Business is usually carried out under contracts where seller and buyers fix the conditions of a specific transaction. The conditions can specify the quality and quantity of the product, delivery, payment, follow up (warranty, service).
There are three cases, when no written contract is needed about the quality of the product:
Usually, delivery conditions depend on the quantity or volume of the product, as well as payment and further relations. The above notes can apply to some of the cases.
A contract is reached by:
Contracts range from "simple" (e.g. purchase of a small quantity of low value product) to complex (e.g. "cover" contract for a long period of time fixing the conditions of acquisition of certain types of goods or services). In the simple cases usually no negotiation take place and no written contract is signed. The standards and more general legislation is applied.
EC services applicable to the Legal Activities in a Business Transaction:
Complex issues of security, authentication, and privacy traverses modern networks. Confidence, reliability, and protection of the information against security threats is a critical prerequisite for the functioning of electronic commerce, especially during contracting and settlement activities.
See the Flash DemoTypes of security:
Security techniques:
Business transactions take place within particular regulatory frameworks dictated by Public Authorities. The objectives of this regulation are:
All trading parties (sellers, buyers, mediators) need to communicate with Public Authorities in order to:
In most of the cases, Public Authorities require paper based documentation. In 70s in the USA the "Paper Reduction Act" specifies that Government agencies can accept certain documents in electronic format. This Act creates opportunities for using paper-less technologies in such areas as accounting and clean the way of electronic commerce. Currently many countries developed laws regulating use of reporting data presented in electronic format, or accept such documents, because the existing law does not specify precisely the type of the document. E.g. in many standards was written that a certain document must be prepared using typewriter, because the only alternative was hand-written document. Authorities are ready to accept even printed documents as an exception. There are generally two ways to overcome this problem: to change every document regulated procedures and formats of reporting, or accept a single document that specifies the type of cases, which allow electronic format of document.
The possibility for unique identification of the person, sending a message over the net, formed the idea of digital signature. The very existence of digital signatures is now in the root of performing electronic negotiations and business contracts, validating on-line documents and using digital money.
See the Flash demoA digital signature is a number, encrypted by two keys: one is used by the author and the other - by the receiver. The first key is private, the second can be public. The public key can decode only signatures, encrypted by the private key. This permits the receiver of the signed message to be sure who signed it.
Digital signatures are not simply codes like those used in the guarding systems. They are encrypted in connection with the text of the signed documents and are different for different documents, so only the keys can decode them.
Mathematical methods for encryption, used today, proved to be reliable enough to save digital signatures from forging. When using Internet for preparing and signing a contract with a business partner, encryption algorithm ties the full text to the digital signatures. Changing one letter only in the contract destroys the signatures.
The legislation in European countries has not solved in full the problem of accepting digital signatures as real signatures. There is not enough evidence how the courts decide cases for denying or challenging such signatures. But using of digital signatures undoubtedly will be an important part of any Internet business and an element of the Information society. We still cannot evaluate the scope of the digital money in future, but the methods of introducing them in next decade provide using digital money together with digital signatures.
Another legal problem is the copyright on the Internet. All European countries protect the copyright. Yet due to specific presentation of the information on the net there are many cases of braking the copyright laws.
There are two main reasons to explain the growth of such crimes. The first one is technical. Any kind of information on the net - software, databases, multimedia, electronic books and newspapers, business data, stored information materials, etc., is easy to be reached, printed, copied and illegally sold or reused in the same or slightly changed form. The other reason is the belief among many users that the information on the net should be free. This belief is supported by some software and information producers who suggest free software and data on the Internet to attract users and later on continue with paid products. Many users react with attempts to steal them, some succeed.
Two categories of companies are the main victims of copyright crimes on Internet: software vendors and online publishers.
The software on the net is protected by the law as well as the off-line software. The legal protection of the software in USA was imposed in 1980 by the Software Copyright Act. Most countries in the world have such laws, but the categories of copyrightable software is different.
Online publishing (in the broad sense) includes everything put on the net for observation and use (free or paid): texts and hypertexts, multimedia works, data of any kind. All of them are protected by the law, but many materials are objects of crime regardless of copyright.
Online publishing includes all web-pages of companies and institutions (free but copyright protected), public materials, directories, research and study results, business information (both free and paid), digital books and journals (many of them paid) and so on. A large number of companies make their money publishing on Internet and they are most interested of strong online publishing copyright protection.
Some online materials are specially protected - e-mail messages, bulletin boards, individual messages of all kinds. For them the copyright laws to be imposed are to be joined with the constitutional human rights of free correspondence and privacy and corresponding legislation.
For several years the use of Internet was not object of any restrictions concerning the content of information sent on the mail. Gradually, a number of cases showing the use of the tremendous possibilities of Internet for criminal and dangerous goals brought to considering the problem of controlling the information spread on the Internet.
In the USA on June 15, 1995 the Senate passed the Communications Decency Act (CDA), restricting the kinds of information which can be put on Internet. CDA extended the existing law of telephone usage, prohibiting obscene or harassing phone calls mainly to protect children of access to such materials on the net. The problems of Internet use, of course, are much more difficult due to the incomparable possibilities of Internet to handle written information, video and voice together. But even the restrictions of CDA caused many protests in the USA of people being afraid that such Act restricts their freedom of speech, guaranteed by the Constitution. In the Supreme Court of the United States in a case of American Civil Liberties Union the CDA was named "unconstitutional as a flat ban on protected speech". The CDA was said to represent a unique censorship scheme that demands strict juridical scrutiny.
