactions Act (UCITA) extends the traditional warranties relating to sales of goods to computer transactions and creates new warranties that address specific issues which arise in relation to sales of software.[77] These include warranties that the buyer's use of the software does not infringe any third party intellectual property rights, and that the licensor will not grant other rights in the [page 145] software that will interfere with the buyer's rights; [78] a warranty that there is no inaccuracy in the information content of the software;[79] a warranty that hardware and software components will effectively integrate together as a system;[80] and a warranty in relation to maintenance and support services for users.[81] In the absence of such warranties in the CISG, the CISG is an unsophisticated instrument for regulating international software transactions, and may well be avoided by buyers in favour of regimes incorporating specific warranties relating to the intangible aspects of software transactions.

2.3 Conclusion

It is clear that the CISG will not apply to e-commerce sales to consumers, and it is at best doubtful whether the CISG will apply to software licence agreements, sales of custom-made software and sales of electronic software. There are significant difficulties involved in determining the parties' places of business or the place of conclusion of the contract, for the purposes of determining the applicability of the CISG. And the application of many of the provisions of the CISG to electronic contracts is problematic. It can therefore be concluded that the CISG is not well suited to the regulation of electronic sales contracts.

3. IMPACT ON THE SIGNIFICANCE OF THE CISG

E-commerce is clearly a major issue in international trade. As more and more transactions are conducted electronically between parties in all the countries of the world, the need for clear, certain and easily applicable rules for international e-commerce contracts becomes more and more pressing. The difficulties involved in applying the CISG to e-commerce transactions, together with the fact that it is questionable whether the CISG applies to certain e-commerce transactions at all, mean that the significance of the CISG as a tool for the regulation of international sales contracts is diminishing. Businesses involved in e-commerce are increasingly seeking to exclude the application of the CISG to their contracts to avoid uncertainties involved [page 146] in its application.[82] There is also a trend for parties to regulate e-commerce transactions themselves by first establishing agreements governing the basis on which e-commerce transactions between them will be conducted.[83]

It would, of course, be possible to amend the CISG so that it specifically addressed the problems associated with international e-commerce transactions. However, this is unlikely to occur for two reasons. Firstly, amending the CISG would be a significant undertaking, tantamount to negotiating a new Convention. It would require the participation of all the parties to the CISG to negotiate a protocol or amendment, which would then have to be signed and ratified by the parties.

Secondly, amendment of the CISG does not appear to have the support of UNCITRAL. Although aware of the problems associated with the application of the CISG to e-commerce transactions, UNCITRAL has concluded that the CISG 'is, in general terms, suitable [ ... ] to contracts concluded electronically.'[84] UNCITRAL has therefore chosen to focus instead on two new international instruments for the regulation of e-commerce. The first of these is the UNCITRAL Model Law on Electronic Commerce (Model Law), which was adopted in 1996. However, this instrument focuses exclusively on rules applicable to electronic communications. It therefore does not cover issues relating to the formation and performance of e-commerce contracts. As a result, UNCITRAL has commenced work on the preparation of a second international instrument: a new convention on electronic contracting. A preliminary draft convention has been prepared, and was considered by the UNCITRAL Working Group at its fortieth session, held in Vienna in October 2002.[85] While the new convention is still in the preliminary drafting stages, it is nonetheless clear that the international community can eventually expect a new international convention to regulate electronic contracting.

4. THE IMPLICATIONS FOR ASIA

E-commerce is becoming increasingly significant to the Asian region. Within the bodies responsible for trade and economic development in the region, most notably the [page 147] Association of Southeast Asian Nations (ASEAN) and the Asia-Pacific Economic Cooperation (APEC), e-commerce has been specifically targeted as one of the key areas on which the region should focus.

In November 2000, the members of ASEAN concluded the e-ASEAN Framework Agreement. This e-ASEAN initiative was adopted to develop a comprehensive action plan to establish the 'physical, legal, logistical, social and economic infrastructure needed to promote an ASEAN e-space.'[86] Significantly, Art. 5 of the e-ASEAN Framework Agreement provides:

Member States shall adopt electronic commerce regulatory and legislative frameworks that create trust and confidence for consumers and facilitate the transformation of businesses towards the development of e-ASEAN. To this end Member States shall:

"(a) expeditiously put in place national laws and policies relating to electronic commerce transactions based on international norms."

It is therefore clear that ASEAN members are committed to the development of a clear and stable regulatory environment for e-commerce in the region. Further, although the measures proposed are to be adopted at a national level, it is clear that the purpose of adopting these measures is to encourage the development of e-commerce in the region through the establishment of international norms.

