INTRODUCTION

In 1999, Dell Computer and Micron Electronics (now doing business as MPC Computers), two companies that sell
personal computers through their Web sites, agreed to settle U.S. Federal Trade Commission (FTC) charges that they had
disseminated misleading advertising to their existing and potential customers. The advertising in question was for computer leasing
plans that both companies had offered on their Web sites. The ads stated the price of the computer along with a monthly payment.
Unfortunately for Dell and Micron, stating the monthly payment without disclosing full details of the lease plan is a violation of the
Consumer Leasing Act of 1976. This law is implemented through a federal regulation that was written and is updated periodically by
the Federal Reserve Board. This regulation, called Regulation M, was designed to require banks and other lenders to fully disclose
the terms of leases so that consumers would have enough information to make informed financing choices when leasing cars, boats,
furniture, and other goods.
Both Dell and Micron had included the required information on their Web pages, but FTC investigators noted that important
details of the leasing plans, such as the number of payments and the fees due at the signing of the lease, were placed in a small
typeface at the bottom of a long Web page. A consumer who wanted to determine the full cost of leasing a computer would need to
scroll through a number of densely filled screens to obtain enough information to make the necessary calculations.
In the settlement, both companies agreed to provide consumers with clear, readable, and understandable information in their lease
advertising. The companies also agreed to record-keeping and federal monitoring activities designed to ensure their compliance with
the terms of the settlement.
Dell and Micron are computer manufacturers. It apparently did not occur to them that they needed to become experts in
Regulation M, generally considered to be a banking regulation. Companies that do business on the Web expose themselves, often
unwittingly, to liabilities that arise from today’s business environment. That environment includes laws and ethical considerations that
may be different from those with which the business is familiar. In the case of Dell and Micron, they were unfamiliar with the laws and
ethics of the banking industry. The banking industry has a different culture than that of the computer industry—it is unlikely that a
bank advertising manager would have made such a mistake.0
As you will learn in this chapter, Dell and Micron are by no means the only Web businesses that have run afoul of laws and
regulations. As new and existing companies open online operations, they become subject to unfamiliar laws and different ethical
frameworks much more rapidly than in the physical world.

The Legal Environment of E-Commerce

Businesses that operate on the Web must comply with the same laws and regulations that govern
the operations of all businesses. If they do not, they face the same set of penalties—fines,
reparation payments, court-imposed dissolution, and even jail time for officers and owners—that
any business faces.
Businesses operating on the Web face two additional complicating factors as they try to comply
with the law. First, the Web extends a company’s reach beyond traditional boundaries. As you
learned in Chapter 1, a business that uses the Web immediately becomes an international
business. Thus, a company can become subject to many more laws more quickly than a traditional
brick-and-mortar business based in one specific physical location. Second, the Web increases the
speed and efficiency of business communications. As you learned in Chapters 3 and 4, customers
often have much more interactive and complex relationships with online merchants than they do
with traditional merchants. Further, the Web creates a network of customers who often have
significant levels of interaction with each other. Web businesses that violate the law or breach
ethical standards can face rapid and intense reactions from many customers and other
stakeholders who become aware of the businesses’ activities.
In this section, you will learn about the issues of borders, jurisdiction, and Web site content and
how these factors affect a company’s ability to conduct electronic commerce. You will also learn
about legal issues that arise when the Web is used in the commission of crimes, terrorist acts, and
even the conduct of war.
Borders and Jurisdiction
Territorial borders in the physical world serve a useful purpose in traditional commerce:
They mark the range of culture and reach of applicable laws very clearly. When people travel
across international borders, they are made aware of the transition in many ways. For example,
exiting one country and entering another usually requires a formal examination of documents,
such as passports and visas. In addition, both the language and the currency usually change upon
entry into a new country. Each of these experiences, and countless others, are manifestations of
the differences in legal rules and cultural customs in the two countries. In the physical world,
geographic boundaries almost always coincide with legal and cultural boundaries. The limits of
acceptable ethical behavior and the laws that are adopted in a geographic area are the result of
the influences of the area’s dominant culture.
The geographic boundaries on culture are logical; for most of our history, humans have been
unable to travel great distances to learn about other cultures. In recent years, however, some
countries decided that times have indeed changed, and people can travel easily from one country
to another within a geographic region. One example is the European Union (EU), which allows free
movement within the EU for citizens of member countries.