In Europe the problem of illegal and harmful content on the Internet was also examined as a major problem. The European Commission prepared a Communication to the European parliament, the Council, the Economic and Social Committee and the Committee of the regions. In this document the following areas of potential harmful or illegal contents which can be misused for criminal activities were shown:
The prime responsibility for content of the information on the net lies with the authors and content providers. At the same time there are legal responsibilities of Internet access providers and host service providers. Although they do not directly control the content available on the Internet, in some cases they have been investigated by the authorities because of the existence of illegal and harmful content. Network operators, on the other hand, are not normally exposed to liability in criminal or civil law for the content.
In a number of Member States, Internet access providers and host service providers have already set up systems of self-regulation. The Commission welcomed this general move towards self-regulation and had encouraged the setting-up of a European network of associations of Internet Access Providers.
Use of Internet permits realisation of some political, social and economic activities which are important elements of the Democratic Information Society. One of them is the voting. Internet allows people of distant places to take part in a online discussion on a given problem as well as to vote. In some organisations and companies computerised voting is now fact. Much more difficult will such voting be in case of political elections, due to the huge number of voters and the specific problems of the election campaign.
Any voting system must assure the following:
The system may have additional checks to identify the voters. At the end it must publish the results of the voting - individually (including the identification codes and the votes for personal checks) and summarised.
Electronic voting systems, used today, are even more complex because they must be absolutely independent from the people running them. But they are still used for internal needs of corporations and organisations, not for nation-wide elections.
In next decade may be we will see first large-scale electronic voting. Probably it will not be for political elections but for exact measuring the public opinion on important matters (i.e. referendum). If it proves to be exact, honest and inexpensive, it will open the road to electronic democracy. It means that the authorities in a really democratic nation may often enough ask for the opinion of their citizens about important questions of legislation, local and central management, public expenditures and nation-wide projects. And sooner or later political elections based on electronic voting also will take place.
The age of electronic democracy is not so far from now as some people think. The speed of solving the technical problems (computers, communications, software) perhaps is higher than that of solving the corresponding legal, social and political problems arising from the possibility of frequent mass electronic voting. But if there is a will in a country of going toward direct democracy, all problems can be solved in next one or two decades.
Taxpaying systems in any developed country may be redesigned from using paper documents to electronic means. As collecting taxes is a vital activity for each country the usage of computers for this aim is not something new. What now is to be done is creating new taxpaying systems based on more courageous application of the networks.
Electronic taxpaying is convenient for both sides. The state will faster and with less expenses collect the taxes. The taxpayers will not be forced to keep (or forget or lose) their records of the incomes and all the time calculate the taxes.
The problems to be solved are mostly of legal and organisational, not of hardware or informational nature. The computers and the networks in many countries are already able to handle a nation-wide taxpaying system. The identification of the taxpayers (persons and legal entities) was completed and it has been long time used in different information systems. Now electronic signatures are to be introduced for the same reason and electronic money systems may be very helpful. The legislation and the governments are those who must go their part of the road to be ready for development and introducing electronic taxpaying systems.
Negotiating and concluding contracts is a very important part of every business. Now all means of communication - letters, telephones, telexes, faxes, e-mail, etc. are used to support this work. The Internet allows the partners to negotiate faster, to prepare and co-ordinate much easier the portions of the future contract, to make the final version and to conclude the contract.
All activities of both partners from beginning of the negotiations until the completing the final version of the contract are clear enough and do not produce any big legal problem. The last stage - the signing (and in this way - the concluding) of the contract is what poses legal problems, because the contract cannot be signed by the hands of authorised of both sides persons on the net. A possible solution is the usage of digital signatures as described at the beginning of this chapter. It still hides some danger for the partners in case of non-fulfilment of one side's duties and bringing it to trial. The digital signatures may not stand up in the court. The legislation in most countries is still not ready to meet such problems.
Another problem (it arises often when other communication means are used, too) is the problem when of one of the partners wishes to change the contract informing the other partner by Internet but not perfectly signing a corresponding document (amendment, annex, additional agreement or so on). In such case the general rule is that the changes of the contract are not legal.
New information and communication technologies and the world wide use of Internet may be dangerous to some civil rights. The content of Internet may be illegal or harmful, as was pointed out above in this chapter, and in such respect to violate the rights of Internet users. From the other side the proposed restrictions of free flow of information on the net may be regarded as a violation of such fundamental human right as the right of free speech. Most civil rights organisations insist that all speech, no matter how controversial, must be carried without discrimination, and system operators are to be protected from liability for user's actions.
The very existence of more and more Internet-connected personal computers at homes hides some dangers for the liberty and privacy of their owners. Everybody can send messages to the owner, to try to interfere in his web materials or to use illegally his software. In the USA the central law protecting the privacy of electronic communications is the Electronic Communications Privacy Act. This Act forbids the interceptions of messages when hey are in transit (except in some well specified cases of extreme necessity). Another laws protect personal privacy rights: nobody can disclose someone's personal affairs in public, the medical and banking information is also protected. Business information, especially trade secrets, are illegal to be disclosed, too.
The problem of protecting the civil rights and privacy of Internet users is not satisfactory solved yet anywhere in the world because the matter is a relatively new one and the legislators usually need more time to enact the necessary laws. But the problem has another side - the prompt reaction of the society to any violation of these rights will be the support the people need until the legal protection gets imposed.
How to write a business report
How to present business results
Password Security, Protection, and Management - US-CERT
The International PGP Home Page
FREQUENTLY ASKED QUESTIONS ABOUT COPYRIGHT
VeriSign Digital ID Center - Introduction to digital certificates
Assessment Remark: The completion of the assignments included in this module (test, essay and participation in discussion) will form 10% of the final assessment.
Answer the following questions in several sentences and mail the answers to your tutor.
Do you believe that legislation can efficiently control the Internet?
Write a two-page essay on the following topic: