The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods

Northwestern Journal of Technology and Intellectual Property

The Future of Electronic Contracts in

International Sales:

Gaps and Natural Remedies under the United

Nations Convention on Contracts for the

International Sale of Goods

Jennifer E. Hill

¶1

¶2

When Eastman Kodak accidentally placed a camera for sale on its United Kingdom

(“UK”) website for £100 instead of £329, word spread within hours.

Customers placed

thousands of orders before the company could correct the error—at great expense to

Kodak.

After informing customers of its mistake and stating that it would not fill the

orders, Kodak faced a choice: honor the orders or cave to a lawsuit.

While Kodak tried

to argue that the orders were simply bids to accept its offer for sale, the company

overlooked the crucial fact that its website accepted and confirmed the orders—forming

an online contract.

Kodak quickly succumbed to customer outrage and honored the

lower prices—a data entry error that cost them US$2 million.

When asked about the

mishap and whether customers could have won their lawsuit, Kodak simply remarked:

“[i]nternet trading is a grey area.”

Data entry mistakes occur easily in sales transactions, but they can often be reduced

through party interaction. However, when mistakes originate from online transactions,

the effect is magnified by the speed at which information is communicated to and acted

upon by customers.

In today’s electronic landscape, parties can instantly agree to,

confirm, and communicate assent with just a few keystrokes.

Jennifer E. Hill, JD/MBA Candidate 2004, Northwestern University School of Law and Kellogg

School of Management, B.A. 1997, Stanford University. The author would like to thank Professor Tracey

E. George and Professor Richard Speidel for inspiration.

Jean Eaglesham, A Troubled Deal on the Internet, FIN. TIMES, Feb. 11, 2002, available at 2002 WL

3306015.

Id.

Id. Kodak argued that “all orders placed on our website legally constitute offers to purchase from us,

just like taking goods to the till in a retail store.” However, an alternative view exists. These transactions

are offers to sell. A customer accepts the offer in the seller’s preferred method of acceptance: placing the

order.

Id.

“Tasks that once required dozens of workers, weeks of preparation, and additional time for delivery

may now be completed in minutes by one person using a computer connected to the Internet.” Donnie L.

Kidd, Jr. & William H. Daughtrey, Jr., Adapting Contract Law to Accommodate Electronic Contracts:

Overview and Suggestions, 26 R

UTGERS COMPUTER & TECH. L.J. 215, 217 (2000); see also PRESTON

GRALLA, HOW THE INTERNET WORKS 8 (Karen Reinisch ed., 4th ed. 1998).

See discussion infra Part I.A.2.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

¶3 It was predicted that over 600 million people would have Internet access and spend

over US$1 trillion online in 2003.

Over eighty-three percent of worldwide online sales

will come from business-to-business (“B2B”) commerce,

growing to eighty-eight

percent by 2006.

Simple computer-based contracts will be formed to facilitate these

transactions. Indeed, they are formed every day—from a consumer purchasing a camera

from a website with a simple click of a “Place Your Order” button to distant merchants

acquiring millions of durable goods from each other through complicated automated

transactions.

Legal scrutiny around the formation of computer-based contracts affects

consumers and businesses engaging in international trade.

While most consumers enjoy

the security of domestic consumer protection laws to shield them from incorrect,

incomplete, or fraudulent computer-based transactions,

commercial entities have

different legal resources embracing their transactions.

Recourse remedies differ based

upon the international jurisdictions of the transacting parties.

These complications lead

commercial entities to question which laws govern international sales transactions.

Where does the line between informal communication of an offer and formal acceptance

begin? On which party’s laws would a legal judgment hinge? Could everyday business

activities, such as simply sending an e-mail with a default “signature” attached to it,

create a binding contract?

Mark W. Vigoroso, The World Map of E-Commerce, E-COMMERCE TIMES, Apr. 2, 2002, at

http://www.ecommercetimes.com/perl/story/16942.html

(last visited Jan. 26, 2004).

Id.

See Amazon.com, at http://www.amazon.com (last visited Jan. 31, 2004), as an example of consumer

online contracting. Amazon.com customers select items from the online catalog and place them in a virtual

shopping cart. After providing customer identification, billing, and shipping information, customers click

on the “Place Your Order” button to execute the completed order, which is verified and confirmed by e-

mail to the customer. See also Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1347 (Fed.

Cir. 2001) (where Amazon.com sued Barnesandnoble.com for patent infringement over its “1-click“

ordering system which enabled customers to select an item for purchase and complete and verify the

purchase in one step). For a complete technical understanding of online shopping, see generally G

RALLA,

supra note 7, at 256.

See generally Edward Lee, Rules and Standards for Cyberspace, 77 NOTRE DAME L.R. 1275, 1278-

81 (2002) (arguing that laws have to keep pace with cyberspace).

See Christopher T. Poggi, Electronic Commerce Legislation: An Analysis of European and American

Approaches to Contract Formation, 41 V

A. J. INT’L L. 224, 241 (2000).

See generally U.C.C. §§ 2-100, 2-102, 2-105, and 2-210 (1998) (where commercial contracts greater

than US$500, in any form, as well as services incidental to the contract are governed by the UCC); see also

Berkeley Center for Law and Technology, The Impact of Article 2B, available at

http://www.law.berkeley.edu/institutes/bclt/events/ucc2b/draft/preface.html

(last visited Jan. 28, 2003)

(comparing Article 2B’s inclusion of information technology issues generally unaddressed by Article 2).

For contracts outside the U.C.C., the consumer relies on common law.

Jurisdiction and choice of law are primary issues with international business transactions. Kidd &

Daughtrey, supra note 6, at 274-75 (citing the CISG as a potential solution to international contracting

concerns).

See Colleen M. Coyle & Lisa Maria Wetzel, Think Twice About “Signing” an E-mail: You Just May

Create a Binding Contract, M

ETRO. CORP. COUNS., Aug. 2002, at 18 (col. 1), WL 8/02 METCC 18, (col.

1). Clicking on a hypertext link creates binding manifestation of intent even though no personal

identification mark is associated with the assenting party; see also Anthony M. Balloon, Comment, From

Wax Seals to Hypertext: Electronic Signatures, Contract Formation, and a New Model for Consumer

Protection in Internet Transactions, 50 E

MORY L.J. 905 (2001) (explaining the effect of electronic

signatures as the result of the United States passing “E-Sign,” the Electronic Signatures in Global and

National Commerce Act, 15 U.S.C.A. § 7001 (1998) [hereinafter E-SIGN]).

Vol. 2:1] Electronic Contracts in International Sales

¶4 Such complex sales situations on paper are the genesis behind the United Nations

Convention on Contracts for the International Sale of Goods (“CISG”),

the uniform

sales law for two-thirds of nations participating in world trade,

when “most international

transactions [were] completed without difficulty.”

The CISG is the “uniform

international law for the most basic transaction of international commerce”—a contract.

Today’s information economy challenges traditional notions of both time and place

because improved communication technology enables business to flow freely across

borders, “ris[ing] above spatial boundaries,”

facilitating an instantaneous ability to form

paperless contracts.

¶5

¶6

The CISG’s inception occurred over seventy years ago, and its finalized form was

ratified over twenty years ago—at least a decade before electronic contracts became a

practicable business solution.

Within this time, the CISG has remained unchanged,

including one remarkably important yet surprisingly overlooked article that defines a

contractual writing: Article 13.

Article 13 describes an international sales contract writing in the following manner:

“[f]or the purposes of this Convention ‘writing’ includes telegram and telex.”

Accordingly, the term writing deems telegram and telex as acceptable contracting

methods, but remains silent on computer-based contracts, such as electronic data

interchange (“EDI”), the Internet, click-wrap and shrink-wrap agreements, and e-mail.

As a result, the CISG, the seminal convention governing international sales, contains a

vital gap by remaining silent on electronic or computer-based contracts in international

sales transactions.

This gap questions legitimacy of Twenty-first Century commercial

United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980, U.N.

Doc. A/CONF.97/18, reprinted in 19 I.L.M. 671 (1980) [hereinafter CISG].

See Pace Law School Institute of International Commercial Law, at http://www.cisg.law.pace.edu

(last visited Jan. 26, 2004). The Pace Law School website is the foremost Internet authority on CISG. It is

“the first Website used as a source in a US [sic] international commercial law judgment.” Camilla Baasch

Andersen, Furthering the Uniform Application of the CISG: Sources of Law on the Internet, 10 P

ACE INT’L

L. REV. 403, 407 (1998); see also UNILEX, Contracting States, at

http://www.unilex.info/dynasite.cfm?dssid=2376&dsmid=13351&x=1

(last visited Jan. 26, 2004).

JOHN O. HONNOLD, UNIFORM LAW FOR INTERNATIONAL SALES UNDER THE 1980 UNITED NATIONS

CONVENTION, viii (3d ed. 1999). John O. Honnold is the Schnader Professor of Commercial Law Emeritus

at the University of Pennsylvania, Secretary, UNCITRAL, and Chief, U.N. International Trade Law

Branch, 1969-1974, a member of the Convention committee and a drafter of the CISG. This tongue-and-

cheek comment alludes to the complexity created by computer-based contracts because they are paperless

and virtually instant.

Id. at ix.

PURCHASING L. REP. (INST. OF MGMT. & ADMIN.) Jan. 1, 2002, available at 2002 WL 8843789.

See Carl Pacini et al., To Agree or Not to Agree: Legal Issues in Online Contracting, BUS. HORIZONS,

Jan. 1, 2002, at 43, available at

2002 WL 15800311.

Pace Law School Institute of International Commercial Law, Guide to Article 13: Comparison with

Principles of European Contract Law (2002), at http://www.cisg.law.pace.edu/cisg/text/peclcomp13.html

(last visited Jan. 31, 2004).

CISG, supra note 18, art. 13. Article 13 has comparatively little commentary devoted to it. It also

has only 8 cases on record, half of which have not been adjudicated on an Article 13 issue. See discussion

infra Parts III and IV.

CISG, supra note 18, art. 13.

Id.

“Article 13. . .does not explicitly deal with the modern means of communication that have been

introduced after 1980 and are nowadays frequently used in connection with the conclusion and

performance of international sales contracts. . . .” Ulrich G. Schroeter, Interpretation of “Writing”:

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

contracting methods that international commercial parties bound by this Convention

currently rely on to facilitate their transactions.

¶7

¶8

¶9

This article examines Article 13’s origination, placement, and interpretation in light

of modern business practices to argue that, although the CISG does not explicitly

recognize electronic contracting methods in its definition of a writing, they are acceptable

by virtue of the convention’s intent, purpose, and support from other articles.

This

article also examines new international and domestic legislation, underscoring the

importance of the electronic contracting gap in international commercial sales. These

efforts to usher in new legislation accommodating electronic contracts are evidence not

only of Article 13’s expansive definition to mature with international commercial

practices, but also of the necessity to fix the electronic contracting gap for legal

frameworks to keep pace with the changing times.

To this end, Part I examines problems caused by electronic contracts in the CISG.

Part II presents the history, scope, and application of the CISG. Part III discusses the

origination and application of Article 13. Part IV evaluates how Article 13 and the CISG

comport with modern interpretations of a writing to naturally include electronic contracts.

Although this article establishes that electronic contracts are acceptable under the CISG,

Part V identifies recent international and domestic legislation that also validates Article

13’s expansive definition and offers additional ways for the CISG to accept electronic

contracts.

I. PROBLEMS POSED BY ELECTRONIC CONTRACTS UNDER THE CISG

Sales transactions are about promises—particularly in a global context where

different cultural, social, political, and legal institutions often make them difficult to

keep.

Contract law is a predictable enabler of international sales transactions because it

provides certainty for the interpretation of promises, agreements, and their enforcement.

As a result, the CISG may be seen as an “important attempt to bridge the gap

between. . .regional efforts and the global market as a whole.”

Part I thus examines

problems with computer-based contracts under Article 13 because they are not in

traditional paper form—laying the foundation to explain the Convention’s intent to gap-

fill electronic contracts.

Comparison between provisions of CISG (Article 13) and counterpart provisions of the Principles of

European Contract Law (Pace Law School Institute of International Commercial Law Jul. 2002), at

http://www.cisg.law.pace.edu/cisg/text/peclcomp13.html#er

(last modified Nov. 21, 2002).

“This poses the question if, and under which conditions, modern means of communication can be

considered to fulfill writing requirements for the purposes of the CISG.” Schroeter, supra note 28, at 269.

See infra Part IV.

See Lee, supra note 13, at 1281-84 (arguing that old laws must be updated to account for new

technology).

See JAN RAMBERG, INTERNATIONAL COMMERCIAL TRANSACTIONS 17 (2nd ed., Kluwer Law

International 2000); see also Helena Haapio & Anita Smith, Safe Sales in Cyberspace (American Corporate

Counsel Association

Jul. 2000) at http://www.acca.com/reprints/safesales.html (last visited Jan. 29, 2004);

CISG, supra note 18, at pmbl.

Philip M. Nichols, Electronic Uncertainty Within the International Trade Regime, 15 AM. U. INT’L L.

EV. 1379, 1393 (1999-2000).

James J. Callaghan, U.N. Convention on Contracts for the International Sale of Goods: Examining

the Gap-Filling Role of CISG in Two French Decisions, 14 J.L. & C

OM. 183, 184-85 (1995).

Vol. 2:1] Electronic Contracts in International Sales

A. Challenges Posed by Electronic Contracts

¶10 Electronic contracting involves two major problematic issues: speed and

automation.

“Electronic communication occupies a functional position somewhere

between the traditional letter and telephone communications.”

Face-to-face interaction

is non-existent, though some interactions are more direct than others.

Just as quickly as

one submits an offer or acceptance, this information may be instantaneously transmitted

to the other party.

Errors are often difficult to catch and harder to rectify, particularly if

one party has relied on the contract.

Electronic agents, mini-computer programs that

automate tasks for the user, further complicate matters by contracting without human

intervention.