Most of the EU countries (Great Britain being a notable exception) have even formed the European
Money Union and use a common currency (the euro) instead of their former individual currencies
(for example, French francs, German marks, and Italian lire). Legal scholars define the relationship
between geographic boundaries and legal boundaries in terms of four elements: power, effects,
legitimacy, and notice.
Power
Power is a form of control over physical space and the people and objects that reside in that
space, and is a defining characteristic of statehood. For laws to be effective, a government must
be able to enforce them. Effective enforcement requires the power both to exercise physical
control over residents, if necessary, and to impose sanctions on those who violate the law. The
ability of a government to exert control over a person or corporation is called jurisdiction.
Laws in the physical world do not apply to people who are not located in or do not own assets in
the geographic area that created those particular laws. For example, the United States cannot
enforce its copyright laws on a citizen of Japan who is doing business in Japan and owns no assets
in the United States. Any assertion of power by the United States over such a Japanese citizen
would conflict with the Japanese government’s recognized monopoly on using force with its
citizens. Japanese citizens who bring goods into the United States to sell, however, are subject to
applicable U.S. copyright laws. A Japanese Web site that offers delivery of goods into the United
States is, similarly, subject to applicable U.S. Laws.
The level of power asserted by a government is limited to that which is accepted by the culture
that exists within its geographic boundaries. Ideally, geographic boundaries, cultural groupings,
and legal structures all coincide. When they do not, internal strife and civil wars can erupt.
Effects
Laws in the physical world are grounded in the relationship between physical proximity and the
effects, or impact, of a person’s behavior. Personal or corporate actions have stronger effects on
people and things that are nearby than on those that are far away. Government-provided
trademark protection is a good example of this. For instance, the Italian government can provide
and enforce trademark protection for a business named Casa di Baffi located in Rome. The effects
of another restaurant using the same name are strongest in Rome, somewhat less in geographic
areas close to Rome, and even less in other parts of Italy. That is, the effects diminish as
geographic distance increases. If someone were to open a restaurant in Kansas City and call it
Casa di Baffi, the restaurant in Rome would experience few, if any, negative effects from the use of
its trademarked name in Kansas City because it would be so far away and because so few people
would be potential customers of both restaurants. Thus, the effects of the trademark violation are
controlled by Italian law because of the limited range within which such a violation has an effect.
The characteristics of laws are determined by the local culture’s acceptance or rejection of various
kinds of effects. For example, certain communities in the United States require that houses be built
on lots that are at least 5 acres. Other communities prohibit outdoor advertising of various kinds.
The local cultures in these communities make the effects of such restrictions acceptable.
When businesses begin operations online, the traditional measures of effects—and the laws that
have been developed using those measures over many years—do not work very well. For example,
France has a law that prohibits the sale of Nazi memorabilia. The people of France have considered
this to be a reasonable law for many years. U.S. laws do not include a similar prohibition. When
U.S.-based online auction sites began hosting auctions of Nazi memorabilia, those sites were in
compliance with U.S. laws. However, because of the international nature of the Web, these
auctions were available to people around the world, including residents of France. The French
government ordered Yahoo! Auctions to stop these auctions. Yahoo! argued that it was in
compliance with U.S. law, but the French government insisted that the effects of those Yahoo!
auctions extended to France and thus violated French law. To avoid protracted legal actions over
the jurisdiction issue, Yahoo! decided that it would no longer carry such auctions (Note: If you
search in Yahoo! Auctions using terms such as “Nazi,” you might find some items available. These
items, which include coins and stamps, are not considered Nazi memorabilia under French law.)
Legitimacy
Most people agree that the legitimate right to create and enforce laws derives from the mandate
of those who are subject to those laws. In 1970, the United Nations passed a resolution that
affirmed this idea of governmental legitimacy. The resolution made clear that the people residing
within a set of recognized geographic boundaries are the ultimate source of legitimate legal
authority for people and actions within those boundaries. Thus, legitimacy is the idea that those
subject to laws should have some role in formulating them.
Some cultures allow their governments to operate with a high degree of autonomy and
unquestioned authority. China and Singapore are countries in which national culture permits the
government to exert high levels of unchecked authority. Other cultures, such as those of the
Scandinavian countries, place strict limits on governmental authority.
The levels of authority and autonomy with which governments of various countries operate varies
significantly from one country to another. Online businesses must be ready to deal with a wide
variety of regulations and levels of enforcement of those regulations as they expand their
businesses to other countries. This can be difficult for smaller businesses that operate on the Web.
