E- Contracting

BBA 8th semester

 Introduction
• Contract are in essence an agreement between two or more parties
to conduct any business transactions.
• Such contract has to be valid and legally binding on the parties to
mutually benefit their interest and transaction.
• E- contracting support the electronic negotiation process by creating
standards for the production of legal documents with a digital
signature.
• E- contract is a kind of contract formed by negotiation of two or more
individual through the use of electronic means, such as e-mail, the
interaction of an individual with an electronic agent, such as a
computer program, or the interaction of at least two electronic
agents that are programmed to recognize the existence of a contract.
 Business phases of Contracting process
• Information phase: In the information phase the business
partner inform themselves about the market situation,
sectorial trends, potential contract partners, products,
services, prices and future conditions.
• Intention phase: In information phase information is provided
in an unstructured way and in a way which is not legally
binding, in the intention phase offers and initiations for treads
are presented in a structured way. The common mean to
express offers within electronic market are electronic catalogs,
which usually contains short reference to the product, a
reference to price as well as payment and delivery conditions.
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• Agreement phase: The agreement phase aims at establishing
a contract. This phase starts with the offer of one of the
potential contract partners fro created in the previous phase
and ends with the acceptance of this offer. During the
negotiation process the business partners are fixing the
details of the aimed contract based on the initial offer of the
intention phase. In the case of negotiation are successful,
this phase result in a contract between the partners.
• Settlement Phase: In the settlement phase the contract
parties fulfill the liabilities they accepted in the contract. The
phase ends with the contract performance.
 Generic service
• One of the important goal of an electronic negotiation process is
the conclusion of a contract or the provision and signing of an
electronic contract. Electronic contact have advantages as their
contents can be examined and processed by programs and
software agents for completeness.
• In order to fully realize the potential of an electronic negotiation
and completion process, an electronic contract must include
categories of information that answer the following questions:
• a. Who are the contracting parties?
• b. what is the content of the agreement?
• How is the electronic contract to be realized?
• Which basic legal conditions apply?
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• Generic services that can answer the questions are available.
• These cover the following aspects: Identifying the
contracting parties; electronic negotiation; contract
archiving; contract enforcement; and electronic arbitration.
• The identification of the contracting parties is regarded as a
generic service since each of the relevant certification
authorities can always be relied upon in different negotiation
processes.
• The negotiation services helps the market participants when
they are negotiating their points of agreement.
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• Making the use of electronic catalogs, the software
system determines the optimal conditions for
exchange and records these intended contract.
• If a contracting party doesn’t fulfill its obligations
then an assurance service must be used.
• If a legal dispute comes about despite these
precautionary measures and security measures,
then an online arbitration court can be consulted
for the purpose of conciliation.
 Structure of a contract
• Most written contracts have similar structure consisting of certain essential clauses,
irrespective of the subject matter of the contract. The general pattern of
paragraphs can be:
• parties to the contract :A commercial contract follows a typical structure starting
with the parties to the contract who are the people entering into the agreement.  
•  Recitals: This is usually followed by the recitals which provide some background to
the agreement.  Following this there is a definitions section which sets out how
certain words are to be interpreted within the contract.
• Operative provisions After this the main body of the contract follows which
includes the operative provisions of the contract.  This usually consists of
provisions which may be categorized as warranties and conditions.  If, for example
the contract is an agreement for the sale of goods it is usual for the agreement to
include provisions such as warranties as to title, merchantability and fitness for
purpose.
• Boilerplate):At the end of the agreement there is a list of Miscellaneous (or
Boilerplate) clauses.  These are standard clauses which are included in the majority
of contracts.
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•  Typical examples of this type of clause include the force majeure clause, the
entire agreement clause and the severability clause.  The force majeure
clause allows the contract to be terminated in the event of some unexpected
event outside of the control of the parties (sometimes referred to as an act
of god).  
• The entire agreement clause states that the contract forms the entire
agreement between the parties and that any prior discussions or
correspondence do not form part of the contract, whilst the severability
clause states that it is possible for the contractual clauses to be read
independently of each other in the event that one or more of them is found
to be unenforceable.
• Signature: Finally there is the signatures section and following this there
may ‘schedules‘; attached to the contract.  The schedule may list something
included in the contract in more detail, for example a price list.
