A Brief History Of E Commerce Information Technology Essay

Electronic commerce (e-commerce) is the term used for any type of business or commercial transaction that involves the transfer of products, services and information over electronic systems such as the internet and other computer networks. The trader and customer are not face to face at any point during these transactions, the business being conducted remotely, regardless of location.

E-commerce covers a range of different types of businesses, from consumer based retail sites, through auction or music sites, to business exchanges trading goods and services between corporations. It is currently one of the most important aspects of the Internet to emerge. Almost all big retailers have electronic commerce presence on the World Wide Web.

Although most electronic commerce involves the transportation of physical items in one way or another, a large percentage of e-commerce is conducted entirely electronically for virtual items, such as access to certain information on a website, purchasing software or other on-line services.

E-business is a superset of e-commerce [] . Electronic commerce is generally considered to be the sales aspect of e-business. It also consists of the exchange of data to facilitate the financing and payment aspects of the business transactions.

E-commerce can be mainly divided into Business-to-Business electronic commerce (B2B) and Business-to-Consumer electronic commerce (B2C). B2B implies that both sellers (suppliers) and buyers are business corporations, while B2C implies that buyers are individual consumers.

Business-to-business e-commerce is significantly different from business-to-consumer e-commerce. While B2C merchants sell on a first-come, first-served basis, most B2B commerce is done through negotiated contracts that allow the seller to anticipate and plan for how much the buyer will purchase. In some cases B2B is not so much a matter of generating revenue as it is a matter of making connections with business partners.

1.1.1. B2B e-commerce

B2B e-commerce requires the technological sharing of information among supplies, retailers, distributors, and other interested parties to create electronic relationships. B2B e-commerce does not just comprise the transaction via the Internet, but also the exchange of information before and the service after a transaction. From the purchasing company’s point of view, B2B e-commerce is a medium for facilitating procurement management by reducing the purchase price and the cycle time. [] 

The key players usually include selling and buying companies, deliverers, and often some type of electronic intermediaries, or third-party service providers. These associations can take many forms, yet most fall into three models. These models are classified depending on who controls the marketplace: the supplier, the buyer or the intermediary:

(a) In a Supplier-Oriented Marketplace: many buyers face few suppliers.

(b) In a Buyer-Orientated Marketplace: few buyers face many suppliers.

(c) In an Intermediary-Oriented Marketplace: many buyers face many suppliers.

A) Supplier-Oriented Marketplace

Supplier-Oriented Marketplaces offer a group of customers a wide spectrum of products and services and also support them in their own business. The markets can involve proprietary auctions, bid systems, and exchanges. By using Supplier-Oriented Marketplaces, suppliers are offered new types of market channels in marketing and distribution. Products can be sold directly to the customer without using intermediaries. Most manufacture-driven electronic stores use this form of market place. Successful examples of this business model are e.g. Dell and Cisco. [] Both Dell and Cisco sold and sell their products via the Internet. However, not only Dell and Cisco use the Supplier-Oriented Marketplace, there are thousands of other companies using this model. Cisco’s main business is providing electronic support using the Internet. The main applications are software downloads, defect tracking and technical advice. Cisco’s business model also includes customer service and finding order status, as well as selling routers, switches and other network interconnect devices.

B) Buyer-Oriented Marketplace

By using Supplier-Oriented Marketplaces, buyers would have to search electronic stores and electronic malls to find and compare suppliers and products. This would be very costly and time consuming for big buyers, who purchase thousands of items on the Internet. As a result, such big buyers prefer to open their own marketplace, which is called a Buyer-Oriented Marketplace. [] By supporting transactions and procurement processes, these marketplaces offer great potentials in cost savings. Buyer-Oriented Marketplaces are found in industrial sectors with few and dominant buyers. The buyer’s bidding site is the most popular type of Buyer-Oriented Marketplace. An example is GE’s electronic bidding site which enhances the company’s procurement process. [] On such bidding sites suppliers can download the project information from the internet and submit bids for the project. Buyers then evaluate the supplier’s bids and may negotiate electronically. Buyers accept the bids that best meet their requirements. By doing so, buyers can identify and build partnerships with new suppliers worldwide. The information and specifications can be rapidly distributed to business partners (suppliers). As a result, bids can rapidly be received and compared from a large number of suppliers to negotiate better prices.

