You are on page 1of 28

+(,121/,1(

Citation: 1 J. Priv. Int'l L. 237 2005

Content downloaded/printed from


HeinOnline (http://heinonline.org)
Fri Jan 9 03:03:08 2015
-- Your use of this HeinOnline PDF indicates your acceptance
of HeinOnline's Terms and Conditions of the license
agreement available at http://heinonline.org/HOL/License
-- The search text of this PDF is generated from
uncorrected OCR text.
-- To obtain permission to use this article beyond the scope
of your HeinOnline license, please use:
https://www.copyright.com/ccc/basicSearch.do?
&operation=go&searchType=0
&lastSearch=simple&all=on&titleOrStdNo=1744-1048

October 2005

Journalof Private InternationalLaw

EXCLUSIVE CHOICE OF FORUM CLAUSES AND CONSUMER


CONTRACTS IN E-COMMERCE

ZHENG TANG*

A.

INTRODUCTION

An exclusive choice of forum clause is an agreement concluded by contractual


parties, for the purpose of deciding disputes that have arisen or may arise in
connection with a particular legal relationship, which allows said partied to
pre-select forum/fora to the exclusion of the jurisdiction of any other courts.
Such a clause functions in terms of both prorogation by conferring jurisdiction
on a forum which might not otherwise have jurisdiction, and derogation by
precluding the other fora which might be competent courts from asserting jurisdiction. This approach has long been applied in international commercial
transactions and has been recognized by the courts in different jurisdictions
because of the contractual freedom principle behind it, the certainty and security it provides, and the resulting order and fairness therein. The acceptance and
recognition of choice of court agreements should be extended in the internet
age. Since electronic commerce ("e-commerce") strongly challenges the concept
of territory, which is the theoretical basis for traditional conflict of laws, different
rules that are able to avoid the concept of territorial nexus are required, which
can be satisfied by permitting the contractual parties to choose the courts they
desire.
However, support for the application of jurisdiction clauses in e-commerce
has been questioned in consumer contracts. The inequality of bargaining power
means that the consumer contract is usually a standardised contract with the
choice of forum clause unilaterally inserted by the business, and the consumer is
in an invidious "take-it-or-leave-it" position. For this reason, many states have
specific rules to restrict the effect of exclusive jurisdiction clauses in consumer
contracts, and the Hague Conference on Private International Law has excluded
consumer contracts from the scope of the Convention on Exclusive Choice of
Court AgreementsI all of which makes the situation in consumer contracts more
uncertain. It is questionable whether the specific advantages a jurisdiction clause
*

PhD student, University of Birmingham, UK.


Hague Conference on Private International Law "Convention on Exclusive Choice of Court
Agreements", concluded on 30June 2005, Art 2. La.

Exclusive Choice of Forim Clauses in E-Commerce

238

JPrIL Vol. 1 No. 2

can provide in e-commerce will change the traditional limitation regulating its
application in consumer contracts. If so, what specific rules have to be established to improve consumer-orientated e-commerce, to ensure litigation certainty
and predictability, and to protect c-consumers from being abused? This article
attempts to answer these questions by studying both the rule-based approaches
and the discretion-based approaches in the current world, and tries to provide a
"uniform model law" for the possible "enlightened unification" of private international law applied in the exclusive choice of forum clauses in electronic
consumer contracts. Section B compares the exclusive jurisdiction clauses in
e-commerce with those in traditional commerce to see whether e-commerce has
brought tremendous differences in this area. If the differences are fundamental,
and render the present legal approaches totally impractical, then fundamental
innovation is called for. If, on the other hand, the differences are only as to the
form and procedure, the current legal rules still can be applied, except for some
necessary reorganisation or reinterpretation to tailor them to cyberspace. Section
C analyses the prerequisites, including formal validity and substantive validity,
for the valid exclusive jurisdiction clauses. Section D examines the effect of valid
exclusive jurisdiction clauses in consumer contracts. For rule-based approaches,
even if a choice of forum clause is valid, its effect on consumer contracts will be
greatly restricted; while for the discretion-based approaches, there is no classification made between consumer contracts and "normal" contracts, and the effect
of a valid jurisdiction clause can be limited by the application of the general
doctrine of forum non conveniens. Finally, Section E makes suggestions for
possible reform, and proposes a "model law" for the application of exclusive
forum selection clauses in electronic consumer ("e-consumer") contracts.

B.

COMPARATIVE STUDY OF CHOICE OF FORUM CLAUSES IN


E-COMMERCE AND TRADITIONAL COMMERCE

1. Different Contract Forms


The most obvious difference between choice of forum clauses in e-commerce
and traditional commerce is that the clauses are included in different forms. An
e-consumer contract is offered via electronic communication, usually by means
of e-mail, "click-wrap" contract and "browse-wrap" contract, all of which are
presented electronically, rather than in a paper-based way The contractual terms
are stored as intangible electronic data messages, which can only be accessed and
read via a combination of computer screen and software. Consent is not shown
by a paper-based signature, but by an electronic signature, or other specific
actions, such as clicking, browsing, entering the website or continuing purchasing. The contract can be established in many new formats with the application

October 2005

Journal of PrivateInternationalLaw

of various website design techniques, including hyperlinks, scroll bars, jump-out


windows, etc., which require new explanations of formal validity It is questionable whether the formality requirements for paper-based contracts can be
2
applied equivalently in e-contracts.
2. Substantial Differences
(a) BargainingPower
It is claimed that e-commerce brings some factors that strengthen the bargaining
power of consumers relative to that of businesses. 3 Compared with paper-based
consumers, e-consumers are generally younger, better-educated and wealthier,
and able to defend themselves better from being exploited by invidious contract
terms inserted by the businesses. On the contrary, the low cost of e-commerce
makes this innovative commerce involve many less-qualified businesses, which
are smaller, financially weaker and less experienced than traditional businesses.
In addition, the internet provides e-consumers with the possibility of making
comprehensive shopping comparisons. By making use of a powerful search
engine, it is possible for consumers to compare the quality, price, service, as well
as contract terms of all the e-businesses, and easily to find similar products
without the objectionable contract terms.4 The powerful information transfer
capabilities of the internet can easily spread the comments of a dissatisfied consumer to all other potential consumers, making e-businesses more concerned
over their reputation, and preventing them from abusing their unequal bargaining
power.
Although these factors favour the consumers, they are rather superficial and
not fundamental. The basic bargaining position held by consumers remains
unimproved in e-commerce. The jurisdiction clause is established by e-businesses
unilaterally and leaves consumers in the same "take-it-or-leave-it" position.
E-consumers usually will not bother to read the "terms and conditions" presented on a business's website or via e-mail, for it is also long, detailed, full of
legal jargon and too complex for a layperson to comprehend. Even if consumers
read these "terms and conditions", they will barely understand the accurate
meaning therein and the actual legal effect of most of the terms. Moreover, even
a complete understanding will make little difference, as consumers have no possibility of bargaining over the terms they dislike. This fact undermines the possible
2

For f'urther discussion on this issue, see infra s C. 1.

See R HillmanJ Rachlinski. "Standard-form Contracting in the Electronic Age", (2002) 77 .A'ew
lirk Uniersitv Law Review '129, 463-85; D Rice, "A Cyberspace Odyssey through US and EU
Internet.Jurisdiction over E-Commerce" (July 2001) ractisin Law Institute, Patents. Copyrigits. 'radenarks. and l'leraj , Property Course Handbook Se'nes, 421, at 429, 518-20; American Bar Association,
"Achieving Legal and Business Order in Cyberspace: A Report on GlobalJurisdiction Issues Created by the internet" (2000) 55 Business Law'ver 1801, para 2.4.
Hillman and Rachlinski, supra n 3, 4164, 473.

Exclusive Choice of Fonim Clauses in E-Commerce

JPrIL Vol. 1 No. 2

benefits the consumers might accrue via e-commerce. No matter how qualified
the e-consumers are, they are still in the take-it-or-leave-it position and are rarely
able to persuade businesses to change their standard contract terms.
Furthermore, some other factors introduced by e-commerce make the consumers' bargaining position worse. First of all, unlike traditional consumers, who
are able to deal with the businesses or the businesses' agent face to face, and at
least are given the opportunity to negotiate, e-consumers rarely have the opportunity to negotiate or inquire. During website trading, e-consumers are faced
with a highly standardized screen, with "terms and conditions" and other relevant contents. The e-consumers directly deal with an electronic agent, a
computer program or other automatic electronic process, which automatically
dispenses all the standardised information according to a predetermined program and will not respond to additional enquiries by consumers as to the choice
of forum clause. 5 Of course, e-consumers have the opportunity to e-mail businesses to negotiate certain terms. However, this action requires consumers to
stop purchasing straight away and restart only after they get the answer from the
business. In fact, e-consumers are unlikely to bother to do this, because they do
not know when the businesses will answer the email, and even with a prompt
reply, the businesses are very unlikely to change their terms. Secondly, website
design techniques enable e-businesses to arrange their websites to minimise consumer scrutiny, using techniques such as hyperlinks, grey text, tiny fonts,
time-limits, etc. Moreover, reading something from the computer screen has been
6
proved to be more tiring and harder on the eyes. Taking all the relevant elements into consideration, it can be assumed that the inequality of bargaining
power between businesses and consumers is worse in e-commerce.
(b) Litigation Power
However, it is claimed that the litigation power of businesses becomes weaker in
e-commerce. E-commerce opens the door for the participation of small businesses, including family businesses or individual businesses, which hold similar
litigation power to individual consumers. At the same time, e-commerce brings
more litigation risks to businesses, for they potentially deal with worldwide consumers and thus might be subject to worldwide jurisdictions. The anonymous
nature of e-commerce makes it very unlikely that an e-business will identify the
location and real identity of its e-consumers, including the information that will
determine the jurisdiction issues, such as the habitual residence or domicile of
the consumers. On the contrary, because many jurisdictions require the seller to
disclose such information to the buyer,7 although e-commerce also increases the
5

For the definition of' electronic agent, see US Unilbrm Computer Information Transaction Act
(UCITA) 2002, s 102(a) (27).

