What are your views on the recent publication of the government's outline proposals on E-Commerce?

The consultation paper is available on the Government Website at www.ecommercegov.ie

1. General Outline

The consultation paper contains four sections:

Section A. Preliminary and General;

Section B. Legal recognition and non-discrimination;

Section C. Provision of Certification Services and

Section D. Miscellaneous.

2. Principal legal implications

The general thrust of the outline proposals is to give legal recognition to

1. signatures;
2. writing;
3. contracts

in electronic form. Parties, by agreement, may exclude the legislation .Existing legislation which requires that a document bear a seal or that witnesses be present will be disapplied to electronic agreements.

Signature:-

Two types of signature are provided for, an electronic signature and an advanced electronic signature. Most electronic signatures will be generated by the use of cryptographic methods.

Cryptography:-

Cryptography involves the disguising of electronic messages so that they can be transformed into unintelligible format temporarily and then reassembled and understood at a later stage. The science of cryptography is dedicated to the formulation of a mechanism to translate the data and involves the use of mathematical algorithms. Public key encryption is one method applied to digital signatures. Here parties communicating through electronic means have two "keys", a public key and a private key. One key is used to encrypt the plain text, creating "cypher text" and the other is used to decrypt the text , to translate it back into plain intelligible text.

The consultation paper provides that electronic signatures, contracts and writing will be legally valid and synonymous with contracts in paper form. The paper provides that an electronic signature or an advanced electronic signature will be admissible in the same way as a hand-written signature.

Opinion is sought here in relation to the feasibility of extending legal recognition to electronic signatures in particular in relation to areas covered by the Statute of Frauds, 1695.For example guarantees or contracts for the sale of land which need to be evidenced in writing in accordance with the Statute of Frauds.

3. Exemptions (7.4, 8.5, 9.5,)

An electronic signature, an electronic contract and electronic writing will not have legal effect in relation to

1. the Creation, Execution or Revocation of

a will, a codicil, or any other testamentary instrument;

trust or

a power of attorney;

2. Dealings in Real Estate
3. Court documents, such as Affidavits which need to be sworn

The Department is seeking views on the application of the Bill to these areas.

4. Service of Proceedings by electronic means.

Section 4.1 provides that service of any notices under the Act may be provided in electronic form by means of electronic mail as an alternative to the usual forms of service.

The Department is seeking views as to the feasibility of this. The section provides that notice will be effected by "addressing it to the person by name and sending it by electronic mail to him or her". The section would appear to imply that an electronic mail address is one which the addressee ordinarily accesses. The pivotal question of course will be the integrity of Electronic systems.

5. Contract issues: when is an electronic message sent and received.

This issue is vital in deciding when a contract or agreement is actually struck. Is it when the acceptance is sent? or when it is received .And how, in the Electronic context, do we define "acceptance", and "receipt". This issue is extremely important where the parties to an agreement are not in the same jurisdiction . To decide what law applies to a contract it is essential to know where the contract was "made".

In paper contracts and oral contracts a contract comes into being when the acceptance of an offer is communicated. Receipt means actual notice except for acceptance sent by post where acceptance is effective when the letter is sent. This is valid even if the letter never arrives. Do we need new rules for new technology or can we adapt the old rules?

10.3 provides that a document will be taken to have been "delivered" when (i) the electronic communication by which the document is sent leaves an information system under the control of the sender; and (ii) will be taken to have been received when the electronic communication by which the document is received enters an information system under the control of the recipient. This is so unless the contrary is proved.

Section 9.6 provides that the in the absence of agreement to the contrary, acceptance of any offer, amendment, cancellation or revocation will be of legal effect when expressed by means of electronic communications.

Although this provides some clarification in relation to the timing of offer and acceptance sent electronically, it does not solve the legal problem of whether acceptance of a contract entered into through electronic means is effected once the acceptance is sent (the postal rule) or whether it is effective once received. However, it would appear that the acceptance will take effect if, when sent by the offeree, it enters into an information system under the control of the recipient. Thus there is no requirement for the offeror to have actual receipt of the acceptance. In the absence of a technological fault preventing the message of acceptance entering into the information system controlled by the offeror, it would appear that prima facia the contract is created by the electronic assent of the offeree. Clearly this will need clarification and discussion.

Undoubtedly, and as is pointed out in the explanatory note inviting advice and comment, this will have implications for consumer protection law. For example, a document required under consumer law to be seen and reviewed by a consumer will be deemed to have been received by them simply when the message enters into their information system. This would suggest that the document would be deemed to have been sent to them and received by them irrespective of whether they had in fact read them. The burden of proving otherwise would lie with the consumer.

6. Provision of certification services.

A certification system provides that a "trusted third party" act as intermediary between parties communicating electronically. The intermediary certifies that a given key is linked to an individual or corporation and may operate a "key escrow" system.

The government proposes a Voluntary Certification System with a scheme to be set out by regulation. It is envisaged that a National Accreditation Board be established to administer the voluntary accreditation system.

