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Legal Challenges in E-Commerce Agreements
When parties enter into contracts face-to-face, it is easier to avoid mistakes compared to engaging in virtual contracts through the internet or phone. In electronic contracts, the entire agreement can be concluded within seconds with just a click of a button. These contracts are commonly referred to as click-wrap agreements.
Traditional paper-based contract law has specific rules governing matters such as jurisdiction, validity, formation, and modification of contracts. However, in online trading, applying these traditional concepts to electronic contracts presents significant challenges.
As the internet market continues to expand with new e-commerce methods, several legal issues arise. Below are some key challenges associated with e-commerce transactions:
1. Enforceability of Online Contracts
Enforceability is an issue due to the differences between civil law and common law systems. This causes uncertainty among citizens of different states regarding when the contract has come into existence. Consent is also a concern, as customers often do not have the opportunity to negotiate the terms and are required to accept the contract before completing their purchase.
2. Jurisdiction
Jurisdiction becomes complicated when determining where a contract was formed and which court has the authority to resolve disputes. A court must have jurisdiction over both the subject matter and the parties involved, which is difficult to establish in online transactions. As activities occur globally, servers may be in one country, the service provider in another, and the customer in a third, further complicating matters.
3. Data Protection
The security of sensitive and personal information provided during online transactions is a major concern. E-commerce providers must ensure they have robust data protection and privacy policies in place. Additionally, interfacing with payment gateways is another challenge, and contractual obligations on data protection and usage must be clearly defined.
4. Intellectual Property Rights
E-commerce transactions often involve intellectual property issues, including the protection of websites, domain names, trademarks, and other types of intellectual property against illegal misappropriation. There are also challenges regarding the rights involved when downloading, viewing, or printing protected works, as well as managing remuneration to right holders, detecting illegal use, and establishing liability.
5. Delivery Systems, Supply Chain, and Service Management
The lack of clear provisions related to online transactions can lead to unresolved customer grievances. For example, the Consumer Protection Act excludes services rendered free of charge, meaning users are only considered customers if an actual sale takes place. Courts have also ruled that intermediaries are not liable for infringements arising from third-party actions, as it is not always feasible to monitor every online advertisement.
6. Competition
E-commerce players may face issues such as price-fixing, tacit collusion, anti-competitive discrimination, or the refusal of access to third parties due to increasing competition.
7. Issues Related to Taxation
Taxation issues in e-commerce transactions include determining how to associate online transactions with a specific country, applying VAT, custom duties, and other taxation regimes to digital transactions. Additionally, there is a challenge in ensuring compliance with administrative requirements for keeping written records of commercial operations and registrations in accounting.
8. Legislative Developments
Legislative frameworks face challenges due to the rapid development of online technology and the difficulty of applying traditional regulations to the digital landscape. At the same time, technology offers solutions to the threats posed by new technologies. Therefore, both law and technology must evolve together to address emerging challenges.
If you are starting an e-commerce business, it is crucial to keep these legal considerations in mind. Any negligence in addressing these issues may lead to reputational damage, business risks, and even regulatory actions such as bans on services.