 Digital signature
• Digital signatures are like electronic “fingerprints.”
In the form of a coded message, the digital
signature securely associates a signer with a
document in a recorded transaction. Digital
signatures use a standard, accepted format, called 
Public Key Infrastructure (PKI), to provide the
highest levels of security and universal acceptance.
They are a specific signature technology
implementation of electronic signature
(eSignature).
 How digital signature works
• How do digital signatures work?
• Digital signatures, like handwritten signatures, are unique to each signer. Digital
signature solution providers, such as DocuSign, follow a specific protocol, called 
PKI. PKI requires the provider to use a mathematical algorithm to generate two
long numbers, called keys. One key is public, and one key is private.
• When a signer electronically signs a document, the signature is created using the
signer’s private key, which is always securely kept by the signer. The mathematical
algorithm acts like a cipher, creating data matching the signed document, called a
hash, and encrypting that data. The resulting encrypted data is the digital
signature. The signature is also marked with the time that the document was
signed. If the document changes after signing, the digital signature is invalidated.
• As an example, Jane signs an agreement to sell a timeshare using her private key.
The buyer receives the document. The buyer who receives the document also
receives a copy of Jane’s public key. If the public key can’t decrypt the signature
(via the cipher from which the keys were created), it means the signature isn’t
Jane’s, or has been changed since it was signed. The signature is then considered
invalid.
Diagram
 Benefits
• The following are the main benefits of using digital signatures:
• Speed: Businesses no longer have to wait for paper documents to be
sent by courier. Contracts are easily written, completed, and signed by
all concerned parties in a little amount of time no matter how far the
parties are geographically.
• Costs: Using postal or courier services for paper documents is much
more expensive compared to using digital signatures on electronic
documents.
• Security: The use of digital signatures and electronic documents
reduces risks of documents being intercepted, read, destroyed, or
altered while in transit.
• Authenticity: An electronic document signed with a digital signature can
stand up in court just as well as any other signed paper document.
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• Tracking: A digitally signed document can easily be
tracked and located in a short amount of time.
• Non-Repudiation: Signing an electronic document
digitally identifies you as the signatory and that cannot
be later denied.
• Imposter prevention: No one else can forge your digital
signature or submit an electronic document falsely
claiming it was signed by you.
• Time-Stamp: By time-stamping your digital signatures,
you will clearly know when the document was signed.
 Legal affairs
• E-contract is any kind of contract formed in the
course of e-commerce by the interaction of two or
more individuals using electronic means, such as e-
mail, the interaction of an individual with an
electronic agent, such as a computer program, or
the interaction of at least two electronic agents that
are programmed to recognize the existence of a
contract.
• Each stage of E- contracting process gives rise to
legal issues.
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• Basic legal conditions for using electronic information and
communication services have existed for some time now. The
most important of these laws concern the following areas:
• Data Protection and Data security: Data protection means the
protection of data from incorrect use. In contrast, data security is
the protection of data from the loss or falsification. Both of these
concern are regulated in law.
• Copyrights and patents: Dealing with goods requires adjusting
and extending appropriate bills relating to copyright protection
and patents. Watermark must be embedded into information
objects, and when information objects are illegally copied and
used, it is important to prove that this is the case.
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• Right to domain name and trademark law: Each computer
connected to the internet possesses a specific number. In
addition, a specific name can be assigned to a computer to
identify it. Both the allocation of domain name and the regulation
of the requirement for a unique name are currently still in a state
of flu, although the initial legal framework associated with these
issues has been created at both national and international levels.
• Digital signature: Signature laws regulate how the allocation of
private and public keys and issuance of certificates are organized.
Asides from rules for the construction of a PKI infrastructure, the
most important of these are security regulations that concerns
the electronic exchange of legally secured documents.
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• International advertising guideline: the international
chamber of commerce in Paris has developed guidelines
concerning the online advertising. The point is that every
provider must reveal its identity to internet users. The
sending of messages on a massive scale is only allowed for
commercial newsgroup, and the sending of advertising
within the newsgroup is not exclusively forbidden.
• Since the internet is a global phenomenon, mere national
laws cannot suffice. Rather, a separate regions as well as
the world community as a whole must act to protect the
private sphere in the electronic market.