An example of an electronic agent is found on any Internet retail site:

when a customer places an order, the agent accepts instantaneously and confirms the

order.

While technology makes business quicker and easier to transact, part of this

speed comes from a lack of formal interaction with paper contracts. As a result, the

certainty and predictability of remedies afforded by a tangible contract are complicated

by electronic measures. Consequently, international legal frameworks must adapt to

establish the same certainty and predictability for electronic contracts as paper contracts.

1. Conducting Business Electronically

¶11

The CISG exists in the face of two important business phenomena: the sale of

intangible goods

(such as software) and intangible methods of transacting business,

such as fax, EDI, the Internet, e-mail, telex, and online software agreements.

These

phenomena fall generally under the moniker of electronic commerce.

These features increase the risk of mistake and the addressee’s reliance on it before correction.

Christina Hultmark Ramberg, The E-commerce Directive and Formation of Contract in a Comparative

Perspective, 1 G

LOBAL JURIST, Iss. 2, art. 3 (2001) at http://www.bepress.com/gj/advances/vol1/iss2/art3

(last visited Jan. 26, 2004).

Siegfried Eiselen, Electronic Commerce and the UN Convention on Contracts for the International

Sale of Goods (CISG) 1980, 6 EDI L. R

EV. 21, 22 (1999), available at

http://www.cisg.law.pace.edu/cisg/biblio/eiselen1.html

(last visited Jan. 31, 2004).

Id.

GRALLA, supra note 7, at 8-10.

See Eaglesham, supra note 1.

Electronic agents are programs, invisible to the user, that automatically perform a task for the user.

They are often referred to as “spiders,” “robots”, or “bots” in the Internet environment. Agents can

perform tasks such as news retrieval, web maintenance, or completing a website purchaser’s shopping

transaction. G

RALLA, supra note 7, at 205-07; see also Amazon.com, supra note 11, at 1347.

See infra Part I.A.2.c-d. An automated e-mail is also commonly sent to the purchaser in addition to

the on-screen confirmation of the order: an electronic receipt.

This concept does not include monetary instruments, which are excluded from the CISG.

The telephone is specifically excluded because it proxies an oral contract, beyond the scope of

electronic contracts. See Eiselen, supra note 36, at 21. “Unlike goods, information is an intangible

commodity that, although it may be recorded in tangible form, can be possessed or used by an unlimited

number of people.” Daniel K. Winters, Courts Struggle with the Application of Contract Law to Internet

Transactions: When Software is Purchased Online, and No One is There to See It, Did the Parties Enter a

Contract?, N.J.L.J. (American Lawyer Media Inc., New York, N.Y.) Aug. 19, 2002, at 1, available at

http://www.pbnlaw.com/PressRoom/ecommerce_0802.pdf

(last visited Jan. 31, 2004).

See Eiselen, supra note 36, at 21.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

¶12 These new concepts create vast business improvements. As new markets are more

easily opened to a wider variety of players,

transactions become cheaper, and

communication costs are reduced.

Simultaneously, businesses find complex contracting

challenges by entering jurisdictions in which they had no intention of conducting

business.

Parties have greater concerns with Internet contracting as opposed to

traditional paper contracting because the law stops at country borders, while the Internet

allows business to freely cross them.

However, computer-based contracts, particularly

those created via the Internet, do not exist in a lawless cyberspace.

Governments are

challenging fundamental legal concepts, such as contracts, to develop flexible

frameworks to protect traditional contract law while recognizing and expanding it to

include technology’s borderless capabilities and maintain integrity for all legal players

(judges, lawyers, legislators, and business people).

“The first step toward laying a legal

foundation for electronic commerce is to clear away the barriers to electronic commerce,

and the first and most obvious barrier is found in laws that require paper.”

¶13 Modern business and legal infrastructures revolve around paper technology, which

presents a challenge to conducting business in today’s information economy.

The

unique nature of electronic contracts creates tremendous uncertainty in international legal

and business environments because the law is slow to respond to new technology.

The

application of existing law to computer-based commerce is often inadequate.

2. Contract Formation: Offer, Acceptance and Consideration

¶14

Electronic commerce (“E-commerce”) presents a multitude of challenges to

traditional paper-based contract law, including: jurisdiction, validity, formation,

See generally GRALLA, supra note 6, at 2. “In electronic communications there is this gap in time and

space, but the gap in time is much smaller than is the case with traditional post. . . .” Eiselen, supra note

36, at 22.

Jeffrey B. Ritter & Judith Y. Gliniecki, International Electronic Commerce and Administrative Law:

The Need for Harmonized National Reforms, 6 H

ARV. J.L. & TECH. 263, 263 (1993) (arguing that the

proliferation of non-paper based transactions requires regulatory reform to facilitate electronic commerce in

a “media neutral” environment).

Damian Sturzaker, Australia: Dispute Resolution in the New Millennium: International Arbitration,

ONDAQ BUS. BRIEFING, Jul. 27, 2001, available at 2001 WL 8987177. Jurisdiction is also an issue

because an electronic agreement “is not executed in any particular place.” Poggi, supra note 13, at 225.

“The Internet is no longer a self-enclosed club with no connection to the outside world. It has

become intimately tied to the way live and work. . .becoming a part of our daily lives.” G

RALLA, supra note

7, at 244.

Michael Joachim Bonell, Do We Need a Global Commercial Code?, 106 DICK. L. REV. 87, 94 n.30

(2001); see also Nichols, supra note 32 (explaining certainty as a prerequisite for commerce in a formal

legal system).

See generally Poggi, supra note 14, at 226.

Patricia Brumfield Fry, Introduction to the Uniform Electronic Transactions Act: Principles, Policies

and Provisions, 37 I

DAHO L. REV. 237, 242 (2001); see also Ritter & Gliniecki, supra note 46, at 263.

See generally Nichols, supra note 33, at 1390-91; see also Ritter & Gliniecki, supra note 46, at 263.

Randy V. Sabett, International Harmonization in Electronic Commerce and Electronic Data

Interchange: A Proposed First Step Toward Signing on the Digital Dotted Line, 46 A

M. U. L. REV. 511,

513 (1996) (arguing that law’s ability to change with electronic commerce’s rapid growth remains in

doubt).

“Technology presents an almost infinite number of ways for parties to exchange and notify each other

of terms and conditions. However, the true challenge is obtaining unequivocal assent to those terms and

conditions.” Winters, supra note 43, at 3.

Vol. 2:1] Electronic Contracts in International Sales

modifications, authentication, message integrity, and non-repudiation.

This comment

does not explore each challenge in detail. Instead, it evaluates contract formation

concerns within four electronic media. The fundamentals of contract creation—offer,

acceptance, and consideration—come under attack in electronic contract formation in the

initial agreement and in modification.

Ultimately, the “take-it-or-leave-it” nature of

electronic contracts, where the agreement is accepted as unread or by acquiescence, poses

the greatest challenge to predictability and certainty in sales.

a. Electronic Mail (“E-Mail”)

¶15

¶16

E-mail, a method of sending an electronic message from one person to another

using the Internet, is a convenient method of time-delayed direct communication.

While an e-mail may be a singular message, it also possesses the ability to form

contracts.

Consequently, e-mail is viewed as both a formal and informal

communications medium.

“[B]usiness people often regard informal e-mail

arrangements and business correspondence as non-contractual events.”

However,

courts have found telegrams “with typed signatures, letterhead and/or logos [to] provide

the ‘signature’ necessary for a binding contract.”

Therefore, sending an e-mail, with or

without a signature line,

including a name and pertinent contact information, may

symbolize assent to contract formation.

If a court concludes that the sender “intended to acknowledge contents of

documents,” then he or she will be bound by the terms.

In contrast, “receipt” in an

electronic environment “does not require that the recipient know of, open, or read the

message. All it requires is that the electronic message be available for processing by the

See generally PURCHASING L. REP., supra note 22.

Commercial parties are not likely to enter into contracts unless there is certainty it will be enforced in

courts. Nichols, supra note 33, at 1390-94.

See Dennis M. Kennedy, Key Legal Concerns in E-Commerce: The Law Comes to the New Frontier,

18 T.M. C

OOLEY L. REV. 17, 25 (2001) (arguing that most contracts presented online or in software are

presented on a “take-it-or-leave-it” basis and accepted unread).

GRALLA, supra note 7, at 78-87 (describing in technical detail how e-mail works).

See Coyle & Wetzel, supra note 17. “[B]usiness transactions involving significant sums of money”

occur via email.

Id.

See Haapio & Smith, supra note 32 (arguing that an informal information attitude can lead to trouble

as documents “develop into legally binding contracts”).

See Coyle & Wetzel, supra note 17, at 18 (col. 1) (citing e.g., Hillstrom v. Gosnay, 614 P.2d 466

(Mont. 1980)).

An example of a signature line at the end of an email is the following:

Jennifer E. Hill

JD/MBA Candidate, 2004

Northwestern School of Law/Kellogg School of Management

[email protected]

See Coyle & Wetzel, supra note 17 (citing Shattuk v. Klotzbach, No. 011109A, slip op. at 7-8 (Mass.

Dec. 11, 2001) (holding that an e-mail signature indicates an intentional act to which a party can be bound),

available at 2001 WL 1839720). See also Discussion re E-Sign infra Part V.B.

Id. E-mails are also entered into the federal rules of evidence. FED. R. EVID. 1001

(“‘Writings’. . .consist of letters, words, or numbers, or their equivalent set down by. . .electronic recording,

or other form of data compilation.”); F

ED. R. EVID. 901(a)(authentication), FED. R. EVID. 904(b)(4)

(distinctive characteristics of authentication). Authentication is a problem with digital signatures. See

discussion infra Part V.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

recipient’s information system.”

An important and humorous example of the power

of electronic signatures via e-mail comes from President Bill Clinton, remarking on the

United States enactment of E-SIGN (The Electronic Signatures in Global and National

Commerce Act): “If this [e-mail] had existed 224 years ago, the Founding Fathers

wouldn’t have had to come all the way to Philadelphia on July 4th for the Declaration of

Independence. They could have e-mailed their ‘John Hancock’s’ in.”

b. Electronic Data Interchange (EDI)

¶17

¶18

EDI is the computer-to-computer transmission of information used by frequently

contracting commercial parties to send and receive standard forms—generally purchase

orders and invoices—in a store and forward message system.

It is, perhaps, the clearest

example of electronic contracting through the use of an electronic agent. Parties agree on

the standardized terms of the transaction.

Transactions—quotes and automatic

responses to them—are sent and received daily via a phone line between electronic

agents, devoid of human involvement.

EDI reduces the time and complexity associated

with sending and receiving large volumes of information, reducing keystroke errors.

Purchase orders are one of the most common uses of EDI.

For example: Wal-Mart, a

large retailer, uses EDI to repeatedly order large quantities of consumer goods, such as

laundry detergent, for its thousands of stores. EDI enables the ordering and invoicing of

these goods between computer systems. Contract offer, acceptance, and assent occur

automatically.

EDI is a tricky method of electronic contracting because the output is in a specific

technical format. Messages are coded in generally acceptable national or international

forms and transmitted through a store and forward system. Since parties must agree on

the standards and forms before they engage in the lengthy and expensive process of

establishing direct communication, contract assent is evidenced by nature of the

connections. Transaction efficiency through rapid electronic contracting has gained

See Coyle & Wetzel, supra note 17, at 18 (col.1).

With default signature lines in greater use to personalize electronic communication, perhaps senders

should consider removing them to avoid any unnecessary liability or change them to reflect the non-binding

nature of the communication.

See Coyle & Wetzel, supra note 17. See Discussion re E-Sign infra Part V. President Clinton’s

tongue-in-cheek representation of today’s communication media humorously embodies an often lengthy

pursuit to validate a document, which may now be completed instantaneously. See generally infra Part V.

PHYLLIS K. SOKOL, FROM EDI TO ELECTRONIC COMMERCE 14-22 (Marjorie Spencer ed., 1995).

“[EDI] is the intercompany computer-to-computer communication of standard business transactions in a

standard format that permits the receiver to perform the intended transaction.” Id. at 14.

Id. at 16.

Id. at 15.

William R. Denny, Electronic Contracting in Delaware: The E-Sign Act and the Uniform Electronic

Transactions Act, 4 D

EL. L. REV. 33, 34 (2001). Generally, large companies can only afford EDI due to

proprietary networks which must be created to support it. See also S

OKOL, supra note 69, at 5, 23. EDI

reduces the five to ten percent key-entry error rate and the subsequent ten-fold costs to correct it. Other

benefits include faster information exchange, quicker order-to-payment cycle, and improved trade partner

relationships. EDI has improved the efficiency of communication for many industries that order large

quantities of stock-keeping-units (SKUs), such as food and drug retailers. Savings as early as the 1970s

were estimated at US$170 million. Id. at 161.

For an example regarding purchase orders, see SOKOL, supra note 69, at 5, 23.

Id. at 16.

Vol. 2:1] Electronic Contracts in International Sales

EDI’s instantaneous communication methods international approval with the

development of EDIFACT (EDI for Administration, Commerce and Transport), an

international EDI standard.

c. The Internet

¶19

¶20

¶21

The Internet is a massive collection of networks cooperating to connect millions of

computers globally to pass information to each other.

The Internet is used for a variety

of purposes including communication, file sharing, information posting, and the purchase

and sale of goods and services.

In the United States, the nation responsible for more

than forty percent of all on-line spending, e-commerce grew more than nineteen percent

to US$32 billion in 2001.

Europe, the second fastest growing on-line community, was

projected to spend US$86 billion in 2002.

As a result, Internet-based sales are quickly

becoming commonplace transactions. Internet sales are divided into three categories:

B2B, business-to-consumer (“B2C”), and peer-to-peer (“P2P”).

To understand a basic example of how a sale transacts over the Internet, let’s

examine a popular Internet retailer: Amazon.com. This online company sells thousands

of products such as books, compact disks, and electronics—a familiar example of B2C

sales.

