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What Are the Legal Aspects of Electronic Contracts?

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When parties enter into contracts with each other and they are interacting face to face, it is easier to avoid mistakes than when they are at a distance and contracting with each other through the internet as medium. When parties enter into electronic contracts the whole contract can literally be concluded within seconds at the click of a button

The traditional paper based contract law has rules that apply to matters such as jurisdiction, validity, formation of contract, modifications to contracts. In the world of online trading these are all issues that arise in online contracts and is a challenge to the traditional concepts of contract law.

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According to several surveys one of the biggest hindrance of commercial use of new media in business is the lack of trust of users in the legal binding of electronic contracts. Another impediment for further spread of e-commerce is the lack of trust in the security of the electronic communication in general. Our modern society relies on an economic system that is mainly based on the mechanism of contracts

Right now our industrial and service society is changing to an even more modern information society. One of the most important indicators that shows this change is the growing digital economy. But without any trust of the economic community in electronic contracts the new economy will not be able to unfold its full potential and the benefit for our society will stay behind the possibilities the new technology is able to offer. Either we can build up the trust in technical solutions for electronic contracts or we have to find a new concept for the exchange of goods in the digital age. It surely is easier to create a technical solution for legally valid Electronic Contracts than to redefine a legal mechanism that exists since centuries. But on the other hand a legal system that was generated thousands of years ago does not have the necessary basics to include modern ways of communication. We may have to rethink and to broaden our contract law to enable legally binding Secure Electronic Contracts (SeCo).

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The evolution of the internet made it an attractive medium for both B2B and B2C e-commerce.[Chris Reed, 2011] In the past, web was used primarily as a shop window by the companies, in comparison to nowadays, where businesses take binding orders directly via website.[Jeremy Newton, 1999] Recently, people prefer online selling and buying of goods and services to physical, since it provides rapidity and convenience. Therefore, possibly online contract formation will surpass offline in the nearest future. Arguably, people will enter into electronic contracts as freely as they do in a bookshop and cafe, with the same little thought

Thus, it is crucial to consider new legal issues raised by e-contracts and find whether the relevant legal framework is appropriate to meet new challenges posed by them or not. But before switching to the discussion, it is pertinent to give the definition of e-contracts. E-contracting is ‘the automated process of entering into contracts via the parties’ computers, whether networked or through electronic messaging.’ E-contracts are treated the same as offline contracts according to the Article 9 of the E-Commerce Directive 2000. However, despite the established legal framework for online contracts, new legal issues raised by them still cause certain challenges and vagueness to the specifics of contract formation. Even if the established legislation tries to deal with the issues online contracts raise, are they effectively addressed in practice? Do the rules of offline contracts really apply to online scenarios?

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Finally, the Internet and digital technology are transforming our lives, everyday with the paces in a dimension of a real revolution

These fast and deep transformations are now being considered worldwide as the second most important revolution behind the industrial one. Using e-mail application for various services that different institutions and companies are offering to citizens enables lowering costs of printing, color, archiving requiring considerable space, and is also faster than service, and more quality.

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Chris Reed, Computer Law (7th edition, OUP, 2011) p 268

Jeremy Newton, ‘Online contracts: web hosts beware’ (1999) 1 (5),EBL, 5

Andrew Murray, ‘Entering into Contracts Electronically: The Real WWW’ in L Edwards and C Waelde (eds), Law and the Internet: A framework for Electronic Commerce, (2nd edition, OUP, 2000) p 19

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