E-Contracting Challenges

E-Contracting Challenges

Lai Xu (CSIRO ICT Centre, Australia) and Paul de Vrieze (CSIRO ICT Centre, Australia)
DOI: 10.4018/978-1-60566-026-4.ch196
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A decade ago, IT — through its innovations in business process reengineering — led the way in breaking down the inefficiencies within companies. Firms in the new millennium now face relentless pressure to perform better, faster, cheaper, while maintaining a high level of guaranteed results. Firms must thus focus on their core competencies and outsource all other activities. Working with a partner, however, requires breaking down the inefficiencies between organizations and coping with frequent change across the entire end-to-end value chain. In this new world of collaborative commerce and collaborative souring, a standard business process is simply inadequate. Using e-contracts to build new business relationships and to fulfill e-contracts through the Internet are important trends. E-contracting is however not a new concept. The history of e-contracting can be reviewed from legal and technology aspects. Over the last 20 years or so, a growing body of research in artificial intelligence has focused on the representation of legislation and regulations (Sergor, 1991). As specific regulations, contracts are used to regulate the actions of twoor multi-party interactions. Gardner (1987) has developed contract formation rules. Her work concerns legislation about the nature of exchanges that lead to contractual relations. The ALDUS project and Legal Expert project investigated drafting the Sale Goods contract (ALDUS, 1992) and the United Nations Convention on contracts for the international sale of goods (Yoshino 1997, 1998), respectively. Detailed information on developing logic-based tools for the analysis and representation of legal contracts can be found in Daskalopulu (1997, 1999). The law regards contracts as collections of obligations; research in this area includes automated inference methods, which are intended to facilitate application of the theory to the analysis of practical problems. The purpose of a legal e-contracting system is to clarify and expand an incomplete and imprecise statement of requirements into a precise formal specification. In the early 1990s, the development of EDI (electronic data interchange) was a significant movement for electronic commerce. EDI was considered a term that refers solely to electronic transactions and contracts (Justice Canada, 1995). EDI requires an agreement between trading partners that not only dictates a standard data format for their computerto- computer communications, but also governs all related legal issues of EDI usage. In 1987, the first set of EDI rules was named the Uniform Rules of Conduct for Interchange of Trade Data by Teletransmission (UNCID, 1987). In 1990, the American Bar Association (ABA) published a Model Trading Partner Agreement and Commentary, together with an explanatory report (Winn & Wright, 2001). In 2000 IBM submitted to OASIS (for standardization) the first example of an XML-based EDI TPA language, called Trading Partner Agreement Markup Language (tpaML). While the EDI standard introduced efficient communication channels between companies, its implementation was not widely accepted due to its high installation costs, lack of flexibility, and technological limitations (Raman, 1996). With the development of the Internet, electronic contracting began to be interpreted in broader terms. In this new view, an e-contract is not only used as a legally binding agreement between a buyer and seller, but it can also used across different workflow systems to cross different organizational business processes (Koetsier, Grefen, & Vonk, 1999; Kafeza, Chiu, & Kafeza, 2001; Cheung, Chiu & Till, 2002) to integrate different Web services (Cheung et al., 2002, 2003). E-contracting has become synonymous with business integration over electronic networks.
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Value Of Online Space

In reaching the maximization of value, businesses must define value, deliver it, and communicate it to customers. Value to the customer is his or her perception of the use of a product or service in relation to expectations. Managing the flow and not just the manufacturing process itself allows manufacturers to reduce non-value adding activities. Having the tools and enablers in place to integrate and automate processes allows all organizations to have marketing performance data (Freeland, 2003). Drivers of value differ in physical (off-line) and online places. Krishnamurthy (2003) viewed online operations as either profit centers (sources of income) or loss centers (offered as service to consumers). The 4 Ps (product, price, place, and promotion) primarily drive physical places. Online, the 6 Cs are the drivers—commerce, content, communication, connectivity, community, and computing (Krishnamurthy, 2003). Commerce describes the selling of products from the manufacturing, distribution, and retail firms to customers. Included in this category are the large businesses buying from other businesses in electronic marketplaces. Content is applicable to the news publishers (e.g., CNN, New York Times, etc.), e-books, or companies using the Internet to educate their customers (e.g., Procter and Gamble at Crest.com). Communication involves Web-based seminars, Internet company meetings, and e-mail-based customer service. Connectivity refers to the interconnections that employees and users have through the use of the Internet or other knowledge management tools. Community is portrayed through special user groups. Computing is manifested through tools such as mapping software, tracking software, and other portfolio management tools that empower customers. Manufacturers build online trust and commitment and potentially increase their value to customers by designing interactive Web sites (Merrilees, 2002). As businesses expand internationally, culture needs consideration as a seventh “C” as companies develop online experiences for their customers (Sigala, 2006). An organization’s attitude is now its lifeblood. Integrating online operations with physical operations and leveraging company assets provides synergy between physical and online stores—a key to effective eCRM.

Key Terms in this Chapter

e-Contracting: The processes of formatting and negotiating of contracts electronically, and also monitoring the contract performance over networks.

Contract: A legally binding exchange of promises or agreement between parties that the law will enforce.

Contract Enforcement: The process of persuading the noncompliant party to perform corrective actions.

Business Collaboration: A set of activities or processes that lead to the accomplishment of an explicitly shared business goal by coordinated business parties; involves at least two autonomous business parties.

Contract Monitoring: The process of observing the activities performed by the parties, knowing the state of contract execution and detecting contract violations.

Contract Violation: Refers to breaking or failing to comply with a term of the contract by a party.

E-Contract: A contractual agreement, represented as digital information and signed with digital signatures of the parties.

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