This semester, we kick off a brand new course for final year undergraduate law students on e-commerce and the law. This course aims at explaining the legal challenges that are posed by electronic commerce. We shall also contextualise and problematise on-going legal/policy developments in Kenya to regulate electronic commerce. In this blogpost, we highlight some of the issues that arise in the context of the law of contract.
Our starting point is to conceptualise the functional equivalence doctrine as the underlying approach to regulation of e-commerce. In this regard the Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996) states as follows:
‘It should be noted that in respect of all of the above-mentioned functions of paper, electronic records can provide the same level of security as paper and, in most cases, a much higher degree of reliability and speed, especially with respect to the identification of the source and content of the data, provided that a number of technical and legal requirements are met. However, the adoption of the functional equivalence approach should not result in imposing on users of electronic commerce more stringent standards of security (and the related costs) than in a paper-based environment.’
For our purposes, electronic contracts include the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organizations, wholly or partially conducted over electronic networks. (e.g. email, sms, websites). They may be negotiated and concluded by natural persons (as principals or agents) or by electronic agents (automated transactions). As stated in our previous blogpost, Kenya Information and Communications Act (KICA) contains some general provisions on regulation of electronic transactions despite lacking definitions of e-commerce and electronic transactions. However a specific provision relating to e-commerce may be found in section 83B of KICA which states that the following transactions may not be concluded electronically: (a) the creation or execution of a will; (b) negotiable instruments; and (c) documents of title.
From a contract law perspective, a valid contract requires offer and acceptance thereby signifying a meeting of minds/consensus between parties. The parties must have contractual capacity. The agreement must be both legally and physically possible. The agreement must comply with any formalities prescribed by law. However this validity may be affected by misrepresentation, mistake or duress. In this connection it is important to note that Section 83J of KICA states that an offer and acceptance of an offer may be expressed by means of electronic messages thus where an electronic message is used in the formation of a contract, the contract shall not be denied validity or enforceability solely on the ground that an electronic message was used for the purpose. Section 2 of KICA states that “electronic” means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
For our purposes, we will be considering three broad categories of contracts in e-commerce namely: contracts for sale of goods, contracts for the supply of digitised products and contracts for the supply of services/facilities. It is important to note that the manner of acceptance of such contracts may vary. For most online contracts, the Terms and Conditions on the website will stipulate the details of contract formation as such Shrink Wrap, Click-wrap and Browse-wrap contracts which refer to the way in which the contracts are concluded more so than the content thereof. Shrink Wrap contracts refer to contracts such as software licenses printed on paper, placed within the shrink-wrap of the software package itself. The purchaser of such software would be bound by the software license upon opening of packaging. However such contracts may be voidable if buyer’s attention not drawn to terms and conditions. Whereas a browse-wrap contracts binds the user of a website to a contract created by the user’s mere browsing of the website.
An important aspect of any contract is the signature. Signatures perform a variety of functions (e.g. identification, certification, confirmation of intent to be bound by, or to endorse, the contents of a document). The focus is on the two basic functions of a signature, namely to identify the author of a document and to confirm that the author approved the content of that document. For our purposes, it is important to note that section 2 of KICA states that “electronic signature” means data in electronic form affixed to or logically associated with other electronic data which may be used to identify the signatory in relation to the data message and to indicate the signatory’s approval of the information contained in the data message. In the context of e-commerce, section 83O states that ‘Where any law requires a signature of a person, that requirement is met in relation to an electronic message if an advanced electronic signature is used that is as reliable as was appropriate for the purpose for which the electronic message was generated or communicated, in light of all the circumstances, including any relevant agreement.’ In this regard, KICA states that a “advanced electronic signature” means an electronic signature which meets all the following requirements—(a) is uniquely linked to the signatory; (b) is capable of identifying the signatory; (c) it is created using means that the signatory can maintain under his sole control; and (d) it is linked to the data to which it relates in such a manner that any subsequent change to the data is detectable.