Customers choose products from the Amazon.com website, place them in a

virtual shopping basket and provide credit card information to complete the purchase.

When a customer clicks the “Place Your Order” button, he or she contractually agrees to

the purchase.

The goods are mailed to the customer’s designated address.

There is no

physical signature and no paper changes hands, which is the major concern for

identification and authentication.

B2B commerce functions similarly with publicly available or privately protected

special websites prepared for valued customers, including direct billing and other

Id. at 43-44, 239. American and European automotive companies, as the heaviest EDI users, mainly

developed the EDIFACT standard, drawing on standardized trade documents created by the United Nations

Economic Commission for Europe (UN/ECE) Committee on Development of Trade.

GRALLA, supra note 7, at 5; Schroeter, supra note 28.

GRALLA, supra note 7.

Vigoroso, supra note 9.

Id. Vigoroso distinguishes Eastern Europe, whose e-commerce growth is slower, from the fast-

growing Western Europe on-line community. Vigoroso writes that Asia is the fastest growing online

community.

See Kennedy, supra note 57, at 18. B2B and B2C are becoming increasingly popular terminology to

refer to electronic commerce based sales. P2P sales are not contemplated in this article because consumer

transactions are excluded from the CISG. Auctions, another popular form of Internet sale for businesses

and consumers, are also excluded for the same reason.

See Amazon.com, supra note 12.

Id.

Id. Purchasers may also designate a different address, such as when sending a gift.

See generally Amazon.com, supra note 12, at 1347 (explaining how its virtual shopping cart

operates). A common saying about anonymity problems online is: “[o]n the Internet, no one knows you’re

a dog!” This means that people often misrepresent themselves. In a commercial environment, this idiom

translates into a specific concern for the CISG: “[n]o one knows whether the buyer is a consumer or a

business.” Amelia H. Boss, Taking UCITA on the Road: What lessons have we learned, U

NIFORM

COMPUTER INFORMATION TRANSACTIONS ACT: A BROAD PERSPECTIVE 2001, PLI Order No. G0-00WN

(Oct. 17, 2001), WL 673 PAT/PLI 121, 153.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

inventory management efficiencies. Similar to EDI, purchasing terms are generally

agreed upon beforehand. Here, however, users manually interact with the website to

select and purchase goods. Dell Computer Corporation is an excellent example of a

business that creates customized websites for its top corporate customers to use for easy

product selection, special pricing, and automatic invoicing.

d. Software Sales

¶22

Electronic contracting also occurs in software sales. Software is generally sold in

four ways: 1) direct sale of a packaged or customized product, 2) license agreement, 3)

subscription or database transaction, or 4) online sales, which results in the shipment of a

software product or automatic download.

Two forms of electronic contracts dominate:

“click-wrap” and “shrink-wrap” agreements.

Software sellers determine the contracting

method.

Click-wrap agreements, also known as “browser-wrap” agreements, allow “a

buyer to manifest assent to the terms of a contract by clicking on an acceptance button

that appears while the buyer obtains or installs the product.”

A buyer cannot start using

the software until he or she has clicked on the button accepting the terms and conditions

of the agreement.

Click-wrap agreements require buyer action in order to begin usage

but do not guarantee cognizance of the agreement terms.

Buyers can assent to the

contract without even reading it in order to use the product.

Buyers cannot negotiate

and must, therefore, accept the terms as-is. Most courts find these agreements

enforceable.

Understandably, concern remains that click-wrap agreements may be

accepted without users actually reading or understanding contract terms when

manifesting assent.

Dell Computer Corporation, an industry leader in “customized procurement portals,” who epitomizes

the direct-to-order model that couples the operational benefits of just-in-time manufacturing with the

personalization of one-to-one made to order products. See Dell, Premier Tour, at

http://premier.dell.com/premier/demo/index.html

(last visited Jan. 31, 2004); see also JAN W. RIVKIN &

ICHAEL E. PORTER, MATCHING DELL, HARVARD BUSINESS CASE NO. 9-799-158 (Harvard Business

School Publishing 1999).

See Marcus G. Larson, Comment, 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, 5 T

UL. J. INT’L & COMP. L. 445, 466 (1997).

Id.

See Winters, supra note 43, at 2.

Id. at 3. See Ofoto.com, at http://www.ofoto.com (last visited Jan. 28, 2004) as an example of

customers agreeing to use free software by reading a click-wrap agreement and clicking on an “I agree”

statement in order to download the software.

Winters, supra note 42.

Customers “must” read the agreement before clicking the “I agree” button, but there are no

mechanisms in place to ensure reading. See Haapio & Smith, supra note 32.

Winters, supra note 42. See generally i.Lan Systems v. NetScout Service Level Corp., 2002 U.S.

Dist. LEXIS 209 at *1-2 (D. Mass., Jan. 2, 2002) (framing the challenge click-wrap agreements pose to

traditional contract law because of the uncertainty around users reading the agreement before manifesting

assent).

Winters, supra note 42. See also Specht v. Netscape Communications Corp., 150 F. Supp. 2d 585

(S.D.N.Y. 2001) (holding that users are bound if they affirm the click-wrap agreement because “notice of a

license appears on the [seller’s] Web site” where users can easily find, read and assent to the “full text” of

the agreement).

Winters, supra note 42. See also i.Lan Systems, supra note 93. Click-wrap agreements are often

inconspicuously placed, as there are no formal requirements for placement. Balloon, supra note 17, at 932.

Vol. 2:1] Electronic Contracts in International Sales

¶23 Shrink-wrap agreements operate slightly differently. For example, they are used

when one purchases off-the-shelf software.

The agreement is imprinted on the software

box, CD-ROM case, or other materials included inside the package.

“The license begins

when the purchaser reads its terms and tears open the cellophane wrapping or shrink-

wrap that surrounds the package.”

Buyers are supposed to return the software package

to the retailer if they elect not to abide by the agreement.

Courts are similarly

concerned about buyers actually receiving notice of the sale, consciously agreeing to the

sale, and conditioning the sale on acceptance of the license.

100

¶24

¶25

As demonstrated by the aforementioned electronic communications methods,

technology offers many ways for parties to exchange information about terms and

conditions when forming electronic contracts.

101

However, the true challenge in the quest

to balance ease of sale with legal protection for both the buyer and seller is “obtaining

unequivocal assent to those terms and conditions.”

102

Without acceptable rules and

guidelines, commercial parties may be hesitant to embrace new technology, fearing

unenforceable or invalid contracts.

103

These tensions currently face the primary

convention on contracts for the international sale of goods—the CISG—which did not

include electronic communications methods because they were not contemplated at the

time of drafting.

104

Keeping electronic contract methods in mind, this article will now

explore how the CISG, particularly Article 13, embraces the information age and

paperless contracts.

II. THE UNITED NATIONS CONVENTION ON THE INTERNATIONAL SALE OF GOODS

(“CISG”)

On January 1, 1988, the CISG came into effect through ratification by eleven

countries.

105

The CISG is a United Nations-sponsored treaty regulating contracts for the

international sale of goods, including formation, party obligations, rights and remedies

for breach of contract.

106

Sixty-two nations have adopted the CISG as guiding legislation

for international sales.

107

The CISG does not purport to answer every question that may

Off-the-shelf software is industry terminology to describe software packages that can be physically

purchased at a local store and installed by the user onto his or her computer.

Winters, supra note 43. See also Larson, supra note 87, at 466.

Winters, supra note 42.

Id.

100

Id.

101

See supra Part I.A.

102

Winters, supra note 42.

103

Sabett, supra note 53, at 534; see also Ritter & Gliniecki, supra note 46, at 274.

104

See Pace Law School Institute, supra note 24.

105

CISG, supra note 18. Per Article 99(1), ten states must adhere to the Convention in order for its

ascendance at the start of the year 1988. By December 11, 1986, instruments of adherence were deposited

with the Secretary General of the United Nations by the following countries: Argentina, China, Egypt,

France, Hungary, Italy, Lesotho, Syria, United States of America, Yugoslavia, and Zambia. See H

ONNOLD,

supra note 20, at 3.

106

Thomas J. Drago and Alan F. Zoccolillo, Be Explicit: Drafting Choice of Law Clauses in

International Sale of Goods, May 2002, M

ETRO. CORP. COUNS. 9, (col. 1), WL 5/02 METCC 9, (col. 1).

107

See CISG: Table of Contracting States, at http://www.cisg.law.pace.edu/cisg/countries/cntries.html

(last visited Jan. 26, 2004). The sixty-two ratifying nations (with dates of effectiveness) are: Argentina

(Jan. 1, 1988), Australia (Apr. 1, 1989), Austria (Jan. 1, 1989), Belarus (Jan. 1, 1990), Belgium (Nov. 1,

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

arise in transactions involving the international sale of goods.

108

Instead, the Convention

promotes “the adoption of uniform rules which govern contracts for the international sale

of goods and take into account the different social, economic and legal systems [that]

contribute to the removal of legal barriers in international trade and promote the

development of international trade.”

109

A. History of the CISG

¶26

¶27

The drafting of the CISG began in the 1930s by European scholars, at the behest of

the International Institute for the Unification of Private Law (UNIDROIT).

110

By 1935, a

preliminary draft of a uniform law for international sales was issued.

111

World War II

interrupted drafting, and in 1956, twenty-one nations continued the project.

112

Revised

drafts were sent to governments in 1956 and 1963 for evaluation.

113

Meanwhile, a draft

for a uniform law of contract formation began in 1958.

114

The 1964 Hague Convention

discussed both related drafts, resulting in two Conventions: the Uniform Law for the

International Sale of Goods (ULIS) and the Uniform Law on the Formation of Contracts

for the International Sale of Goods (ULF).

115

Five states, mostly European, ratified these

Conventions in 1972.

116

In 1966, a General Assembly of the United Nation’s Resolution desired worldwide

support of such Conventions to promote the harmonization of international trade law.

117

Thus, the United Nations Commission on International Trade Law (UNCITRAL) was

1997), Bosnia-Herzegovina (Mar. 6, 1992), Bulgaria (Aug. 1, 1991), Burundi (Oct. 1, 1999), Canada (May

1, 1992), Chile (Mar. 1, 1991), China (PRC) (Jan. 1, 1988), Columbia (Aug. 1, 2002), Croatia (Oct. 8,

1991), Cuba (Dec. 1, 1995), Czech Republic (Jan. 1, 1993), Denmark (Mar. 1, 1990), Ecuador (Feb. 1,

1993), Egypt (Jan. 1, 1988), Estonia (Oct. 1, 1994), Finland (Jan. 1, 1989), France (Jan. 1, 1988), Georgia

(Sept. 1, 1995), Germany (Jan. 1, 1991), Greece (Feb. 1, 1999), Guinea (Feb. 1, 1992), Honduras (Nov. 1,

2003), Hungary (Jan. 1, 1988), Iceland (Jun. 1, 2002), Iraq (Apr. 1, 1991), Israel (Feb. 1, 2003), Italy (Jan.

1, 1988), Kyrgystan (Jun. 1, 2000), Latvia (Aug. 1, 1998), Lesotho (Jan. 1, 1988), Lithuania (Feb. 1, 1996),

Luxembourg (Feb. 1, 1998), Mauritania (Sep. 1, 2000), Mexico (Jan. 1, 1989), Moldova (Nov. 1, 1995),

Mongolia (Jan. 1, 1999), Netherlands (Jan. 1, 1992), New Zealand (Oct. 1, 1995), Norway (Aug. 1, 1989),

Peru (Apr. 1, 2000), Poland (Jun. 1, 1996), Romania (Jun. 1, 1992), Russian Federation (Sept. 1, 1991),

Saint Vincent and the Grenadines (Oct. 1, 2001), Singapore (Mar. 1, 1996), Slovak Republic (Jan. 1, 1993),

Slovenia (Jun. 25, 1991), Spain (Aug. 1, 1991), Sweden (Jan. 1, 1989), Switzerland (Mar. 1, 1991), Syria

(Jan. 1, 1988), Uganda (Mar. 1, 1993), Ukraine (Feb. 1, 1991), United States (Jan. 1, 1988), Uruguay (Feb.

1, 2000), Uzbekistan (Dec, 1, 1997), Yugoslavia (Jan. 1, 1988), Zambia (Jan. 1, 1988). Declaring and

reserving states are included within this list. Id; see

http://www.unilex.info/dynasite.cfm?dssid=2376&dsmid=13351&x=1

(last visited Jan. 26, 2004).

108

John P. McMahon, Applying the CISG: Guides for Business Managers and Counsel, at

http://www.cisg.law.pace.edu/cisg/guides.html

(revised Jan. 2004).

109

CISG TREATY, supra note 18, at pmbl.

110

HONNOLD, supra note 20, at 5. See also CISG, supra note 17. See also, PETER SCHLECHTRIEM,

NIFORM SALES LAW–THE UN CONVENTION ON CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS 17-

20 (Manzche Verlags 1986), available at http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem.html

(last

visited Jan. 26, 2004).

111

HONNOLD, supra note 109.

112

Id.

113

Id.

114

Id.

115

Id.

116

Id. at 6.

117

Id. at 6.

Vol. 2:1] Electronic Contracts in International Sales

born, holding its first session in 1968.

118

Because UNCITRAL felt that both Conventions

would not achieve worldwide acceptance due to countries’ legal, economic and political

differences,

119

the Conventions were revised by fourteen States.

120

By 1978, the updated

Conventions, the ULIS and ULF, were combined into one document: the CISG.

121

received unanimous approval

122

and represented “the equality and mutual benefit [that] is

an important element in promoting friendly relations among the States.”

123

B. Scope and Application

¶28

The CISG is a self-executing treaty

124

divided into three distinct parts: Part I

explains the sphere of application and general provisions, Part II describes contract

formation, and Part III provides substantive rules for contracting.

125

The Convention

grants a “buyer and seller. . .[a] reasonable certainty as to their respective legal rules and

obligations.”

126

It encompasses the international sale of commercial goods for business

purposes only, not including accompanying services, consumer goods, or products

procured through auction.

