Brazil: E-Commerce: An Outline

Co-authored by Franco Grotti

E-commerce is increasingly present in the day-to-day lives of people and companies worldwide, revolutionizing the business environment as a whole.

The major drive for e-commerce expansion was the Internet, the worldwide computer network that was soon to materialize into an affordable business mechanism.

This work addresses the e-commerce activities under Brazilian law, and focuses on some issues recently raised in connection with e-commerce deals.

First of all, it should be noted that the expression “e-commerce” currently encompasses not only business activities, but also the rendering of services. Despite the apparently improper use of the word “commerce” to cover activities governed by civil law, the expression “e-commerce” has been given a much greater latitude lately.

No laws or regulations have been issued to govern e-commerce activities in Brazil, despite the several initiatives currently underway in Congress to that end. From among such initiatives, we point out the following:

1. Bill No. 3173/1997 proposed by Amapá Senator Sebastião Rocha of the Labor Democratic Party (PDT), dealing with the documents released by and filed on electronic means;



2. Bill No. 1483/1999 proposed by São Paulo Representative Hélio de Oliveira Santos (PDT), instituting the electronic invoicing and digital signature for e-commerce deals;



3. Draft Bill proposed by the Brazilian Bar Association, São Paulo Chapter (OAB/SP), governing e-commerce activities as well as the legal validity of electronic documents and digital signatures (the “Bill of Law”). This Bill of Law refers to a public and private key certification system (by which an electronic document signed by its author under a public-key cryptographic system is treated as an original document), and lays down rules on the operation of public certification entities (all of which have public faith and credit) as well as private certification entities, also encompassing the regulation and inspection of such entities by the Judiciary Branch, among other measures; and



4. Bill No. 672/1999 proposed by Ceará Senator Lúcio Alcântara of the Brazilian Social Democracy Party (PSDB), also laying down rules on e-commerce activities. This Bill has relied on the 1996 UNCITRAL Model Law on E-commerce.

Until specific rules are set out to govern e-commerce in Brazil, the current body of laws and rules must be resorted to and adapted to account for this new business mechanism. Some jurists contend that new rules need not be created, as the development of business activities by electronic means, in and of themselves, would not make current laws outdated or inapplicable. Accordingly, offers made by electronic means must comply with the Brazilian Civil and Commercial Codes, as well as with the Consumer Protection Code (whenever consumer relations are into play). There are often a number of obstacles to application of such day-to-day directives, as they were primarily conceived to cover tangible goods and objects.

(iv) Validity Of Deals Made By Electronic Means

As Brazilian laws are quite flexible regarding the means to contract (according to article 82 of the Brazilian Civil Code, an act is valid whenever there are a capable agent, a licit object, and a manner either prescribed or not proscribed by law), it is clear that deals made by electronic means are fully valid, provided that no special mechanism need be adopted pursuant to law (Civil Code, art. 129). By extension, any transactions that are dependent upon a special mechanism for performance of the respective act—say, the purchase and sale of real properties dependent upon a public deed and respective registration at the Real Estate Registry Office—cannot be entered into by electronic means.

(v) Means Of Evidence

One of the major challenges and setbacks for the parties to this type of deal refers to the production of proper evidence. It is still unclear whether digital files are comparable to a document.

The lack of clear-cut legal definitions about what a document is has stirred up heated discussions in this specific area. The features necessary to classify an electronic file as a document are still a bone of contention among legal writers.

Some concerns shown by legal writers about e-commerce contracts cast further doubts about their evidentiary value, to wit: (i) such contracts do not bear the hand signature of the parties; (ii) the identity of the contracting party is uncertain (leading to grounded fears that a party may purport to be another in these contracts); and (iii) the integrity of their contents is not assured (an electronic contract may conceivably be unduly changed without leaving any trace of whoever has done so).

In light of such difficulties, some legal writers contend that the existence and extent of an electronic contract in court must be proven by technical expert investigation, in lieu of the attachment of a document.

(vi) A Few Hints On Contracting

Some precautions should be taken when doing business on the Internet for greater safety of the parties, as well as to assist in the production of evidence as regards a certain transaction.

