The UN Electronic Convention Practical Implications Sieg Eiselen, University of South Africa (UNISA) Programme 5 E-Commerce 1. Introduction Legal Uncertainties The use of electronic means of communication such as e-mail, SMS and the internet in the last decade has outstripped and replaced other more traditional forms of communications such as post, telex and telegram. The only other form of communication which has been able to hold its own, is fax, which in any event is of fairly recent origin and is increasingly becoming integrated into the other forms of electronic communications. The convergence of technologies is also increasingly diffusing the boundaries between these various forms of electronic communications. Smart phones, for instance have become a small computer enabling the user to use either voice, SMS, e-mail and even fax from the same instrument, as well as accessing the internet. 1 The internet has had the added effect that all forms of communications (including voice) have become much faster, cheaper and, importantly, international. Distance in the digital world has virtually no meaning and has almost erased the importance of national boundaries in communications. These developments have also changed the face of communications in international trade. The ease and reliability of communications have facilitated the development of international trade as traders can advertise and sell their wares independent of where buyer and seller may find themselves in the world. This is also important for developing nations as it opens up international markets to smaller traders from developing nations to an unprecedented extent. It is a common perception that the law, and more particularly the law of contract, has been lagging behind in the development of solutions for the use of electronic communications in commerce, leading to legal uncertainty which in turn creates obstacles to trade. 2 This perception exists not only in respect of international law, but also in respect of most domestic legal systems. Some of the questions usually raised include: the legal value and validity of electronic communications; compliance with formalities; whether electronic signatures are possible and valid; determining the time and place of the conclusion of the contract; the validity of automated transactions; the applicable legal system; the evidential value of electronic records; 1 Eiselen Sieg "The UNECIC: International Trade in the Digital Era" 2007(2) Potchefstroom Electronic Law Journal 1/49-49/49 available online at <http://www.puk.ac.za/fakulteite/regte/per/issuepages/2007volume2.html>. 2 Par 4 Working Group Report 5-9 May 2003 A/CN.9/528 (19 May 2003); UNCITRAL Model Law on Electronic Commerce with Guide to Enactment (1996) with Article 5 bis as adopted in 1998 par 2 and 3.
and similar issues. 3 The Pre-amble to the United Nations Convention on the Use of Electronic Communications in International Contracts states: The States Parties to this Convention, Reaffirming their belief that international trade on the basis of equality and mutual benefit is an important element in promoting friendly relations among States, Noting that the increased use of electronic communications improves the efficiency of commercial activities, enhances trade connections and allows new access opportunities for previously remote parties and markets, thus playing a fundamental role in promoting trade and economic development, both domestically and internationally, Considering that problems created by uncertainty as to the legal value of the use of electronic communications in international contracts constitute an obstacle to international trade, Convinced that the adoption of uniform rules to remove obstacles to the use of electronic communications in international contracts, including obstacles that might result from the operation of existing international trade law instruments, would enhance legal certainty and commercial predictability for international contracts and help States gain access to modern trade routes,..." Changing circumstances Schroeter states in regard to changes taking place in modern communications: 4 3 "The arrival of mobile communication has brought changes to the international contracting practice and its participants, resulting in what could be described as the modern travelling merchant. The proverbial travelling merchant of the Middle Ages travelled to foreign cities and towns carrying goods he wanted to sell, and transporting other goods he purchased during his travels back to his home country. The contracts of sale or purchase that Medieval travelling merchants concluded were nevertheless concluded locally (on the spot), with other merchants he met and negotiated with in the cities he visited. The modern travelling merchant combines his cross-border mobility with an ability to communicate across borders a businessman from Cape Town attending a meeting in Milan can today enter into a sales contract by sending an e-mail from his mobile device to a merchant in Buenos Aires. It is this combined mobility of both persons and communications that raises novel legal questions to be addressed in this article.... When taking international contract law (understood as the rules of law specifically Eiselen Sieg "The purpose, scope and underlying principles of the UNECIC" in Andersen CB & Schroeter U Sharing International Commercial Law across national Boundaries Festschrift for Albert H Kritzer (2008 Wildy Simmonds &Hill). 4 Schroeter U " The Modern Travelling Merchant: Mobile Communication in International Contract Law" unpublished paper delivered at The Use of UNCITRAL Instruments in Promoting Regional Harmonization of Trade Law 26-27 May, Intundla Lodge, Dinokeng, South Africa.