Hillman and Rachlinski, slpra n 3. 479.

October 2005

Journalof Private InternationalLau

consumers' possibility of foreign litigation, it seems more predictable and


manageable.
3. Conclusion
Since e-businesses will face more litigation risks and costs, the effectiveness of
choice of forum clauses becomes of greater importance in order to reasonably
reduce the litigation hazards. Therefore a valid choice of forum clause should
not be declared ineffective just because e-consumers cannot afford the expense
of foreign litigation. At the same time, e-commerce weakens consumers' bargaining power, which requires more restrictive prerequisites, including formality
and substantive validity, to ensure that consumers read the contractual terms and
protect the consumers' real consent. Furthermore, the electronic contract differs
fundamentally from the paper contract in a number of ways: the contract form;
the innovative format; the procedure to enter into an agreement; the time and
location at which an agreement is concluded; and even the real consent therein,
which means the detailed regulations and tests for prerequisites need substantial
reform. The following sections will study in detail what reforms should be made
in all these areas.

C.

PREREQUISITES FOR EXCLUSIVE CHOICE OF FORUM CLAUSES

Generally, the prerequisites for the validity of an exclusive jurisdiction clause


mainly concern the existence of consent, and safeguards in relation to consent. 8
The present approaches of most jurisdictions are to regulate these issues either
by rules of form, or of substance, or of both.' Since formal validity is more tangible and crucial to the decision, it is suggested that all the expressed or external
manifestations of consent be classified as formal validity, and only those issues
without tangible expression that need evidence other than the contract be classified as substantive validity." The purpose of formal requirements is to ensure the

In the EU tite sellers are required to provide his name, geographic address, and other infbrmation
to tile consumers. see Directive on Eh'ctronic Commerce, 2000/31/EC. art 5(l); Distance Contracting Directive, 97/7/EC, Art 5(l).
[he prerequisites also cover a wkide range of issues, including the existence of ans international
element. the partie's capacit. the connection of tile chosen lbrum with tile disputes and tile
parties, etc. These issues are regarded as less important, and generate fewer challenges in
e-comnerce, so will not he discussed here.
It is usually not easy to delineate fbrm and substance, for both of then concern the existence of
consent attn act to provide tie safieguard as to consent. The tivil lawv tradition is to determine the
issue of substance according to the urinal rules, While the commonl lasswtradition pays more
attention to tie substance instead of' explicit fbrms.
'0 This delineation provides a wide delinition for formal validity 'br the sake of certainty See eg.,
NI Giuliano and P Lagarde, "Report on the Convention on tihe Law Applicable to Contractual

Exclusive Choice of Forum Clauses in E-Commerce

JPrIL Vol. 1 No. 2

availability of proof that each party gave free and informed consent to the jurisdictional choice, and to try to protect the other party to a contract with anyone
using the jurisdiction clause in the contract from the danger of being bound by
this clause without realising it.II All the other issues not regarded as form will fall
into the catch-all requirement of substantive validity, which encompasses the
inherent authenticity and lawfulness of the expressed consent. The requirements
on substance aim to achieve real fairness and justice, and protect the genuine
intention of the parties; it is especially important that where unequal bargaining
power exists or the agreement is concluded in a non-negotiated nature, close
examination is undertaken to find out whether the consent really exists despite
the expressed intention. This section will focus on studying the present requirements on formal and substantive validity, and whether these requirements work
properly in e-commerce.
1. Formal Validity
The formality requirements differ between civil law and common law practices. 2
Rule-based approaches usually impose explicit formal conditions of validity.
Generally, several alternative permissible "forms" in which the choice of court
agreement may be valid will be defined. 3 The discretion-based approaches generally do not impose explicit formal conditions for a jurisdiction clause to be
valid. The courts usually try to look at the intent of the parties behind the forms,
and are willing to recognise choice of forum clauses not finalised in writing, not
signed, contained in small-print, or included in a purely oral contract. 4 However, although no specific rules for formality are required in discretion-based
jurisdictions, the courts will be reluctant to enforce a choice of forum without
any tangible evidence of the existence of and consent to such choice. It has been
assumed that the approaches in rule-based and discretion-based jurisdictions
are very different in method, but not always in effect.' 5 By summarising the
Obligations" (1980) OJ C282, 29; P North andJ Fawcett, Cheshire and \orth's Prate International
Law (heareafter "Cheshire and Xorth") (London, Butterworths, 13th edn, 1999), 589; J Yackee,
"A Matter of Good Form: The (Downsized) Hague judgments Convention and Conditions of
Formal Validity for the Enforcement of Forum Selection Agreements" (2003) 53 Duke Law Journal
1179 1182, and fn 14 therein. CfJ FawcettJ Harris and M Bridge, International Sale of Goods in
The Conalict
of Laws (Oxford University Press, 2005), para 21.38.
1 See eg, Estasis Salotti vRUIVA 24/76 [1976] ECR 1831; Caleries Segoura v Bonakdarian 25/76 [1976]
ECR 1851
12 The civil law practice is mainly based on rules (and is known as the rule-based approach), while
the common law practice is generally discretionary (known as the discretion-based approach).
13 See eg, Council Regulation 44/2001 on Jurisdiction and the Recognition and Enforcement of
Foreign Judgments in Civil and Commercial Matters (Brussels I Regulation),. Art 23.1; Hague
Conference on Private International Law, Judgnent Project, Summary of the Outcome of the
Discussion in Commission 11of the First Part of the Diplomatic Conference 6-20,june 2001.
Interim Text (Interim Text 2001), Art 4.2; Hague Convention on Choice of Court Agreement,
supra n I,Art 3.c.
"
See Yackee. supra n hO. 1192-93.
15 Abid, 1205.

October 2005

Journalof Private InternationalLaw

discretion-based decisions in common law countries and the explicit listed formal
conditions in rule-based countries, there are in general three formal requirements. These are that an exclusive jurisdiction clause should be in a form: (1)
which is accessible for subsequent reference as evidence; 6 (2) which is the regular
usage by the parties; 7 or (3) which is the common usage in the particular trade
or commerce. 8 The third condition can be applied only to the area where there
exists internationally recognised or authorised customs and general commercial
usage, which does not exist in consumer-orientated e-commerce. For this reason,
this section will only try to deal with the first two requirements to see how these
requirements can be applied to e-consumer contracts.
(a) Accessiblefor Subsequent Reference
Traditionally, the best way for an agreement to be accessible for further reference
is to make it "in writing", or "evidenced in writing", and signed by the parties. 9
E-contracts, however, by using electronic data technology, provide great challenges to this traditional formal requirement.
(i) In Writing/Evidenced in Writing. The traditional concept of "writing" encompasses recording everything in the paper document by a text 2 " that meets
standards of reaccessibility, legibility, durability, accuracy and unchangeability.
The choice of forum clause in e-contracts, however, is in the form of an electronic data message or digital information, held as a series of on/off switches in
a chip or other medium, and represents words on the computer screen after the
application of code conventions via software. It is different from paper-based
"writing" both in form and in certain functions. The content herein is not simply
tangible and legible, but shown in two forms, the visual form of which is only
available via a combination of computer screen and software. The original
e-contract term is stored in the chip or other medium, it is intangible in nature
and can be easily destroyed or changed either deliberately or by mistake, without
any mark being left. Although an electronic choice of forum clause can be
16 See eg, Brussels I Regulation, Art 23.1(a); Hague Draft on Exclusive Choice of' Forum Agreement, Art 3(c).
17 See eg, Brussels I Regulation, Ar-t 23. 1(b): US case .Mordyne, Inc r Intl Controls &lleasurenients G'op,
262 F 3d 843, 847 (8th Cir 2001); .Aew ,1loon Sipping Co r Man B& IV Diesel A, 121 F 3d 24.
31-32 (2d Cir 1997).
'8 See eg, Brussels I Regulation, Art 23.1(c); English case: Circle Frecoht International Lid (F/A Mogul
Air) v Aledeast Gulf Evports 11d (7/A Gulf Erport) [19881 2 Lloyd's Rep 427. '133.
19 Although it is not indispensable in all the states, a signature is very important and usually required
for the validity of an agreement. See inia text C. I(a)(iii); CMV Clarkson and.J Hill, Jo_/kr on the
Coict of l-auw (London. Butterworths, 2nd ed, 2002) 76; 'artenreederei is Ti//l Russc .A'VIlzm &
erroerbedrijf.Aora71/83 11984] ECR 2417, 2432 para 16.
20 See eg, Switzerland's Federal Code on Private International Lao: Art 5.1: "...The agreement
may be made in writing, by telegram, telex, telecopier, or by any other means of commtuInication
which evidences the terms of the agreement by a text."

