By Oona A. Jackson, Scott J. Lebson and John Richards [1]

It has been estimated that in 1999 the value of "e-commerce" in the United States amounted to about $500 billion. The "e" nature of this commerce raises a number of legal issues that have not arisen in the context of traditional commercial contracts, for example: what is a signature if the terms have been negotiated over the Internet; where is a contract formed; what terms are implied - questions which may not have arisen previously or to which the answers may be different in the new environment. Such differences may be highlighted by the fact that a substantial proportion of e-commerce does not relate to transactions pertaining to goods or even services as traditionally understood but to information or other intangibles. However, it is important to recognize that simply because there is an "e" element, a transaction does not cease to be commerce and many traditional rules still apply. Simply because a contract may have been made over the Internet does not mean that if it is for the sale of goods, Article 2 of the Uniform Commercial Code (UCC) does not apply, nor that if it is for the leasing of equipment, Article 2A of the UCC does not apply. However, in view of the new environment, a number of laws have been enacted or are under consideration to supplement or, where necessary, modify the traditional law so as to make it more readily applicable to e-commerce.

Responsibility for the regulation of commerce in the United States is split between the federal government and the states. Article I, Section 8 of the U.S. Constitution gives to the United States Congress the power to legislate the regulation of commerce with foreign nations, among the several states, and with the Indian tribes. However, the right to regulate all other commerce remains with the individual states. Furthermore, the states are not precluded from enacting laws even if they have an effect on interstate commerce if such laws are in an area in which Congress has not itself made any law. Traditionally, contract law has therefore been regarded as a matter of state law rather than federal law except in areas such as antitrust law and regulation of certain industries. However, it is clear under Article VI, Section 2 that where Congress has enacted a law within its area of competence, this is the law of the land and any state law that is inconsistent therewith is preempted by the Federal Statute.

The boundary between the respective areas of state and federal competence has not always been constant. Under Chief Justice Warren, the Supreme Court took a fairly expansive view of what was meant by regulation of interstate commerce and upheld the power of Congress to enact federal laws in a wide field. [2] More recently however, under Chief Justice Rehnquist, the Supreme Court has tended to favor the rights of the states over those of the federal government in cases where the dividing line was not clear and the power of Congress to make law under the Interstate Commerce Clause has been cut back. For example, in United States v. Lopez, [3] the Supreme Court held that Congress had no power under this provision to enact the Gun Free School Zone Act since the law lacked a relation to any economic activity that might by repetition elsewhere have a substantial effect on interstate commerce. In Seminole Tribe of Florida v. Florida [4] and in College Savings Bank v. Florida Prepaid Postsecondary Education Expense Board [5] it was held that the Interstate Commerce clause did not give Congress the power to enact laws curtailing the sovereign immunity of the states enshrined in the Eleventh Amendment.

In the e-commerce area, there has been only a little federal legislation, for example the Anticybersquatting Consumer Protection Act and the Children's Online Privacy Protection Act. Most legislative action has been at the state level. The National Conference of Commissioners on Uniform State Laws (the body that drew up the UCC) has issued two model laws that may be enacted by the states, namely, the Uniform Electronic Transactions Act and the Uniform Computer Information Transactions Act. Additionally, a number of states have already enacted laws affecting some areas of e-commerce. One further point to note is that this is an area where aspects of intellectual property law may impinge in non-traditional ways, for example as they apply to Internet service providers.

In this Guide we will attempt to deal with some of these issues and in particular those that relate to formation of contracts, particularly aspects of contracts relating to computer information, privacy issues, liability of online service providers as well as some aspects of the anticybersquatting law. Issues relating to patentability of e-commerce methods and the application of copyright law to e-commerce are dealt with in our separate Guide to Protection for Computer Software.