Legal Issues in the Virtual World and E-Commerce

Legal Issues in the Virtual World and E-Commerce

Daniel S. Hoops (Walsh College, USA)
DOI: 10.4018/978-1-61692-808-7.ch010
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Abstract

Cyberspace is such an enormous concept that trying to briefly explain the “rules” for E-Commerce or “cyberlaw” is next to impossible. For an E-Commerce, it is important to understand that there are business-to-business transactions and those involving consumers. In addition to requiring a mastery of many legal specialties, E-Commerce presents legal issues in a virtual environment. Many business practices in a cyberspace are untested in the courts. New and innovative methods of competition, as well as the effects of an international playing field change the playfield constantly. The legalities of this great new frontier pose an impressive and intellectually stimulating challenge. This chapter is a survey and summary of the legal environment in the E-Commerce and the virtual world.
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Jurisdiction, Venue And Choice Of Laws

The easiest way to navigate the jurisdictional procedure is to answer the following questions: where did the alleged wrongful act occur? Where does the defendant reside or conduct business? Is there another jurisdiction in which the defendant established “minimum contacts” thereby making jurisdiction appropriate there? (International Shoe Company, 1945)

Each dispute must be analyzed using the U.S. Supreme Court’s standard that the non-resident defendant must (a) have had some minimum contact with the particular state, and (b) invoking that state’s jurisdiction will not offend the “traditional notions of fair play” and “substantial justice”.(Ibid; Heliocopteros Nacionales de Columbia, 1984). In other words, did the defendant receive some benefit from the jurisdiction, such as engaging in sales with residents of the particular jurisdiction, advertising within the jurisdiction, having residents of the jurisdiction as members to its website (Helicopteros Nacionales de Columbia).

The fact that a party has its principal place of business and servers located in another jurisdiction does not insulate that party from another state invoking its jurisdictional long-arm statute (Zippo Manufacturing Company; Lakin, 2003; Trintec Industries In, 2005).

One way to avoid being subjected to another state or nation’s jurisdiction is through a mandate as to what law will apply should there be a dispute related to the transaction. The “choice of laws” or “choice of venue” provision is a standard term in most contracts. In the event there is a breakdown in an on-line business relationship, next to the parties’ signatures, this should be considered one of the more important covenants in any eContract. Who will be presiding over the dispute, where will the dispute be resolved, and what laws will be applied are critical strategies in business.

Language to the following effect should be considered in any agreement between parties in an E-Commerce transaction:

Choice of Law and Venue. This agreement has been entered into in the State of Michigan, United States of America. The validity, interpretation and legal effect of this agreement is governed by the laws of the State of Michigan applicable to contracts entered into and performed entirely within such state (without giving effect to any conflict of laws principles under the laws of the State of Michigan and regardless of the place or places of the actual execution of this agreement or the place or places of the actual performance of this agreement). The Michigan courts (state and federal), only, shall govern jurisdiction over any controversies regarding this agreement, and the parties hereto consent to and irrevocably and unconditionally agree to be subject to the exclusive jurisdiction of said courts located in Wayne County, Michigan, United States (and of the appropriate appellate courts therefrom).

Courts throughout the United States and treaty nations should honor the provisions of a valid and otherwise lawful agreement, including an agreement pre-determining the jurisdiction, venue, choice of laws, if these are terms negotiated between the parties (Hague Conference on Private International Law, 2005).

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