Exclusive Choice of Forum Clauses in E-Commerce

JPrIL Vol. 1 No. 2

printed out on paper, which might amount to "evidenced in writing", most


e-contracts are only stored by the parties in their original forms and are not
printed out. The choice of forum clause in an electronic form raises a question:
is the application of the traditional requirement of "writing" and its reinterpretation sufficient and efficient to cover the e-contract and regulate it to satisfy the
two main requirements concerning formality?
In order to improve the development of e-commerce, the current tendency is
to recognize the validity of e-contracts with the clauses and terms therein. The
United Nations Commission on International Trade Law (UNCITRAL) Model
Law on Electronic Commerce adopts a "functional equivalent" approach, which
has been mirrored by many countries' subsequent legislation, to single out the
basic function of the requirement of "in writing" to form the criteria, which,
once met by an e-clause, will enable this clause to enjoy the same legal recognition as its paper-based counterpart. 2 ' According to UNCITRAL Model Law, a
data message satisfies the requirement of "writing" if the information contained
is accessible so as to be usablefor subsequent reference.22 This approach has been adopted
by many later legislations; for example, the Hague Convention on Choice of
Court Agreement adopts the same interpretation,23 and the Brussels I Regulation
adopts its variation providing that "any communication by electronic means
24
which provides a durable record of the agreement shall be equivalent to 'writing'."
The "functional equivalent" approach sounds effective as it avoids rigid and
exhaustible lists of valid forms but focuses on the substantial function of different
forms. However, not all the functions of paper-based "writing" can be satisfied
by electronic clauses, which makes further regulation necessary to ensure their
security.25 The problem is which functions are significant so that they have to be
fulfilled by electronic means of jurisdiction clauses in order to meet the requirement of formality The definitions in the UNCITRAL Model Law, the Hague
Convention on Choice of Court Agreements and the Brussels I Regulation,
although couched in different terms, all focus on the same point: to provide a
permanent and unchangeable record of a choice of forum clause for future reference. This requirement, however, has been criticised for its over-simplicity,
because "durability" or "accessibility for future reference" alone cannot guarantee that the choice of forum clause will be legible and tangible to both parties at
21

22

UNCITRAL's Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce


(1996): Introduction to the Model Law,The "'tuctional-equivalent" approach.
UNCITRAL Model Law. Art 6.

23 Art 3.c(i)(ii).
14 Brussels I Regulation, Art 23.2. Before this legislation, in Porta-Leasing
GibIl

Prestige International

SA, Case 784/79, [1980] ECR 1517, the Court did not insist on the medium but on the fact the
formal requirements aiming to ensure the consent of the parties has been expressed in a clear

and precise way.


25 For the functions of paper-based writing requirements, see UNCITRAL Guide to Enactment

1996, supra n 21, para 48.

October 2005

Journalof Private InternationalLaw

the time of contracting. If an e-clause is just stored in the chip without being
shown on the screen, this digital information, although it is durable and can be
accessed in the future, cannot be the evidence of an agreement. Furthermore,
either through software error or mechanical mistake, the visible form of an
e-clause showing on one computer screen as legible text may appear on another
as illegible code. For example, a business who sends an e-mail containing a
choice of forum clause is able to view the complete text accurately on its computer screen, while the consumer, who received the e-mail, but does not have a
corresponding decode program, may find the whole or part of the e-mail content to be unreadable text. In this case, an electronic choice of forum clause,
although durable and accessible for future reference, cannot prove the intention
of the parties.
It seems that some other legislations pay more attention to the legibility of a
form, by interpreting "in writing" as including an "electronic message.. .which is
capable of expressing its content in a tangible form".26 The weakness here is that a
message which is tangible or accessible on screen can be temporary: for example
if such a message is stored in the computer's volatile memory or RATTM, it will
disappear when the machine is switched off; or the electronic message may be
revised in the future so that the tangible form is different from the original one
the consumer accessed on the screen. It is suggested a valid form should be both
legible at the time of contracting, and permanent or durable for further
reference.
The other problem is whether only the original contract, which is able to
prove the consent of an agreement, can be regarded as formally valid, or
whether a copy of the original contract is enough to meet the formal requirement, if it is legible and durable. Although a data message can be copied very
accurately as another data message or a hardcopy, a copy alone cannot satisfy the
requirement of authenticity and reliability, for an electronic data message is vulnerable to revision, damage or forgery. However, if there exists reliable assurance
as to the integrity of a data message from the time it is first generated to its final
form, this information message, no matter whether it is the original or a copy,
can be regarded as the original form.27 Furthermore, a copy does meet the "evidenced in writing" requirement 28 if it satisfies the main purpose of the formality
29
once, and neither party raises any objection.
See eg, Chinese Contract law. 2001, Art 11: "a writing means a memorandum of contract, letter
or electronic message (inichding telegram, telex, facsimile, electronic data exchange and electronic mail, etc.), which is capable of expressing its content in a tangible iorm."
27 UNCITRAL Model Law%.Art 8(I), Art 8(3)(a).
2 Brtssels I Regulation, Art 23.1(a).
29 For the formal validity of the agreement evidenced in writing, the parties' confirmation is
reqtuired. See Gateries Segoura Sprl v Firisa Rahin Bonadarian, Case 25/76 [19761 ECR 1851;
F Berg/hoer GilbH and Co k v A SA S, Case 221/84 [19851 ECR 2699. Cl Powell D~ffrvn ph. r.
Illbygang Petereit, Case 214/89 [ 19921 ECR 1 1745.
16

Exclusive Choice of Forum Clauses in E-Commerce

JPrlL Vol. 1 No. 2

(ii) Format. Besides the requirement of "in writing", a court may invalidate a
choice of forum clause by additionally examining its format, such as a clause
printed on the reverse side of a contract without an express reference directed to
3
it,30 a clause written in a language illegible to one party, a clause written in tiny
or fine print,3 2 etc. Some of the traditional format requirements can be copied
for e-clauses, which can also be shown in an unfamiliar language, in a tiny or fine
33
print, or in an unobvious place without any reference to it. Although electronic
communication brings some new possibilities as to format, it is assumed that the
principle behind the traditional format requirement can be applied to e-contracts, namely the choice of forum clause should be indicated in a manner that is
obvious and convenient for the consumer to read. Any technique that makes
reading less attractive should be adequately explained, and with the necessary
references requiring the consumers to read the contract completely 14
For example, electronic clauses sometimes appear as the form of "hypertext",
which means the content of this clause has not been directly and fully shown in
the contract terms on the screen, but has been referred to by a hyperlink label.
The consumer has to click the label to view the content of clause in a pop-up
window, or a refreshed window. More complicatedly, multiple hyperlinks may be
involved. The consumer has to follow a hyperlink to "Terms and Conditions",
then another to "Dispute Settlement", and a third to 'Jurisdiction Clause",
where he/she finally finds the content of the clause. It is suggested that businesses be obliged to make a clear and conspicuous disclosure to the consumer of
the general conditions of the e-contract, make the consumer readily aware of the
real content of the choice of forum clause and make the clause easily accessible,
so that the content of jurisdiction clauses should usually be expressed immediately rather than via hyperlinks.3 5 However, since the usage of hypertexts and
hyperlinks is widely adopted in e-commerce, and has been approved of as efficient
36
and effective, it is not a good idea to abandon this technique in e-contracts. It is
assumed that e-businesses only adopt hyperlinks where the clause is lengthy or
appears in more than one place on their website. In this case there should be a
clear language on the hyperlink label to indicate the importance and general
30 Colzano v RI V4 C24/76 [19761 ECR 1831.
31 Cass corn, 27 Feb 1996, RCDIP 1996, 732, at 734, H.G.-'L
App Ct 1998) at 125-26; Tandy Computer Leas32 Mellon First United easing r Hansen 705 NE 2d 121 (111

Pizza, Inc 784 P 2d 7 (Nev 1989) at 8.


ing i; Terinam
33 For example, a jurisdiction clause can only be seen by scrolling down the screen, and there is no
obvious relitrence directing the consumers to this clause.
31 See: Ticketmaster Corp e Ticket.s.com, Inc, 2000 WL 525390 (CD Cal Mar 27, 201)0) (the court held
the user was not bound by the terms, because the website was in thelbrm that the user could
escape viewing the terms by linking to other pages, or needed a great ellrt in order to reach the
terms to read them). Cf Caspi v Alicrosoji a\"toork. LL 732 A 2d 528 (NJ Super Ct App Div 1999)
(the court held the terms binding despite the user being easily able to accept it without reading).
33 Federal Trade Commission, Dot Corn Disclosures, wwft.[tc.gov/bcp/cotline/pubs/buspubs/
dotcom/index.html, accessed on 21 June 2005.