A similar commitment to the development of e-commerce is evident within APEC. In February 1998, APEC Senior Officials agreed to establish the APEC Electronic Commerce Task Force to undertake work in relation to key issues arising from e-commerce. In 1999 the APEC Ministers adopted the APEC Blueprint for Action on Electronic Commerce.[87] In this Blueprint, APEC Ministers acknowledge the importance of e-commerce and commit to a work program for the development of e-commerce in the region. This program includes: [page 148]

"Working with UNCITRAL and other international fora in moving forward work on legal foundations, where appropriate, for a seamless system of cross-border electronic commerce."[88]

This commitment was affirmed in the e-APEC Strategy, released in October 2001. [89]

In relation to legal and regulatory issues, the APEC Secretariat commissioned Baker & McKenzie in 1997 to examine legal issues relating to e-commerce in the APEC member economies. Baker & McKenzie ultimately published a report [90] which suggested a number of measures for the creation of a more certain regulatory environment for e-commerce, including the adoption of national legislation based on the Model Law. Interestingly, the Baker & McKenzie report notes that significant difficulties arise in the area of electronic contracting, and suggests that the most viable solution is for parties to establish 'a framework agreement, setting out the circumstances under which the communicating parties will become legally bound.' The report was used to generate a practical guide to e-commerce for small and medium enterprises in the region. This guide also notes the difficulties which can arise in relation to electronic contracting and states that 'it may not be prudent to rely on contracts established solely by electronic communications outside of a legal framework provided by a good trading partner agreement.' It is therefore clear that within APEC, there is an awareness of the difficulties associated with international electronic contracts, together with a desire to adopt an effective legal and regulatory framework for e-commerce.

At a national level, also, it is clear that Asian countries are committed to the development of a legal framework for e-commerce. Already Singapore, Brunei, Thailand, Malaysia, the Phillippines, Hong Kong and Korea have formulated national legislation either adopting the Model Law or addressing the key issues raised by the Model Law.[91] Thus already a far greater number of countries within the Asian region have adopted the Model Law than have become parties to the CISG.

It is therefore clear that, as a region, Asia views e-commerce as central to the region's economic development. The region has made a commitment to the development of e-commerce and to the development of an effective legal framework for e-commerce. In [page 149] view of this, and in view of the diminishing significance of the CISG to the regulation of e-commerce, becoming party to the CISG is unlikely to be a priority for Asian countries, and rightly so. It is clear that the international community is in the process of developing a new convention on electronic contracting. Asian countries would be better waiting to become parties to such a convention than seeking to become parties to the CISG, which is ill-suited to the regulation of e-commerce.

5. CONCLUSION

The CISG was adopted in 1980, before the significant advances in communications technology which have resulted in e-commerce. E-commerce was unheard of at the time the text was drafted. As a result, the CISG is difficult to apply to the regulation of e-commerce transactions. In some cases, it may not even apply at all. The international community is therefore in the process of negotiating a specific convention for the regulation of electronic contracts. In view of this, and in view of the importance of e-commerce to Asia, becoming a party to the CISG should not be a priority for the region. Rather, the region should focus on establishing a stable legal and regulatory framework for e-commerce, and should encourage and await the adoption of an international convention on electronic contracting. [page 150]


FOOTNOTES

a1. Solicitor, Freehills Lawyers, Melbourne, Australia.

1. UNCITRAL Status of Conventions and Model Laws, available at: <http://www.uncitral.org/english/status/status-e.htm>.

2. Flechtner, H., 'Another CISG case in the US courts: Pitfalls for the practitioner and the potential for regionalized interpretations' (1995) 15 Journal of Law and Commerce 127.

3. Please see fn 1.

4. Note by the Secretariat for the thirty-eighth session of the UNCITRAL Working Group on Electronic Commerce, UN Doc A/CN.9/WG.IV/WP.91 (2001), at paragraph 27.

5. Ibid.

6. Cox, T., 'Chaos versus uniformity: The divergent views of software in the international community' (2000) 4 Vindobona Journal of International Commercial Law and Arbitration 3.

7. Larson, M., 'Applying uniform sales law to international software transactions: The use of the CISG, its shortcomings, and a comparative look at how the proposed UCC Article 2B would remedy them' (1997) 5 Tulane Journal of International and Comparative Law 445, at p. 468.

8. Larson, M., Ibid, at p. 465.

9. Communications Groups Inc v Warner Communications Inc 527 NYS2d 341 (NY City Civ Ct 1988), at p. 345.

10. Fraser, S., 'Canada-United States trade issues: back from purgatory? Why computer software "shrink-wrap" licences should be laid to rest' (1998) 6 Tulane Journal of International and Comparative Law 183, at p. 212.

