Tuesday, August 7, 2012

Introduction to Electronic Commerce.

Some people may believe that a contract is not valid unless signed by hand. "Signed," according to the UCC, "includes using any symbol executed or adopted with present intention to adopt or accept a writing." [1] This includes online contracting, whereby an individual can agree to purchase goods via email or another electronic method. This happens in situations where goods are needed quickly. Sometimes one merchant ships goods to another merchant based on a good faith belief that the other party will pay according to the terms of a given email exchange.

For instance, let's say A Seller deals in widgets. B Buyer needs widgets tomorrow, and sends a high priority email to A asking to ship them immediately. B Buyer may not have time to get a purchase order requisition through his company's purchasing department in time to receive the widgets when B needs them. So, A must rely on B's good faith in entering the online contract with no purchase order or handwritten signature. B's intent is surely to enter a contract, because the characters in his email to A indicate his intention to adopt or accept the terms of A's overnight shipment of widgets to B.

Now, if B were a scoundrel, and wanted to evade any terms of A's good faith shipment without a handwritten signature or formal purchase order, B would not be able to do so. Laws authenticating electronic signatures are ubiquitous in the United States. B would be bound by the terms of the online agreement.

Another example might be the situation where B sends another high priority email to A requesting widgets immediately, and A provides the terms of the transaction, but includes no mention of how long the price is valid. Three months and one day later, B sends a purchase order to A for standard delivery at the price sent over three months earlier. What then? Well, the UCC provides that the price quote would be valid for a "reasonable time," but not to exceed three months. [2] Of course, A could honor the quote if the price has not changed, or has changed a small amount. This would be of A's own volition, however, and not what the law provides.

Generally, the determination of reasonableness of time is a jury question. [3] It depends on the nature, purpose, and circumstances of the action. [4] The court and factfinder would likely look to the express terms of the agreement, as well as what is called "course of performance," "course of dealing," or "usage of trade." [5] A "course of performance" is conduct and behavior of parties to a particular transaction if the parties have an agreement involving repeated occasions for performance by a party, and the other party does not object to the performance of the performing party, or acquiesces to it without objection." [6] A "course of dealing" is conduct and behavior of parties with regard to comparable business transactions before entering the subject agreement. [7] "Usage of trade" is probably the easiest concept to grasp of the three. It is "any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect" to the subject transaction. [8]

Express terms prevail over the three others. [9] Course of performance prevails over course of dealing, because it deals more directly with the conduct and behavior of the two or more parties in their prior business dealings with each other. [10] Course of dealing prevails over usage of trade because it deals directly with the conduct and the behavior of the two or more parties in business dealings, but not with each other. [11] Usage of trade is more consistent with industry or geographic standards that each party assumes the other to implicitly implement into their agreement without having to discuss them. Following these guidelines, the factfinder, or jury, would then determine the duration of "reasonable time," in a particular situation.

[1] UCC 1-201(b)(37).
[2] UCC 2-205.
[3] St. Ansgar Mills, Inc. v. Streit, 613 N.W. 2d  289, 295 (Iowa 2000).
[4] UCC 1-205(a).
[5] UCC 2-202(a).
[6] UCC 1-303(a).
[7] UCC 1-303(b).
[8] UCC 1-303(c).
[9] UCC 1-303(e)(1).
[10] UCC 1-303(e)(2).
[11] UCC 1-303(e)(3)

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