11 UNCITRAL Model Law. A't 5 bis.

October 2005

Journalof Private InternationalLaw

nature of this clause, and to require the consumer to read the content of the
clause. Access to the content of hyperlink should be convenient, ideally without
the need to refresh the previous window, or should allow a party easily to return
to the previous window. Multiple hyperlinks should be avoided.
(iii) Signature. Although a signature is not required by all states to ensure a clause
is formally valid,37 most courts do regard it as a major factor in the authentication of consent. 38 Especially for adhesion contracts, some jurisdictions
specifically provide further formal requirements, requiring the adherent party to
indicate "expressed acceptance" of the clause. 9 Although the signature requirement has not been proposed in the Hague Conference on Judgments Project,"'
it is suggested the requirement of the consumer's signature should be adopted
for e-consumer contracts, for the following two reasons. Firstly, in an electronic
business-to-consumer transaction, the e-business is usually unaware of the other
party's identity, and so the requirement to identify the contractual party is more
necessary and important than the function of a signature in the paper-based
world. Secondly, in a contract where the parties hold unequal bargaining power,
it is necessary to protect the weaker party by requiring express acceptance of the
contractual terms to indicate his real intent. It is suggested that in an e-consumer
contract, a jurisdiction clause should be held not to satisfy formal requirements
without the necessary means to identify the consumer and indicate the consumer's approval to the agreement.
The requirement for a signature in e-commerce generates a problem: what
can be regarded as a signature in e-commerce? The traditional requirement of a
signature encompasses the parties setting their pens on paper, which is no longer
the situation in e-contracts. The development of e-commerce calls for reform
either by adopting the electronic equivalent of a signature and providing it with
the same legal effect, or by removing the requirement for a signature from the
recent legislation and replacing it with any means that can establish authentic
assent," providing the method is sufficiently reliable and secure. "2 Both these
3

For example, no sigature require'mcrnt for a contract to be formally valid exists in Japan. Also

see: Roberts & Scaefer Co v Merit Conlracting, Inc 99 F 3d 248. 252-53 (7th Cir 1996).
8 See ElU case I'arenreederei. supra n 19, para 16; Italian Civil Code, Art 2702; German case
Bundesgerictlshqf 1BGHI ISupreme Court], 22 Feb 2001, available at http://vww curia.cu.int/

commori/recdoc/coitventjotii/ci/2001/29-2001.itm, accessed on 23 June 2005. Cf Powell


Duffryn, i 29. but this should not be applied in non-negotiable consumner contract.
39 See eg, French case: Compagnie (,enerale 7iansotlantiquez PellierJferes, Cass req, 2 Mar 1909, s 1909,
1-384; halian non-Regulationi law. Italian Code of Civil Procedure. Art 2.
a See eg, Hague Contfirence on Private International law. NI Dogauchi ard T Hartley, 'Preliminarv Drali Convention on ExCluSive Choice of Court Agreements: Draft Report" (Prel Doc No
25), para 78.
See Hague Corifirence on Private International Law P Nygh and F Pocar "Preliminary Drali
C(Invention nJurisdliction and Foreign Judgments in Civil and Commercial Matters" (Prel l)oc
II), '16.
12 As to how to lest the reliabiliiy and security of art electronic signature or any other means, the

Exclusive Choice of Forum Clauses in E-Commerce

JPrIL Vol. 1 No. 2

approaches are considered to differ only in form but have the same function and
effects. According to these approaches, if a data message uses a reliable method
to identify the party and to indicate the parties' approval to the agreement, it can
be regarded as satisfying the requirement of a "signature", 43 or fulfilling the
requirement to establish authentic assent. It could be a scanned manuscript signature incorporated into an e-mail or other online document; it could be the
typing of a name of the signatory in an e-mail or other online document; or it
could be in any invisible form which confirms the identity and intention of the
parties, such as digital signatures using an encryption system, clicking on a
website button, or even by continuing purchasing or downloading.
The problem here is whether the consumer's intent can be indicated and protected by these alternative forms of "signature". Unlike traditional commerce where consumers are accustomed to the importance of signing their names on
paper - in e-commerce, consumers are less sensitive to the importance of the
"electronic signature". To most e-consumers, the behaviour of "clicking" or
"downloading" might mean nothing more than the normal process of transaction, and they will be completely unaware that by these actions they are bound
by the jurisdiction clauses provided by the businesses. It is suggested that further
requirements be provided to ensure the consumer's intent. The words of acceptance should be clear words that indicate the consumer's intention to be bound by
such a clause, including "Yes", 'Agree", 'Accept", "Consent", 'Assent", etc.
Ambiguous words, such as "Continue", "Next", "Submit", "Confirm", "Download", etc, cannot be regarded as expressed acceptance.1 4 The method of
accepting a choice of forum clause should be clear and obvious. The consumer
can indicate his intention either by typing "Yes" or by other unambiguous words
listed above in the online purchasing form or in an e-mail, or by clicking a button
containing the clear words of acceptance.1 3 Ambiguous behaviour such as downloading the software, continuing purchasing, submitting delivery information,
46
etc, cannot be regarded as clear indication of acceptance.
technique criteria in The Electronic Signature Regulation 2002 can be borrowed. An electronic
signature or any other means to prove the user's consent is regarded as reliable and safe, if the
method used can ensure that the signature or other indication is uniquely linked to the signatory,
is capable of identifying the signatory, is created using means that the signatory can maintain
under his sole control, and is linked to the data to which it relates in such a mainner that any subsequent change of the data is detectable.
'3 UNCITRAL Model Law, Art 7.
41 See Spedht v .Ascape Communications Corp 150 F Supp 2d 585 (SDNY 2001) (the court held the
action of clicking the "download" button cannot be regarded as assent to the agreement but only
an intention to obtain the products).
15 See ProsCf Zeidenberg, 86 F 3d 1447 (7th Cir 1996).
46 This requirement fundamentally questions the validity of browse-wrap contracts in electronic
consumer transaction. It is assumed that in this way, the consumers more easily ignore what has
been represented on the screen, and they are not professional enough to predict that the behaviour of entering a website or downloading a product willresult in a submission to a foreign
jurisdiction.

October 2005

Journalof Private InternationalLaw

249

(b) Regular Usage Between the Parties


The recognition of the regular usage between parties as a valid form usually
happens in international business-to-business transactions, where there is a continuous, long-term and regular business relationship. It has been suggested that
this approach could be applied to electronic business-to-consumer transactions,
where the consumer is a frequent customer and the company provides him with
a shortcut channel after the first several transactions, through which the consumer only needs to log-in and confirm his name, address and account details to
make the purchase, without being required to read the "terms and conditions"
again. This suggestion, however, would be unreasonable for consumers who are
not professional enough to foresee the possible effects of a "terms and conditions" on subsequent transactions. He might one day surprisingly find himself
being bound by a jurisdiction term in a click-wrap contract he "clicked" years
ago. He may completely forget the content of the agreement; his financial situation may have already changed, such as to prevent him from engaging inforeign
litigation; the nature of the transaction, including the quantity and total value of
the subject matter, may be very different from the first time he dealt with the
business. It is suggested even if the "regular usage" condition can be applied to
online consumer contracts, there should be certain regulation on it, depending
on the frequency with which the consumer transacts through the website, and
whether the nature of the transaction is substantially different from the first time
of transaction, etc. The e-business also needs to make reference notifying the
consumer that the previously agreed contractual terms will be applied.