Notice
Physical boundaries are a convenient and effective way to announce the ending of one legal or
cultural system and the beginning of another. The physical boundary, when crossed, provides
notice that one set of rules has been replaced by a different set of rules. Notice is the expression
of such a change in rules. People can obey and perceive a law or cultural norm as fair only if they
are notified of its existence. Borders provide this notice in the physical world. The legal systems of
most countries include a concept called constructive notice. People receive constructive notice
that they have become subject to new laws and cultural norms when they cross an international
border, even if they are not specifically warned of the changed laws and norms by a sign or a
border guard’s statement. Thus, ignorance of the law is not a sustainable defense, even in a new
and unfamiliar jurisdiction.
This presents particular problems for online businesses, because they may not know that
customers from another country are accessing their Web sites. Thus, the concept of notice—even
constructive notice—does not translate very well to online business.
Jurisdiction on the Internet
Defining, establishing, and asserting jurisdiction are much more difficult on the Internet than they
are in the physical world, mainly because traditional geographic boundaries do not exist. For
example, a Swedish company that engages in electronic commerce may have a Web site that is
entirely in English and a URL that ends in “.com,” thus not indicating to customers that it is a
Swedish firm. The server that hosts this company’s Web page could be in Canada, and the people
who maintain the Web site might work from their homes in Australia.
If a Mexican citizen buys a product from the Swedish firm and is unhappy with the goods received,
that person might want to file a lawsuit against the seller firm. However, the world’s physical
border-based systems of law and jurisdiction do not help this Mexican citizen determine where to
file the lawsuit. The Internet does not provide anything like the obvious international boundary
lines in the physical world. Thus, the four considerations that work so well in the physical world—
power, effects, legitimacy, and notice—do not translate very well to the virtual world of electronic
commerce.
Governments that want to enforce laws regarding business conduct on the Internet must establish
jurisdiction over that conduct. A contract is a promise or set of promises between two or more
legal entities—people or corporations—that provides for an exchange of value (goods, services, or
money) between or among them. If either party to a contract does not comply with the terms of
the contract, the other party can sue for failure to comply, which is called breach of contract.
Persons and corporations that engage in business are also expected to excercise due care and not
violate laws that prohibit specific actions (such as trespassing, libel, or professional malpractice). A
tort is an intentional or negligent action (other than breach of contract) taken by a legal entity
that causes harm to another legal entity. People or corporations that wish to enforce their rights
based on either contract or tort law must file their claims in courts with jurisdiction to hear their
cases. A court has sufficient jurisdiction in a matter if it has both subject-matter jurisdiction and
personal jurisdiction.
Subject-matter jurisdiction
Subject-matter jurisdiction is a court’s authority to decide a particular type of dispute. For
example, in the United States, federal courts have subject-matter jurisdiction over issues governed
by federal law (such as bankruptcy, copyright, patent, and federal tax matters), and state courts
have subject-matter jurisdiction over issues governed by state laws (such as professional licensing
and state tax matters). If the parties to a contract are both located in the same state, a state court
has subject-matter jurisdiction over disputes that arise from the terms of that contract. The rules
for determining whether a court has subject matter jurisdiction are clear and easy to apply. Few
disputes arise over subject-matter jurisdiction.
Personal Jurisdiction
Personal jurisdiction is, in general, determined by the residence of the parties. A court has
personal jurisdiction over a case if the defendant is a resident of the state in which the court is
located. In such cases, the determination of personal jurisdiction is straightforward. However, an
out-of-state person or corporation can also voluntarily submit to the jurisdiction of a particular
state court by agreeing to do so in writing or by taking certain actions in the state.
One of the most common ways that people voluntarily submit to a jurisdiction is by signing a
contract that includes a statement, known as a forum selection clause, that the contract will be
enforced according to the laws of a particular state. That state then has personal jurisdiction over
the parties who signed the contract regarding any enforcement issue that arises from the terms of
that contract. Figure 7-2 shows a portion of the contract that governs site visitors’ activities on the
Qpass site. Qpass sells software to wireless system and network operating companies. The first
paragraph shown includes the site’s forum selection clause. The second paragraph clarifies that
site visitors are subject to their own jurisdictions’ laws in addition to the jurisdiction specified in the
forum selection clause.
In the United States, individual states have laws that can create personal jurisdiction for their
courts. The details of these laws, called long-arm statutes, vary from state to state, but
generally create personal jurisdiction over nonresidents who transact business or commit tortious
acts in the state. For example, suppose that an Arizona resident drives recklessly while in
California and, as a result, causes a collision with another vehicle that is driven by a California
resident. Due to the driver’s tortious behavior in the state of California, the Arizona resident can
expect to be called into a California court. In other words, California’s long-arm statute gives its
courts personal jurisdiction over the matter.