designed to address international contracts, whether through rules of substantive law or through conflict of laws rules) as a starting point, it is surprising to see that the existing legal rules in this area are almost always based on the assumption that the parties to international contracts the buyers and sellers, the senders and consignees, the suppliers and factors etc. each stay in their home country throughout the formation and the execution of the contract. The picture implicitly underlying international contract law rules is thus essentially one of immobile merchants : What typically crosses the border under an international contract are the communications between the parties and (later, during contract performance) the goods or services contracted for, by not the acting parties themselves." 2. Need for the Convention Eiselen 2007 PER states: 5 The fact that many of these issues could already be adequately accommodated in terms of existing flexible rules, 6 has not removed these perceptions about legal uncertainty. It provided the ground for UNCITRAL to develop a Model Law on Electronic Commerce (1996) 7 and a Model Law on Electronic Signatures (2001) 8 and finally the United Nations Convention on the Use of Electronic Communications in International Contracts, 2005 (UNECIC). The two model laws were aimed at standardising and facilitating the response of domestic legal systems to the challenges of electronic commerce and have subsequently been used in the drafting of the domestic legislation of a fairly large number of countries, including South Africa. 9 The UNECIC, in turn, aims at establishing legal certainty in international trade by providing solutions and harmonizing rules on electronic communications for international transactions. 10 The very first opinion of the CISG Advisory Council 11 dealt with electronic communications as the provisions of the Vienna Sales Convention of 1908 had become outdated: 12 5 Eiselen Sieg "The UNECIC: International Trade in the Digital Era" 2007(2) Potchefstroom Electronic Law Journal 1/49-49/49 available online at <http://www.puk.ac.za/fakulteite/regte/per/issuepages/2007volume2.html>. 6 Par 30 and 31 Working Group Report 5-9 May 2003 A/CN.9/528 (19 May 2003). 7 Adopted by UNCITRAL on 12 June 1996. See G.A.Res.51/162, adopted on 16 December 1996, UN Doc.A/RES/51/162 (30 January 1997) http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/1996model.html [date of use 8 Aug 2007]. The Model Law provided the basis for Chapter 3 of the South African Electronic Communications and Transactions law 25 of 2005. 8 Adopted by UNCITRAL on 5 July 2001. See G.A.Res56/80 adopted on 12 December 2001, UN Doc.A/RES/56/80 (24 June 2002). 9 For a full list of states that have implemented legislation based on or influenced by the Model Law, including the United States see http://www.uncitral.org/uncitral/en/uncitral_texts/electronic_commerce/1996model_status.html. 10 See the UNECIC Preamble. 11 CISG-AC Opinion no 1, Electronic Communications under CISG, 15 August 2003. Rapporteur: Professor Christina Ramberg, Gothenburg, Sweden. 12 Eiselen S "The Integration of the UN Electronic Communications Convention and the CISG" in Schwenzer I, Atamer YM & Butler P (eds) Current Issues in the CISG and Arbitration (2014 eleven The Hague) ISBN 978 94 6236 097 6.
The very first Opinion of the Council published in 2002 dealt with electronic communications under the CISG. The opinion analyses the various provisions of the CISG where communications such as offer and acceptance are dealt with in order to provide an opinion on the effectiveness and validity of electronic communications. The premise of the opinion is that "[a] contract may be concluded or evidenced by electronic communications." and that the "term writing in the CISG also includes electronic communications retrievable in perceivable form. The relevant aspects of the Opinion will be discussed below. 3. Entry into force and parties The UN Electronic Convention entered into force on 1 March 2013 and currently has 5 parties. State Notes Signature Central African Republic 27/02/2006 China 06/07/2006 Colombia 27/09/2007 Ratification, Accession Entry into force Congo 28/01/2014(*) 01/08/2014 Dominican Republic 02/08/2012(*) 01/03/2013 Honduras 16/01/2008 15/06/2010 01/03/2013 Iran (Islamic Republic of) 26/09/2007 Lebanon 22/05/2006 Madagascar 19/09/2006 Montenegro 27/09/2007 Panama 25/09/2007 Paraguay 26/03/2007 Philippines 25/09/2007 Republic of Korea 15/01/2008 Russian Federation (b) 25/04/2007 06/01/2014( ) 01/08/2014 Saudi Arabia 12/11/2007 Senegal 07/04/2006 Sierra Leone 21/09/2006 Singapore (a) 06/07/2006 07/07/2010 01/03/2013 Sri Lanka 06/07/2006
There are indications that economically important states are considering accession to the Convention in the near future. 4. Scope of the Convention The scope and field of application of the Electronics Convention is closely aligned to that of the Vienna Convention for the International Sale of Goods, 1980 (CISG), although the Electronics Convention potentially has a wider field of application than pure sales. The general purpose of the Electronics Convention is to provide uniform practical solutions for legal issues emanating from the use of electronic methods of communication in international contracts. 13 This falls within the wider scope of UNCITRAL's mandate to further the progressive harmonisation and unification of international trade law. 14 The scope of the Convention is addressed in Article 20: Article 20 Communications exchanged under other international conventions 1. The provisions of this Convention apply to the use of electronic communications in connection with the formation or performance of a contract to which any of the following international conventions, to which a Contracting State to this Convention is or may become a Contracting State, apply: Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 10 June 1958); Convention on the Limitation Period in the International Sale of Goods (New York, 14 June 1974) and Protocol thereto (Vienna, 11 April 1980); United Nations Convention on Contracts for the International Sale of Goods (Vienna, 11 April 1980); United Nations Convention on the Liability of Operators of Transport Terminals in International Trade (Vienna, 19 April 1991); United Nations Convention on Independent Guarantees and Standby Letters of Credit (New York, 11 December 1995); United Nations Convention on the Assignment of Receivables in International Trade (New York, 12 December 2001). 2. The provisions of this Convention apply further to electronic communications in connection with the formation or performance of a contract to which another international convention, treaty or agreement not specifically referred to in paragraph 1 of this article, and to which a Contracting State to this Convention is or may become a Contracting State, applies, unless the State has declared, in accordance with article 21, that it will not be bound by this paragraph. 13 14 UNCITRAL United Nations Convention on the Use of Electronic Communications in International Contracts (with Explanatory Note) (2007 United Nations New York) available online at http://www.uncitral.org/ 8 Aug para 3. See the Prologue to the Electronics Convention.