2. Substantive Validity
There is more difficulty and confusion about the requirement of substantive
validity, which varies significantly from one country to another, and enters the
area of national substantive law, or issues of public policy. At present, there are
in general three approaches to dealing with the issues of substantive validity in
choice of forum clauses: (i) by leaving it to national law; (ii) by providing uniform
conflict of law rules; 4 7 (iii) by providing uniform substantive lav.' While the first
See the preliminary documents for Convention on Choice of Court Agreement in the Hague
Conference on Private International l.aw which are available at Nw-\vlcch.net; United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) Art 11(3); UNCITRAL Model Law on International Commercial Arbitration, Art (8).
This approach has also been accepted by Rome Convention to determine the substantive validity
of choice of law clauses.
'8 The Brussels I Regulation has not established any rules on substantive validity of a choice of
forum clause, however, in the EU case law the ECJ has preferred to use tnil-rnm community-law
to ascertain the actual will of the parties, see RIll ., supra n II, l~ancesco
Beniuasa r Deralkit Srl
(Benincasa),
269/95, [1997] ECR 1-3767; Tramnpori
Castelletti Spedizioni Internazioali S.l 1 Ihoo
Trumpy SpA (Castelletti), 159/97, [19991 ECR 1-1597. For detailed IiscussiorI, see A Briggs and P
Rees, CiritJurisdietionandJutgients(London. l.LI 3rd edn, 2002), para 2.97.
17

Exclusive Choice of Forum Clauses in E-Commerce

JPrIL Vol. 1 No. 2

option is considered improper due to the high degree of uncertainty it creates,


the second approach is more favoured by international conventions, for it is considered workable and it can achieve partial predictability.4 9 However, it has been
suggested that the existing wide variety of national law including private international law with regard to the issues of substantive validity in consumer
contracts, the highly globalised character of e-commerce, and the requirement
for improved uniformity and certainty for the further development of consumerorientated e-commerce make the uniform substantive law approach more desirable. Firstly, the uniform approach can provide the utmost certainty and
predictability to e-commerce, the international character of which requires a
unified standard for its smooth development. Secondly, the innovative character
of e-commerce brings challenges to existing national substantive laws. Most
states try to answer these challenges either by reinterpreting the traditional law,
or by establishing new laws on the commercial activities carried out online.
Without the application of mature and traditional rules to e-commerce, the
international uniform substantive rules are more practical in e-commerce than in
traditional commerce. Thirdly, the choice of forum clause is a special conflict of
law rule, the primary purpose of which is to provide certainty without relying on
any other nexus. This original intent of application of jurisdiction clause will be
damaged by subsequent uncertainty caused by the less-than-certain rules for its
validity. Even if there are uniform conflict of law rules, they cannot provide the
predictability they are supposed to,30 and the additional effort taken to determine
the applicable law will increase the parties' litigation expenses. Although the
international uniform substantive rules will doubtless face obstacles and practical
problems, it is assumed such a uniform rule should be the future or final aim of
an international convention on jurisdiction clauses." This section will adopt the
third approach to provide uniform guidelines and tests to determine the substan2
tive validity of jurisdiction clause in e-consumer contracts?
(a) Authentic Consent
A jurisdiction clause complying with formal requirements may be impugned
upon substantive grounds where inherent authentic consent is missing. Since it is
19

Nygh and Pocar. supra n 41, 43.

30 There is no consensus as to how the choice of law rules can he designed to provide both certainty
and fairness. For detailed discussion on the pros and cons of different choice of law rules as
regards substantive validity of jurisdiction clauses, see Hague Conference Judgment Project
reports, especially, Prel Doc Nos 7, 19, 20, 21.
51 Some experts on the Hague Conlerence have expressed the view that uniform provision on substantive validity should le included in the convention, at least in the future. See Prel Doc No 7,
para. 107; Prel Doc No 9, p 37.
52 However, the guidelines and tests provided this section will not touch any area other than the
jurisdiction clauses in electronic consumer contracts. This section is also not supposed to provide
uniform definition on any traditional concept such as fraud, misrepresentation, mistake, etc.

October 2005

Journal of Pivate InternationalLaw

not easy to determine whether there is authentic consent at the time of concluding the clause, many jurisdictions provide no further rule on substantive validity
by assuming the formal requirements are full, perfect and sufficiently guarantee
the authentic consent, which, however, is obviously not the case. 3 In order to
guarantee the existence of authentic consent and to protect the e-consumers as
the weaker party, it is suggested to adopt the discretion-based tradition in
e-consumer contracts, which is to consider not only the formal validity, but also
the substantive grounds of the exclusive choice of forum clauses.
First, electronic error may lead to unauthentic consent in electronic consumer
contracts. 5 Concluding an e-contract primarily depends on the proper function
of the technology. A breakdown of the information processing system, a mistake
in the information transmission system or software bugs can cause a jurisdiction
clause short of authentic consent. An electronic error may also occur if the consumer makes a mistake but has no chance to make a change in a reasonable
period of time. For example, suppose a consumer erroneously clicks an 'Agree"
button below the jurisdiction clause but quickly notices that he is in error. However, the system continues to the next step without offering the option of
reviewing and correcting the error, and the consumer cannot get prompt contact
information from the website to inform the business about the mistake. 5 A jurisdiction clause concluded in this case should be regarded as substantively invalid
as it lacks authentic consent.
Secondly, the character of electronic communication introduces a new possibility where the e-contract may include a choice of forum clause that is inserted
after the purchasing procedure has been completed. One common practice in
software purchasing and some website trading is that the "terms and conditions"
only appear after the user downloads the software or submits the acceptance.
Another possibility is that the consumer is required to read the "terms and conditions" before acceptance, but after clicking 'Assent", the screen will be
refreshed showing the whole contract for the consumer to "Confirm", including
the condition of products, the delivery information, the personal information of
the consumer, as well as the new "terms and conditions", which may include an
exclusive jurisdiction clause not shown up in the previous "terms and conditions". The consumer might click to confirm, assuming they have read the same
terms already A similar situation is where the business sends the consumer an
e-mail confirming the transaction, including the choice of forum clause, which
has not been disclosed to the consumer before purchasing. In some cases, the
contents in a website are dynamic in nature. The whole webpage may change
after updating without any trace left of the previous contents. It is possible that
during the actual procedure of purchasing, the webpage is updated, and the
5

See generally Briggs, Rees, supra n 48, para 2.97.

, The term "electronic error" has been introduced in US UCITA, s 213.


s See UCITA, s 213(b).

Exclusive Choice of Forum Clauses in E-Commerce

252

JPrlL Vol. 1 No. 2

terms the consumer read before accepting are different from the terms when he
clicks to accept. In these cases this jurisdiction clause should be held invalid for
56
falling short of authentic consent.
Thirdly, the non-localization and non-identification nature of e-commerce
may lead to agreement short of consent, because some terms, which may be
accurate in traditional contracts, are considered ambiguous in e-commerce. The
jurisdiction clause may state that "any dispute should be submitted to the court
of the place of business/the place of performance/the place the contract established/etc." Not only may the consumer have no idea which country these
descriptions actually refer to, but also the businesses, the legal professionals, even
the courts may have a confused understanding of the described locations in
e-commerce. 5' Without further explicit disclosure of what the designated place
is, the choice of forum clause can be claimed by the consumer to be invalid for
falling short of authentic consent.
Fourthly, an e-consumer might encounter a time-limit for reading the contract
terms provided by an e-businesses, which may prevent the consumer from reading and considering with his own pace and lead to false consent. E-businesses
may claim that this time-limit is provided for reasonable marketing and business
considerations, for example, there are great amount of demands over the limited
number of products, or the price of some products will increase as time goes
by. 55 It is not wise to permit one consumer to hold the bargain for an unreasonably long time while other potential consumers cannot process this transaction.
However, this time-limit should be reasonable. If there is no special business consideration behind it, and the limitation is just provided to prevent the consumer
from proper reading and consideration of the contractual terms, 5 the authentic
consent can be questioned.
(b) Lawfulness
Another requirement for substantive validity is lawfulness. Generally, a choice of
forum clause that seems valid might be claimed to be invalid if it is regarded as
unfair or unreasonable. Presently, there are three possible approaches as to the
lawfulness of a choice of forum clause. The first one is to look to the result of the
agreement to see if there is unfairness, or unreasonableness in the choice of
forum clause."n For example, if the effect of the choice of forum clause is obvi56 For example, in Sperdt, supra n 44, the court held that since the licence terms only appeared after
the user downloaded the solware, the downloaded software was not protected by the licence.
57 However, these clauses are valid in traditional contracts. See Coreck M1anitie GsbH r Handelsrees,
58

Br and Others, C387/98, 12000 ECR 1-9337; Powell, supra n 29.


Such as the tickets for transportation; see eg, National Express fun fare ticket purchasing procedtire, www.gobycoacl.com, -accessed on 24 June 2005.

59 For example, the time limit is set up fbr normal transaction without any convincing reason
and/or together with an over-lengthy dral of contractual terms.
'
See eg, Burke r Goodtnan 114 SW 3d 276, at 280 (Mo App El) 2003); Swain r .'l/o Services. htc 128
S\\ 31 103, (Mo App ED, 2003). etc.

