[Ecommerce] Informal notes on UNCITRAL E-Contracting project and questions

[Manon Anne Ress]

Dear Colleagues,
Sorry for cross-posting. Please find my informal notes on UNCITRAL 
E-Contract project teleconference followed by some questions.  I would 
appreciate any input on the issues raised by the discussion regarding 
the inclusion or exclusion of consumer contracts in the project.  Thank 
you.
Manon
PS feel free to correct me...the "over two hours teleconference" is 
sometimes difficult to follow

1)	Informal Notes on UNCITRAL E-Contracting project teleconference
Hal Burman of the U.S. State Department and Co-Chair of the Global 
E-Commerce Subcommittee of the ABA Business Law Section's Cyberspace Law 
Committee was chairing the working group teleconference on Tuesday, 
January 21, 2003.  The teleconference was attended by US and non-US 
members of the working group, industry representatives, academics, a 
journalist and one consumer group (CPTech).  I am hoping more consumer 
groups will be represented in the next teleconferences on February 4th 
and 19th (on virtual goods).

Background:  The issues under discussions are described in the Working 
group IV (E-Commerce) Report (Paragraphs 72-126 pp. 17-30) prepared for 
the Vienna meeting 10-2002. 
http://www.uncitral.org/english/sessions/unc/unc-36/acn9-527-e.pdf

QUOTE:  Article 2. Exclusions
82. The text of the draft article, as considered by the Working Group, 
read as follows:
“This Convention does not apply to the following contracts:
“(a) Contracts concluded for personal, family or household purposes;
“(b) Contracts granting limited use of intellectual property rights;
“(c) [Other exclusions, such as real estate transactions, to be added by
the Working Group.]”
Subparagraph (a)
83. The Working Group noted that subparagraph (a) was based on the 
approach generally taken toward the exclusion of consumers in UNCITRAL 
instruments. It was noted, in particular, that the language of the 
exclusion was drawn from article 2, subparagraph (a), of the United 
Nations Sales Convention, since it was language that had been tested in 
practice and had proved to be workable.
84. The Working Group held an extensive discussion on the desirability 
of excluding consumer transactions from the scope of application of the 
draft preliminary convention. Among the arguments put forward for such 
an exclusion, for which there was strong support, was the concern that 
issues of consumer protection varied greatly between legal systems, 
which was a reason why consumer transactions had thus far been 
systematically excluded from the field of application of UNCITRAL 
instruments.
END of QUOTE
The teleconference participants focused on the issue of exceptions. They 
first discussed the case for or against the exclusion of consumers from 
the project, then the possibility of excluding financial services 
contracts.
Regarding consumers 2 or maybe 3 positions were expressed:
1) in favor of exclusion of consumer contracts (see the Working Group 
position in the Report)
2) in favor of inclusion of consumer contracts but with "qualification 
as in model law" or depending on domestic law
and maybe 3) the working group does not have a position yet.  The 
instrument was drafted as a B2B instrument and the consumer contracts 
came as an "after thought", thus we do not know yet.

If consumer contract are to be excluded, the next question is how.  Is 
the CISG language (written before ecommerce even existed) the right one 
in the ecommerce context?  Is more needed?  No consensus on that question.
One participant who was not convinced that exclusion was the way to go, 
mentioned that maybe "consumers should be included without saying 
it...some people have concerns that the provision could harm consumers 
but at this stage we want to see if it could help"
The other "side" was concerned about how including consumer "might drag 
the process down" and advised on leaving the issue up to national law.
There was no reference to any specific member state but one can imagine 
how "consumer protection" issues are treated differently in Europe and 
in the US) and how *some countries* might want their own consumer 
protection laws to become the norm.
There was also a discussion on the "hybrid situation" or the "gray area" 
when it is not clear if the transaction if a B2B or a B2C.  How would 
that work in cyberspace, would a seller have the incentives to ask and 
how (with a "check the box on a econtract if you're a consumer or a 
business"?)  Often the line between work and home use is not clear and 
is difficult to make clear.
The business community seemed to be in favor of exclusion and want to 
focus on "increasing certainty in B2B" situations.
A participant suggested the possibility of dealing with the scope issue 
by drafting rules of inclusion instead of exclusion.
Some (including me) expressed concerns for the problems regarding 
non-negotiated contracts (click/browse)and the validity issue in an 
automated system where it will "become a battle ground" for consumers.
For consumers caught in such contract, there has not been a "meeting of 
the mind" or any kind of "agreement" and therefore there's no "contract"...
Trying to summarize or conclude was difficult: "there was no full 
support for inclusion... and partial support for partial inclusion."
Finally, someone suggested creating an "opt out" position for some 
member states.  The response was quite negative with mentions of UCITA 
("it could legitimize changes that we do not want")and all its 
controversies.

[The second part of the teleconference focused on financial contracts. 
The industry wants to be excluded.  Arguments in favor of the exclusion 
included the description of problems due to the fact that the market is 
"substantially regulated" and that every country has very different 
regulations.  I guess that means online brokers are out?]

2)   Questions
In evaluating the merits of including or excluding consumers into the 
UNCITRAL e-contracting project, it seems essential to consider the role 
that consumer *consent* plays in contract formation generally.  When it 
comes to non-negotiated contracts (as much B2C contracts are on the 
Internet) most consumers are not even aware they entered a contract.

It is also important to consider that the rules that govern the 
formation, interpretation and enforceability of private contracts are 
defined by state law, and not by federal law.  I believe there is no 
general federal law on the formation, interpretation and enforcement of 
private contracts. Federal laws such as E-Sign Act, the Truth in Lending 
Act, and the Federal Trade Commission Act modify state law, but federal 
law does not displace state law.
So, if consumers were to be included in this contract project, given the 
contract-making power that appears necessary in the world of e-commerce, 
how should the contract formation process be structured to promote the 
best interests of e-consumers? How easy should it be for a consumer to 
be bound by legal obligations (and how easy should it be for a consumer 
to lose his assets (or credit rating) by clicking")? If consumers are 
"in" how can they be protected from unfair contract?  Would the 
"Distance Selling Directive" apply for European Consumers?  Would 
definition of what is a good or a service become a big issue?

If consumers were to be excluded, how would you write the exception?

There will be at least two more teleconferences before the May meeting.
I'll post announcements and hope some of you can participate.

-- 
Manon Anne Ress
Consumer Project on Technology
www.cptech.org
PO Box 19367, Washington, DC 20036
manon.ress@cptech.org, voice: 1.202.387.8030, fax: 1.202.234.5176