5. Location of the parties The location of the parties is important to determine whether the CISG will apply or not. The same holds true for the Electronics Convention. The fact that electronic communications take place in cyberspace, is often cited as a factor which causes legal uncertainty because it may be very difficult to establish the locality of the other party, that is, is it its place of business, place of residence or the place where its information system or server is situated. It is generally recognised that the location of the information system and server is not a useful connecting factor as their physical location may be spread out over various jurisdictions or may be entirely fortuitous or irrelevant as far as the parties are concerned as indicated by Schroeter. 15 The Electronics Convention recognised this issue and solved it by attributing physical localities to the parties, either with reference to place of business or usual place of residence. Article 6 determines that where communications are deemed to be sent from and received, ie the place of business of the respective parties or their place of residence as a default. It is made clear in Article 6(4) that the location of information systems is irrelevant. Determining where communications were made and contracts concluded are important for purposes of validity (where formalities are prescribed), jurisdiction (where must a party lodge legal proceedings against the other party) and the applicable law (private international law). Article 6 Location of the parties 1. For the purposes of this Convention, a party s place of business is presumed to be the location indicated by that party, unless another party demonstrates that the party making the indication does not have a place of business at that location. 2. If a party has not indicated a place of business and has more than one place of business, then the place of business for the purposes of this Convention is that which has the closest relationship to the relevant contract, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract. 3. If a natural person does not have a place of business, reference is to be made to the person s habitual residence. 4. A location is not a place of business merely because that is: (a) where equipment and technology supporting an information system used by a party in connection with the formation of a contract are located; or (b) where the information system may be accessed by other parties. 5. The sole fact that a party makes use of a domain name or electronic mail address connected to a specific country does not create a presumption that its place of business is located in that country. 15 Schroeter U " The Modern Travelling Merchant: Mobile Communication in International Contract Law" unpublished paper delivered at The Use of UNCITRAL Instruments in Promoting Regional Harmonization of Trade Law 26-27 May, Intundla Lodge, Dinokeng, South Africa..
Article 10 Time and place of dispatch and receipt of electronic communications 1. The time of dispatch of an electronic communication is the time when it leaves an information system under the control of the originator or of the party who sent it on behalf of the originator or, if the electronic communication has not left an information system under the control of the originator or of the party who sent it on behalf of the originator, the time when the electronic communication is received. 2. The time of receipt of an electronic communication is the time when it becomes capable of being retrieved by the addressee at an electronic address designated by the addressee. The time of receipt of an electronic communication at another electronic address of the addressee is the time when it becomes capable of being retrieved by the addressee at that address and the addressee becomes aware that the electronic communication has been sent to that address. An electronic communication is presumed to be capable of being retrieved by the addressee when it reaches the addressee s electronic address. 3. An electronic communication is deemed to be dispatched at the place where the originator has its place of business and is deemed to be received at the place where the addressee has its place of business, as determined in accordance with article 6. 4. Paragraph 2 of this article applies notwithstanding that the place where the information system supporting an electronic address is located may be different from the place where the electronic communication is deemed to be received under paragraph 3 of this article. 6. Writing and signature The CISG is premised on the principle of freedom of form. This means that international sales contracts need not be reduced to writing or any other kind of form and that signature is not required for the validity of any contract, unless the parties themselves require such formalities. The contents of the contract can be proved by any means, including oral testimony. It is also generally recognised that Article 11 excludes the application of the parol evidence rule of Anglo-American law. The Electronics Convention supports this approach by ensuring that there is proper legal recognition for the use of electronic communications in this process. A few states have made use of the right to make a declaration under CISG Article 96 requiring contracts for the sale of goods to be in writing. 16 That is the only statutory formality requirement allowed as an exception to the general principle of freedom of contract. However, in terms of the party autonomy principle of CISG Article 6, it is open to the parties to require stricter formalities, including signature for the validity of 16 The following countries have made an Art 96 declaration: Argentina, Belarus, Chile, Hungary, Paraguay, Russia, and the Ukraine. China, Latvia and Lithuania have withdrawn their reservations under Art 96.