October 2005

Journal of PrivateInternationalLaw

ously one-sided, with all the disadvantages on one party, it can be declared unfair
and might be held void or avoidable. However, this approach is not favoured in
practice, because if the parties genuinely consent to the effects of the agreement
at the time it is established, especially where the party carrying the disadvantages
6
agrees to accept the invidious result in exchange for some other advantages, '
there is no sound reason to invalidate the clause based on "unlawfulness".
It is also possible to study the process involved in concluding the clause. If the
clause has been concluded in an abusive manner, including an abuse of economic power, or by other unfair means - eg, taking advantage of the other
party's weaker position, such as poor bargaining power, low education level and
62
lack of available choice - the clause can be held invalid for its unlawfulness.
The problem is that no criteria have been established to determine what kind of
manners can be called abusive or unfair in e-commerce. Click-wrap and
browse-wrap contracts are widely used in e-commerce and have been accepted
for their convenience and economy When we look only at the process, we find
that the contract terms are provided unilaterally by the business - the party with
stronger economic power. The terms are standard and non-negotiable in nature.
The consumer, being the party with poorer bargaining power, is in a "take-it-orleave-it" position. In this process, businesses do make use of their economic
power, and consumers have no other choice but to accept all the terms or be
refused the transaction, due to their weaker position. However, if the process of
concluding a click-wrap or browse-wrap contract is regarded as unfair, unjust or
unreasonable, so that all click-wrap or browse-wrap contracts would be judged
invalid, the whole of e-commerce would be seriously impeded. Thus, to judge
the process alone cannot be a reasonable way to decide the lawfulness of a
choice of forum clause in e-commerce. The possible alternative is to connect the
process with the result and other elements to determine whether the choice of
forum clause is lawful or not.
Many states adopt the third alternative to study both the agreement itself and
its effects as well as the process to establish whether the clause should be
regarded as substantively invalid. For example, the Unfair Terms in Consumer
Contracts Regulation 1999 provides that a "contractual term which has not been
individually negotiated shall be regarded as unfair if, contrary to the requirement
of good faith, it causes a significant imbalance in the parties' rights and obligations arising under the contract, to the detriment of the consumer". 63 Both the
6'
62

Such as more attractive price, more convenient purchase, or favourable service, etc.
See Inter-American Convention on Jurisdiction in the International Sphere for the Extraterritorial Validity of Foreign Judgments of 24 May 1984 (La Paz Convention), Art I(D). The
Hague Convention of 25 November 1965 on the Choice of Court, Art q(3). The US Uniform
Commercial Code, Section 2-302(1). Also see the US Federal case: (lonial Leasing 0o of ,Wv

England. Inc v Pqh Brothers Garage. 735 F 2d 380 (9tl Cir 1984).
63

Art 5(1). See also Ociano Grupo Editorial &l c Rocid MIurciano Quintero C-240-243/98 12000] ECR
1-4,1.1, para 24.

Exclusive Choice of Fonim Clauses in E-Commerce

JPrIL Vol. 1 No. 2

Federal Court and some State courts of the United States adopt the doctrine of
reasonability and conscionabiity to decide the substantive lawfulness of the
choice of forum clause.64 Unconscionability has been classified by some scholars
as either procedural and substantive. 65 Under procedural unconscionability,
courts should look for unfair unawareness or an absence of meaningful choice by
considering the consumer's educational level, the lack of opportunity to study
the contract and enquire about contract terms, whether the clause was stated in
overly technical terms, and whether there was a lack of voluntariness of the consumer. 66 Under substantive unconscionability, courts have to consider whether
the clause was unreasonably one-sided, oppressive or unfavourable to one party;
whether the creditor or seller unduly expanded his own remedies; or whether the
67
consumer waived his right to a remedy.
This last approach may be more effective when applied to e-commerce consumer contracts than the other two. Take click-wrap contracts as an example. To
a business, a click-wrap contract will be regarded as prima facie effective, which
will increase business expectation and commercial efficiency To a consumer, this
requirement to look to the process and result of the choice of forum clause will
help to prevent him from being bound by overly hostile clauses. Under the third
approach, general considerations on the lawfulness requirements of consumer
contracts in e-commerce can be suggested as the following. (i) Whether the
choice of forum clause has been individually negotiated and agreed without any
economic or other pressure on the consumers. If the clause has been individually
negotiated in an equal and reasonable way, the clause can be regarded as lawful.
For example, the consumer sends an e-mail to the business to negotiate the
choice of forum clause. (ii) Whether the procedure to enter into an agreement is
reasonable enough, the consumer has the opportunity to review the clause," is
69
given a clear choice between accepting or rejecting the clause. has the chance
to correct errors and change his mind any time during the procedure, and has
70
adequate notice of the consequences of assent and rejection. If all of these
procedural requirements are fulfilled, the business has presented utmost good
faith for the consumers to indicate their authentic intention on the choice of
See eg, M/SBreynen and Unten'eser Reederei, GubHr Zapata Off-Shore Co ,107 US I (1972) ("The Bremen"); Wll11ians v Anerican Online, Inc 2001 WL 135825 (Mass Super Ct, 8 Feb 2001); Lamb r
egaflight, Inc 26 SW 3d 627 (Ten Ct App, 2000).
65 See A Leit, "Unconscionability and the Code - the Emperor's New Clause" (1967) 115 Unhiersi'
of Pennvllania law Reniew. 185.
66 J Bruch, "Forum Selection Clauses in Consumer Contracts: An Unconscionable Thing Happened on the Way to the Forum" (1992) 23 Laola Unirersit of l(/ago low Journal 329, 333.
67 Ibid.
61

68 UCITA s 113(a) delines "opportunity to review" as a term "available in a manner that ought to
call it to the attention of a reasonable person and permit review".
69 See eg, Capsi r MWicrosoft Aetwork LLC 732 A 2d 528 (.NJ Super Ct App Div, 1999); Specit. sapra
n 46.
7) See eg, Rudder z ,Vlicrosqf1 (,16p. [1999] 2 CPR (4th) 4741 (Out Super Ctjustice, 8 Oct 1999).

October 2005

Journalof Private InternationalLaw

forum agreement, which should be regarded as reasonable. (iii) If the answer to


the above two questions is negative, then the effect of the choice of forum clause
is unreasonable and unfair, as it was unreasonably one-sided, oppressive or unfavourable to the weaker party. If it is for the benefit of the consumer, even if the
clause is designed by one party and put the other party in a "take-it-or-leave-it"
position, the clause would not be regarded as unlawful. In e-commerce, in most
cases, the choice of forum clause is unilaterally inserted by the business, and no
individual negotiation is involved. Non-negotiation in adhesion contracts will
easily cause unfairness and lack of authentic consent. However, since it is widely
used in e-commerce, it is not reasonable to invalidate all choice of forum clauses
without individual negotiation, especially when the effect of the clause will not
be a disadvantage to the consumer. The same reason will be applied to the second point. Even if the consumer cannot understand the choice of forum clause,
if the clause has an absolutely fair result to the consumer, simply to disregard it
will not be reasonable, and will lead to further uneconomic consequences and
inconvenience to commercial practice.

D.

EFFECTIVENESS OF VALID EXCLUSIVE CHOICE OF FORUM CLAUSES

Once an exclusive choice of forum clause meets all the prerequisites, it is theoretically effective and binding on both contractual parties. However, in practice its
effectiveness is far from certain. 7 Especially with respect to consumer protection,
the effectiveness of a valid exclusive choice of forum agreement might be more
complicated and confusing. Rule-based approaches try to set up separate rules to
treat jurisdiction clauses in consumer contracts and limit their effect; 72 discretion-based approaches provide judges with discretion to decide the effectiveness
they might be given based on the principles of fairness and justice. Since there
are many different approaches to the effectiveness of jurisdiction clauses in the
present world, this section will only focus on studying and comparing the two
most influential, and possibly the most appropriate, approaches in rule-based
and discretion-based jurisdictions, namely the approach adopted in the Brussels I
Regulation, and the one widely accepted by most courts in England and other
Commonwealth countries.

For example, some states give full elfect to a valid jurisdiction clause by entertaining tie
prorogated jurisdiction and declining jurisdiction if they are riot chosen, see Civil Code of
Quebec, Art 3148; other states only recognize the effect of jurisdiction clause in its prorogation
sense but not derogation.
72 Such as the approaches adopted in the Brussels Regime. However. many other rule-based couttries still apply the general rule to consumer contracts owing to the delayed response of legislation
to consumer protection. This approach is outdated and obviously unreasonable.

Exclusive Choice of Forum Clauses in E-Commerce

JPrIL Vol. 1 No. 2

1. Rule-based Approaches
One of the main characteristics of rule-based approaches is that - unlike their
discretion-based counterparts - they set up provisions that clearly distinguish
consumer contracts from other types of contracts and design different rules
regarding the effect and application of exclusive choice of forum clauses within
them in order to protect consumers. The most radical approach is simply to
refuse to give effect to exclusive choice of forum clauses in all contracts that
involve consumers. 73 However, this approach goes too far and is very unlikely to
be favoured in e-commerce where exclusive jurisdiction clauses should be given
more value.74 Comparatively, the approach adopted by the Brussels Regime, to
recognize the effectiveness of exclusive choice of forum clauses in consumer contract with certain conditions, is more reasonable, and it seems this approach has
been widely accepted and is an international trend. 7 5 According to this
approach, exclusive choice of forum clauses in consumer contracts are prima
facie ineffective, except in certain circumstances. The qualifications can be read
as the following: (i) the exclusive jurisdiction clause is entered into after the dispute has arisen; 76 (ii) the exclusive jurisdiction clause broadens the consumer's
options; 77 or (iii) the exclusive jurisdiction specified is also the domicile/habitual
residence of both the business and the consumer at the time of entering into the
agreement.' 8 Despite it having been favoured by more countries, this approach,
together with the qualifications described below, faces challenges in e-commerce.
79

(a) Qualifications

The first qualification concerns the difficulty of deciding two important times in
e-commerce: when the dispute has arisen, and when the jurisdiction clause has
been agreed upon. It has been said the time when the dispute has arisen is the
time "as soon as the parties disagree on a specific point and legal proceedings
are imminent or contemplated". 0 However, this explanation has been criticised
for its vague and outdated nature,8 ' especially in e-commerce. Unlike traditional

73

74
75
76
77
78

79
80

See eg, Switzerland's Federal Code on Prixate International Law of Dec 1987, Art 114.2 states:
"The consumer may not waive in advance the venue at his domicile or place of habitual residence." Art 120.2 also rejects the effect of choice of law in consumer contract.
See generally supra s B.
See Brussels I Regulation, Art 17, Art 23.
Ibid, Art 17.1.
Aid, Art 17.2.
bid, Art 17.3.
It is assumed the second qualification can be reasonably applied in e-contract, so that this section
will focus on studying only the first and third qualifications.
See eg: PJenard, "Report on the Convention of jursidiction and the Enforcement of Judgments
in Civil and Commercial Matters". (Jenard Report), [1979] OJ C59/1, 32; Nygh, Pocar supra
n 41, 53.
Briggs and Rees, supra n 48, 81 and n 345 therein.