11. Larson, M., please see fn 7, at p. 466. For example, the customer's use of the software may be limited to personal use.

12. Diedrich, F., 'Maintaining uniformity in international uniform law via autonomous interpretation: Software contracts and the CISG' (1996) 8 Pace International Law Review 303, at pp. 317-21.

13. Note by the Secretariat for the thirty-eighth session of the UNCITRAL Working Group on Electronic Commerce, please see fn 4, at paragraph 21.

14. Oberlandesgericht Köln, 26 August 1994, Case Law on UNCITRAL Texts (CLOUT), available at: <http://www.uncitral.org/>, case 122.

15. Arbitration Court attached to the Hungarian Chamber of Commerce and Industry, 20 December 1993, Case Law on UNCITRAL Texts (CLOUT), available at: <http://www.uncitral.org/>, case 161.

16. Article 2(d).

17. Article 2(f).

18. Larson, M., please see fn 7, at p. 453.

19. Cox, T., please see fn 6.

20. Oberlandesgericht Koblenz, 17 September 1993, Case Law on UNCITRAL Texts (CLOUT), available at: <http://www.uncitral.org/>, case 281.

21. See, for example, Scott Primak, L., 'Computer software: Should the UN Convention on Contracts for the International Sale of Goods apply a contextual approach to the question?' (1991) 9 Computer Law Journal 197; Fakes, A., 'The application of the United Nations Convention on contracts for the international sale of goods to computer, software and database transactions' (1990) 3 Software Law Journal 559.

22. Refer, for example, Fraser, S., please see fn 10, at p. 209.

23. As set out in the Preamble.

24. Primak, L., please see fn 21.

25. Cox, T., please see fn 6.

26. Note by the Secretariat for the thirty-eighth session of the UNCITRAL Working Group on Electronic Commerce, please see fn 4, at paragraph 25.

27. Honnold, J., Uniform Law for International Sales under the 1980 United Nations Convention, 1999, Kluwer, Deventer.

28. Under UCC Art. 2-105(1), the relevant test is whether the 'predominant factor' was the supply of goods or services.

29. 1987 US Dist, LEXIS 5611, *11.

30. 925 F2d 670 (3rd Circuit, 1991).

31. In Germany, for example, contracts for the production of custom-designed software are considered contracts of manufacture (Werkverträge) or contracts for the supply of goods and services (Werklieferungsverträge): Diedrich, F., please see fn 12, at p. 325.

32. Cox, T., please see fn 6; Larson, M., please see fn 7.

33. Larson, M., please see fn 7, at p. 450.

34. Ibid.

35. Cox, T., please see fn 6; Larson, M., please see fn 7, at p. 469.

36. Fraser, S., please see fn 10, at p. 209.

37. For example, Art. 30 requires the seller to 'deliver the goods, hand over any documents relating to them and transfer the property in the goods.'

38. Article 2(f).

39. Pro CD Inc v Zeidenberg, 86 F3d 1447 (7th Circuit, 1996), at pp. 1451-2.

40. Larson, M., please see fn 7, at p. 470.

41. National legislatures and courts, particularly in Europe, have tended to treat electronic software contracts as contracts for services. Please see fn 31 above. At the EU level, the E-Commerce Directive (Council Directive 2000/31/EC, 2000 OJ (L 178) 1) treats all electronic deliveries as the supply of services.

42. Note by the Secretariat for the thirty-eighth session of the UNCITRAL Working Group on Electronic Commerce, please see fn 4, at paragraph 10.

43. Ibid, at paragraph 11.

44. Ibid, at paragraph 11.

45. Ibid, at paragraph 12.

46. Enderlein, F. and Maskow, D., International Sales Law, 1992, Oceana Publications, New York, at pp. 33-4.

47. Cox, T., please see fn 6. This approach has also been suggested by Honnold: Honnold, J., please see fn 27.

48. Kidd, D. and Daughtrey, W., 'Adapting contract law to accommodate electronic contracts: Overview and suggestions' (2000) Rutgers Computer and Technology Law Journal 215, at p. 227.

49. Kidd, D. and Daughtrey, W., Ibid, at p. 242.

50. Under Art. 23 a contract is concluded at the moment when an acceptance of an offer becomes effective. Article 14 provides that an offer must indicate the intention of the offeror to be bound in case of acceptance. Article 18 indicates that an acceptance is 'a statement made by or other conduct of the offeree indicating assent to an offer.'