127

It also excludes goods comprising material parts necessary

for manufacture or production, including labor services.

128

Personal injury liability arising

from goods is also excluded from the Convention.

129

The Convention only concerns the

“formation of the contract of sale and the rights and obligations of the seller and buyer

arising from such a contract.”

130

It does not regulate contract validity or property in

118

Id. at 6. Membership was initially set at 29 States and later enlarged to 36 States to represent all

regions of the world. G.A. Res. 3108, UNCITRAL, V Yearbook, at 10-12 (Dec. 12, 1973).

119

Explanatory Note by the UNCITRAL Secretariat on the United Nations Convention on Contracts for

the International Sale of Goods, U.N. Doc. V.89-53886 (1989), available at

http://www.cisg.law.pace.edu/cisg/text/p23.html

(last visited Jan. 29, 2004).

120

HONNOLD, supra note 20, at 9. The Convention underwent three stages before it reached finality: (1)

the UNCITRAL Working Group (1970-77), (2) Review by the full Conference (1977-78), and (3) The

Diplomatic Conference (1980). J

OHN O. HONNOLD, DOCUMENTARY HISTORY OF THE UNIFORM LAW FOR

INTERNATIONAL SALES: THE STUDIES, DELIBERATIONS AND DECISIONS THAT LED TO THE 1980 UNITED

NATIONS

CONVENTION WITH INTRODUCTIONS AND EXPLANATIONS 2 (Kluwer 1989).

121

HONNOLD, supra note 20, at 9-10.

122

HONNOLD, supra note 20, at 10-11 (Under the rules of the conference, each article was approved by

a two-thirds majority. The two articles not passing underwent compromised revision, whose new versions

were “approved without dissent.” The CISG’s text was finalized in six different languages—Arabic,

Chinese, English, French, Russian, and Spanish.).

123

CISG, supra note 18, at pmbl.

124

FRANCO FERRARI, THE SPHERE OF APPLICATION OF THE VIENNA SALES CONVENTION 4-5 (Kluwer

Law International 1995). See also Karen B. Giannuzzi, The Convention on Contracts for the International

Sale of Goods: Temporarily Out of “Service”?, 28 L

AW & POL’Y INT’L BUS. 991, 992 n.8 (1997) (“A self-

executing treaty requires no further action by a legislative body in order to effectuate its transformation into

domestic law.”).

125

See CISG, supra note 18, at Points 2 and 3.

126

Don’t Let CISG’s Differences From UCC Trip Up Your International Supplier Agreements,

URCHASING L. REP., Dec. 1, 2001, available at 2001 WL 24141770.

127

CISG, supra note 18, at art. 2. Article 2 additionally excludes goods for personal use, family use or

household goods—unless the seller was unaware of this fact before contracting, goods prohibited by law,

“stocks, shares, investment securities, negotiable instruments of money,” and “ships, vessels, hovercraft or

aircraft. . .[and] electricity.” Id.

128

CISG, supra note 18, at art. 3.

129

CISG, supra note 18, at art. 5.

130

CISG, supra note 18, at art. 4.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

goods sold.

131

The Convention is further limited to international sales and, therefore,

does not encompass domestic transactions.

132

¶29

¶30

Transacting parties must be from different contracting states who have adopted the

CISG, in order for the convention to apply to the contract.

133

Alternatively, the CISG

may be applied when a state has domestically incorporated the rules of the CISG.

134

an example of the former situation, a seller of ceramic tiles from Italy contracting with a

buyer from Australia would have the CISG apply to their transaction because the contract

is for the international sale of goods (the Italian ceramic tiles) and both contracting states

have adopted the CISG.

135

As an example of the latter situation, if a South African buyer

(non-contracting state) purchased goods from an Austrian seller (contracting state), the

CISG would apply because Austrian law has adopted the CISG as part of domestic law.

136

The nature of the CISG enables it to have a neutralizing effect on domestic laws, which

puts both the buyer and seller from different States on equal footing, enabling transparent

decisions and accountability through equal legal principles.

137

“At a minimum, the CISG

provides a common language for the international business community to rely upon in

negotiating and structuring transactions.”

138

Parties, however, have a right to contract around the CISG’s default rules by

choosing the application of domestic law, the forum’s private international law rules, or

particular sections therein.

139

Such terms may be expressly accepted or rejected as long

as domestic law validity requirements are met.

140

Parties may also opt-in to the CISG

when their transaction falls outside the Convention’s scope.

141

Furthermore, parties can

also refer to the CISG in their transactions by lex mercatoria (customs and practices

governing commercial law developed through time by merchants).

142

However, if parties

131

Id.

132

Domestic transactions were excluded from the CISG scope in order to achieve universal adoption.

ONNOLD, supra note 20, at 2-3.

133

CISG, supra note 18, at art. 1(1).

134

Id; see also Drago & Zocolillo, supra note 106.

135

CISG, supra note 18, at art. 1. However, if parties appear “to have their places of business in the

same State,” but one party uses an agent from an undisclosed foreign principle, the CISG would not apply.

Id.

136

Eiselen, supra note 36, at 21. Not all domestic states agreeing to this combination have reserved to

Article 95. If, for example, the South African company had contracted with the United States, the CISG

would not apply because the United States reserved to its application within the private rules of

international law. Article 95 reads: “[a]ny State may declare at the time of the deposit of the instrument of

ratification, acceptance, approval or accession that it will not be bound by subparagraph (1)(b) of Article 1

of this Convention.”

CISG, supra note 18, at art. 95. Article (1)(b) reads, “[w]hen the rules of private

international law lead to the application of the law of a Contracting State.” CISG, supra note 18, at art.

1(1)(b).

137

Giannuzzi, supra note 124, at 1011 n.91.

138

Id. at 1034 (CISG may be viewed as international default rules by contracting states, unless

specifically contracting around them.).

139

CISG, supra note 18, at art. 6, 12, 96. For methods of treaty acceptance, see id. at art. 91 and 100.

See also S

CHLECHTRIEM, supra note 110, at 24.

140

SCHLECHTRIEM, supra note 110, at 24 (domestic law does not mean that local sales laws apply, nor

does it mean that the Convention “bypasses” domestic law). See also R

AMBERG, supra note 32, at 26-27.

141

Larson, supra note 87, at 452; see also FERRARI, supra note 123, at 36.

142

See Louis F. Del Duca & Patrick Del Duca, Selected Topics Under the Convention on International

Sale of Goods, 106 D

ICK. L. REV. 205, 207 (2001); see also Monica Kilian, CISG and the Problem with

Common Law Jurisdictions, 10 J. T

RANSNAT’L L. & POL’Y 217, 224 (2001) (“CISG has gained the status

of lex mercatoria, at least in arbitral proceedings.”). See also R

AMBERG, supra note 32, at 20-21 (Lex

Vol. 2:1] Electronic Contracts in International Sales

want to ensure that the CISG does not apply to their transaction, an explicit opt-out clause

should be inserted in the international sales contract, favoring a choice of law provision

instead of or in place of the CISG.

143

¶31

¶32

¶33

¶34

The importance of the CISG has been established not only by the great efforts

taken by the United Nations to transform three uniform sales conventions on contracts for

the international sale of goods into one, but also from the sheer number of states who

have ratified it.

144

Against these conditions, Article 13’s limited definition of a contract

writing is illuminated.

III. CISG A

RTICLE 13

Article 13 states: “For the purposes of this Convention ‘writing’ includes telegram

and telex.”

145

Accordingly, Article 13 was written prior to computer-based contracting

becoming en vogue.

146

To understand how Article 13 functions within the CISG, Part III

uncovers Article 13’s drafting and legislative history to fully define terms and usage and

to view its purpose and connection with other CISG articles.

A. Drafting Considerations

Though Article 13 defines a writing, it does not interpret declarations or statements

made by transacting parties, either expressly or implicitly.

147

In fact, a contract does not

have to be “concluded or evidenced by writing” at all—the CISG has no form

requirements.

148

Contract writings under the CISG may be proven by “any means,

including witnesses.”

149

Form requirements were purposely excluded from the CISG to give parties greater

flexibility in contracting with each other and to account for oral agreements and modern

means of communication.

150

This also avoids conflict with States’ domestic form

requirements, which are often stricter.

151

If the CISG has no form requirements, then why

does Article 13 exist at all? Article 13 was added to act as a supplementary definition to

mercatoria is an “a national system of principles and rules generally accepted in international commerce.”

An example of lex mercatoria is pacta sunt servanda, parties observing good faith in contractual

relationships.).

143

Drago & Zocolillo, supra note 106; see also Paul M. McIntosh, Selected Legal Aspects of

International Sales Transactions: The United Nations Convention on Contracts for the International Sale

of Goods, B

US. CREDIT, Oct. 1, 2001, at 36, available at 2001 WL 12570546.

144

See CISG, supra note 106.

145

CISG, supra note 18, at art. 13.

146

See generally Eiselen, supra note 36; see also Schroeter, supra note 28.

147

Schroeter, supra note 28. See also CISG, supra note 18, at art. 8. (Article 8 provides for

interpretation).

148

CISG, supra note 18, at art. 11.

149

Id.

150

See SCHLECHTRIEM, supra note 109, available at

http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem-11.html

(last visited Jan. 29, 2004); see also Jacob

S. Zeigel, Report to the Uniform Law Conference of Canada on Convention on Contracts for the

International Sale of Goods (Jul. 1981) (freedom of form is also a tradition in civil law countries, such as

those of Western Europe), available at http://www.cisg.law.pace.edu/cisg/text/ziegel11.html

(last visited

Jan. 29, 2004).

151

Id; see also infra Parts IV-V (enabling domestic form requirements through reservation to CISG

Articles 12 and 96).

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

two other articles on acceptance: Article 21(2) “letter or other writing containing a late

acceptance,” and Article 29(2) “a contract in writing which contains a provision requiring

any modification or termination by agreement to be in writing. . .”

152

Article 13’s

purpose was to emphasize that telex and telegram are acceptable methods of contract

modification,

153

even though the CISG does not have form requirements.

154

Article 13

was included to ensure that telex and telegram are media that will always satisfy a writing

requirement because they are explicitly mentioned.

155

Telex and telegram were singled

out at the time of drafting (late 1970s) as suitable methods to facilitate communication

speed.

156

Contract modifications often necessitate quick decisions; telex and telegram

were two newly available methods to do so.

¶35

¶36

Article 13 also links to the proper acceptance of an offer, as described in Article

20.

157

Here, Article 13’s mention of telex and telegram make two salient points in Article

20. First, a telegram equates to a letter to convey that the period of time for acceptance

begins from the moment the telegram is handed in for dispatch, the letter sent, or if no

date is listed, the date on the envelope.

158

Second, telex compares to the telephone or

“other means of instantaneous communication,” which fixes the acceptance period

starting from the time the offer reaches the offeree.

159

Article 13’s specific inclusion of

these two writing media—telex and telegram—is thus complemented by Article 20,

which expounds on assent methods to accommodate new forms of communication.

B. Legislative History and Commentary

The legislative history of Article 13 also uncovers motivation behind the mention

of only two distinctive forms of writing. The German delegates to the CISG Working

Group specifically suggested including telex and telegram to give reserving States who

have a domestic writing requirement the option of using these methods for the

“conclusion, rescission, or modification” of a contract.

160

Dr. Peter Schlechtriem, a

152

CISG, supra note 18, at Arts. 21(2), 29(2); see also HONNOLD, supra note 20, at 141.

153

Schroeter, supra note 28, at 46; see also HONNOLD, supra note 20, at 141.

154

CISG, supra note 17, at art. 11; see also, HONNOLD, supra note 19, at 135 (CISG does not formally

require a writing for a contract because the Convention does not contemplate the Statute of Frauds. Since

the CISG aims to avoid interference with domestic regulations, Article 11 was written to avoid writing

requirement problems, yet enable parties to contract around them by invoking Article 6, or reserving to

Article 11 altogether. While Article 11 does not prohibit the imposition of a formal requirement, it

“removes any impediment to enforcement between parties based on any domestic ‘requirement as to

form’”). See also S

CHLECHTRIEM, supra note 109, at 46-47 (However, if parties invoke the Article 96

reservation, then higher domestic form requirements might apply).

155

CISG, supra note 17, at art. 11. The term writing is only mentioned twice in the articles and it only

requires it for Article 29(2) modifications. See generally CISG, supra note 18, at art. 13 and 29(2); see

generally S

CHLECHTRIEM, supra note 110.

156

SCHLECHTRIEM, supra note 110, at 46. An excellent online resource to Article 13’s legislative

history is Pace Law School Institute of International Commercial Law, Legislative History 1980 Vienna

Dipolomatic Conference, available at http://www.cisg.law.pace.edu/cisg/chronology/chrono13.html

(last

updated Sept. 5, 2000).

157

CISG, supra note 18, at art. 20.

158

Id.

159

Id. Acceptance is considered once the telegram is “handed in for dispatch” or from the date shown

on the envelope or letter. It is considered an instantaneous form “from the moment the offer reaches the

offeree.”

160

CISG, supra note 18, at art. 20; see also SCHROETER, supra note 28.

Vol. 2:1] Electronic Contracts in International Sales

notable international law scholar, concludes that telegram and telex were probably

included in the final draft of Article 13 because it was drafted on a model provision in the

UNCITRAL Convention on the Limitation Period of 1974 (Article 1(3)(g)), which

required form.

161

Thus, including telex and telegram would enhance form clarity in

contract modifications that require quick decisions.

162

Further legislative history reveals

that CISG Article 13 is comparable to UNIDROIT principles as its definition of a

writing: “. . .any mode of communication that preserves a record of the information

contained therein and is capable of being reproduced in tangible form.”

163

The

comparable relationship concludes that Article 13 was intended to achieve a uniform

objective standard for form requirements, so that parties need not comply with domestic

requirements that could pose a higher standard and become difficult to verify.

164

¶37

¶38

It should also be noted that Article 13 had no direct predecessor in the ULF, ULIS

or any previous Convention drafts.