October 2005

Journalof PrivateInternationalLawi

commerce, where the parties can discuss problems face to face and get immediate feedback, e-commerce separates the complaint procedure into several stages.
For example, an e-consumer will send a business an e-mail or fill in an online
electronic form to complain, and the business will reply with a possible solution
after a period of time, which can be called the first negotiation. If the consumer
is dissatisfied, he may directly bring proceedings, or he will try to have a second
negotiation. The same procedure might continue until finally the dispute goes to
court. It is not clear which stage can be regarded as that at which "the parties
disagree on one special point". If it is the first time the consumer sends the complaint, without knowing the business's response, it is too soon to say the dispute
has arisen; even if the consumer finally received the answer he is unhappy about,
he might try to continue negotiation rather than go to court, so that it is hard to
say "legal proceedings are imminent or contemplated". If it is the first time the
business makes an unsatisfactory answer, when can the dispute be regarded as
having arisen if the business just ignores the consumer's complaint and never
replies? Even if we have chosen the first time the consumer makes a complaint, it
is not certain what the time is: is it the time the consumer sends the complaint,
or is it the time the business receives it? The same difficulty also decides when
the agreement is concluded:"2 is it the time the consumer sends the acceptance,
the time the acceptance has been received by the other party, or when the consumer has received from the business the acknowledgement of the receipt of
consent? 83 It seems the second choice is more popular nowadays, but it will face
problems caused by the delay of e-mail - eg, if an e-mail containing a jurisdiction clause has been held up by the server or returned owing to a system mistake,
while the complaining e-mail, though sent later, has arrived at the business
earlier. It also suffers from the difficulty of determining when the acceptance has
been received - is it the time the acceptance enters the receiver's server, the time
it is downloaded to the receiver's computer, or the time the receiver opens and
reads it? Taking these two issues together, determining the effect of a jurisdiction
clause according to the time of dispute is not practical in e-commerce.
The third qualification is designed to protect the reasonable expectation of
the business, for a subsequent change of domicile by the consumer cannot confer
jurisdiction to the consumer's new domicile. However, uncertainty will result in
e-commerce, given the difficulty of identifying the other party When dealing
with an e-consumer, the business usually will not know which country is the consumer's domicile/habitual residence. It cannot be judged from the consumer's
e-mail address, which may be misleading;84 nor the IP (internet protocol) address
The Electronic Commerce Regulation 2002 (transporting into UK law the majority provisions of
the Electronic Commerce Directive 2000/31 /EC) keeps silent in this area.
83 See eg, Malta Electronic Commerce Act 2001, Art 10(a): "...an electronic contract is concluded
when the addressee has received from the originator, electronically, the acknowledgement of
receipt of the addressees' consent..."
81 Internet service providers usually will provide an internet user with the domain name required
82

Exclusive Choice of Forum Clauses in E-Commerce

JPrIL Vol. 1 No. 2

of the information message, which may be temporary; 5 nor the delivery information, which can also be temporary;"' nor the consumer's statement, which
may be untrue. Without knowing the consumer's origin, the business will have no
idea about the effectiveness of the jurisdiction clause. It seems that the concepts
of "time" and "territory" hold little sway in e-commerce, and should be avoided
in e-contracts.
(b) Prima Facie Ineffective Policy
In addition to concerns over the above qualifications, since exclusive choice of
forum clauses will play a more important role in e-commerce, it is questionable
whether the obvious conservative policy, namely to hold the choice of forum
clause prima facie ineffective in consumer contracts, can be copied in e-commerce.Y7 E-business faces great challenges in its litigation power and has to find a
way to avoid highly oppressive global jurisdiction without its economic efficiency
being fatally compromised. E-commerce also needs a more positive model to
improve its development. E-consumers, although still holding a weaker position
in general,8 8 may be more reasonable and economically sensitive and may want
to enjoy the convenience and the competitive price the exclusive jurisdiction
clauses provide, despite the disadvantage of foreign litigation. 9 Providing the
strict prerequisites to ensure the e-consumer's real intention, the effect of the
jurisdiction clause shall not be rejected just because one party is the consumer.
The principle of regarding exclusive jurisdiction clause in consumer contracts as
prima facie ineffective is considered too restrictive and unreasonably limiting of
the application of jurisdiction clauses.

without careful investigation of the user's real location. It is possible for someone resident outside
the UK to register a domain name with ".uk." In addition, besides country code top-level
not give the internet
domains (TLDs) there are generic TLDs, eg, ".com" and ".net", which %%ill
user any hint about the probable location of the other party
85 ['he IP address tells us no more than the location of the computer, which can only indicate the
location of the user during the communication, but not more.
86 For example, the consumer can purchase something during a short holiday, and proide a temporary address for deliver.
87 "Electronic Commerce and International Jurisdiction", Ottawa, 28 Feb-I Mar 2000, Prei Doc
No 12, Hague Conference on Private International Law. 7.
e-consumers' weaker position can be protected by strict and high standard prerequisites.
8aTh
89 From the economics point of' view, without an effective and enforceable choice of forum clause,
tile c-business may incorporate tie cost and risk of global jurisdiction into the price of tie prod-

uets provided online. See eg, CarniralCruise Lines, Lid i'Shute 499 US 585 (199 1) gave the economic
rationale that "passengers who purchase tickets containing a forum clause.. benefit in the form
of reduced fairs reflecting the savings that the cruise line enjoys by limiting the for a in which it
ma be stied".

October 2005

Journal of Private InternationalLaw

259

2. Discretion-Based Approaches
(a) General Principle
Discretion-based approaches have no predetermined rules to govern the consumer protection issues raised by exclusive jurisdiction clauses; however, more
flexible, but also more uncertain approaches will be adopted, so that the effectiveness of a valid jurisdiction clause primarily depends on the courts' discretion.
Given the widely accepted policy for courts to hold parties to their bargain,"'
together with the policy that the parties cannot "oust" the courts' jurisdiction
obtained by their private agreement, 91 common law courts usually will give primacy to a valid jurisdiction clause, but may deny its effectiveness in certain
circumstances. At present, most of the common law jurisdictions adopt the
approach of holding a valid exclusive jurisdiction clause prima facie effective
unless strong causes have been shown to the contrary, which appears more
appropriate in traditional commerce. 92 This approach is assumed at least in part
to achieve "order and fairness" for it ensures the courts give full weight to the
parties' agreements and also provides sufficient leeway for the purposes of justice. 93 This general rule can be applied to e-commerce, for it satisfies the criteria
for an appropriate approach in e-consumer contracts, by ensuring certainty and
predictability, as well as proper protection for the weaker party. However,
although the general principle is quite suitable and can be properly applied to
e-commerce, the test therein for the courts to exercise their discretion whether to
uphold the clause needs further consideration.
(b) Strong Causes
(i) The Factorsfor Discretion. Theoretically, the test and criteria to buttress the
9o According to this policy the court has discretion to give effect to the choice of forum clause. See
eg, English case: The Chaparral [1968] 2 Lloyd's Rep 158, Akai Py ld v Peolples Insurance Compaly
Lid [1999] ILPr 24; US Federal case: The Brenmen, supra n 64; Canadian cases: 7I Pompey Industrie z
ECU-Line NV [2003] 1 SCR 450; Australian case: Oceanic Sun Line Special Shipping Co Inc v Fav
(1988) 165 CLR 197 at 230-31, 259.
51 According to this policy, the court has discretion to maintain its jurisdiction despite a validjurisdiction clause. Although a court will be very reluctant to disregard a valid jurisdiction clause, it
does make this discretion in limited circumstances where it is considered the parties are amenable
to the jurisdiction of the trial forum and the ends of justice w%-ill
he hetter served by a trial in this
country See English cases: Citi-iarch lid rs'septune Orient Lines lid [1996] 2 All ER 545; Air.'surn
Aine Airlines lid [1993] 2 NZLR 632; Aratra Potato Co Lid r Le'ptian Narigation Co ("The El Anria')
[19811 Lloyd's Rep 119. CA; US cases: llKn If Muller & Co r Swedish Anerican Line Lid 224 F 2d
806 (2d Cir 1955); Carbon Black Erpori Inc r The SS Alonrosa 25,t F 2d 297 (5th Cir. 1958).
52 The approach has been set up in a cornerstone case "The Eleflheria" 11970] P 94, 110, repeated in
The El Amnria, supra n 91, and has been confirmed as accepted by a large number of cases in the
Commonwealtl thereafter. See Akai Ptv Lid, supra n 90; Citi-Alarch ltd. sopra n 91: lbth v Alanildra
flour Mills Ptv Lid, 171 CLR 538; Oceanic Sun line, supra n 90, at 230-31, 259: Zl Pompe, supra n 90.
For more detailed discussion, see generally Cheshire and s'orih, supra n 10. 339. 350-355, 370-73.

