Technology Neutral Contracting

Article by Zoe Fahy and Nick Rudgard

The Government stated in its March 1999 Consultation document that 'as far as possible the law is technology neutral in its application'. In short, its intention was to create a level playing field to ensure the risks associated with on-line contracting are not too far removed from those arising from traditional paper based contracts. Unfortunately, this assumption is flawed. The reality is that contracting on-line presents different challenges for modern business.

Pre-contract considerations

Before contracting online, businesses should establish any restrictions on their potential customer base. Once a business launches its website, there are no geographic boundaries - unless blocking technology or passwords are employed. Theoretically anyone with access to the Internet can access the website.

There are several reasons why businesses may choose to restrict their activities either geographically or to a particular market. Many have long established distribution networks, both in their home territory and abroad and they may be reluctant to encroach upon existing arrangements.

Also, many countries have in place mandatory laws, (for example prohibiting the sale of certain products such as alcohol or services such as gambling), or standards which may apply to any contract with a party based in that country. Whilst a business cannot practically investigate laws world-wide, it can address such issues, either in its terms and conditions, or by placing notices on its website.

Another difficulty is ascertaining the identity of the customer, and ensuring that any communications remain secret and confidential. How can you be sure that the individual/company with whom you are contracting is who they actually say they are, that they actually sent the communication, or that it hasn't been intercepted by an unauthorised person, or even altered by them?

The use of digital signatures (now admissible in court pursuant to the Electronic Communications Act 2000) can alleviate such risks. A common misconception is that a digital signature is actually some form of signature, when in fact it is really a form of technology. The originator of a communication uses a "private key" (a piece of software based on mathematical algorithms) to scramble the communication and send it to the recipient. The scrambled communication is actually the "digital signature". By using the public key, the recipient can unscramble the message...