165

Such little legislative history is unsurprising, given

the minimal debate it received in conference meetings and plenary sessions.

166

Article 13

was quickly adopted, with forty-two affirmative votes and three abstentions.

167

IV. ELECTRONIC CONTRACTING UNDER ARTICLE 13

Because the CISG specifically excludes mention of electronic contracting, a

question is left unanswered: are electronic contracts valid in international commercial

sales?

168

If the CISG is outdated, States would violate this treaty by forming electronic

contracts via e-mail, EDI, or the Internet. Part IV thus evaluates electronic contracting

under Article 13 to reveal that it is an organically acceptable method of international

commercial contractual agreement, uniquely worded by the drafters to contemplate future

commercial communications improvements. Part IV also explores other CISG articles to

establish electronic contracting acceptability.

A. Article 13 is Outdated, but Naturally Updateable

One obvious instance of a provision that was outdated from the moment

the CISG came in to force is Article 13. It mentions the telex—nobody

uses a telex anymore—but it doesn’t mention the fax or other recently

161

SCHLECHTRIEM, supra note 110, at 46 n.145 (citing U.N. Doc. A/Conf. 97/C.1/SR.7 at 10 § 73)

(listing construction contracts as an example of time-sensitive contracts).

162

See discussion infra Part IV.A.

163

Use of the UNIDROIT Principles to help interpret CISG Article 13 (citing INTERNATIONAL

INSTITUTE FOR THE UNIFICATION OF PRIVATE LAW, UNIDROIT PRINCIPLES OF INTERNATIONAL

COMMERCIAL CONTRACTS, art. 1.10 (1994)), at http://www.cisg.law.pace.edu/cisg/principles/uni13.html

(last visited Jan. 27, 2004). For example, Article 20(1) requires a written acknowledgment for the

interruption of the limitations period. See also infra note 198.

164

See generally supra note 161.

165

That Article 13 has no predecessor is further evidence of the lack of technical standards in

international business transactions in the 1980s. Schroeter, supra note 28 at 270.

166

U.N. Convention on Contracts for the International Sale of Goods, 33rd meeting, Apr. 2, 1980, U.N.

Doc. A/Conf.97/C.1/SR.33 (on file with author); see H

ONNOLD, supra note 120, at 645.

167

UNCITRAL, 6th Plenary Meeting, U.N. Doc.A/Conf.97/SR.6/Doc C(7) (Apr. 8, 1980) (on file with

author); see H

ONNOLD, supra note 120, at 740.

168

See Schroeter, supra note 28.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

developed means of communication. That, I think, is an example of how

quickly a Convention or a civil code can become outdated.

169

¶39 Article 13, indeed, fails to reflect important features of modern day business

practices. However, this does not mean that Article 13 and the entire CISG is “a statutory

piece of legislation [that has] largely petrified the law.”

170

Consequently, this section

examines the intent and purpose of the CISG to demonstrate that it naturally extends its

boundaries for a writing to include issues not conceived by the drafters.

171

1. The outer limits of writing requirements

¶40

¶41

As noted in Part III supra, Article 11, defining form, does not impose any official

writing requirements, which reinforces Article 13’s flexibility.

172

This means that even

oral contracts— in person or via telephone—are valid under the CISG.

173

The lack of

writing requirements creates benefits within the CISG. For example, it facilitates

confidence in oral agreements, such as telephone sales orders which are evidenced by a

purchase order number.

174

Facsimile and telex status, widespread commercial methods of

contracting or modification, also need not be questioned.

175

Lastly, writing requirements

often interfere with the “necessary speed of commercial transactions.”

176

Therefore,

excluding formal writing requirements facilitates international trade—the very purpose of

the CISG.

177

The term writing, however, is not intended to fix the term’s outer limits.

178

Modern

business communication and contracting methods include a multitude of electronic

media: e-mail, EDI, and the Internet, which are not rooted in paper form.

179

However,

they are the ideal contracting tools because they enable distant parties to collaborate,

negotiate and communicate more easily, reducing the time and effort involved.

180

could be argued, therefore, that by virtue of the outer limits interpretation, electronic

169

Harry M. Flechtner, Transcript of a Workshop on the Sales Convention: Leading CISG Scholars

Discuss Contract Formation, Validity, Excuse for Hardship, Avoidance, Nachfrist, Contract Interpretation,

Parol Evidence, Analogical Application, and Much More, 18 J. L. & C

OM 191, 218 (1999) (quoting Prof.

Schlechtriem).

170

Eiselen, supra note 36, at 21.

171

Fletchner, supra note 169, at 220 (quoting Prof. Schlechtriem).

172

See discussion supra Part III.A. A contract does not have to be “concluded in or evidenced by

writing and is not subject to any other requirement as to form.” CISG, supra note 18, at art. 11. The

principle of form allows contracting parties to declare form requirements. S

CHLECHTRIEM, supra note 110,

at 46. Potential areas include: Articles 26, 29(2), 39(1), 43(1), 47(1), 65(1), 72(2), 81(1), 92; Schroeter,

supra note 28, at 269.

173

See generally, HONNOLD, supra note 20, at 141.

174

R.M. Lavers, CISG: To Use or Not to Use?, 21 INT’L BUS. LAWYER 13 (Jan. 1993).

175

Id.

176

Alejandro M. Garro, Reconciliation of Legal Traditions in the U.N. Convention on Contracts for the

International Sale of Goods, 23 I

NT’L LAW. 443, 448 (1989), available at

http://www.cisg.law.pace.edu/cisg/text/garro11,12.html

(last visited Jan. 26, 2004).

177

If contracting methods were really an issue, the drafters would have included them.

178

Fletchner, supra note 169, at 220 (quoting Prof. Schlechtriem).

179

See discussion supra Part I.A.

180

See also Kidd & Daughtrey, supra note 6, at 217 (arguing that tasks once requiring weeks of

preparation and delivery and dozens of workers can be accomplished “in minutes by one person using the

Internet”); see generally Poggi, supra note 14, at 250.

Vol. 2:1] Electronic Contracts in International Sales

communication would not pose a more serious problem to the CISG than either telex or

telegram. Although the medium for the contract is changing, the business principles

behind the transaction are not.

181

Yet electronic contracts become questionable because

they do not exist in a formal paper-based medium known to traditional contracts.

182

The

key concern with new electronic contract forms is a readable record—whether parties

have the ability to create or retain a copy of the contract.

183

However, these concerns are

resolvable because agreements formed by e-mail, EDI or over the Internet may be stored

and printed as evidence, if required.

184

This makes them as enforceable as other

agreements.

185

¶42

¶43

Article 11’s effect on Article 13 also leads to two additional implications: (1) a

writing does not require a signature or any other “validating mark or sign,”

186

and (2) a

contract may be valid in a non-publishable form. Examining each implication in turn, the

following conclusions result. The signature on a contract is a critical part of

authentication and non-repudiation.

187

Under Article 6, parties may not require a

signature.

188

If no signature is required, no gap exists with telex or telegram to satisfy a

signature requirement.

189

If parties require a signature, the aforementioned methods

would still satisfy this contractual requirement because parties can easily sign or affix a

signature mark.

Let us use the facsimile (fax) as an example to test the readability principle under

Article 13. The fax is a modern communication method relative to the ratification of the

CISG (1980).

190

Therefore, it serves as an excellent proxy to understand how Article 13

extends to new forms of electronic contracts. Communication by fax in Europe was

181

“Electronic commercial practice does not require changing the principles on which business is

conducted. It merely changes the medium.” Poggi, supra note 13, at 267.

182

“Electronic commerce is fundamentally altering business practice by replacing traditional paper-

based methods of moving information with direct computer-to-computer communications.” Ritter &

Gliniecki, supra note 46, at 263.

183

Schroeter, supra note 28. “Electronic means of communication fulfill the writing requirement if they

lead to printed and material text which the parties can put into their files, submit to their superiors, to

government boards or tax authorities. Most importantly, it can serve as evidence which is as reliable as

telegram or telex.”

SCHLECHTRIEM, supra note 110.

184

Id. E-mail is acceptable to the U.S. Federal Rules of Evidence. FED. R. EVID. 1001. Another less

supported view of Article 13 exists because of this writing issue: that its purpose was to achieve a “uniform

objective standard for requirements” so that parties did not have to take efforts to comply with domestic

requirements, which could be stricter. In essence, Article 13 could be viewed as a “stop-gap” which

enumerates more specific satisfactory methods of a “writing” to achieve compliance. However, the

awkward wording of Article 13, coupled with the intent and purpose of the drafters to establish a flexible

tool for international business, leads one to disregard this contention.

185

Kidd & Daughtrey, supra note 7, at 222; see discussion infra Part V (for examples of international

and domestic legislation that have created legal framework to put electronic and paper contracts on equal

footing).

186

Kidd & Daughtrey, supra note 7, at 222.

187

See generally Balloon, supra note 17.

188

CISG, supra note 18, art. 6.

189

See Switzerland HG 45/1994 Commercial Court St. Gallen, Switzerland, 53-54 (Dec. 5, 1995)

(holding that a buyer’s unsigned fax order for equipment was a contract with the seller because a CISG

contract “is not subject to any requirement as to form” and the buyer’s intentions were clear), available at

http://www.cisg.law.pace.edu/cases/951205s1.html

(last visited Jan. 31, 2004).

190

See Schroeter supra note 28.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

virtually unheard of at the time of drafting and, therefore, not mentioned.

191

Since fax

was an unknown medium, an internal gap existed.

192

Article 7(2) provides for gap-filling

“according to the general principles on which the Convention is based” or those of

private international law.

193

Fax possesses the ability to result in traditional written form:

a recordable and printable document. A fax creates a printable copy to send through a

fax machine, which the receiver views in printed form when it transmits through his or

her machine.

Faxes sent electronically are equally readable because the document,

though sent electronically, may be printed just as easily.

194

Lastly, fax satisfies the

drafters’ intent to provide for modification measures that enable a quick decision on a

contract, such as are inherent to telex and telegram. Therefore, including fax as a rapid

method of initial agreement is similarly consistent with the drafters’ intent to facilitate

commercial transactions.

195

¶44

Although Article 13 precedent is sparse, two Article 13 cases have been decided on

the fax issue.

196

In 1993, the Austrian Supreme Court decided that fax is an acceptable

method to update a domestic lease in a dispute over whether the lessor had legitimately

received notice of lessee’s lease updates.

197

The Court specifically stated that “a message

sent by telefax should be considered valid” under Article 13 principles.

198

In 1999, a

Russian commercial arbitration similarly held that contract modifications are “effective”

if sent by fax.

199

Parties may “exchang[e] documents by mail, telegraph, teletype,

electronic or other means of communication, which allow credible verification that the

document is sent by the party to the contract.”

200

191

See HONNOLD, supra note 20, at 141. Most of the CISG drafting was accomplished in Europe. The

Convention draws on both common and civil law principles. The lack of a writing requirement reflects

European legal principles, which have operated for centuries without such a rule. Lavers, supra note 174,

at 13.

192

“It is clear that in the case of electronic communications there is only reference to telex and none of

the other forms of communication with the result that the existence of a gap can be assumed.” Eiselen,

supra note 36, at 28.

193

CISG, supra, note 18, at art. 7(2). It reads: “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, or in the absence of such principles, in conformity with the law applicable by virtue of

the rules of private international law.” See also supra Part III.B.3 for additional information on the gap-

filling provision.

194

“This condition is certainly fulfilled if the fax is stored on the recipient’s computer system, [even if]

the fax message merely appears on the recipient’s screen and he chooses not to print it out.” Schroeter,

supra note 27; see generally Efax.com, at http://www.efax.com

(last accessed Jan. 31, 2004) (Efax.com is a

web-based fax services provider, offering email access to faxes sent to a user through a traditional fax

machine via a phone line or the Internet. Users access their email to view (and print) the fax.).

195

See supra Part III.A.; see also Schroeter, supra note 27.

196

Of the over 1000 cases listed in the UNCITRAL database, eight concern Article 13. Although not all

are translated, only three address Article 13 issues directly. Others merely list Article 13 as a

supplementary definition. The UNCITRAL database is the most comprehensive listing of CISG cases.

CISG Case Database, http://www.cisg.law.pace.edu/cisg/text/e-text-13.html

(last accessed Jan. 31, 2004).

Unfortunately, the database does not contain an exhaustive list because many CISG disputes are settled in

arbitration, which are not always published. Lavers, supra note 174, at 13.

197

SZ 1/525-93 (OGH Jul. 2, 1993), available at UNILEX.COM, http://www.unilex.info (last visited

Jan. 29, 2004).

198

Id.

199

Russia 6 October 1999 Arbitration proceeding 55/1998 (on file with author).

200

Id.

Vol. 2:1] Electronic Contracts in International Sales

¶45 Therefore, a fax is considered a writing under Article 13 and satisfies Articles 21(2)

and 29(2) modifications. With fax established as an acceptable form of an Article 13

writing, let’s examine how other electronic media follow suit.

2. Article 13 Applies to Electronic Contracts

¶46

¶47

¶48

If the drafters included telex and telegram to account for the often quick decision

needed to modify a contract, then including rapid methods of initial agreement are

consistent with the drafters’ intent.

201

EDI, the computer-to-computer automatic transmission of standard forms, falls

within Article 13’s scope because contracts are initially required to develop the technical

connections necessary to facilitate EDI.

202

Parties agree beforehand on the types of

documents and technical standards they will send to each other, enabling the automatic

exchange of information.

203

These prior arrangements are evidence of parties’ intent to

contract.

204

The “store and forward” EDI function, which collects messages from the

sender and sends them to the mailbox of the recipient, allows for readability and printing,

if desired.

205

Principles of European Contract Law (“PECL”) also support the acceptance

of EDI under Article 13 interpretation. CISG Article 13 has been compared to PECL

1:301(6), which makes no explicit mention of EDI, but encompasses any “means of

communication capable of providing a readable record of the statement of both sides.”