C) Intermediary-Oriented Marketplace

This business model is established by an intermediary company which runs a marketplace where business buyers and sellers can meet. There are two types of Intermediary-Oriented Marketplaces: horizontal and vertical marketplaces. Vertical marketplaces concentrate on one industrial sector whereas horizontal marketplaces offer services to all industrial sectors. The Intermediary-Oriented Marketplace is a neutral business platform and offers the classical economic functions of a usual market. The difference is that the participants do not have to be physically present. An Intermediary-Oriented Marketplace contains catalogues where information on products and prices can be presented. By offering search functions, the marketplace makes the comparison and transparency of products possible. Marketplaces can also offer auctions. These auctions can be organized by sellers (products are sold) or by buyers (orders are sold). Furthermore is it possible to offer electronic functions where participants can negotiate in real time. [] An example of an intermediary-oriented marketplace is Buzzsaw. [] Buzzsaw is a vertical electronic marketplace which concentrates on the building industry. Many different parties are involved in a construction project: e.g. building contractors, builders, manual workers, architects, merchants and the building owner. Many of these parties are regional sellers. Buzzsaw offers software to improve planning and communication between the parties. Detailed information about the building industry is also offered (e.g. news affecting the sector, a classified directory and a local weather forecast). The marketplace also provides the option to do business. All products relevant for the building industry can be traded. The Web site offers search engines to find the wanted products, and additionally, buyers and sellers can insert requests and offers on the marketplace.

1.1.2. B2C e-commerce

B2B e-commerce is basically a concept of online marketing and distributing of products and services over the internet. Business prefer this method because they can reach more customers, service them better, make more sales while spending less to do it. For the consumer, it is relatively easy to appreciate the importance of e-commerce. Many prefer not to waste time fighting the very crowds in supermarkets, and shop on-line at any time in virtual Internet shopping malls, and have the goods delivered home directly, all from the comfort of their own homes.

B2C e-commerce is conducted essentially via three business models:

Pure-play online retailers, such as Amazon.com, sell only over the Internet. They do not sell offline and do not have traditional stores that consumers can visit.

A second type of online retailer includes companies that have traditional stores or sell offline through catalogs or mail-order, but that also have a presence on the Web. These are known as “bricks-and-clicks” because they sell to consumers both through an offline channel and an online storefront.

A third category consists of portals, such as America Online, where goods and services from several online retailers are offered to consumers.

1.2. A Brief History of E-commerce

E-commerce and its meaning have changed a lot over the past 40 years. At first, the term e-commerce meant the execution of commercial transactions electronically, using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT), which gave an opportunity for users to exchange business information and do electronic transactions. The ability to use these technologies appeared in the late 1970s and allowed business companies and organizations to send commercial documentation electronically, such as purchase orders or invoices.

E-commerce became possible in 1991 when the Internet was opened to commercial use. Since then, thousands of businesses have taken up residence at web sites. The internet began to gain popularity among the general public in 1994 and by 2000 a great number of business companies in the United States and Western Europe represented their services on the World Wide Web. By this time, the meaning of electronic commerce had changed. People began to define the term as the process of purchasing goods and services over the internet using electronic payment services.

The history of e-commerce is unthinkable without Amazon and E-bay which were among the first Internet companies to allow electronic transactions. Currently there are 5 largest and most famous worldwide Internet retailers: Amazon, Dell, Staples, Office Depot and Hewlett Packard. According to statistics, the most popular categories of products sold in the World Wide Web are music, books, computers, office supplies and other consumer electronics.

1.3. E-commerce in Romania

In Romania, e-commerce is still in an early stage. While in the US the first on-line payments using bank cards took place in 1994, in Romania, the first transaction of this type was recorded in 2004. [] The first e-shop in Romania was opened in 1997. Since then many more e-shops have started business in Romania, and the e-commerce market has grown. According to www.trafic.ro, the most used system for monitoring web sites in Romania, the top five most accessed e-commerce web sites, in 2010 are: www.OKcazii.ro, www.shopmania.ro, www.price.ro, www.domo.ro and www.compari.ro.