the contract or its amendment. The Electronics Convention Article 9 makes provision for all of these situations. 17 Article 9 Form requirements 1. Nothing in this Convention requires a communication or a contract to be made or evidenced in any particular form. 2. Where the law requires that a communication or a contract should be in writing, or provides consequences for the absence of a writing, that requirement is met by an electronic communication if the information contained therein is accessible so as to be usable for subsequent reference. 3. Where the law requires that a communication or a contract should be signed by a party, or provides consequences for the absence of a signature, that requirement is met in relation to an electronic communication if: (a) A method is used to identify the party and to indicate that party s intention in respect of the information contained in the electronic communication; and (b) The method used is either: (i) As reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement; or (ii) Proven in fact to have fulfilled the functions described in subparagraph (a) above, by itself or together with further evidence. 4. Where the law requires that a communication or a contract should be made available or retained in its original form, or provides consequences for the absence of an original, that requirement is met in relation to an electronic communication if: (a) There exists a reliable assurance as to the integrity of the information it contains from the time when it was first generated in its final form, as an electronic communication or otherwise; and (b) Where it is required that the information it contains be made available, that information is capable of being displayed to the person to whom it is to be made available. 5. For the purposes of paragraph 4 (a): (a) The criteria for assessing integrity shall be whether the information has remained complete and unaltered, apart from the addition of any endorsement and any change that arises in the normal course of communication, storage and display; and (b) The standard of reliability required shall be assessed in the light of the purpose for which the information was generated and in the light of all the relevant circumstances. 17 Eiselen S The Interaction between the UNECE and the CISG in Kilian W and Boss A (eds) The United Nations Convention on Electronic Communications in International Contracts (UNECE) (2009 Kluwer).
7. Automated transactions and mistake The CISG does not specifically deal with the issue of mistake in communications between the parties other than the provisions of Article 8. In terms of Article 8 the statements or conduct of a party must be interpreted according to the intent of that party where the other party knew or could not have been unaware of such intent. Where the other party could not have been aware of such intent, the conduct or statement must be interpreted according to the interpretation of a reasonable party in the same position or in the same circumstances as that party. In determining such understanding due consideration must be given to all the relevant circumstances of the case including the negotiations and practices established between the parties. 18 Article 12 Use of automated message systems for contract formation A contract formed by the interaction of an automated message system and a natural person, or by the interaction of automated message systems, shall not be denied validity or enforceability on the sole ground that no natural person reviewed or intervened in each of the individual actions carried out by the automated message systems or the resulting contract. Article 14 Error in electronic communications 1. Where a natural person makes an input error in an electronic communication exchanged with the automated message system of another party and the automated message system does not provide the person with an opportunity to correct the error, that person, or the party on whose behalf that person was acting, has the right to withdraw the portion of the electronic communication in which the input error was made if: (a) The person, or the party on whose behalf that person was acting, notifies the other party of the error as soon as possible after having learned of the error and indicates that he or she made an error in the electronic communication; and (b) The person, or the party on whose behalf that person was acting, has not used or received any material benefit or value from the goods or services, if any, received from the other party. 2. Nothing in this article affects the application of any rule of law that may govern the consequences of any error other than as provided for in paragraph 1. 8. Conclusions Although very few economically important countries have acceded to the Electronics Convention it seems sensible for countries to do so. There seems to be a good synergy between the Convention and other Conventions with the Electronics 18 Eiselen S "The Integration of the UN Electronic Communications Convention and the CISG" in Schwenzer I, Atamer YM & Butler P (eds) Current Issues in the CISG and Arbitration (2014 eleven The Hague) 163.
Convention sensibly augmenting the CISG in respect to the uncertainties that may arise in regard to electronic communications in international agreements. The conclusions drawn by the CISG Advisory Council in their Opinion 1 on the validity and effect of electronic communications in the CISG context, can largely be found in the solutions provided by the Electronics Convention. The Convention does bring greater clarity and certainty and provides unique solutions for problems only encountered in electronic communications and trade. The solutions are also similar to solutions already adopted for domestic trade in the United States. The adoption of the Electronics Convention by CISG countries is a sensible solution to the problems and uncertainties posed by electronic communications.