206

“[E]lectronic developments such as FAX and EDI do not present more serious problems

of verification than ‘telegram and telex’ and should be assimilated to the definition of

‘writing’ in Article 13.”

207

E-mail functions in a comparable manner to fax because e-mail can result in a

printable record.

208

Although messages and attachments, such as contracts, are sent

between recipients electronically, messages are stored in the systems of both the sender

and recipient.

209

These messages are easily accessed and printed. Therefore, e-mail

201

See also THE UNCITRAL THESAURUS, A/CN.9/SER.C/GUIDE/1 Eng. Sept. 12, 1995, at

http://www.cisg.law.pace.edu/cisg/text/cisgthes.html#13

(last visited Jan. 26, 2004) (stating that under

Article 13 its terms apply to the writing requirement in arts. 21(2) and 29(2), and that “[e]lectronic

communications similar to telex and telegram” are acceptable writings).

202

See discussion supra Part I.A.2.b.

203

Id.; Schroeter, supra note 28, Part 4.2.

204

Schroeter, supra note 28 (citing Eiselen, supra note 36).

205

See generally SOKOL, supra note 69, at 14-22.

206

Schroeter, supra note 27 (citing COMMISSION ON EUROPEAN CONTRACT LAW, PRINCIPLES OF

EUROPEAN CONTRACT LAW (PECL), Article 1:301(6) (Ole Lando and Hugh Beale, Eds. complete and

revised version 1999)). PECL 1:301(6) is often comparable to CISG Article 13 because it provides similar

terms for writing and does not include document interpretation. Although the PECL was written almost 20

years after the CISG, its text was drawn from many European sources, including the CISG, and specifically

meant to be more expansive than Article 13 itself.

207

Schroeter, supra note 27. Telegram and telex were probably accepted as methods to fulfill the

writing requirement “without further debate” because it was drafted from the UNCITRAL Convention on

the Limitation Period of 1974 (Article (1)(g)(3)). In addition, UNCITRAL established a Working Group to

deal with exactly this problem—electronic signatures. Its efforts resulted in the UNCITRAL Model Law

on Electronic Commerce. See discussion infra Part V.A.

208

E-mail has a similar store and forward system to EDI. GRALLA, supra note 7, at 78-84. The main

difference is the open standards between the parties, because messages may be sent to practically any

network without prior arrangement. See discussion supra Part.I.A.b, Part IV.A.1.

209

GRALLA, supra note 7, at 78-85.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

fulfills the Article 13 standard for writing as a standard format and for Article 21(2) and

29(2) modifications. Signature issues are irrelevant because form is not required under

the CISG.

210

If parties choose to require a signature, a signature line

211

or other mark may

be included to satisfy this requirement.

¶49 Internet-based agreements, such as those executed via click-wrap,

212

are also valid.

Click-wrap agreements enable a party to interact with the document by pushing a button

to affirm the contract of sale.

213

Parties have similar capabilities for printing out and

recording a copy of the click-wrap document. Parties who agree to web-based sales

contracts in a commercial context almost certainly have pre-arranged terms of the

transaction, similar to EDI,

214

and have established this method as a custom.

215

3. The CISG’s Texture and Capacity to Respond to New Changes

¶50

¶51

Laws that may be readily amended (e.g. income tax laws and regulations) may

indulge in detail, but this is “not feasible for laws that must endure.”

216

Domestic laws on

obligations and sales have stood for almost a century and many are even older.

International legislative machinery is even harder to put in motion.

217

Consequently, the

CISG must be read and applied in a manner that permits it to grow and adapt to novel

circumstances and changing times.

218

The CISG is purposefully a flexible, expanding document—to meet the strengths

and challenges of international business, continuously promoting equitable international

trade.

219

Decades of drafters’ work would be eradicated if new methods of electronic

communication were excluded. “The key legal mechanism to ensure safe sales in [B2B]

transactions is the contract.”

220

Contracts help parties to reach their goals, avoid disputes,

and set expectations for resolving disputes if one arises.

221

Because the Convention was

drafted for international business people “with no special knowledge of international

business law” and not lawyers, modern electronic contracting methods suit the scope and

intent of the CISG. The CISG was meant to act as a neutral choice of law to help parties

concentrate on transacting business instead of battling over jurisdiction.

222

Furthermore,

the text of the treaty does not indicate that the Convention was intended “to exclude any

specific kind of communication.”

223

This assumption holds because electronic

210

See supra Part IV.A and note 154.

211

See supra Part I.A.2.a and note 63.

212

See discussion supra Part I.A.2.c.

213

Id.

214

See discussion supra Part I.A.2.b.

215

CISG, supra note 18, at art. 9(2). As long as a usage is well-known and “regularly observed by

parties to contracts” in international trade, a usage “may become part of the contract not only if the parties

knew about it but also if they ought to have known about its existence.” R

AMBERG, supra note 32, at 19.

216

HONNOLD, supra note 20, at 16.

217

Id.

218

Id.

219

See CISG, supra note 18, at pmbl.

220

See Haapio & Smith, supra note 31; see Coyle & Wetzel, supra note 17; see generally Ritter &

Gliniecki, supra note 46, at 264.

221

See CISG, supra note 18, at pmbl.; see generally Ritter & Gliniecki, supra note 46, at 264-67.

222

See CISG, supra note 18, at pmbl.; see Lavers, supra note 174, at 10 (arguing that businesses often

fear “parochial” tendencies of local courts).

223

Eiselen, supra note 36, at 28; see infra Part III.

Vol. 2:1] Electronic Contracts in International Sales

contracting methods were “largely non-existent” when the treaty was ratified.

224

Conceivably, the drafters would have been more explicit with exclusions for a writing

had they intended any.

225

¶52

¶53

Perhaps the most revealing element of the drafters’ intent for a growing definition

of a contract writing is the actual language used in Article 13: “. . .’writing’ includes

telegram and telex.”

226

Use of the word includes indicates a non-terminating list of

acceptable forms of writing: more than just the lex mercatoria, or customary, paper

contract form. A different interpretation yields similar results: includes specifies that the

two ensuing listed methods (telegram and telex), representative of modern electronic

communications for 1980, are suitable forms of contract writing.

227

Had CISG drafters

enumerated acceptable contracting methods instead, a fixed interpretation of a contract

writing would have been created.

228

Dutch drafters actually proposed contract form

enumeration for Article 11.

229

However, their proposal was rejected because specific

enumeration and inflexibility of terms is inconsistent with the overall purpose, intent and

text of the CISG. The lack of fixed terms in the CISG points toward a writing definition

that evolves with international business. Hence, use of the term includes ensures that

modern communication methods for commercial contracting will not be excluded.

230

Two additional assumptions support a liberal interpretation of Article 13. First,

Article 6 enables contracting parties to “derogate from or vary the effect of any of its

provisions.”

231

Second, the Vienna Convention specifies that when deviations occur they

should not be contrary to the intent and purpose of the treaty.

232

Therefore, States possess

the ability to specify that a contract must be in electronic form, such as EDI, under the

CISG.

233

Parties could similarly require that contracts be formed via paper writing, which

still would not invalidate the permissibility of electronic methods under Article 13. Thus,

when interpreting Article 13, the freedom of formality and freedom of contract principles

224

Eiselen, supra note 35, at 28.

225

Other international legal scholars agree that Article 13 does not have an “exhaustive” definition of

writing. Jacob S. Ziegel, Report to the Uniform Conference of Canada on Convention on Contracts for the

International Sale of Goods, at http://www.cisg.law.pace.edu/cisg/text/ziegel13.html

(last visited Jan. 26,

2004) (a Canadian interpretation says that Article 13 is to be “liberally conformably [sic] to modern means

of communication.”). Similarly, a Spanish interpretation advises that Article 13 does not seem to indicate

that it should remain static in the face of new sophisticated methods of communication. New technology

relates to improved communication methods for geographically distant parties, such that an improvement

of transactional abilities would fall within the intent of the Convention. Prof. M

del Pilar Perales

Viscasillas, El Contrato de Compraventa Internacional de Mercancias (Convención de Viena de 1980), §

147, at http://www.cisg.law.pace.edu/cisg/biblio/perales1-13.html

(last visited Jan. 26, 2004).

226

CISG, supra note 18, at art. 13 (emphasis added).

227

Professor M

del Pilar Perales Viscasillas, supra note 225, available at

http://www.cisg.law.pace.edu/cisg/biblio/perales1-11.html

(last visited Jan. 26, 2004) (arguing that Article

11’s lack of form requirement gives the parties the flexibility of using electronic means of communication

to create contracts).

228

In addition, a Convention article used by two-thirds of nations’ involved in world trade would be

outdated. See discussion supra Part IV.A, note 169.

229

SCHLECHTRIEM, supra note 110, at 44.

230

Eiselen, supra note 36, at n.43 (quoting Prof. Honnold).

231

CISG, supra note 18, at art. 6.

232

Vienna Convention on the Law of Treaties, May 23, 1969, art. 31(1), 8 I.L.M. 679. The Vienna

Convention is the “treaty of treaties,” which concerns the obligations of States to each other.

233

See discussion supra Part II.A.2.b.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

imply an “inclusive interpretation” that accepts any of the aforementioned electronic

contracting methods when a writing is required.

234

B. Additional CISG Articles Support an Expansive Definition of Writing

¶54 Article 13’s affirmation of electronic contracting is also supported by other

Convention articles. The articles’ connections magnify the drafters’ original intent to

promote growing international trade, encourage active contracting, and harmoniously co-

exist with states’ domestic laws.

235

1. Article 20(1)

¶55 Article 20’s provision for fixed acceptance periods also specifies how telegrams,

letters, telexes, telephones or “other means of instantaneous communication” are

handled.

236

The acceptance period for telegrams and letters begins at the point when it is

handed in to dispatch, or from the date shown on the letter or envelope, depending on

which is available.

237

An acceptance via a phone call, telex, or other instantaneous

measure begins when the offer reaches the offeree.

238

The important distinction drawn

from Article 20 supporting Article 13 is the combination of media in each specific fixed

acceptance period. Telegrams are included with letters as non-instantaneous means of

communication, whereas telex, phone calls, and other means are instantaneous. Because

e-mail, EDI, and the Internet provide instantaneous means of communication, their

acceptance periods are also fixed when the communication reaches the recipient under

Article 20.

239

If these measures satisfy Article 20 criteria precisely in the same manner as

the cited methods, then they should be viable options for creating a contract under

Articles 11 and 13.

240

2. Articles 12 and 96

¶56

Articles 12 and 96 also support a liberal interpretation of Article 13. Combined,

they permit a State to exclude Article 11, which stipulates freedom of contract form, by

substituting its own domestic laws on writing.

241

Article 96 stipulates that States reserve

the option of declaring that Article 11’s lack of freedom of form does not apply “where

any party has his place of business in that State.”

242

States invoking this reservation could

dictate writing requirements, which must be agreed upon by both contracting parties,

234

Eiselen, supra note 36, at 36.

235

See generally CISG, supra note 18, at pmbl.

236

CISG, supra note 18, at art. 20(1); see also discussion supra Part III.A.

237

CISG, supra note 17, at art. 20(1).

238

Id.

239

See generally, Eiselen, supra note 36, at 30.

240

Recall that Article 13 was also included in the Convention to facilitate the quick modification of

contracts. See supra Part III.

241

CISG, supra note 18, at art. 12, 96; Eiselen, supra note 36. States may exclude the Convention

altogether if they contract for this upfront and if the parties’ domestic sales law is the “same or closely

related.” CISG, supra note 18, at art. 94; see also, S

CHLECHTRIEM, supra note 110, at 112.

242

CISG, supra note 17, at art. 96.

Vol. 2:1] Electronic Contracts in International Sales

though States need not have reserved in order to impose a writing requirement.

243

However, Article 6 allows for variance of CISG provisions, as long as they do not act

contrary to the intent of the treaty.

244

To this end, parties may choose to impose an

electronic contracting requirement just as easily as a paper requirement. One of the key

reasons Article 11 allows freedom of form is not to bias modification methods in favor of

one party.

245

3. Article 7

¶57

¶58

The “observance of good faith in international trade” and gap-filling requirement

embodied by Article 7 is perhaps the most compelling support of Article 13’s natural

extension to include electronic contracting methods within its definition of writing. The

CISG’s principles are expected to endure and to “embrace the gamut of transactions and

conditions that will arise in a diverse and developing international economy.”

246

Because

the CISG was created to facilitate commerce across a variety of political, legal and socio-

economic systems, thus requiring a different level of detail than domestic legislation,

frequent changes by legislative adjustment are unrealistic.

247

Article 7 recognizes that

uniform international law is difficult to achieve, must be interpreted “with sensitive

regard for its special character and purpose,” and is meant to “adapt and grow in light of

new circumstances.”

248

Article 7(1) asserts that the Convention should be interpreted “to promote

uniformity” and “the observance of good faith in international trade.”

249

Good faith

applied in the CISG is not a general requirement but an interpretation principle

250

that

holds a reasonableness standard to those acceptable in trade.

251

Article 9 advances this

standard by establishing that parties give notice regarding trade customs or usages widely

known in international trade so they can apply to contracts and their formation.

252

243

Id.

244

Id. at art. 6.

245

SCHLECHTRIEM, supra note 110, at 45, available at

http://www.cisg.law.pace.edu/cisg/biblio/schlechtriem-11.html

(last visited Jan. 26, 2004).

246

HONNOLD, supra note 20, at 104.

247

See RAMBERG supra note 32. The CISG took more than a decade to draft and, arguably, could take

just as long to change.

248

HONNOLD, supra note 20, § 85, at 88. Article 7 reads:

“(1) In the interpretation of this Convention, regard is to be had to its international character and to the need

to promote uniformity in its application and the observance of good faith in international trade. (2)

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 or, in the absence of such principles,

in conformity with the law applicable by virtue of the rules of private international law.” Id.

249

CISG, supra note 18, at art. 7(1).

