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Lectue-5
Electronic Commerce and Contracts

- E-Commerce Contracts on the International Level

Professor Pedro, a physical education instructor at a major Brazilian
University and avid soccer fan and coach in in Rio de Janeiro, Brazil,
bought a dozen books on World Cup soccer over the internet from
“rhein.com”, a book retailer based in Germany. There was no paper-based
contract involved, and so Pedro furnished no identification other than his
mailing address. Pedro did not have a credit card of his own, so he used
his brother’s credit card number to pay for the purchase.
Pedro’s purchases drained “rhein.com” inventory of several of the titles
he ordered, which fact was duly noticed by its inventory control computer,
but not by any person employed by “rhein.com”.
Rhein.com’s computer was programmed automatically to purchase
replacements of any title in its inventory whose stock of books became
too low. To do this, “rhein.com” computer was programmed to
automatically contact the computers of several book distributors and
publishers, seeking to know the price and terms on which they were
programmed to sell the books needed. These computers automatically
responded to the inquiry form “rhein.com” computer, and it, in turn,
selected the best offer according to the criteria built into its programming.
“Rhein.com” computer then issued a book order for $ 10,000 worth of
books to East Publishing CO., an American firm. East’s computer
received the book order, mechanically retrieved the books from East’s
inventory storage, and labeled the box, and delivered the box to a mail
pick-up point-all without any human intervention.
All three parties (Pedro, rhein.com and East) would like to know whether
they have enforceable contracts or not. Can Pedro refuse to accept
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delivery of the goods when they arrive? Must East ship the goods, and
must rhein.com pay for them? Is there “assent” or “meeting of the minds”?
Is there a signed writing to satisfy the Statute of Frauds? What kind of
“signature” can be sent over the net? And, in both transactions, what are
the terms of any contract formed, and where should one look for them?
Although Rhein.Com is a German company, it is wholly-owned by an
American parent corporation, “rivers.com”. Rhein.com sends daily
reports of all its sales to its parent, specifying the name and address of
each purchaser, and the title and subject-matter of each book purchased.
From this information, “rivers.com” could prepare lists of individuals who
were interested in particular subjects, such as soccer. Revirs.com has
prepared such lists in the past and they have generated significant revenue
at little expense. It now wants to know whether it can continue this
practice, in the light of the new EU Privacy Directive.
Professor Pedro has recently received several communications from a
Bahamas-based Bookmaker, urging Pedro to bet on the Upcoming world
cup soccer gamed. Brazil has a privacy law which is similar to the EU
Privacy Directive. Would it give him a cause of action against anyone
under these facts? (1)
Focus of Consideration:
Electronic Commerce is not only “here to stay”, but also as growing
presence, Further, although e-commerce today occurs primarily in the
United States, potentially all e-commerce transactions are international.
When Professor Pedro contacts a web site, he has no idea where that web
site, or its server, may be: in Brazil, the U.S. or Germany. Even the
language of the website may not provide this information, because

(1)
Ralph H. Folsom, Michael Wallace Gordon, John A. Spanogle, Jr., International Business
Transactions, A Problem Oriented Coursebook, Fifth Edition, American Casebook Series, Page
193 and next.
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English is the primary language of e-commerce, and many e-merchants

have multiple-language web sites.
Does the fact that the commerce is electronic create any new legal issues?
There are -of course- many of the same issues in electronic transactions
as there are in paper-based transactions. However, they usually arise in
different context and need further analysis to resolve them in an
electronic transaction. This fact has led to a plethora of legislation on
international level. Many States have enacted Digital Signature
Statutes. There are many different types of digital signature statutes,
and Horning discusses their differences.
There is also activity at the international level. UNCITRAL drafted a
Model Law on Electronic Commerce, which parallels the E-SIGN Act
and UETA “Uniform Electronic Transactions Act” in US, and is
discovered by Reed.
This solves problems for intranational contracts, but create problems for
some international transactions. UNICITRAL attempted to harmonize
these by drafting a Model Law on Electronic Signatures, also discussed
by “Reed”(1). The real impact in this area has been created by the EU
Directive on Electronic Signature.
Historically, the path of development is so clear, till the UNICITRAL
Model Law on Electronic Commerce, then the UNICITRAL Model Law
on Electronic Signatures and the EU Directive came later.
An issue that arises in electronic commerce is one of the regulations by
governmental entities. What jurisdiction has the power to regulate what
occurs on the internet? There are many other issues which are not
expressly raised in this problem, but which will arise out of an electronic
commerce system. They include the content of information, protection of