51. Guide to the Enactment of the UNCITRAL Model Law on Electronic Commerce, at paragraph 35.

52. Although the Model Law is simply a model for the enactment of national legislation and is therefore not binding at an international level, paragraph 5 of the Guide to Enactment of the Model Law provides that 'the Model Law may be useful in certain cases as a tool for interpreting existing international conventions and other international instruments that create legal obstacles to the use of electronic commerce.' It is therefore reasonable to use the Model Law as a guide to interpreting the CISG, as the CISG would create a legal obstacle to e-commerce if it did not allow for contracts to be concluded by electronic agents. Further, the Model Law approach is consistent with the only significant piece of national legislation on this point, the US Uniform Computer Information Transactions Act (UCITA), which provides that transactions between electronic agents are enforceable contracts.

53. Chissick, M. and Kelman, A., Electronic Commerce: Law and Practice, 1999, Sweet & Maxwell, London.

54. US District Court, Central District of California, 27 March 2000, available at: <http://www.gigalaw.com/library/ticketmaster-tickets-2000-03-27.html>.

55. 1998 WL 388389, 47 USPQ 2d 1020 (BNA) (ND Cal. 16 April 1998).

56. Please see the discussion of Art. 14 and Art. 18 in fn 50, above.

57. Chissick, M. and Kelman, A., please see fn 53, at p. 71.

58. Enderlein, F. and Maskow, D., please see fn 46, at p. 93.

59. Step-Saver Data Systems Inc v Wyse Technology and Software Link Inc, 939 F2d 91 (3rd Circuit 1991); Arizona Retail Systems Inc v Software Link Inc, 831 FSupp 759 (D. Ariz. 1993).

60. Hill v Gateway 2000 Inc, 105 F3d 1147 (7th Circuit 1997).

61. Refer, for example, Fraser, S., please see fn 10.

62. Under Art. 15, an offer becomes effective when it reaches the offeree. Under Art. 18, an acceptance becomes effective when it reaches the offeror.

63. Poggi, C., 'Electronic commerce legislation: An analysis of European and American approaches to contract formation' (2000) 41 Virginia Journal of International Law 224, at p. 267.

64. As to the significance of the Model Law when interpreting the CISG, please see note 52 above.

65. Article 15(2).

66. Article 2(f).

67. Commentary to the Model Law, at paragraph 10.

68. Article 15(1).

69. Eiselen, S., 'Electronic commerce and the UN Convention on Contracts for the International Sale of Goods (CISG) 1980' (1999) 6 EDI Law Review 21.

70. Note by the Secretariat for the thirty-eighth session of the UNCITRAL Working Group on Electronic Commerce, please see fn 4, at paragraph 36.

71. Eiselen takes the example of a South African requirement that documents be printed out before they will satisfy the requirement of writing: Eiselen, S., please see fn 69.

72. Note by the Secretariat for the thirty-eighth session of the UNCITRAL Working Group on Electronic Commerce, please see fn 4.

73. Article 32.

74. Article 38.

75. Larson, M., please see fn 7, at pp. 454-5.

76. Article 35(2)(a).

77. Cox, T., please see fn 6.

78. Section 401.

79. Section 404.

80. Section 405.

81. Section 612.

82. Cox, T., please see fn 6.

83. As discussed later in this paper, this approach was advocated by an APEC guide to e-commerce for small and medium enterprises.

84. Note by the Secretariat for the thirty-eighth session of the UNCITRAL Working Group on Electronic Commerce, please see fn 4, at paragraph 56.

85. Report of the Working Group IV (Electronic Commerce) on the work of its fortieth session, UN Doc A/CN.9/527 (2002), at paragraphs 72-126.

86. 'Toward an e-ASEAN', available at: <http://www.aseansec.org>. See also the e-ASEAN Task Force website, available at: <http://www.e-asentf.org>.

87. Available at: <http://www.dfat.gov.au/apec/e_com/ecom_blueprint.html>.

88. APEC Blueprint, at paragraph 6.

89. Available at: <http://www.dfat.gov.au/apec/reports/estrategy/apec_estrategy.pdf>.

90. Available at: <http://www.bakerinfo.com/apec>.

91. UNCITRAL Status of Conventions and Model Laws, available at: <http://www.uncitral.org/english/status/status-e.htm>; ASEAN Electronic Commerce Legislation Comparison Table, available at: <http://www.aseansec.org/ec/ec_legis.htm>.


Pace Law School Institute of International Commercial Law - Last updated August 15, 2006
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