Businesses should be aware of jurisdictional considerations when conducting electronic commerce
over state and international lines. In most states, the extent to which these laws apply to
companies doing business over the Internet is unclear. Because these procedural laws were
written before electronic commerce existed, their application to Internet transactions continues to
evolve as more and more disputes arise from online commercial transactions. The trend in this
evolving law is that the more business activities a company conducts in a state, the more likely it
is that a court will assert personal jurisdiction over that company through the application of a long-
arm statute.
One exception to the general rule for determining personal jurisdiction occurs in the case of
tortious acts. A business can commit a tortious act by selling a product that causes harm to a
buyer. The tortious act can be negligent, in which the seller unintentionally provides a harmful
product, or it can be an intentional tort, in which the seller knowingly or recklessly causes injury to
the buyer. The most common business-related intentional torts involve defamation,
misrepresentation, fraud, and theft of trade secrets. Although case law is rapidly developing in this
area also, courts tend to invoke their respective states’ long-arm statutes much more readily in the
case of tortious acts than in breach of contract cases. If the matter involves an intentional tort or a
criminal act, courts will assert jurisdiction more liberally.
Jurisdiction in International Commerce
Jurisdiction issues that arise in international business are even more complex than the rules
governing personal jurisdiction across state lines within the United States. The exercise of
jurisdiction across international borders is governed by treaties between the countries engaged in
the dispute. In general, U.S. Courts determine personal jurisdiction for foreign companies and
people in much the same way that these courts interpret the long-arm statutes in domestic
matters. Non-U.S. corporations and individuals can be sued in U.S. Courts if they conduct business
or commit tortious acts in the United States. Similarly, foreign courts can enforce decisions against
U.S. corporations or individuals through the U.S. Court system if those courts can establish
jurisdiction over the matter.
Courts asked to enforce the laws of other nations sometimes follow a principle called judicial
comity, which means that they voluntarily enforce other countries’ laws or judgments out of a
sense of comity, or friendly civility. However, most courts are reluctant to serve as forums for
international disputes. Also, courts are designed to deal with weighing evidence and making
findings of right and wrong. International disputes often require diplomacy and the weighing of
costs and benefits. Courts are not designed to do cost benefit evaluations and cannot engage in
negotiation and diplomacy. Thus, courts (especially U.S. courts) prefer to have the executive
branch of the government (primarily the State Department) negotiate international agreements
and resolve international disputes.
Jurisdictional issues are complex and change rapidly. Any business that intends to conduct
electronic commerce should consult an attorney who is well versed in these procedural issues.
However, there are a number of resources online that can be useful to nonlawyers who want to do
preliminary investigation of a legal topic such as jurisdiction. The Harvard Law School’s Berkman
Center for Internet & Society Web site includes links to many current Internet-related legal
issues. The UCLA Online Institute for Cyberspace Law and Policy contains an archive of legal
reference materials published between 1995and 2002.
Conflict of Laws
In the United States, business is governed by federal laws, state laws, and local laws. Sometimes,
these laws address the same issues in different ways. Lawyers call this situation a conflict of
laws. Since online businesses usually serve broad markets that span many localities and many
states, they generally look to federal laws for guidance. On occasion, this can lead to problems
with state and local laws.
One online business that faced a serious conflict of laws problem was the direct wine sales
industry. Most U.S. states have heavily regulated all types of alcoholic beverage sales since the
repeal of prohibition in 1933. The U.S. Constitution’s Commerce Clause prohibits the states from
passing laws that interfere with interstate commerce. However, the states do have the right to
regulate matters pertaining to the health and welfare of their citizens. Under this right, most states
have laws that require alcoholic beverages be sold through a regulated system of producers,
wholesalers, and retailers. Some states allowed producers (such as wineries) to sell directly to the
public, but only within that state. When online wine stores wanted to sell their products across
state lines, they ran into these laws. Some states allowed the sales, others allowed the sales if the
online store delivered to a licensed retailer in the destination state, and some states prohibited all
direct sales. This resulted in a classic conflict of laws. State laws regulated the sale of alcoholic
beverages in the interest of the health and welfare of the state’s citizens, yet those same laws
gave in-state producers an advantage over out-of-state producers (in some states, in-state
producers could sell direct without adding the markup of a retailer; in other states, out-ofstate
producers could not compete at all). When a state law gives an in-state business an advantage
over an out-of-state business, the free flow of interstate commerce is impeded and, in general, the
U.S. Constitution’s Commerce Clause is violated.