In 2008 the National Authority for Management and Regulation in Communications (ANCOM) of Romania ordered a study to be conducted by the team Link 2 ecommerce. The study would serve as an instrument by means of which both the Authority and the interested entities in the market would have access to an accurate and objective assessment of the Romanian electronic commerce market, as well as to an analysis of the evolution prospective for the years 2009-2011.

The study revealed the fact that there were approximately 900 active online shops at the time, most of which offered for sale products from the field of technology and communications. Computer games, toys, flowers, watches and tickets to various performances were sold in 30% of the active online shops. Books and information were sold in 10% of all the shops and the same percentage of all the shops dealt with clothes and fashion. The study also established that 5% of all the websites active in Romania offered e-commerce services and found evidence showing that the number of shops in Romania will keep growing by 50% per year between 2009 and 2011, up to 3,000 active shops that will operate online.

The study showed that, among the online buyers, most of the respondents purchase IT&C products. 26% of consumers declare having spent more than RON 2,000 in the Romanian IT&C online shops during the last year. The average income of the respondents that declared they do not shop online is RON 1,072/month, while the average monthly income of the online buyers amounts to RON 1,945.

The study also revealed that most of those who purchased items on the Internet used the Romanian shops, no more than 3% declared having bought from the foreign shops. 72% of those who bought online during 2008 declared that they came back for new products, which means they were pleased and became loyal customers of the respective shops, while only 21% declared encountering problems with the online shops.

1.4. Advantages and disadvantages of e-commerce

1.5. Introduction into the Conflict of Laws

In the last years it has become technically impossible and also economically inefficient to produce all the goods and services necessary for day to day life, in the same country. As a result, the states are determined to participate in the world circuit of goods and services. This participation must, however, be regulated by certain legal rules. Therefore the international law was conceived to regulate such relationships.

The international private law is a branch of each national system of law, containing all the legal rules that regulate the juridical relations between natural or legal persons which involve a foreign element. Thus, the international private laws are reference rules because they send to the national rules which apply to a specific case. All seems clear when regulating internal business affairs; but once a foreign element is added to the situation, the juridical relation is regulated by two different systems of law in the same time. Therefore, the foreign element creates the problem of applying a foreign law, which is also known as the problem of conflict of laws.

The global and borderless nature of electronic commerce means that contracting parties and customers are just as likely to be from overseas as from the same country. Consequently, jurisdictional issues relating to contractual disputes are inevitable. Disputes are a fact of life in business. Conflicts arise when the interests of different parties are involved, whether they occur between buyers and sellers, manufactures and suppliers, employees and supervisors or even businesses and governments.

When conflicts arise, the court must determine whether it has jurisdiction to adjudicate upon the case. If the court does not have this competence the case is dismissed and the plaintiff is obliged to go to another court that has jurisdiction. However, if the court does have jurisdiction, it must, secondly, determine which rules it shall apply to solve the conflict.

Since the start of commercial activity via the World Wide Web, there has been a need to regulate electronic commercial activities and disputes by implementing model laws, framework or conventions on electronic commerce and introducing or amending specific national legislation on particular legal aspects. Efforts to harmonise rules of Private International Law have been made in the European Union through the Brussels Convention concerning jurisdiction and through the Rome Convention concerning applicable law. The United Nations Commission on International Trade Law (UNCITRAL) has also played an important part in the harmonisation of legislation in the area of contracting, through the Convention on Contracts for the International Sale of Goods 1980 (CISG) and the Convention on the Use of Electronic Communications in International Contracts 2005 (UNECIC).

II. International Online Contracts

This chapter deals with on-line contracts, from their inception to their completion.

A simple definition of a contract can be stated as: A legally binding agreement involving two or more parties that sets forth what the parties will or will not do. [] A contract may be governed by the law of the jurisdiction agreed between the parties or by the law of the jurisdiction imposed by the court.While the specific requirements for various types of contract will vary across jurisdictions, generally speaking, the successful formation of a contract requires:

(a) an offer;

(b) an acceptance;

(c) consideration (a payment or a promise). [] 

Although the law prescribes the general elements of a binding contract, it does not require a contract to be formed by any particular method or to be in any particular form. It is accepted that a contract can be formed by a variety of methods including:

(a) an exchange of correspondence through the post, by telex or by e-mail;

(b) orally, either in person or by use of a telephone; or

(c) by completion of a formal document.