(1)
https://www.reed.co.uk/ Career advices and upskill with courses.
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intellectual property, the structure of the system, jurisdiction for private

litigants, taxation and others.
I am going to talk about digital signatures as they relate to electronic
commerce. Electronic commerce is really a continuation of traditional
commerce, using new means of communication and interaction. The
buying and selling goods and services has been going on for millennia,
but we are now facing a phenomenon that’s widely referred to as
“disintermediation. Basically, existing structures and organizations for the
distribution of goods and services are being moved aside by virtual
enterprises, such as click-and-order- enterprises.
The fundamental obstacle impacting the contracting process in
cyberspace goes back 350 years, to the statute of Frauds adopted in
England in 1677. The concept of the Statute of Frauds, a concept which
has been carried forward in modern Western law, is that there should be
some formal recognition between contracting parties of the making of and
existence of their contractual relationship. The wise legislators recognized
this need in 1677 and said, “Put it in writing and sign it”. Written contracts
were the result.
Since 1969, we have been living and working in modern era of contractual
practice. E-mail, web forms, EDI (electronic data interchange) transaction
sets, the “click here on the I agree” button, and the click-wrap license, are
all used to create contracts.
Today, computers are not merely a means of communication that enable
and facilitate electronic commerce, but are capable of initiating that
communication. The role of a computer is developing from that of a
passive tool into an active participant in the electronic trading process. We
can envisage a world where electronic agents become sufficiently
animated as to generate agreements. In such a situation, the question that
naturally arises is whether a contract that has been generated and
conducted by an intelligent agent without any direct human intervention,
is legally binding and on whom. Would such an agreement be enforceable
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on the person who used that agent and gave it substantial autonomy to
take initiative and make decisions? (1)
“If machines are capable of replicating, or at least mimicking, processes
that are regarded as evidence of free will, when performed by human
beings, what are, are ought to be, the legal consequences of this
situation?”.
Electronic agents may be uses as mediators in electronic commerce. In
order to establish the role of electronic agents in e-commerce, a model
known as the Consumer Buying Behavior (CBB), Model was devised by
Maes, Guttman, and Moukas, who are members of the software Agents
Gorup at MIT (Massachusetts Institute of Technology) Media
Laboratory(2).
There are stages for e-commerce contracts on international level:
(1) need identification, (2) product brokering, (3) merchant
brokering, (4) negotiations, (5) purchase and delivery, (6) product
service and evaluation. Once the buyer becomes aware of some unmet
need (need identification), a number of product alternatives are retrieved
and presented to him based on buyer-provided criteria (product
brokering). A number of alternative merchant suppliers are then provided
based on buyer-provided criteria (merchant Brokering). Once the product
and the merchant have been selected, the terms of the transaction are
negotiated (negotiation), following which the product is purchased and
delivered. The last stage of the model involves product service,
customer service and an evaluation of the satisfaction of the overall
buying experience and decision.
Only persons who are legally capable of contraction, may enter into a
binding contract. This in practice means that only natural persons or legal
(1)
Ralph H. Folsom, Michael Wallace Gordon, John A. Spanogle, Jr., International Business
Transactions, mentioned reference, Page 198 and next.
(2)
The Media Lab is home to an interdisciplinary research culture where art, science, design, and
technology build and play off one another.
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persons have the legal capacity to contract. Within these categories, the
capacity to contract is the rule, incapacity is the exception, e.g., minors,
and persons who have been interdicted or incapacitated are not deemed to
have the requisite capacity to enter into a legally binding contract.
It may be rather tempting to consider applying the notion of agency to
contracts formed through the use of electronic agents. After all, one might
argue, does not an autonomous electronic agent that has the capability to
execute agreements without any human intervention or awareness, serve
the same function as a similarly instructed human agent of a party? This
view has been put forward by Professor Fischer(1), but has been subjected
to a number of criticisms.
Under Common law, the agent must accept his mandate, which means
that the agent has a free will. Moreover, in the law of Agency, there is
a presumption that both principal and agent are two separate
persons. At common law, the word “agency” represents a body of
general rules under which one person, the agent, has the power to
change the legal relations of another, the principal.
It is interesting that the use of intelligent agents is implied by Article (2)
of the UNCITRAL Model Law, which provides that the originator of a
data message includes both “a person by whom or on whose behalf” a
message is purported to have been sent. The Article-by- Article Remarks
provide that “data message that are generated automatically by computers
without direct human intervention are intended to be covered by
subparagraph”. (2)
- Overview on the Main Regulations Governing E-Commerce
Contracts in Egypt (Characteristics of E-Commerce Contracts):