250

HONNOLD, supra note 20, § 94 at 100. “Good faith” has varying interpretations worldwide. For

example, the U.C.C. requires good faith “in its performance of enforcement” of “every contract or duty

within this Act.” See U.C.C. § 1-201(19). Similarly, German Civil Code (§ 242) states: “The debtor is

bound to effect performance according to the requirements of good faith, giving consideration to common

usage.” Id.

251

HONNOLD, supra note 20, § 95 at 101. For a more detailed understanding of good faith in the CISG,

see Carolina Saf, A Study of the Interplay Between the Conventions Governing International Contracts of

Sale, at http://www.cisg.law.pace.edu/cisg/text/saf7.html

(last visited Jan. 26, 2004).

252

Id.; CISG, supra note 18, at art. 9. Article 9 reads:

(1) The parties are bound by any usage to which they have agreed and by any practices which they have

established between themselves. (2) The parties are considered, unless otherwise agreed, to have impliedly

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

International business customs and usages are always evolving; therefore, the “terrain” to

which the CISG is applied will change, along with CISG interpretations.

Electronic

commerce is “transform[ing] how international trade participants (including

governments) conduct business;” thus, electronic contracting is an international business

custom.

253

It does not “alter the substance of business contracts so much as it alters the

process of agreement.”

254

Therefore, a narrow construction of the CISG would make it

inapplicable to grounds it once covered and affect its future applicability and longevity.

255

¶59

¶60

¶61

Article 13 of the Vienna Convention also lends support to an expansive

interpretation of a writing in Article 13. It proclaims that a treaty is supposed to be

interpreted within the “ordinary” meaning of its own terms “in their context and in the

light of its object and purpose.”

256

A Convention that creates obligations between States

for contracting in international sales is naturally subject to its purview.

The necessary complement to the good faith inclusion is the “gap-filling” measure

provided for in Article 7(2), which governs matters “not expressly settled” in the CISG.

257

Such matters must be developed from the general principles of the Convention, or by

“virtue of the rules of private international law” if general principles are absent.

258

Thus,

matters governed by the Convention, such as formation or writings, turn to the

Convention itself to provide meaning and solutions or look to private international law to

resolve discrepancies.

259

Combined, the two paragraphs of Article 7 convey that general CISG principles

should be applied to new situations, as it would have been difficult and extraneous to the

purpose of a uniform code to anticipate every detailed scenario. Article 13’s writing

definition would, therefore, naturally include electronic forms of contracting because to

do so is consistent with the purpose of the Convention and falls neatly within the gap-

filling provision of Article 7. Furthermore, Article 13 lies within Part II (General

Provisions) of the CISG, which specifically lends itself to a broader interpretation.

260

made applicable to their contract or its formation a usage of which the parties knew or ought to have known

and which in international trade is widely known to, and regularly observed by, parties to contracts of the

type involved in the particular trade concerned.

See also R

AMSBURG, supra note 215; SCHLECHTRIEM, supra note 110, at 40-41.

253

See generally, Ritter & Gliniecki, supra note 46, at 264-66; but cf. Kidd & Daughtrey, supra note 7,

at 218 (arguing that “[f]ew companies are likely to rely on old ways of doing business.”).

254

Kidd & Daughtrey, supra note 7, at 222.

255

See Giannuzzi, supra note 123.

256

Vienna Convention on the Law of Treaties, supra note 232; see also, HONNOLD, supra note 20, § 90

at 93.

257

CISG, supra note 18, at art. 7(2).

258

Id.

259

HONNOLD, supra note 20, § 96 at 103. The drafters rejected domestic law as the method to fill gaps

because of the varying nature, confusion, and disagreement which would arise from differing domestic

legal frameworks and interpretations. Since the goal of the CISG is to promote the uniformity of

international trade principles while considering “different social, economic and legal systems,” looking first

toward domestic law would frustrate this purpose. CISG, supra note 18, at pmbl.

260

HONNOLD, supra note 20, § 103.1 at 113. The CISG does not advocate strict construction; the

closest approximation to strict construction exists in Articles 1-5, establishing international sales

transactions that are included and excluded.

Vol. 2:1] Electronic Contracts in International Sales

4. The Special Case for “Shrink-Wrap” Agreements

¶62

¶63

¶64

Shrink-wrap agreements are a form of electronic contracting which could pose a

challenge to automatic inclusion under Article 13. Shrink-wrap agreements are affirmed

by silence or inaction because the user does not have to take any active measure to

demonstrate acceptance.

261

The CISG expressly prohibits acceptance by silence or

inactivity, per Article 18.

262

However, a solution to this problem exists within the CISG.

If the Buyer and Seller agree to transact business this way—through a shrink-wrap

agreement, their respective intent to contract is established.

263

Since the Buyer needs to

give his or her acceptance to this method of contracting, he or she takes an active part in

assenting to the offer. Therefore, the exclusion of agreements by silence or inaction

would not apply.

264

In summary, Article 13’s articulation of two now outdated writing media does not

result in the exclusion of electronic contracting. Article 13’s purpose and scope,

supported by other articles, and the Convention’s intent to expand global trade through

uniform contracting principles reveal that these new methods are organically

acceptable.

265

That the Convention has yet to be updated to reflect electronic forms of

contracting is a testament to the uniformity and flexibility of the Convention to smoothly

adapt to novel circumstances in changing times.

V. GLOBAL LEGISLATION ALSO GAP-FILLS THE ARTICLE 13 WRITING REQUIREMENT

This comment has argued that computer-based contracts are valid under the CISG.

As a result, there is no call for change to the CISG. The intent of the Convention and

Article 13 points to an inclusive interpretation of writing, which is supported by

legislative history, case law, and lex mercatoria. However, an analysis of Article 13’s

extension to electronic contracting would lack a thorough evaluation without viewing it

in light of international and domestic legislation which has recently started to address the

shift toward electronic commerce. Thus, Part V describes how such legislation fills the

Article 13 writing gap and how parties might make the CISG subject to its purview.

Section A presents the UNCITRAL Model Law on Electronic Commerce—the U.N.

framework for States’ domestic electronic commerce legislation.

266

Since the mid-

1990’s, the e-commerce phenomenon has incited countries around the world to remove

legal barriers to e-commerce.

267

As an example of domestic efforts to give equal validity

261

Larson, supra note 87, at 466.

262

CISG, supra note 18, at art. 18(1). “Silence or inactivity does not in itself amount to acceptance.”

Id. See also, Rob Schultz, Note, Rolling Contract Formation Under the UN Convention on Contracts for

the International Sale of Goods, 35 C

ORNELL INT’L L. J. 263, 264 (2002).

263

See supra note 233. Assent through silent could have been an established business custom.

264

Sellers of shrink-wrapped contract necessitating goods, such as computer software, presumably

choose the shrink-wrap form of contracting because it provides intellectual property protection and reduces

the costs of doing business by not having to actively elicit the buyer’s assent. However, this kind of

contract arrangement to grant a software license is often used at the consumer level, which is not covered

by the CISG.

265

See discussion supra Part III, IV.

266

United Nations Commission on International Trade Law (UNCITRAL), UNCITRAL MODEL LAW

ELECTRONIC COMMERCE (WITH GUIDE TO ENACTMENT), U.N. GAOR, 6th Comm., A/51/628 (1996)

[hereinafter

UNCITRAL MODEL LAW ON E-COMMERCE].

267

Poggi, supra note 14, at 237.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

to electronic contracts, Section B examines the world’s largest e-commerce player—the

United States.

268

A. International: UNCITRAL Model Law on Electronic Commerce

¶65 The U.N. Model Law on E-commerce originated to further progress and harmonize

international trade by including electronic transactions within the scope of international

contracts, to accommodate increasing usage.

269

The Model Law identifies paper as the

main obstacle for electronic commerce-based legislation, because of physical writing

requirements.

270

The Model Law ensures “legal security in the context of the widest

possible use of automated data processing in international trade.”

271

However, the Model

Law legitimizes electronic communications without disturbing international or domestic

paper-based legislation.

272

Its articles apply to any kind of data message used in

commercial activities.

273

It directly addresses legal obstacles posed by terms, such as

writing, signed (or signature), and original, to include electronic contracting.

274

Overall,

the UNCITRAL Model Law is perhaps the comprehensive answer to omitted parts of the

CISG, such as Article 13, because it directly addresses writing issues to resolve

contracting concerns, including offer, acceptance, consideration and modification.

275

1. Main Components of the UNCITRAL Model Law

¶66

Specifically, the Model Law sets forth that electronic communication should not be

denied legal effect “solely on the grounds that it is in the form of a data message.”

276

Legal effect includes “due evidential right.”

277

Instead of directly equating electronic

documents to paper documents, the Model Law regards data messages as a “functional-

equivalent,” by isolating “basic functions of paper-based form requirements” and

268

For a list of over 55 States’ and their domestic legislation on e-commerce, see Baker & MacKenzie,

Global E-commerce Law: International Regulations & Legislation (2003), at

http://www.bmck.com/ecommerce/intlegis.htm

(last visited Jan. 26, 2004). “By the mid-1990s, the

explosion of electronic commerce over the Internet led almost every European nation and U.S. states’

legislatures to enact some sort of statute designed to remove legal impediments to electronic commerce.”

Poggi, supra note 14, at 226.

269

See generally, UNCITRAL MODEL LAW ON E-COMMERCE, supra note 266, at pmbl., Guide to

Enactment, chap. I.F.19. (“The decision to undertake the preparation of the Model Law was based on the

recognition that, in practice, solutions to most of the legal difficulties raised by the use of modern means of

communication as sought within contracts.”)

270

Id. at chap. I.E.15; see also Ritter & Gliniecki, supra note 45.

271

UNCITRAL MODEL LAW ON E-COMMERCE, supra note 265, at pmbl. The provisions contained are

minimum acceptance standards, but this does not insinuate that States should undertake stricter

requirements themselves. Id. at Guide to Enactment, chap. I.F.21.

272

Id. at Guide to Enactment, chap. I.E.15-16. Although the Model Law seeks to help States update

their domestic legislation “without necessitating the wholesale removal of the paper-based requirements

themselves or disturbing the legal concepts or approaches underlying those requirements.” Id.

273

Id. at art.1. However, States have the option of limiting this to international data messages.

274

Id. at Guide to Enactment, chap. I.A.3; see also Poggi, supra note 14, at 237.

275

See UNCITRAL MODEL LAW ON E-COMMERCE, supra note 265, at Part I, chap. 1 (General

Provisions), chap. 2 (application of legal requirements in data messages), chap. 3 (communication of data

messages).

276

Id. at art. 5.

277

Id. at art. 9(2).

Vol. 2:1] Electronic Contracts in International Sales

explaining data messages to meet these requirements.

278

Offer, acceptance, and any part

of contract formation is acceptable “by means of data message.”

279

Distinct from the

CISG, writing is delineated to include data messages if the information can be accessed

for subsequent reference.

280

It specifies the validity of data messages used as electronic

signatures, assuming the signer and his assent can be identified reliably.

281

Data message

originality is also addressed to account for imagery and integrity.

282

Time and place of

data message dispatch regulate offer and acceptance.

283

Dispatch time is set at the time

the sender loses control over the data message in the information system, unless

otherwise agreed upon by parties.

284

2. Application to the CISG

¶67

¶68

The scope of the Model Law is intentionally broad, to give the “widest possible

application” to electronic communications to facilitate its increasing international use.

285

The framework purposefully does not set forth every electronic contracting contingency.

Instead, it defines key terms with open-ended wording to include enough guidance for

States to apply terms as best fitting circumstances. The open-ended choice is based on

the functional-equivalent approach toward electronic communications. Model Law

drafters believe that “electronic records can provide the same level of security as paper

and, in most cases, a higher degree of reliability and speed, especially with respect to the

identification of the source and content of the data.”

286

Perhaps more importantly, the Model Law advises that it can be a “tool” to

interpret “existing international Conventions. . . that create legal obstacles.”

287

Its “media

neutral”

288

approach to electronic commerce methods as paper-alternatives to

communication, storage and authentication reflects the United Nation’s recognition of

them as international trade customs.

289

Although it has been established in Part IV,

supra, that computer-based contracts are acceptable under the CISG, the Model Law also

fills the electronic contract gap in Article 13 if states incorporate Model Law provisions

into their legislation or create similar legislation themselves. The CISG Article 96

278

Id. at chap. I.E.17; see also discussion infra Part V.A.1.

279

Id. at art. 11(1).

280

Id. at art. 2(a). “Data message” means information generated, sent, received or stored by electronic,

optical or similar means including, but not limited to, electronic data interchange, electronic mail, telegram,

telex or telecopy; see also id. at art. 6.

281

Id. at art. 7. The importance of the electronic signature provision stems from a common Internet

concern about identity. See Kennedy supra note 80. Authentication measures are crucial to acceptance of

data signatures. For more information on digital signatures and authentication, see Balloon, supra note 17.

282

UNCITRAL MODEL LAW ON E-COMMERCE, supra note 265, at art. 8(1)(a). A data message satisfies

originality of a reliable image exists “when first generated in final form.” Integrity is established when the

message “remain[s] complete and unaltered” apart from the “addition of any endorsement and any change

which arises in the normal course of communication, storage and display.” Id. at art. 8(3)(a-b).

283

Id. at art. 15.

284

Id.

285

Id. at pmbl. ¶ 3.

286

Id. at Guide to Enactment, chap. I.E.17. This assumes that “a number of technical and legal

requirements are met.” Some of the reasons paper-based contracts are a concern include the following:

legibility, alteration, copy, authentication, and acceptability in courts. Id. at chap. I.E.16.

287

Id. at chap. I.A.5.

288

Id. at chap. I.A.6.

289

Id. at pmbl. ¶ 2.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

reservation allows States to make a declaration in accordance with Article 12 to require

that sales contracts “be concluded in or evidenced by writing” as required by domestic

legislation.

290

For example, a seller in Australia could specifically require its Romanian

buyer to use electronic contracts or assume that these means are acceptable because of

existing domestic legislation.