A contract is not generally required to take a particular form and may be oral, provided there is no specific statutory requirement for the contract to be in writing

In essence, an online contract does not differ from a traditional contract. One may associate online contracting to a modern dimension of traditional contracting. A key factor to remember is that the Internet is a tool of communication or a medium, which can be used for online contracting and thus far, the law has developed rules to deal with new tools of communication.

2.1 Types of online contracts

An electronic contract can be defined as a contract concluded in any electronic form; in other words, no paper or other hard copies are used.

This type of contract has the following characteristics: [] 

It is concluded between absent parties, meaning persons who are in different locations; An e-contract can be viewed as a form of perfect contracts concluded by mail;

E-contracts are conceptually very similar to traditional (paper based) commercial contracts and can be deemed as distance selling: vendors present their products, prices and terms to prospective buyers, while buyers consider their options, negotiate prices and terms (where possible), place orders and make payments;

The transmission of information as well as communication between parties is done by electronic means: video transmissions, electronic catalogues, e-mail etc;

E-contracts are concluded over the internet, in a borderless environment, which implies the international nature of the contract (the distinction national-international contract is no longer an issue.)

As mentioned above, according to the parties concluding the contract, two main types can be distinguished, business-to-business contracts and business-to-consumer contracts. No matter parties to the contract, there are two major ways of forming an online contract:

(a) via e-mail correspondence and

(b) via a website.

There are three broad categories of subject matter for electronic contracts [] 

(a) sale of physical goods – goods are ordered over the Internet with payment via the Internet but delivery occurs in the usual way;

(b) supply of services – examples include electronic banking, sale of shares, financial advice, or consumer advice.

(c) sale of digitised products (or online delivered content- ODC) – goods such as software, videos, movies, books, music, newspapers, magazines can be ordered, paid for and delivered on-line;

These three distinctions are important to online businesses whwn considering laws on consumer protection, implied terms and liability because many statutes define their scope based on whether a purchase is a good or a service.

However, a new question arises concerning digitised services: are they goods or services? As previously mentioned, e-businesses will find this distinction important because it determines the terms implied into the contract and therefore the standard of quality that their product will have to satisfy.

A) Contracting via e-mail correspondence

One way of forming an online contract is by the exchange of documents via e-mail. At first glance, it might appear similar to the exchange of documents through traditional methods, such as the mail. One may draw parallels to the text of an e-mail message to a digital letter. However, on a technical level, the processing of e-mail correspondence is different from the processing of traditional mail.

The complexity of e-mail processing through servers, routers and Internet Service Providers (ISPs), can be explained as follows [] :

• The process of sending an e-mail starts when the sender is connecting to its ISP and clicking the send-button.

• From the ISP the e-mail then enters the worldwide network and bounces back and forth between several servers before it reaches the intended receiver’s ISP.

• The process ends when the receiver logs on to its ISP and downloads the e-mail.

This is only one example of how the structure of processing an e-mail may look like. The communication may also be exchanged directly between computers or via a shared server.

The several stages in the process are of importance when deciding the time of contract formation. What may complicate the process further is that the offer and acceptance may be exchanged entirely by e-mail, or by a combination of e-mails, websites, paper documents and oral discussions.

B) Contracting via a website

Another way of forming an online contract is when one party completes an online order form and views the terms and conditions of the contract on the other party’s website. The buyer is transmits the form online and agrees to the terms and conditions by clicking on a button on the website. This is often referred to as a click-wrap contract. [] The term “click-wrap” is derived from the fact that such online agreements often require clicking with a mouse on an on-screen icon or button to signal a party’s acceptance of the contract. Among other things, click-wrap agreements are used to:

(1) Establish the terms for the download and use of software over the Internet;

(2) Set forth a Web site’s Terms of Service, i.e., the rules by which users may access the Web site or a portion of the Web site such as a chat or message service; and

(3) Establish the terms for the sale of goods and services online.

Click-wrap agreements are intended to substitute for direct bargaining between parties in an online environment and can be used in a wide array of applications. It would be inefficient, if not impossible, for example, for a Web site owner or other online service provider (OSP) to bargain with each person who visits its Web site. Accordingly, the Web site owner may instead place an agreement (the click-wrap) on its Web site and require visitors to assent to the terms of the agreement in order to access the site, download software, purchase a product/service, and so forth. A click-wrap agreement may, for example: (1) put users on notice that the material contained on the Web site, as well as any software downloaded from that site, is proprietary; (2) impose limitations on the use of the site and the downloaded software; and (3) make it easier for the OSP to pursue users for any violations or infringement. Usually, the agreement specifies the applicable law that will govern the conditions of the contract and any disputes that might arise between the buyer (user) and the seller (OSP).