(1)
Appointed to South western’s faculty in 1976, Professor Fischer was recognized for his
outstanding teaching and contributions to Southwestern and the legal community.
(2)
Ralph H. Folsom, Michael Wallace Gordon, John A. Spanogle, Jr., International Business
Transactions, mentioned reference, Page 200 and next.
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Although e-commerce legislations are currently adopted in many

countries in the Middle East, there is no specific unified e-commerce law
in Egypt till now. Instead, e-commerce in Egypt is subject to the general
rules governing commerce in general including the Civil Code, the Penal
Code, the Commercial Code no. 17/1999, the Consumer Protection Law
no. 181/2018 (the “CPL”) and the Intellectual Property Rights Law. In
addition, e-commerce is subject to regulation under different laws that
address digital aspects of e-commerce such as the Media Law, the
Personal Data Protection Law, the Cybercrimes Law, the E-signature Law
and the electronic payment regulations.
On the contrary, Saudi Arabia, for example has adopted a unified e-
Commerce law in 2019 to regulate and censor the transactions conducted
online as well as ensuring consumer protection. Also, the UAE has
thoroughly regulated ecommerce by issuing the Electronic Commerce and
Transaction Act in 2006, whereby it governs online contracting, and create
a legal framework for executability of both electronic contracts and
electronic signatures. In Lebanon, Law no. 81/2018 on Electronic
Transactions and Personal Data was passed, which provides both persons
and businesses a higher level of legal protection and security. The
Tunisian e-commerce law no. 83/2000 was also passed and addresses
electronic trade and transactions in Tunisia for the first time.
A- Consumer Rights and Protection:
What is the purpose of the Consumer Protection Laws and who is
the consumer?
One of the primary objectives of establishing a unified law for e-
commerce in the Middle East is the protection of the consumers’ rights.
Hence, many countries in the Middle East have issued a separate law
regarding consumers protection to enhance a wider range of protections
to consumers, including protections from false or misleading
advertisements, or hazardous products. That said, in Egypt, the CPL is
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issued to address Business to Consumers (B2C) transactions, for the

purpose of guaranteeing and defending the consumer’s fundamental rights
regarding the goods and services that the consumer buys, and the
businesses they deal with at the market. In the same respect, UAE has also
issued the Consumer Protection law no. 15/2020 (the “UAE CPL”), in a
bid to protect consumer privacy and impose hefty penalties on whoever
infringes the consumer rights stipulated under the UAE CPL.
Further, the Egyptian Data Protection Law no. 151/2020 (the “DPL”)
prohibits any electronic communication for the purpose of direct
marketing to any data subject, unless the following conditions are met:
1. Obtaining the consent of the data subject: The Data Protection Law no.
151/2020 defines data subject as: “any natural person to whom
electronically processed personal data is attributed which identifies them
legally or factually and enables their identification from any other.
2. the electronic communication includes the identity of its creator and
sender;
3. the sender has a valid address in order to be reached;
4. the communication indicates that its purpose is direct marketing; and
5. setting clear and accessible mechanisms to allow the data subject to
refuse electronic communication or to withdraw his consent to receiving
such communication.
Furthermore, the DPL obliges the sender of any electronic communication
for the purpose of direct marketing to undertake the following:
1. Specifying a defined marketing purpose;
2. refraining from disclosing the contact details of the data subject; and
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3. maintaining electronic records evidencing the consent of the data