In order to afford greater protection to the parties concerning their identity, such measures as the development of prior enrollment records and the adoption of passwords are highly advisable, in an effort to prevent any contracting party from operating in the stead of another.

In order to confirm the parties’ manifestation of intent and the performance of a juristic act, the e-mails exchanged during the transaction must be kept on file for a reasonable period.

In product offers on the Internet, the offeror must circumscribe the territory within which the offer is valid (as such offer may also be accessed offshore).

Unless on-line update mechanisms are adopted, whoever offers products must include a disclaimer stating that acceptance of the order is conditioned to product availability, thus being released from the obligation to deliver out-of-stock products.

Until specific laws are approved to govern e-commerce deals, it is strongly advisable that the parties sign (by hand) a preliminary contract stating that any deals carried out by electronic means will be fully valid and binding on them, provided that some procedures as those spelled out in this work have been met.

(vii) Safety – Cryptography And Digital Signature

The dissemination of trades by electronic means has prompted the development of techniques intended to provide such deals with greater safety. From among these mechanisms, there is cryptography, a technique consisting of encoding based on a set of symbols, the meaning of which is incomprehensible for those who do not have the respective decoding standards. The cryptography system is generally applied to protect the identification of contracting parties, as well as to ensure the authenticity and privacy of e-messages. In order to earn the trust and loyalty of customers, companies engaged in e-commerce activities have increasingly resorted to cryptography mechanisms.

Basically, there are two encrypting systems: (i) a symmetric system, utilizing one single key for message encoding and decoding; and (ii) an asymmetric system, which calls for the application of several supplementary keys for message encoding and decoding.

Digital signatures, in turn, stand for a cryptographic technology which allows for its user to be sure about who is the actual addressor of a message.

There are no rules governing the adoption of cryptography for private use in Brazil.

(viii) Confidentiality

Article 5, XII of the Federal Constitution reads that “the secrecy of correspondence and telephone communications is inviolable, except in the latter case based on court order to the contrary, in the events and to the extent prescribed by law for criminal investigation purposes.” What is now under discussion is whether the e-mails exchanged for completion of a business deal should be accorded this same protection.

There are few legal writings in this respect, and discussions are still incipient, most of them focusing on the environment (the Internet) where such (public or private) transactions are carried out, as well as on the definition of the extent of such inviolability rights warranted by the Constitution (i.e., whether they are also valid for data communications) or the nature of e-mails (e.g., open or closed correspondence). As for past court rulings on this subject, they are still scarce and courts are split in this regard.

(ix) Applicable Laws

As the deals carried out on the Internet often involve several foreign individuals and companies, it is important to check the laws governing the parties’ obligations.

Pursuant to article 9 of the Law of Introduction to the Civil Code, “in order to qualify and govern obligations, the laws effective in the country where such obligations are constituted shall apply”, and “the obligation ensuing from a contract is deemed constituted in the place where the proponent is based.” There is no consensus among legal scholars as to whether the provisions of the Law of Introduction to the Civil Code should necessarily be followed or, instead, the parties’ free will should prevail on certain conditions. The stand usually taken in this regard is that, in principle, the parties are free to choose the laws that will apply to the respective contract, with due regard for certain conditions.

(x) Taxation

Taxation issues are one of the most controversial issues when it comes to e-commerce.

Some e-commerce transactions pose no major problems in this regard, since there is no specific tax procedure applying only because a deal was made on the Internet. However, other e-commerce deals involve the trading of intangible assets, or else use electronic means to settle them (as for example, software downloading debited to the customer’s credit card), thus making it very difficult to adopt the current legal concepts and definitions to these cases.

(xi) Conclusion

Technology innovations and the law have never walked hand in hand. E-commerce is increasingly present in the day-to-day lives of persons the world over, and is now a practical and highly effective means to promote the sale of products and/or the rendering of services.

The society as a whole must now discuss and define the legal treatment to be afforded to the several controversial issues ensuing from e-commerce activities, without arriving at solutions that will translate into obstacles to the development of this new mechanism.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.