Click-wrap agreements can also be used to limit the OSP’s potential liability. For example, through the use of a click-wrap, an OSP can attempt to absolve itself from liability associated with content on the OSP’s Web site. This includes any losses associated with use of such content, any errors or problems with respect to software downloaded, or products/services purchased, from the Web site.

In a written contract, parties typically sign paper documents to signal their consent to be bound by the contract. In an online environment, “signing” a click-wrap agreement may be accomplished in several ways, each with its own advantages and drawbacks. The two principal types of click-wrap agreements are the “type and click” and the “icon clicking” agreements described below.

Type and Click. Under this approach, a party must type “I accept” or other specified words in an on-screen box and then click a “send” or similar button to signal acceptance of contractual terms. Without such action, the user cannot proceed to access the targeted Web site, download the desired software, or purchase the desired product or service.

Icon Clicking. Here, a party simply clicks an “I accept,” “I agree,” or similar icon to signal acceptance of the terms in the click-wrap agreement. Access is denied unless the button is clicked. Users not wishing to enter click a “No” or “I do not agree” icon, which takes them elsewhere.

Most Web sites implement general Terms of Service regarding use of the Web site through a hyperlink at the bottom of each Web page of the site. The link is often titled “Terms of Service”, “Conditions of Use”, “User Agreement”, or something similar. Most web site use a link to access the general Terms of Service agreement due to the fact that the “type and click” or “icon clicking” approaches may be problematic as they: (1) require the home page to be devoted to the Terms of Service; (2) obligate users to agree each time they access the Web site; and (3) provide no access or content to users until they signal acceptance of the agreement. If the link is followed one can find a page full of detailed rules and regulations, most of which, as mentioned above, are intended to limit the Web site owner’s liability for what a visitor may do with the information they obtained from the site. In most cases, a site visitor is held to the terms of service even if that visitor has not read the text or clicked a button to indicate agreement with terms. Compared to click-wrap agreements, such hyperlinked Terms of Service provide a lower level of protection because they do not require the user to view the Terms or indicate affirmative consent either by typing in words of assent or by clicking an “I agree” icon. Thus, the visitor is bound to the agreement by simply using the site.

For example, the first few sections of the priceline.com terms and conditions agreement appear in Figure 2-1, which shows the top of Priceline’s Terms & Conditions page.

Figure 2-1 Priceline.com Terms and Conditions page

However, is a website owner contractually bound as soon as the order is received? Categorizing websites into different types may be helpful when resolving the issue. Three different types of websites have been distinguished, namely:

-Non-interactive websites that provide information (only) and any contact with the website owner is through other means of communication;

Interactive websites were a person can log onto a site, chose an item for sale, and enter their payment details; and lastly

Automated interactive websites that work in the same way as interactive sites with the difference that they are operated totally by a computer. [] 

It may be especially complicated to determine the time of contract formation if the website is totally computerized. The offer and the acceptance are then exchanged within the same information system and it may also result in no actual time difference between the making of the offer and the acceptance.

2.2. When is an Online Contract Formed?

The timing of contract formation is another area where technological developments have had an impact on the law. Generally, a contract is formed upon communication of the acceptance to the offeror. An exception is the postal rule which holds that if the offer contemplates acceptance by post the acceptance is effective once posted, rather than when it is received. The rule was designed to remove uncertainty from the contract formation process by providing the offeree with confidence that an acceptance once posted will be effective, despite possible postal system delays.10 However, the principle that the acceptance takes place at the time of delivery as opposed to the time of receipt was rejected in series of cases relating to communication via telephone, telex and facsimile, as these were considered instantaneous forms of communication.

Model law (signature and writing + EU and US)

This section will examine enacted and proposed legislative attempts to validate contracts in electronic form and the prospects for international harmonization between North America and Europe. Taking UNCITRAL’s Model Law on Electronic Commerce as a baseline, the approaches found in the United States and the European Union are compared and analysed.

