Breaking and associated brands will be offline for scheduled maintenance Friday Feb. 26 9 PM US EST to Saturday Feb. 27 6 AM EST. We apologize for the inconvenience.


Thank you for sharing!

Your article was successfully shared with the contacts you provided.
B2B electronic contracting is not really a legal minefield, as many fear. Of course, companies will run up against occasional difficulties, but in practice disputes are relatively infrequent. Problems can mostly be avoided altogether when parties have an underlying master contract that governs their ongoing electronic contractual relationship. The International Chamber of Commerce formed this assessment by consulting companies of various sizes in different sectors on their experiences with electronic contracting. For example, one ICC member company with more than 400,000 employees, heavily engaged in electronic contracting, reported that it had never experienced an actual dispute as a result of using electronic communication in contracting. In this context, electronic contracting refers to the use of data messages such as electronic data interchange (EDI), e-mail, telegram, telex, or telecopy in relation to business contracts. ICC — the world’s largest business organization, with over 8,000 member companies and associations in more than 130 countries — is dedicated to business self-regulation. It sets voluntary rules that companies from all parts of the world apply to millions of transactions every year. ICC also contributes to international and regional initiatives on electronic contracting. While business seems to be adapting to these new electronic means of communication without major difficulties, feedback to ICC shows that the main source of tension is uncertainty about when an electronic communication is legally binding: i.e., how to make sure it is binding when you want to contract, and how to avoid being bound when you don’t want to contract. Take, for example, the lack of formality in electronic exchanges. People tend to be more careless about what they say in e-mails than when they are committing themselves to paper. This increases the likelihood that exchanges may be interpreted as binding before the parties intend to be bound. Lack of formality also means that people may “click” themselves into a contract accidentally. Employees could find themselves clicking their company into contracts without authorization. Furthermore, the new technologies sometimes give rise to confusion about how to apply the provisions of contract laws regarding offer and acceptance issues. This includes, for example, the location of transmission and receipt, as well as the legal effect of acknowledgement of receipt. Security and confidentiality-related issues such as authenticity of origin, accuracy of content, and fraudulent misuse were also identified as problems that some organizations have faced when contracting by electronic means. Depending on region, size, and sector, companies have different needs and experiences with electronic business communication. But one thing they all can agree on is that business practices in electronic contracting are presently evolving and codification of this practice is premature. However, governments do not seem to share this view. The United Nations Commission on International Trade Law has started work on a convention on electronic contracting. The latest draft, which was discussed at UNCITRAL Working Group IV’s meeting in New York last May, sets out detailed provisions that seek to regulate companies’ use of data messages such as e-mails. ICC, a close adviser to the United Nations, has been following UNCITRAL’s efforts on these issues, and has submitted to the group key principles, which ICC believes should guide any work on the international legal framework for electronic contracting. ICC recommended that before making a decision on the scope and format of any initiatives in this field, UNCITRAL should carefully consider the actual problems faced by international businesses. ICC’s concern, which has been raised with UNCITRAL, is that the proposed convention is not sufficiently responsive to either the scope or the nature of the problem. Electronic contracting is not fundamentally different from international contracting conducted through other media. Even though the Internet raises certain new questions, international commerce has over many years adapted with remarkable speed and pragmatism to other technological advances without revisiting the fundamentals. Thus any new instrument should provide practical solutions to medium-specific problems, rather than a comprehensive code for international commerce on the Internet. From ICC’s point of view, the main focus of UNCITRAL’s work should be on adapting e-contracting practices to the special needs of developing countries, whose priorities include infrastructure enhancement and reliability. Second, the contractual autonomy of the parties should be the basis of any legal instrument. Through an assessment of their own needs, risks, and experience, the parties should organize their commercial dealings within an electronic environment in a manner that best suits their individual expectations and requirements. These requirements will change from customer to customer and as technology advances. Third, the drafting of a convention, as well as its ratification and implementation under national law, can take several years, by which time new issues may have emerged. And amending a convention when provisions turn out to be unsatisfactory is just as difficult and time-consuming. These considerations do not necessarily mean that there is no need for an international legal framework for electronic contracting, but that such a framework must focus on actual, practical problems specific to the electronic medium, and that it must be flexible and capable of swift adoption. Business has a proposal that would meet these requirements. ICC’S ALTERNATIVE ICC is working on a self-regulatory instrument that would enhance legal certainty in electronic contracting by providing users with a package of voluntary model clauses, checklists, and guidance documents. There are numerous successful examples of self-regulation. Commercial rules, for example, have become part of the legal fabric of international commerce. Other ICC rules include Uniform Customs and Practice for Documentary Credits (UCP 500, the rules that banks apply to finance billions of dollars’ worth of world trade every year) and International Commercial Terms (Incoterms 2000, standard international trade definitions used every day in thousands of sales contracts). ICC also drafts model contracts that give parties a neutral framework for their contractual relationships. Major intergovernmental organizations such as UNCITRAL, the U.N.’s Economic Commission for Europe, and the World Bank endorse and actively support the use of several such ICC rules. Unlike the proposed UNCITRAL convention, self-regulatory instruments would have the advantage of faster deployment for business use. They could also be applied more flexibly; for example, a company could decide to use the instrument in all its electronic contracting, only in certain electronic contracts, or not at all. Finally, these instruments could be amended rapidly if problems arise over specific provisions. ICC has established a special Task Force on Electronic Contracting that over the next 12 months will develop the proposed self-regulatory B2B instrument on electronic contracting. The task force is co-chaired by Christopher Kuner and professor Charles Debattista, two internationally recognized legal experts with experience in drafting business rules such as model clauses for cross-border transfer of personal data, and the widely used Incoterms 2000 and the UCP. To avoid interfering with party autonomy, the task force will tackle medium-specific B2B issues raised by the following questions: • Who is contracting? • When is the contract made? • Where is the contract made? • How is the contract made? Issues raised by these questions will not be included: • What is being contracted about? • Why should your company contract with ours? Companies have become accustomed to resolving many issues through carefully drafted contractual clauses. The proposed self-regulatory approach will provide enterprises with user-friendly model clauses that will not only create a trustworthy legal framework for electronic contracting, but will also save resources for companies and their advisers by facilitating negotiations. Any risks of electronic contracting can readily be reduced by having appropriate systems in place. With model clauses, guidance, and checklists, businesses can make electronic contracting smooth and dispute-free. Jonas Astrup is policy manager for the ICC Commission on Commercial Law and Practice, and the ICC Commission on Financial Services and Insurance. He can be contacted at [email protected].

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.