For years, the online wine industry worked to find a way to resolve these issues with the states,
but did not have much success. Finally, wineries filed suit on the Commerce Clause violation issue.
In 2005, the U.S. Supreme Court voted 5-4 to strike down Michiganand New York laws that barred
out-of-state wineries from selling directly to consumers. The online wine industry was happy with
the outcome, as were wine lovers throughout the country who could now buy wine directly from
the more than 3000 wineries and online wine shops.
Contracting and Contract Enforcement in Electronic Commerce
Any contract includes three essential elements: an offer, an acceptance, and consideration. The
contract is formed when one party accepts the offer of another party. An offer is a commitment
with certain terms made to another party, such as a declaration of willingness to buy or sell a
product or service. An offer can be revoked as long as no payment, delivery of service, or other
consideration has been accepted. An acceptance is the expression of willingness to take an offer,
including all of its stated terms. Consideration is the agreed upon exchange of something
valuable, such as money, property, or future services. When a party accepts an offer based on the
exchange of valuable goods or services, a contract has been created. An implied contract can
also be formed by two or more parties that act as if a contract exists, even if no contract has been
written and signed.
People enter into contracts on a daily, and often hourly, basis. Every kind of agreement or
exchange between parties, no matter how simple, is a type of contract. For example, every time a
consumer buys an item at the supermarket, the elements of a valid contract are met:
● The store offers an item at a stated price.
● The consumer accepts this offer by indicating a willingness to buy the product for the stated
price.
● The store exchanges its product for another valuable item: the consumer’s payment.
Contracts are a key element of traditional business practice, and they are equally important on the
Internet. Offers and acceptances can occur when parties exchange e-mail messages, engage in
electronic data interchange (EDI), or fill out forms on Web pages. These Internet communications
can be combined with traditional methods of forming contracts, such as the exchange of paper
documents, faxes, and verbal agreements made over the telephone or in person. An excellent
resource for many of the laws concerning contracts, especially as they pertain to U.S. businesses,
is the Cornell Law School Web site, which includes the full text of the Uniform Commercial Code
(UCC).
When a seller advertises goods for sale on a Web site, that seller is not making an offer, but is
inviting offers from potential buyers. If a Web ad were a legal offer to form a contract, the seller
could easily become liable for the delivery of more goods than it has available to ship. When a
buyer submits an order, which is an offer, the seller can accept that offer and create a contract. If
the seller does not have the ordered items in stock, the seller has the option of refusing the
buyer’s order outright or counter offering with a decreased amount. The buyer then has the option
to accept the seller’s counteroffer.
Making a legal acceptance of an offer is quite easy to do in most cases. When enforcing contracts,
courts tend to view offers and acceptances as actions that occur within a particular context. If the
actions are reasonable under the circumstances, courts tend to interpret those actions as offers
and acceptances. For example, courts have held that various actions—including mailing a check,
shipping goods, shaking hands, nodding one’s head, taking an item off a shelf, or opening a
wrapped package—are all, in some circumstances, legally binding acceptances of offers. Although
the case law is limited regarding acceptances made over the Internet, it is reasonable to assume
that courts would view clicking a button on a Web page, entering information in a Web form, or
downloading a file to be legally binding acceptances.
Written Contracts on the Web
In general, contracts are valid even if they are not in writing or signed. However, certain
categories
of contracts are not enforceable unless the terms are put into writing and signed by both parties.
In 1677, the British Parliament enacted a law that specified the types of contracts that had to be in
writing and signed. Following this British precedent, every state in the United States today has a
similar law, called a Statute of Frauds. Although these state laws vary slightly, each Statute of
Frauds specifies that contracts for the sale of goods worth more than $500 and contracts that
require actions that cannot be completed within one year must be created by a signed writing.
Fortunately for businesses and people who want to form contracts using electronic commerce, a
writing does not require either pen or paper.
Most courts will hold that a writing exists when the terms of a contract have been reduced to
some tangible form. An early court decision in the 1800s held that a telegraph transmission was a
writing. Later courts have held that tape recordings of spoken words, computer files on disks, and
faxes are writings. Thus, the parties to an electronic commerce contract should find it relatively
easy to satisfy the writing requirement. Courts have been similarly generous in determining what
constitutes a signature. A signature is any symbol executed or adopted for the purpose of
authenticating a writing. Courts have held names on telegrams, telexes, faxes, and Western Union
Mailgrams to be signatures. Even typed names or names printed as part of a letterhead have
served as signatures. It is reasonable to assume that a symbol or code included in an electronic
file would constitute a signature. As you will learn in Chapter 10, the United States now has a law
that explicitly makes digital signatures legally valid for contract purposes.