¶69

¶70

Although the Model Law is not a compulsory piece of legislation, UNCITRAL

efforts to provide international recognition for paperless contracts are influential over

States whose laws do not equally protect or are silent on electronic contracts.

291

U.N.

efforts have not stopped at the Model Law on Electronic Commerce. In 2001,

UNCITRAL adopted model laws on electronic signatures: UNCITRAL Model Law on

Electronic Signatures.

292

It reinforces the signature principles of the Model Law on E-

commerce to help States build reliance and achieve harmonization on digital marks for

legal effect as a functional-equivalent to handwritten signatures.

293

B. Domestic: U.S. Electronic Contracting Acceptance Efforts

UNCITRAL’s goal to influence domestic legislation has become a reality.

294

The

United States, the world’s largest e-commerce participant,

295

has followed UNCITRAL’s

quest to remove obstacles from the free flow of electronic commerce—to make it an

accountable contracting method for international business.

296

In particular, the U.S. has

enacted one federal statute, E-SIGN, and two model codes, UETA and UCITA, which

states have the option to adopt.

297

Although Section B merely introduces the underlying

principles and applications of domestic e-commerce law, the compelling thread linking

each piece is the direct endorsement of electronic contracts as a valid writing which is

given equal legal accord with its paper predecessor.

1. E-SIGN

¶71

The United States’ enactment of E-SIGN combines the major tenets of the

UNCITRAL Model Laws on E-commerce and E-Signatures within the first section of the

statute. It provides a general rule for signatures, contracts, “or any other record relating

to such transaction” that will not be “denied legal effect, validity, or enforceability solely

290

CISG, supra note 18, arts. 12, 96; see also Annotated Text of CISG, at

http://cisgw3.law.pace.edu/cisg/text/e-text-96.html#commentary

(last visited Jan. 26, 2004), derived from

LBERT H. KRITZER, GUIDE TO PRACTICAL APPLICATIONS OF THE UNITED NATIONS CONVENTION ON

CONTRACTS FOR THE INTERNATIONAL SALE OF GOODS (Kluwer Law 1994).

291

Nichols, supra note 33, at 1404-05.

292

U.N. MODEL LAW ON ELECTRONIC SIGNATURES, U.N. Doc.A/56/588, U.N. Sales No. E.02.V8

(UNCITRAL 2001), [hereinafter U.N. M

ODEL LAW ON E-SIGNATURES].

293

Id. at pmbl. See “Electronic signature” at art. 2, “Equal treatment of signature technologies” at art. 3,

“Conduct of signatory” at art. 8, “Conduct of the certification service provider” at art. 9, and “Recognition

of foreign certificates and electronic signatures” at art. 12. “If a digital signature means 150 different

things in 150 different countries, it becomes impossible to do business electronically.” Making Rules for

Electronic Commerce, ICCWBO, at http://www.iccwbo.org/home/news_archives/1997/making_rules.asp

(Nov. 14, 1997).

294

See generally Baker & MacKenzie, supra note 268.

295

See Vigoroso, supra note 9.

296

See generally Poggi, supra note 14, at 238.

297

See infra Part V.B.1-3.

Vol. 2:1] Electronic Contracts in International Sales

because it is in electronic form.”

298

This applies to both consumer and business

transactions.

299

In essence, E-SIGN gives equal footing to paperless contracts as paper

contracts so that parties may transact “without ever exchanging documents in paper

format.”

300

Thus, when a person clicks on “I agree,” he or she is bound.

301

E-SIGN

ushers in paperless contracting without preferring one technology over another and pre-

empting state legislation which may wish to attempt such regulation.

302

2. Uniform Electronic Transactions Act (UETA)

¶72

Similar to its federal counterpart, E-SIGN, UETA is the state model law that also

protects electronic signatures or records from being “denied legal effect or enforceability

solely because it is in electronic form.”

303

It assures the public that online contracts are

valid. Like the CISG, the UETA aims not to be formulistic. For example, it does not

requite a writing but instead states that whenever a formal writing requirement exists, it

can be satisfied by electronic means as long as the signature method ensures the intention

to sign.

304

The UETA also has exclusions, which include testamentary documents, most

of the UCC, and other specifically identified statutes.

305

Although the UETA focuses

more on the intent to sign than just the presence of an electronic document itself as in E-

SIGN, the UETA places greater emphasis on which party bears responsibility in case of

an error. The UETA favors the party relying on the mistake, to ensure that web-site

designers craft contracts and other agreements to ensure maximum visibility and

interaction, thereby increasing the chance that when a party clicks on a button to affix

consent, he or she really means it.

306

Electronic agents are also considered to be valid

forms of contracting under the UETA, even if its users are unaware of or do not review

the contents of agents’ transactions.

307

If a state adopts the UETA, however, it by no

means forces parties to accept an electronic signature unless parties have agreed to

transact electronically.

308

298

15 U.S.C.A § 7001 (a)(1)-(2) (2000). An electronic signature is defined as “an electronic sound,

symbol, or process, attached to or logically associated with a contract or other record and executed or

adopted by a person with the intent to sign the record.” 15 U.S.C.A. § 7006(5) (2000).

299

Id.; see also Poggi, supra note 14, at 239.

300

Winters, supra note 43; see also Kenneth R. Costello, Franchise Sales on the Internet, 7/01/02

FRANCHWLD 37, available at 2002 WL 11450317.

301

15 U.S.C.A. § 7001 (c)(1) (2000).

302

Winters, supra note 42. The only way that E-SIGN may not preempt state legislation is if a state has

adopted the Uniform Electronic Transmissions Act or institutes similar alternate procedures that are not

contrary to E-sign. See E-SIGN, supra note 16, at § 7002 (a)(1)-(2); see discussion infra Part V.B.2.

303

UNIFORM ELECTRONIC TRANSACTIONS ACT § 7 (a) (2001) [hereinafter UETA]. This text has been

adopted in part or whole by thirty-eight states plus the District of Columbia. Table of Jurisdictions

Wherein Act Has Been Adopted, UETA (West 2003).

304

See UETA, at §§ 7(c)-(d), 2(7) (contains definition of electronic record), 2(8) (contains definition of

electronic signature).

305

Fry, supra note 51, at 254.

306

Id.

307

See Coyle & Wetzel, supra note 17.

308

See Poggi, supra note 14, at 238.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

3. Uniform Computer Information Transactions Act (UCITA)

¶73

¶74

¶75

¶76

¶77

The third important piece of U.S. domestic legislation is the controversial UCITA,

drafted by the National Conference of Commissioners on Uniform State Laws, as a

“commercial contract code for the computer information transaction.”

309

It reflects an

achievement after many failed attempts to convert UCC Article 2 into a software and

information-based licensing clone.

310

UCITA mainly applies to software licenses, licenses to access online databases,

website user agreements, and “agreements for most Internet based information.”

311

The

biggest concern with UCITA is that it favors software sellers’ rights over those of

consumers, which would not exist in a non-UCITA jurisdiction.

312

UCITA usurps these

rights in the following manner: 1) consumers often must agree to contract terms before

reviewing them, 2) sales are conditioned on license agreements instead of sales

agreements, which forces a user to agree to set terms before purchase, 3) because the

licensor drafts the agreement (and thus chooses the language), the licensor chooses the

most favorable jurisdiction.

313

UCITA diverges from E-SIGN and the UETA by rejecting

“signature” terms in favor of “authentication,” which includes sounds, encryption, or any

other process including recording or adopting a symbol that indicates a party has

identified himself as adopting, accepting or verifying the content and terms of the

record.

314

The authentication process should be technologically neutral and provide

sufficient evidence for affirmation and identification.

315

Virginia is the first of only two states to enact UCITA, claiming jurisdiction unless

parties contract otherwise before agreement.

316

Iowa, in contrast, found UCITA so

outrageous that it instituted a “bomb-shelter” provision “expressly forbidding any party

from enforcing UCITA as a choice of law against any Iowa citizen or business.”

317

Although UCITA is the least accepted of the U.S. E-commerce related laws (or

model laws), its presence as a body of legal work represents an important step in the

evolution of domestic computer transaction law. Despite its controversial nature, UCITA

presents yet another example of the accepted nature of computer-based contracts which

prevail in international business transactions to comport with and to perhaps fill the gap

in the CISG.

C. Making the CISG and Article 13 subject to domestic legislation

Unless the CISG is the domestic law of a State,

318

domestic rules are generally not

evaluated in a CISG dispute. Recall, the purpose of the CISG is to provide a neutral

309

UNIFORM COMPUTER INFORMATION TRANSACTIONS ACT, Prefatory Note (1999), available at

http://www.law.upenn.edu/bll/ulc/ucita/ucita01.htm

[hereinafter UCITA].

310

Winters, supra note 43.

311

Brian D. McDonald, The Uniform Computer Information Transactions Act, 16 BERKELEY TECH. L.J.

461, 461 (2001).

312

Id. at 463.

313

Id. at 464; see UCITA, supra note 309.

314

UCITA, supra note 309, at Part 1.A, cmt 4.

315

Id.

316

McDonald, supra note 311, at 466.

317

Id. at 468-69.

318

See discussion supra Part II.B.

Vol. 2:1] Electronic Contracts in International Sales

choice of law for different contracting States.

319

However, they may be relied upon for a

contract writing, under Article 11, which allows States to require domestic writing

form.

320

This is accomplished by Article 12 and 96 reservations, which allow the writing

requirement to apply to contract formation and modification (Article 29).

321

Therefore,

parties who are subject to the CISG could require electronic contracts, paper contracts, or

remain silent on the issue. In this case, all methods would be acceptable. For example, a

U.S. seller could require a German buyer to conform to the requirements of U.S. law,

which includes electronic contracting as an acceptable writing. Here, domestic laws

favor a liberal interpretation of Article 13 because U.S. legislation gives equal weight to

electronic contracts as paper contracts.

322

Each State, however, has its own domestic

contract laws.

323

Therefore, parties must specify the choice of law when engaging in

international sales. If the CISG is chosen, as is common to avoid a battle of the forms,

electronic contracts are acceptable contract writings. The complexity of domestic law

underlies the purpose of the CISG: to create uniformity for international sales

contracts.

324

¶78

¶79

No precedent, other than the two aforementioned fax cases, has been found

regarding electronic contract validity under the CISG.

325

Perhaps this results from

electronic contracts already being naturally accepted as CISG writings. Alternatively,

merchants find non-legal recourses to disputes, preferring to focus on maintenance of the

commercial relationship or quickly resolving the matter instead of resorting to litigation.

Nonetheless, merchants should feel confident that when applying the CISG to

international sales contracts, Article 13 evaluation will favor electronic contracts.

Merchants can further rely on the U.N. Model Laws on Electronic Commerce and

Electronic Signatures and, in many states, domestic legislation for support.

VI. CONCLUSION

Because the CISG is the foremost authority on international sales, the absence of

computer-based contracts in the definition of a contract writing could theoretically leave

319

See discussion supra Part II.

320

BERNARD AUDIT, LEX MERCATORIA AND ARBITRATION, (Thomas E. Carbonneau ed., rev. ed. Juris

Publishing 1998) 184 n.48, available at http://cisgw3.law.pace.edu/cisg/biblio/audit.html

(last visited Feb.

7, 2004).

321

See generally id.

322

However, States could just as easily invoke the same reservations to exclude electronic contracts. If

parties choose to do so, CISG principles would not be violated because these changes were subject to a pre-

ratification declaration. See E-SIGN, supra note 16.

323

Domestic laws, such as those exemplified by the United States, do not always neatly comport with

international trade needs. Domestic laws are often characterized as reactive instead of proactive. See

UDIT, supra note 320; Nichols, supra note 32, at 1406.

324

See Philip Hackney, Comment, Is the United Nations Convention on the International Sale of Goods

Achieving Uniformity?, 61 L

A. L. REV. 473, 474 (2001).

325

See supra Part IV.A.1; see also Schmitz-Werke v. Rockland, 37 Fed. Appx. 687 (4th Cir. 2002),

available at 2002 U.S. App. Lexis 12336 (“case law interpreting the CISG is rather sparse,” citing Claudia

v. Olivieri Footwear Ltd., No. 96 Civ. 8052 (S.D.N.Y April 7, 1998), available at 1998 WL 164824). Prof.

John Honnold chides that the reason why the U.S. has so little case law on the CISG is that its courts are

overcrowded with domestic matters; thus, settlement is the preferred dispute mechanism. Furthermore,

European countries have more experience using the CISG because of its 1964 Hague Convention

predecessor. Hackney, supra note 324, at 480-81.

NORTHWESTERN JOURNAL OF TECHNOLOGY AND INTELLECTUAL PROPERTY [2003

a significant legal gap in the commercial certainty and predictability of international

sales. Electronic contracts have both com

plicated and facilitated international sales

transactions with faster and easier methods of conducting business: even one person with

a computer and an Internet connection can become an agile global competitor. This

comment has argued that although CISG’s Article 13 does not explicitly mention

electronic contracting methods as acceptable forms of writing, they are organically

included in the CISG by way of Article 13’s history and legislative intent, relationship

with other articles and scope implied through precedent. Businesses, legal practitioners,

and justice systems alike should understand the CISG’s capacity, which provides for an

expansive scope to develop with the global marketplace, without additional revision.

International and domestic legislation is constantly modernized to account for electronic

communications to ensure certainty and predictability in commercial transactions, which

additionally supports Article 13’s inclusion of electronic contracting through reservation

or international commercial custom. Accordingly, the United Nations Convention on

Contracts for the International Sale of Goods remains an enduring code, flexibly adapting

to new trade customs while retaining uniform principles to assist international sales, that

earned its adoption by two-thirds of nations engaged in global trade.

326

CISG extension has been contemplated, in the following areas: consumer protection, new scope

definition beyond goods to include services, and the adaptation of contract formation rules “beyond merely

incorporating the electronic contracting provisions of the [UNCITRAL] Model Law [on Electronic

Commerce].” Boss, supra note 84, at 143.