subject, to receive electronic marketing communication and any
amendments thereof, or their non-objection to its continuity for a duration
of three years from the date the last communication has been sent.
B- Protection against Deceptive Behavior in E-commerce contracts:
The CPL aims at shielding the consumer from being deceived by unethical
practices and acts from the producer or the advertiser that leads to creating
a wrong or misleading impression about the product to the consumer or
that renders him confused or mistaken. Hence, any acts that involve
deceptive behavior to elements such as: the product’s nature, essential
characteristics, components or quantities, the product’s origin, weight,
size, method of manufacture, production date, expiry date or the
characteristics of the product and the expected results of its use; will be
penalized with a fine that varies between EGP 50,000 and EGP 2 million
or twice the value of the product subject violation.
C- Online Contracting:
A. What are the obligations imposed on suppliers prior to online
contracting?
Pursuant to the CPL, the suppliers shall provide the consumer with
information that enable the latter to make the decision of contracting, such
information shall include, the supplier’s data, the data of the product
which must include its price, taxes, shipping costs, guarantee, and
provisions of cancelling the contract.
B. Are E-signatures and E-contracts legally binding?
The Egyptian E- Signature Law no. 15/2004 (the “ESL”) gave the E-
signature, and E-contracts, within the scope of civil, commercial and
administrative matters, the same evidential value as signatures on paper.
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The ESL and its executive regulations stipulate that, in order to consider
the electronic signature and documents valid in proof, the following
conditions shall be met:
1. The electronic signature is linked exclusively to the signatory;
2. The signatory shall have sole control over the electronic media used
(this shall be technically available to determine the source of creating
electronic writing or official or customary electronic documents, and the
degree of their creator’s control over this source); and
3. The possibility of detecting any modification in the data of the
electronic document or signature.
4. In the event that electronic writings are issued without human
intervention, partially or totally, their authenticity shall be established
whenever the time and date of their creation can be determined with a
proof that those writings have not been tampered with.
D- Liability of marketplace intermediaries:
A. Who are considered marketplace intermediaries?
The CPL sets its obligations only on “suppliers” and “advertisers”, hence
there is no specific legislation in Egypt that regulates marketplace
operators. The UAE CPL reiterates similar definitions.
Unlike the CPL in Egypt, the e-commerce Law in Saudi Arabia did not
distinguish between the supplier and advertiser, as it made a general
definition for anyone engaging in e-commerce activities (the “Service
Provider”). The e-commerce Law in Saudi Arabia divides Service
Providers into two categories: a) The seller who holds commercial
records, and practices e-commerce. An advertiser is defined under the
CPL as any person who advertises or promotes a service or goods
personally or through another person through any media or advertising
means, including digital means.; and b) the practitioner who does not hold
commercial records, and practices e-commerce activities.
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B. What are the implications of selling defective products?

