It seems like a no longer accurate statement to say the world is “moving online:” it’s already there. There are more computers in the home and businesses than ever before, the Internet and mobile data plans keep us connected, and companies are signing contracts and making deals without ever actually meeting the person on the other side. Unfortunately, it seems that all too frequently the world moves ahead while laws get left behind and only catch up out of necessity.

In an official Message to the Senate, released February 10, 2016, President Barack Obama outlined his opinion of and interest in the UN Convention on the Use of Electronic Communications in International Contracts (“Electronic Communications Convention”). The Convention was adopted on November 23, 2005, and entered into force on March 1, 2013. As of yet, the United States has not signed or ratified this Convention. In his message, President Obama acknowledges that the Electronic Communications Convention is quite similar to State laws enacted throughout the US, which are based on the 1999 Uniform Electronic Transactions Act (“UETA”). It’s also similar to federal law, namely the Electronic Signatures in Global and National Commerce Act.

Ratification and implementation of the Electronic Communications Convention would create universal legal uniformity throughout the US and a sense of predictability that is currently missing. The result, President Obama provides, could be a reduction in costs for US businesses that use electronic communications and engage in electronic commerce.

The Electronic Communications Convention aims to facilitate the use of electronic communications used in international trade by assuring businesses that the contracts they’re signing and other communications that are exchanged via email and other electronic methods are just as valid and enforceable as the traditional paper contracts. The Electronic Communications Convention works to remove obstacles created by older international laws, including the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and the UN Convention on Contracts for the International Sale of Goods.

President Obama’s message goes on to advise the Senate that the US was the one to propose the Electronic Communications Convention and actively participated in its discussions and negotiations. The President suggests that adoption of the Convention would be a sign for other nations to do the same and could result in further facilitation of electronic commerce across borders.

The President outlines in his message how the Electronic Communications Convention would be adopted into US law and the process that would be followed, including the presentation of the Convention to Congress. He ends his letter by requesting that the Senate provide “early and favorable consideration… and give its advice and consent to ratification.”

If accepted and ratified, the United States would be the 8^th party to ratify the Electronic Communications Convention.

For more information regarding the Electronic Communications Convention and how it could impact you and your business contact Revision Legal’s Internet attorneys through this form or by calling 855-473-8474.

Image credit to Flickr user Garfield Anderssen

The UN Electronic Communications Convention: Current Status

President Obama transmitted the UN Convention on the Use of Electronic Communications in International Contracts to the Senate for advice and consent to ratification in February 2016, as described in the original post above. As of 2024, the United States has not ratified the Convention. The Treaty sits in the Senate Foreign Relations Committee, awaiting floor action. This is not unusual for international commercial law conventions — the UN Convention on Contracts for the International Sale of Goods (CISG) sat before the Senate for several years before ratification in 1986 — but it means that US businesses engaged in cross-border e-commerce continue to operate under a patchwork of domestic and international frameworks rather than a unified global standard.

The Convention currently has 11 contracting states, including China, Honduras, Montenegro, and Singapore. For US businesses dealing with counterparties in those jurisdictions, understanding the Convention’s framework — even without US ratification — is relevant because the Convention may govern the counterparty’s obligations under the contract.

The Domestic Legal Framework for Electronic Commerce

While the international convention process moves slowly, US domestic law provides a robust framework for electronic commerce. The key statutes are:

• ESIGN (Electronic Signatures in Global and National Commerce Act), 15 U.S.C. §§ 7001-7006. The federal baseline. ESIGN establishes that electronic signatures, contracts, and records cannot be denied legal effect solely because they are electronic. It applies to transactions in or affecting interstate or foreign commerce and preempts inconsistent state laws.
• UETA (Uniform Electronic Transactions Act). Adopted by 49 states and the District of Columbia, UETA provides state-level rules for electronic transactions not covered by ESIGN. Most states adopted UETA with modest modifications, creating near-uniform domestic standards.
• CISG (UN Convention on Contracts for the International Sale of Goods). The US ratified the CISG in 1986. The CISG automatically governs contracts for the international sale of goods between parties in different CISG contracting states, unless the parties explicitly exclude it. Most US practitioners routinely exclude the CISG in international contracts to avoid uncertainty about how unfamiliar provisions will be interpreted.

Formation of Electronic Contracts: Key Legal Issues

The formation of a valid electronic contract requires the same elements as any contract: offer, acceptance, and consideration. In the electronic context, the key formation questions revolve around whether there was a valid offer and acceptance, and whether the parties actually agreed to the terms:

• When is an electronic communication an offer? Under the Electronic Communications Convention and under the CISG, an offer becomes effective when it reaches the offeree. For electronic messages, “reaches” means when the message enters the offeree’s information system in a retrievable form. For US domestic contracts under ESIGN and UETA, similar principles apply — an electronic record is received when it enters the recipient’s information processing system.
• Automated transactions. E-commerce websites generate contracts automatically — a customer clicks “Buy Now,” the website processes the order, and a contract is formed without any human review on the seller’s side. ESIGN and UETA both validate automated electronic transactions. The Electronic Communications Convention also addresses automated message systems, clarifying that a contract can be formed through the interaction of an automated message system and a natural person.
• Input errors. What happens when a customer makes a data entry error — ordering 100 units when they meant to order 1? The Electronic Communications Convention provides that a person who makes an error using an automated message system has the right to withdraw the erroneous part of the electronic communication if: (1) the automated system did not provide the person with an opportunity to correct the error; and (2) the person notifies the other party of the error as soon as possible after learning of it. UETA has a similar provision under Section 10.

Governing Law and Jurisdiction in Cross-Border E-Commerce

One of the most practically important questions for e-commerce businesses operating across borders is which law governs the contract and which courts have jurisdiction over disputes. In the absence of a governing law clause, courts apply conflict-of-laws rules that can produce unpredictable results — particularly when the seller is in one country, the buyer is in another, and the payment processor is in a third.

Most e-commerce terms of service include governing law and venue clauses specifying that disputes will be resolved under the law of a particular state and in the courts (or arbitration forums) of a particular jurisdiction. These clauses are generally enforceable in domestic US transactions, and in many cross-border transactions, provided they do not violate the mandatory consumer protection laws of the buyer’s home jurisdiction. EU consumer protection law, for example, prohibits enforcement of governing law clauses that deprive EU consumers of the protections to which they are entitled under their home country’s law.

Electronic Records Retention and Evidence

Electronic contracts create obligations not just at formation but throughout the contract’s life. ESIGN provides that an electronic record satisfies any legal requirement to retain a record “in writing,” provided the electronic record accurately reflects the information in the original record and remains accessible to all parties for the period required by applicable law. E-commerce businesses must maintain accurate, accessible electronic records of contracts, order confirmations, privacy notices, and consent records — both for compliance purposes and to support enforcement of their agreements in litigation.

In litigation, electronic records are subject to the Federal Rules of Evidence’s requirements for authentication and the Federal Rules of Civil Procedure’s electronic discovery rules. Businesses that cannot produce complete, unaltered records of their electronic contracts face adverse inference arguments and potential sanctions. A records retention policy that specifies what electronic records are kept, for how long, and in what format is an essential element of any e-commerce legal compliance program.

Talk to an Attorney

Electronic contracts are the backbone of e-commerce, and getting the legal fundamentals right — formation, terms, governing law, records retention — determines whether those contracts are enforceable when it matters. Revision Legal’s internet attorneys advise e-commerce businesses on contract drafting, terms of service, and cross-border transaction compliance. Contact us through the form on this page or call 855-473-8474.