Monday, 25 May 2015

ECommerce formalities back in the CJEU spotlight

For an ecommerce lawyer who spent far too many hours at the turn of the millennium pondering how writing and signature requirements could be complied with electronically, reading the CJEU decision in El Majdoub v CarsOnTheWeb (C322/14, 21 May 2015) is something of a throwback.

The 2001 Brussels Jurisdiction Regulation, like its predecessor the Brussels Convention, requires a jurisdiction agreement to be in writing or evidenced by writing.  In an attempt to update the writing requirement for the electronic age, the Regulation added a new gloss.  Article 23(2) provides that “any communication by electronic means which provides a durable record of the agreement” shall be equivalent to writing.

The CarsOnTheWeb click-wrap process provided a box to accept its terms and conditions. The terms and conditions themselves, containing the choice of court provision, were behind a hyperlink with the rubric ‘click here to open the conditions of delivery and payment in a new window’.  The CJEU analysed the process:

“it is an essential feature of the facts of the case in the main proceedings that a potential purchaser must expressly accept the seller’s general terms of sale by clicking the relevant box before making a purchase. However, that operation does not automatically lead to the opening of the document containing the seller’s general terms, as an extra click on a specific hyperlink for that purpose is still necessary.” [21]

El Majdoub argued that the process did not provide a durable record of the agreement, since a window containing the terms and conditions was not automatically created.

The CJEU disagreed. Clicking on the relevant box expressly accepted the terms and conditions. Because the terms and conditions could be saved or printed, that possibility of creating a durable record was sufficient regardless of whether the purchaser actually durably recorded the terms and conditions.

The CJEU considered its 2012 decision in Content Services (Case C49/11). In that case it held that a hyperlink to terms and conditions did not satisfy the Distance Selling Directive (now superseded by the Consumer Rights Directive) requirement that a consumer should receive written confirmation or confirmation in another durable medium.  Distinguishing Content Services, the Court said in CarsOnTheWeb:

“both the wording of Article 5(1) of Directive 97/7, which expressly requires the communication of information to consumers in a durable medium, and the objective of that provision, which is specifically consumer protection, differ from those of Article 23(2).”

Requirements of form have a long history. They tend to be technology-specific, causing problems when an unforeseen new technology arrives.  

In the case of durable form the EU legislature has sought to identify the essence of an old technology requirement – writing - and translate it into a new medium. 

The risk with that approach is that the newly articulated formality does not accurately reflect the characteristics of the previous technology and, when interpreted, may turn out to be more onerous rather than technology-neutral.

In Content Services the CJEU said:

“a substitute for paper form may be regarded as capable of meeting the requirements of the protection of the consumer so long as it fulfils the same functions as paper form.”

It went on:

“Where a medium allows the consumer to store the information which has been addressed to him personally, ensures that its content is not altered and that the information is accessible for an adequate period, and gives consumers the possibility to reproduce it unchanged, that medium must be regarded as ‘durable’ within the meaning of that provision.”

Paper, however, is not tamperproof. Some paper is flimsy.  The Australian Electronic Commerce Expert Group identified the risk of overstating the qualities of previous technology in its 1998 Report to the Attorney-General:

“There is always the temptation, in dealing with the law as it relates to unfamiliar and new technologies to set the standards required of a new technology higher than those which currently apply to paper and to overlook the weaknesses that we know to inhere in the familiar.”

While the CJEU’s decision in CarsOnTheWeb is welcome, it is debatable whether the court should have had to interpret a requirement of form based on durability in the first place.

In 1954 England had the good sense to repeal most of S.4 of the Statute of Frauds, the 1677 legislation that rendered a variety of contracts unenforceable without a signed note or memorandum in writing.  At the same time S.4 of the Sale of Goods Act 1893, which required writing as a condition of the enforceability of contracts for the sale of goods of the value of £10 or upwards, was repealed. 

These reforms followed the recommendations of an official Committee in 1937, which had observed:

“'The Act', in the words of Lord Campbell . . . 'promotes more frauds than it prevents'. True it shuts out perjury; but it also and more frequently shuts out the truth. It strikes impartially at the perjurer and at the honest man who has omitted a precaution, sealing the lips of both. Mr Justice FitzJames Stephen ... went so far as to assert that 'in the vast majority of cases its operation is simply to enable a man to break a promise with impunity, because he did not write it down with sufficient formality.’ ”

Even in England, a relatively liberal jurisdiction in this regard, some requirements of form remain. Section 4 of the 1677 Act still applies to guarantees. Requirements of signature, writing and the like apply to some specific types of transaction such as an assignment of copyright. 

Consumer protection laws, such as those regulating consumer credit, tend to impose detailed formalities.  Even when adapted to the electronic environment, such requirements of form can still pose vexing questions. In Bassano v Toft (2014) the court considered whether an electronically generated document had been signed by clicking on an ‘I accept’ button, and if so whether the signature was in "the space in the document indicated for the purpose", as required by the applicable consumer credit regulations. Popplewell J held that both were satisfied:

“the word "I" can be treated as being the mark which is unambiguously that of Mrs Bassano affixed for the purposes of authenticating and agreeing to be bound by the terms of the document”.

In the 1990s requirements of form began to be perceived as an obstacle to electronic commerce. What constituted writing or signature in an electronic environment? How do you satisfy a legibility requirement when the consumer controls the screen display? What constitutes a document? Mr Justice Lightman gave an answer to that question in 1999 in Victor Chandler International v HM Customs and Excise:

“In summary, a document is a material object which contains information capable of extraction from it (e.g. a tape so long as it is not blank). Mr Oliver (Counsel for VCI) properly disavowed that he was a document: the repository of information must be inanimate: neither a person nor A.P. Herbert's "negotiable cow" (referred to in Uncommon Law, p.201) can constitute a document.)”

Some legislative initiatives such as the US Uniform Electronic Transactions Act promulgated in 1999, followed by the federal E-SIGN Act in 2000, sought to facilitate electronic transactions by rendering requirements of form, as far as possible, medium-neutral. As the Chair of the UETA Drafting Committee, Patricia Blumfeld Fry, memorably explained:

“. . . UETA preserves the requirements concerning the manner of sending, posting, displaying, formatting, etc. contained in other State law. If other State law requires information to be furnished in a conspicuous manner, UETA §8 states that you can furnish the information electronically, but must do so in a conspicuous manner. If other State law requires the information to appear in purple ink sprinkled with glitter, you can furnish the information electronically only if you can assure that it appear to the recipient in purple sprinkled with glitter."

The UK Electronic Communications Act 2000 took a different approach, providing a power to amend existing legislation piecemeal to facilitate electronic transactions. In 2001 a Law Commission Advice increased confidence that e-mails and website trading were capable of satisfying formal requirements of writing and signature. Subsequent court decisions have confirmed the traditionally liberal English view of what can constitute a signature including, for instance, typing one’s name at the end of an e-mail.


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