This voluntary system is in line with Article 3 of the EU Directive on Electronic signatures. The directive requires that any system be "objective, transparent and proportionate". Article 3(2) provides that member states establish an appropriate system of supervision of certificate providers.

The Department are of the view that it may be necessary to provide for a system of mutual recognition of certification procedures throughout the EU.

7. Section 17- Liability of certification providers.

Providers would be liable for " any damage caused to any person who reasonably relies on such certificates , unless the certificate service provider proves that he has not acted negligently". The provider may , in issuing the certificate, place a limit on his liability.

There are several issues here on which the Department seek clarification:

1. Would it be convenient to limit the liability of certification service in order to promote their service in order to promote their establishment?
2. to what extent will contractual liability exclusions be applied?
3. to what extent will liability cover be priced into certification products and will this effect market up-take?
4. how can persons relying on certified signatures claim damages?

The question of liability exclusion will arise in circumstances such as where the provider loses control of the private key used to sign certificates or where the algorithm used to produce the signature is broken or forged.

8. Electronic writing, signatures and contracts as evidence

Section 12 allows for the admissibility of electronic signatures in legal proceedings. This is in accordance with Article 5 of the draft EU Directive on electronic signatures and the Uncitral Model Law on Electronic Commerce.

Sections 13 -15 provide for the admissibility of electronic contracts, electronic writing and electronic originals in legal proceedings.

9. Originals

Section 9.10 provides that where there is a requirement under law that contractual information should be presented or retained in its original form that requirement will be met by electronic communication if (i) there is "reliable assurance" that the information contained in the original document has not been altered in any way on route to being created in electronic form and (ii) where the information held electronically is capable of being displayed.

Section 9.12 sets out criteria for assessing document integrity. The criteria will be whether the information has remained complete and unaltered apart from the addition of any endorsement or other changes which arise in the normal course of the communications, storage and display and the standard of reliability required will be assessed in the light of the purpose for which information was generated and in the light of all relevant circumstances. This definition, in particular the toleration of changes arising in the normal course of communications, storage and display may lead to ambiguity and lack of certainty.

10. Retention of documents.

Section 9.3 provides that where legislation requires documents to be retained, such as in the case of employment records, then retention of documents in electronic form will satisfy that requirement provided certain conditions are met. The electronic contract must be retained in the format in which it was generated, sent or received, or in a format which can be demonstrated to represent accurately the information generated, sent or received. In addition, the information must be accessible so as to be usable and such information as is retained must enable the identification of the origin or destination of the electronic contract and the date and time when it was sent or received.

11. Export/import of cryptographic products.

The paper proposes no regulation in relation to the production, import and use of cryptographic products in Ireland. Export of such products will be regulated in accordance with EU regulations.

12. Domain Name Register

Section 18 sets out proposed regulations in relation to the Registration of Domain Names. Regulation of the following areas are proposed.

1. the designated registration authority or authorities,
2. the general form of such registration,
3. the period during which such registrations continue in force,
4. the manner in which, the terms on which, and the period or periods for which such registrations be renewed,
5. the circumstances and manner in which such registrations may be granted or refused by the registration authorities,
6. the right of appeal processes,
7. the fees, if any, to be paid on the grant or renewal of such accreditation’s and the time and manner in which such fees are to be paid,
8. any other matter relating to such registrations in respect of which it shall appear to the Minister to be necessary or desirable to make provision by regulations made under this section.

1. Whether agreements in the form of a will, a codicil, or any other testamentary instrument; trust or a power of attorney; Transactions involving real estate and Court documents such as affidavits ought to be excluded from the application of e-commerce legislation. Are these the only areas suitable for exemption?
2. Whether service of proceedings in electronic form would be feasible. Whether proof of sending proceedings in electronic form would imply receipt.
3. The feasibility of extending legal recognition to electronic signatures and writing in relation to areas governed by the Statute of Frauds 1695 to documents such as guarantees.
4. Should the legislation clarify the legal rules to be applied in order to assess when a contract in electronic form comes into being. Do we need to adopt rules specifically for electronic commerce or will the traditional rules of contract law graft seamlessly on to such agreements?
5. Whether the definition of "delivery" under Section 10.3 is correct and operable. Whether this ought to be elaborated on to comply with the wording of the EU draft directive providing that the contract is concluded when the recipient of the service has received acknowledgement of his acceptance and has confirmed such receipt.
6. Ought there to be a limit of liability for certification service providers (CSPs). If so how should they be constructed.
7. Ought there to be regulations governing the production, import and use of cryptography products in Ireland and should their export be regulated in accordance with Irish law.
8. How should registration of domain names be regulated in Ireland.

If you have any views or questions on the consultation paper, please let us know by contacting

Carol Leland,
Know How Lawyer, Technology Unit
E-mail: cleland@algoodbody.ie

or contact the Department of Public Enterprise directly.