Canada: E-Commerce And The Law

Last Updated: July 25 2001

This is the first of a series of articles to be published in the "Journal of Current Legal Issues" dealing with various issues regarding Internet and, in particular, electronic commerce, commonly known as "e-commerce". Our discussions do not purport to cover exhaustively all the issues relating to e-commerce, a task hardly possible given its continuously evolving nature, but rather to focus on selected aspects thereof with a particular emphasis on its impact on Canadian businesses and consumers. We will look at the present legal framework regulating e-commerce, as well as examine such issues as the impact of e-commerce on general contractual matters, copyrights, consumer protection, the Quebec Charter of the French Language, proof and commercial leasing.

You wake up in the morning and turn on your computer, that is if you bothered turning it off the night before. While your morning coffee is brewing, you go on a weather web site to check forecast for your area. You then drag your mouse to the CNN site to quickly glance at the news. With fresh coffee in one hand, you then point your mouse at the "Favorites" bar on top of your screen and log yourself into your private world of personal finance. You're in a rush, so hastily you make a few transfers of funds between your various accounts, pay your Hydro bill and check transaction history on your credit card. Due to the lack of time, you do not print any hard copies of the operations you have just completed. After all, it surely all got recorded somewhere, virtually that is. You then realize that you will be late for work as appears from the traffic report on your local radio station web-site. In order to make up for lost time, you launch Microsoft Outlook and send an e-mail to your boss with a Word document attachment - a highly confidential draft of a due diligence report your team had just completed a few days ago to which you made a few corrections at home the night before, said report being prepared in the context of a multi-million dollar acquisition. Just before jumping in the shower, you check the Yahoo financial site to see how your favorite stock is doing only to realize that if you do not purchase some of it now you may miss out on a great opportunity. So you log on to your financial institution's site in order to open a discount brokerage account and quickly do the necessary purchase of the shares. While going through the registration process, you are asked to read and agree (or not agree) to accept the content of a long statement which you certainly have no time to read. So in order to complete the

you click on the "I agree" icon and proceed to complete the transaction. Fresh out of the shower, you start panicking realizing that tomorrow is your wedding anniversary and given your work load there is no way for you to have the time to shop around for a gift for your spouse. So just before switching your computer off, you do a quick search on the net for a site where you could pick a present for you spouse with a 24-hour delivery facility. You find what you have been looking for and in a hurry go through the required steps to complete the purchase, last requirement being your credit card number which, although hesitantly at first, you finally release by clicking on the "Complete" icon, somehow reassured by the statement on the screen that it is all being done via a "secure connection".

The above scenario may seem exaggerated and smack of science fiction to some. To an increasing number of others, however, it is the reality of today.

Internet is a world without frontiers and as such it offers a significant number of advantages such as, to mention but a few, accessibility to information, swift communication, an unprecedented ability to exchange ideas and, last but not least, a brand new way to conclude business transactions. At the same time, the emergence of Internet, or electronic data interchange, as it is often referred to ("EDI"), has become a playground for such disturbing issues as child pornography, defamation, copyrights violation and unauthorized access to personal information. Furthermore, the phenomenal speed with which Internet has progressed in the recent years has caught legislators around the world off guard. The example in the opening paragraph was given to illustrate a point of the various issues that come into play when dealing with Internet. To point out but a few: security and confidentiality of information and messages transmitted via EDI, validity of concluded transactions, or the legal implications of clicking on the icon "I agree". It is therefore a matter of concern that the mind-boggling world of Internet still remains largely unregulated. This, fortunately, is beginning to change. Legislators have by now recognized the growing significance of EDI and the need to put into place effective legislation not only to deal with the present state of affairs but also to anticipate future developments in electronic communication whether by EDI, optical or other means. Generally, such legislation is still at the inception stage in most countries. Some of them are currently working on draft legislation focusing on matters ranging from e-commerce to protection of personal information. In others, such bills have already become law. Below, we provide a brief overview of the legislative developments with particular focus on Canada.