Firms conducting international electronic commerce do not need to worry about the signed writing
requirement in most cases. The main treaty that governs international sales of goods, Article 11 of
the United Nations Convention on Contracts for the International Sale of Goods (CISG), requires
neither a writing nor a signature to create a legally binding acceptance. You can learn more about
the CISG and related topics in international commercial law at the Pace University School of
Law CISG Information Web site.

Warranties on the Web

Most firms conducting electronic commerce have little trouble fulfilling the requirements needed to
create enforceable, legally binding contracts on the Web. One area that deserves attention,
however, is the issue of warranties. Any contract for the sale of goods includes implied warranties.
A seller implicitly warrants that the goods it offers for sale are fit for the purposes for which they
are normally used. If the seller knows specific information about the buyer’s requirements,
acceptance of an offer from that buyer may result in an additional implied warranty of fitness,
which suggests that the goods are suitable for the specific uses of that buyer. Sellers can also
create explicit warranties by providing a specific description of the additional warranty terms. It is
also possible for a seller to create explicit warranties, often unintentionally, by making general
statements in brochures or other advertising materials about product performance or suitability for
particular tasks.
Sellers can avoid some implied warranty liability by making a warranty disclaimer. A warranty
disclaimer is a statement declaring that the seller will not honor some or all implied warranties.
Any warranty disclaimer must be conspicuously made in writing, which means it must be easily
noticed in the body of the written agreement. On a Web page, sellers can meet this requirement
by putting the warranty disclaimer in larger type, a bold font, or a contrasting color. To be legally
effective, the warranty disclaimer must be stated obviously and must be easy for a buyer to find
on the Web site. Figure 7-3 shows a portion of an Apple Computer Web page that includes the
warranty disclaimer for its Web site. The warranty disclaimer is printed in uppercase letters to
distinguish it from other text on the page.
Authority to Form Contracts
As explained previously in this section, a contract is formed when an offer is accepted for
consideration. Problems can arise when the acceptance is issued by an imposter or someone who
does not have the authority to bind the company to a contract. In electronic commerce, the online
nature of acceptances can make it relatively easy for identity forgers to pose as others.
Fortunately, the Internet technology that makes forged identities so easy to create also provides
the means to avoid being deceived by a forged identity. In Chapter 10, you will learn how
companies and individuals can use digital signatures to establish identity in online transactions. If
the contract is for any significant amount, the parties should require each other to use digital
signatures to avoid identity problems. In general, courts will not hold a person or corporation
whose identity has been forged to the terms of the contract; however, if negligence on the part of
the person or corporation contributed to the forgery, a court may hold the negligent party to the
terms of the contract. For example, if a company was careless about protecting passwords and
allowed an imposter to enter the company’s system and accept an offer, a court might hold that
company responsible for fulfilling the terms of that contract.
Determining whether an individual has the authority to commit a company to an online contract is
a greater problem than forged identities in electronic commerce. This issue, called authority to
bind, can arise when an employee of a company accepts a contract and the company later
asserts that the employee did not have such authority. For large transactions in the physical world,
businesses check public information on file with the state of incorporation, or ask for copies of
corporate certificates or resolutions, to establish the authority of persons to make contracts for
their employers. These methods are available to parties engaged in online transactions; however,
they can be time consuming and awkward. You will learn about some good electronic solutions,
such as digital signatures and certificates from a certification authority, in Chapter 10.
Terms of Service Agreements
Many Web sites have stated rules that site visitors must follow, although most visitors are not
aware of these rules. If you examine the home page of a Web site, you will often find a link to a
page titled “Terms of Service,” “Conditions of Use,” “User Agreement,” or something similar. If you
follow that link, you find a page full of detailed rules and regulations, most of which are intended
to limit the Web site owner’s liability for what you might do with information you obtain from the
site. These contracts are often called terms of service (ToS) agreements even when they appear
under a different title. In most cases, a site visitor is held to the terms of service even if that visitor
has not read the text or clicked a button to indicate agreement with the terms. The visitor is bound
to the agreement by simply using the site. The first few sections of the Amazon.com terms of
service agreement appear in Figure 7-4, which shows the top of Amazon’s Conditions of Use page.