Product liability is regulated under the Egyptian Commercial Code no.
17/1999 (the “Commercial Code”). The CPL regulates the product
liability in the context of consumer transactions. The Commercial Code
provides that the producer and the distributor of a product shall be liable
to any person suffering harm caused by a product, if the harmed person
proves that such harm resulted from a defect in the product in question.
The Commercial Code also deems a product “defective” if sufficient
precautions were not taken in product design, manufacture, assembly,
processing for consumption, storage, packaging, method of display or use,
so as to prevent the occurrence of harm or to warn against the possibility
of such harm. Whilst the CPL, as previously mentioned regulates product
liability in the context of consumer transactions. It distinguishes between
the liability of the supplier, the manufacturer/producer and the
distributor/seller, as follows:
1. The manufacturer is liable for any damages caused by the product if it
is proved that such damages were caused due to a defect in its design,
production or installation;
2. The distributor/seller is liable when the damage caused by the product
was due to the way the product was prepared for consumption,
preservation, packaging, trading or display; and
3. The supplier (including the manufacturer and all persons in the supply
chain till the customer) is liable for damages caused by the product due
to the wrong use if it is proved that such damage was due to that the
supplier failure to take necessary precaution to prevent the damage or
warn the customer of the occurrence of such damages. In all events, all
suppliers, including, manufacturers, producers, distributors, and sellers
shall be jointly liable vis -a -vis the customer.
C. What are the implications of selling counterfeit products?
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Article (67) of the Commercial Code no. 17/1999, Article (27) of the CPL,
Pursuant to Law no. 48/1941 on combating fraud and deception, a penalty
of imprisonment for a period of no less than one year and/or a fine of no
less than EGP 5000 and not exceeding EGP 20,000, or the equivalent
value of the product subject of the violation, whichever is greater, shall be
imposed on anyone who deceives or attempts to deceive the consumer in
any of the following aspects:
1. the reality of the products, their nature, their essential qualities;
2. the type, origin, or source of the products in cases where, such type,
origin, or source is considered a fundamental reason in buying the
product; or
3. the number, quantity, size, amount, weight, capacity of the product.
The Intellectual Property Law no. 82/2002 (the “IPR”) further penalizes
the sale, offering for sale or possession for trade of counterfeit products
with imprisonment for a period not less than two months and/or a fine
between EGP 5000 and EGP 20,000. In case of repetition, the penalty
shall be imprisonment for not less than two months in addition to a fine
between EGP 10,000 and EGP 50,000. In all cases the court may order the
confiscation of the products subject of the crime, or any relevant gains
and any tools used to commit the violation.
The court may also order the closure of the entity used by the violator to
commit the crime for up to 6 months. Store closure shall be mandatory in
case of recidivism.
Also, article (117) of the IPR grants the court the right to order the
destruction of the illegal marks, counterfeit goods, products, packaging,
invoices, correspondence, signboards, advertisement, or any other item
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bearing the illegal mark. It may also order the destruction of the machines
used specifically in the act of infringement.”(1)
E- Online Payment:
There is raising awareness among Middle East countries regarding the
importance of regulating payment through non-cash methods, due to its
importance to the economy.
Egypt has issued the Law no. 18/2019 (the “Non-cash Payment Law”) on
organizing non-cash payment methods. The Non-cash Payment Law
defines non-cash payment method as: “each payment method results in
adding in one of the banking accounts of the beneficiary like deposit
orders, transfer, discount, credit cards and paying using smartphones or
other methods being recognized by the governor of the Egyptian Central
Bank”.
Establishing the importance of using online payment methods, the Non-
cash Payment Law provided that all public authorities, public legal
persons and companies owned or most owned by the state to pay monetary
receivables to its members and workers through non-cash methods.
Private legal persons and establishments of all kinds are also obliged to
pay all the dues of their employees, experts, chairmen and members of
boards of directors and committees, and social insurance contributions by
means of non-cash Payments Law no. (18/2019).(1)

(1)
https://www.jpo.go.jp/e/system/laws/gaikoku/document/index/egypt.

(1) https://www.adsero.me/storage/uploads/blogs/pdf/qPF4xsztVql1Z48XA2ec30FrFql7mp9
QOJ176XHl.pdf.
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A Case

There is a contractual Agent in Egypt for selling FIFA PlayStation Games.

He made a contract agency with the Company (Principal) in Switzerland,
to open a new market for their products in Alexandria. The time condition
or limit clause in the contract is for Five years. They agreed upon the
commission, which is 20% of the payment at the end of every year in the
contract. Also, they agreed upon making the agent the only one in selling
this product in this area (this condition is due to the legal nature of the
contractual agency). After two years, the agent failed in his mission, as he
found that other contractual agent is selling the same product in the same
area. So, the agent filed a case in front of Alexandria Economic Court.
The plaintiff (the agent) claims that the principal (defendant) broke the
condition of their contract agency, as he must be the only contractual agent
for selling his product in Alexandria due to the condition in the contract
and also due to the legal nature of the contractual agency, but the
defendant made another contract agency with another agent to sell his
product in the same area, so he failed to make good sales percentage of
the product, in spite of the fact that he made a lot of advertisements and
opened new stores in main areas in Alexandria, so as to make a good plan
for selling the principal’s product, but he failed due to the contractual
breach of the agency contract by the principal. So, the plaintiff asks the
court, to decide that the defendant must give him a compensation and to
decide also termination of the court after the plaintiff paid to him all the
expenses that he endured.
Question
1) How will the plaintiff (agent) prove his claim (by which legal
means)?
2) In case the plaintiff succeeded to prove his claim, does the court
decide a termination of the contract? Does the court decide a
compensation for him? What are the reasons for this judgement?