The pioneer of e-commerce legislation was the United Nations which in 1996 adopted a Resolution which ultimately gave rise to what is known as the "Model Law" on e-commerce. Acknowledging that an increasing number of international commercial transactions are concluded by means of EDI and other means of communication involving the use of alternatives to paper-based methods of communication and storage of information, the ambitious objective of the Model Law was, in broad terms, to provide individual States with an effective framework for introducing or modernizing their legislation as well as to provide standards for international uniformity with respect to e-commerce legislation. The main principle laid down by the UN blueprint for e-commerce legislation is that "information shall not be denied legal effect, validity or enforceability solely on the grounds that that it is not contained in the data message purporting to give rise to such legal effect, but is merely referred to in that data message". In this regard, "data message" is defined as "information generated, sent, received or stored by electronic, optical or other similar means including, but not limited to, EDI, electronic mail, telegram, telex or telecopy". To clarify, in the context of commercial transactions, for instance, unless otherwise agreed by the parties, an offer and the acceptance of an offer may be expressed by means of data messages. Where a data message is used solely in the formation of a contract, that contract shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose (Model Law, Art. 11). The idea behind this principle was to provide recognition that only because information is not provided in the traditional paper-form, such information should not be discriminated against and should have the same validity and enforceability as its paper equivalent. It is worth noting that the Model Law attempts to provide an effective framework for determining the validity and enforceability of transactions in the electronic environment. For instance, e-commerce relies quite heavily on the notion of incorporation by reference. In layman's terms, it means that an electronic message will frequently refer the recipient to related sites by way of hyperlinks or .pdf files (i.e. files in a particular text format) to complete the information transmitted. An example of such incorporation by reference is a distributor who offers a product for sale providing a very general description of the product while inviting the recipient to click on a hyperlink allowing direct access to the manufacturer's web site for detailed product description. Furthermore, the recipient is invited to open a .pdf. file to check the terms of warranty for the product. Under the circumstances, the validity of a concluded transaction between the recipient and the distributor will depend on a number of factors such as accessibility of the referenced web site or text, attached costs, if any, of such access, authentication of the owner or author of the site or text in question and communication of latest up-dates or correction of errors. In addition, in order to deal with the traditional elements regarding conclusions of contracts, the Model Law extends the meaning of such terms as "in writing", "original" and "signature". In this regard, the Model Law offers a set of guidelines or checkpoints to be used in determining the validity or enforceability of a transaction concluded electronically ranging from the sophistication of the equipment used by the parties, the nature of their trade activity (are they sophisticated buyers and sellers?), the particular statutory signature and documentary requirements in a given jurisdiction, the certainty of identification and intention of the parties and other relevant factors. The Model Law does emphasize its limitations by pointing out the existence of areas regulated by statutes prescribing particular forms of documentation and record as evidence of transaction validity. The example of wills, immoveable transactions, consumer protection laws are a few illustrations of such limitations.

The Model Law has so far proved an effective cornerstone for national legislation. The European Community has based its draft laws on e-commerce on the Model Law. In Canada, Saskatchewan was the first province to draft its legislation based on the UN document. However, Ontario was the first Canadian Province to enact such legislation, the "Electronic Commerce Act 2000" (Bill 88), which received royal sanction on October 16, 2000. Entitled "An act to promote the use of information technology in commercial and other transactions by resolving legal uncertainties and removing statutory barriers that effect electronic communication", the Ontario law incorporates the principles of the Model Law. It provides various definitions of the term "electronic" in order to cover existing and future technologies of communication confirming, in essence, that the use of electronic communication rather than paper documents does not in itself affect the legal validity of such communication. The law also introduces provisions dealing with public bodies in the context of electronic filings and payment, including requirements prescribed by the Minister of Finance. Finally, the law sets out principles regarding contractual transactions concluded electronically.

The National Assembly of Quebec tabled last year Bill No. 161 entitled the "Loi concernant le cadre juridique des technologies de l'information" affirming the principle entrenched in the Model Law with respect to the validity and enforceability of transactions concluded electronically, the whole with a view to harmonize national and international transactions. The Bill also addresses the issues of security and preservation of electronic communication. The specific provision of this legislation will be discussed in detail in our next issue.

On the federal level, the "Personal Information Protection and Electronic Documents Act" focuses on the protection of personal information and does not deal with contractual matters as these are in the competence of provincial jurisdiction. The Act addresses the issues of protection of personal information exchanged between public bodies, private businesses and individuals alike.

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.

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