The United Nations Commission on International Trade Law (UNCITRAL) is currently addressing electronic-commerce-related issues through framework legislation ready for adoption by states. Most relevant to writing and signature requirements are the Model Law on Electronic Commerce and the Model Law on Electronic Signatures.

The Model Law on Electronic Commerce [] was adopted by UNCITRAL in 1996, and was designed to afford certainly and security for all parties involved in electronic data transactions. The main principles of the Model Law include technological neutrality, national source neutrality, and party autonomy in the choice of applicable contract law and rules. [] The Model Law deals generally with the formation and validity of (electronic) contracts (Article. 11), the legal recognition of data messages (writing, Article. 6; signature, Article. 7; original document, Article. 8), and specifically with the carriage of goods (transport documents, Article. 17). All in all, the Model Law puts (electronic) data messages in the same category as paper-based messages.

The Model Law attempts to remove writing and signature requirements to provide greater certainty to on-line contracts and to promote e-commerce. It focuses mainly on redrafting statutes to include the electronic equivalent of writing and signature. It first develops the concept of a “data message”, the electronic equivalent of a written document, which includes e-mails, EDI, telex, fax, etc. [] In Articles 6 and 7 it redefines the concepts of writing and signature to fit into the digital world.

The Model Law reduces writing to its most essential legal property, permanence. Article 6 ensures that data messages qualify as writing so long as they can be retrieved:

“Where the law requires information to be in writing, that requirement is met by a data message if the information contained therein is accessible so as to be usable for subsequent reference”. [] 

Similarly, it reduces signatures to its endorsement or authentication property:

“Where the law requires a signature of a person, that requirement is met in relation to a data message if:

(a) a method is used to identify that person and to indicate that person’s approval of the information contained in the data message; and

(b) that method is as reliable as was appropriate for the purpose for which the data message was generated or communicated, in the light of all the circumstances, including any relevant agreement.” [] 

The Model Law also verifies the enforceability of on-line contracts, providing that both the offer and the acceptance may be in the form of a data message, and that the contracts “shall not be denied validity or enforceability on the sole ground that a data message used for that purpose”. [] 

The Model Law has been adopted, and adapted, by leading digital economies such as the European Union and the United States. These major trading blocs have taken steps to legally recognise and enforce electronic contracts. They have done so by recognizing the principles contained within the Model Law, not necessarily enacting the full range of its provisions.

The current US position

The US legislation which gives primary effect to the Model Law is the Uniform Electronic Transactions Act (UETA). The principles within the Model Law are all implemented through section 7 of UETA, which provides “Legal Recognition of Electronic Records, Electronic Signatures and Electronic Contracts.” This section replicates all the necessary principles for electronic contracting, as contained in the Model Law. Thus, the provisions within UETA recognise and replicate the four pillars of the Model Law: functional equivalence for electronic data, documents and signatures and legal parity for electronic contracts. Equally importantly UETA replicates the model of technological neutrality found in the Model Law. A similar approach has been taken by the Federal Government in enacting the E-Sign Act (the Electronic Signatures in Global and National Commerce Act ). [] E-Sign is intended to clarify the legal status of electronic records and electronic signatures in the context of writing and signing requirements imposed by law.

The current EU position

The European Union has set out to give recognition to the Model Law in two key Directives. The first is the Directive on Electronic Signatures, (ESD) which is important to the formation of the electronic contracts, and the second is the E-Commerce Directive (ECD).

This ECD is meant to be a general electronic commerce framework under which the individual member states are left considerable discretion with respect to its implementation. Article 9 requires states to give effect to electronic contracts and forbids the creation of barriers to their use or the denial of legal validity based solely on form. The obligations and benefits flowing from the ECD apply only within the EU, however, and therefore trade with non-member-country businesses is not particularly facilitated by the Directive.

The provisions of the ECD contain three articles in Chapter II, section 3: “Contracts Concluded by Electronic Means”. These articles not only fulfil the main principles of equivalence of the UNCITRAL Model Law and the UETA and E-Sign within the United States, but they also determine some basic rules for the formation of electronic contracts. The Directive also lays down minimum informational standards required for electronic business to consumer contracts as well as the applicable assumptions in calculating the moment at which an electronic contract is concluded.

LEGAL ISSUES