93 ZI Pomipv., supra n 90, at para 20.

Exclusive Choice of Forum Clauses in E-Commerce

JPrIL Vol. 1 No. 2

court's discretion in enforcing an exclusive choice of forum clause are not different in the case of the chosen court facing a prorogation jurisdiction clause and
the non-contractual forum facing a foreign jurisdiction clause. 9 ' Generally, all the
relevant factors will be taken into account, both those concerning the nature of
the dispute, including the availability and location of witnesses and evidence, 95
the applicable law,96 the countries closely connected with the parties, 97 the place
of concluding a contract,98 the place of performance, etc; and the factors concerning the failure of justice - eg, if the judiciary is not independent, 99 the
chosen court is seriously incompetent in dealing with the dispute, 0 the resisting
party will suffer prejudice in the chosen forum for reasons of insecurity", there
are difficulties in enforcing the judgment, or religious, political, racial or other
reasons which may deprive him of a fair trial. 0 Applying the same factors, especially the factors concerning the natural forum, to e-commerce, will create at
least three difficulties. First, some factors in determining the natural forum of
disputes will be regarded as less important in e-commerce. For example, in a
transaction of digital products, all the processes are completed online, and usually only between the parties without the involvement of any witnesses. The
relevant records or evidence can be stored in a range of countries in different
forms providing it is reaccessible, accurate and reliable.'03 Some are stored on the
internet server, or the chips of any other person who provides service for retention of electronic recodes,'0 4 the location of which may be artificial, multiple,
irrelevant to the dispute or changeable. The businesses might be obliged to send
the consumer a copy; in this case, the same evidence will also be located in the
consumer's home country. Some companies just make records on the website,
and all persons are entitled to access these using their username and password.
No matter where the evidence is located, it is portable and accessible by courts
worldwide. Secondly, since most of the factors are still territorially based, they
are no longer effective in e-commerce, where these territorial connections are
broken. It is not clear where the place of business is - the place the company is
physically located, the place the website company is located, or where the
'4 See Akai P Ltd, supra n 90, at 52.
95 See AlacShanno r Rockware Glass Lid [1978] AC 795, at 812, 828; The Sidi Bisr [1987] I Lloyd's
Rep 42, 4.3.
96 See lbbbe v Capeplc [19991 IL Pr 113 at 126, CA.
97 See Spiliada A.laritinie Corpn v Cansulex Lid [1987] AC 460, at 4.78; "rendex Trading Co v Credit Suisse
[19801 3 All ER 721, at 734.
98 See Bank of Baroda v Vy59a Bank Lid [19941 2 Lloyd's Rep 87. 96.
9 See Mfiddle East Ban/king Co SA- v AI-Haddad (1990) 70 OR (2d) 97.
'00 See Islamic Arab Insurance Go v Saudi Egyptian.4American Reinsurance Co [ 1987] I Lloyd's Rep 315, 319.
101 See Oppenheinmerr Louis Rosenthal and Co AG 11937] I All ER 23.
102 See Carralhov lIl, Blvth (Amigola) Lid [1979] 3 All ER 280.
103 See UNCITRAL Model Law Art 10(l)
'04 Ibid. Art 10(3) permits the party using the services of any other person to retain data message
records, providing that the accuracy reaccessibility and integrity can be guaranteed.

October 2005

Journalof Private InternationalLaw

website can be accessed. It is also not clear where the contract is concluded. In
click-wrap contracts, is it the place where the consumer clicks for consent, or the
server where the electronic agent for receiving the electronic data is located?
Where does a digital product transaction take place? Is it where the information
is uploaded, or where the information is downloaded from? Thirdly, in e-commerce, in most cases there is no natural forum, or the forum which is the centre
of gravity is in fact the jurisdiction with fortuitous connections to the dispute.
The involvement of an internet service provider (ISP)05 separates the "formal
connection" and the "substantial connection". The traditional nexuses, however,
mainly focus on the connection as to the form and the procedure of a transaction. Since in most of cases the evidence is stored on the server, the electronic
agent is located in the server, and the products are actually sent out from the
server, the agreement can be regarded as being concluded on the server. The
place of the server thus will be the centre of gravity conferred by the traditional
nexuses. However, an ISP is by nature just a service or a channel for the performance of e-commerce. It is not responsible for any actions done through it, and
carries no rights and obligation over the relationship between the parties in
e-commerce. A business can easily change the location of its server, or apply several servers located in different states. The existence of a "natural forum"
conferred by traditional factors will be purely fortuitous.
(ii) Test Principle. Furthermore, the current approach provides no more than a
very basic and ambiguous principle for the test, without a clear and guiding
criterion of how the test should be taken, or how much weight should be given
to the natural forum fact or justice fact against enforcing a valid agreement. The
discretion thus becomes too flexible to be certain. With different weights given to
the factors, and different understandings of the "important factors", the effectiveness of a valid jurisdiction clause, which is supposed to be respected in most
cases, turns out to be uncertain. In some cases, the courts permit the effectiveness of a valid jurisdiction clause to be denied simply on "natural forum"
grounds.""' In some cases, it is held that the simple natural forum test is not
enough, and the courts only permit the party to escape the effect of a valid jurisdiction clause by relying on the factors they cannot foresee at the time of
conclusion of the contract.' 0 7 In other cases, the courts held that "strong causes"
should be shown beyond mere "natural forum" claims and look to the justice of
the matter. 08
105 An ISP is a company that provides access to the internet.
IrO See "The .1mria", supra n 9 1: Citi-Marrh. supra n 9 1: New Zealand case: .Ipple Computer filc

Apple

Corps Sa, High Cour orf New Zealand, 17 IPR 123, 19 Feb 1990.
"17 See British..lepospace 'le r Dee Howard Co [19931 1 L.oyd's Rep 368, at 376:" The Sociey of ljords r
Peter Ererett IVhitle (A6 2) 120021 1LPr II.
1'8 See M.lereur IPh-v Communication Yeicveoms Lid [1999] 2 All ER (Comni) 33: Sinochem hiternationalOil
(london) ld vAMobil Sales and Suppplr Cotp 12000] I Lloyd's Rep 670, at 679-80:.P Alogquan Securities

Exclusive Choice of Forum Clauses in E-Commerce

JPrIL Vol. 1 No. 2

Allowing a valid jurisdiction clause to be avoided only by reason that the


non-contractual forum is clearly more appropriate does not seem reasonable
because it will lessen the effectiveness a jurisdiction clause would otherwise have.
The relevant merits comparison between the current forum and the chosen
forum is regarded as having already been considered at the time of contracting,
so taking that into account in exercising discretion may make the choice of
forum clause overly vulnerable. Furthermore, in e-commerce, the "natural
09
forum" might be the location of the ISP,' which usually is not substantially connected with the dispute at all; or there might be no natural forum for the current
dispute, for the nexuses will be decentralised and spread around many states.
As a result, a new test combining the "unforeseeable factors" and "end of justice" sounds more appropriate. According to this test, if the resisting party can
show unforeseeable factors which are material for the convenience and expense
of the action and the interests of the parties, the relief might be given. Without
the unforeseeable factors, the reason that justice will be denied in the chosen
forum also can lead to a relief. The unforeseeable test, which has been regarded
as extremely rare and impractical in traditional contracts, can work better in
e-consumer contracts. Based on the contract's adherent and non-negotiable
nature, as well as the consumer's inadequate knowledge, limited time for consideration and non-access to professional consultation, the consumer will often have
something reasonably unforeseen when assenting to a jurisdiction clause, which
needs to be taken into account. However, this unforeseeable event should be
reasonable and arise in good faith. Simply having unexpectedly high travel
expenses cannot be sufficient to deny the effect of a jurisdiction clause. Only
subsequent changes which are unforeseen at the time of contracting meet the
10
unforeseeable requirement, such as the additional requirement for travelling,
the subsequent change in consumer's financial or physical situation,"' or the
change of the consumer's residence."l 2 The consumer also can rely on the "justice test" to escape the effect of a valid jurisdiction clause. Besides the factors
3
buttressing the justice claim in the traditional commerce," the consumer should
be permitted to challenge the enforcement of the jurisdiction clause, by claiming
that the litigation is unreasonable and excessively expensive and inconvenient so
that forcing him to litigate in the chosen forum will deprive him of his day in
Asia Private Limited v Malaysian Newsprint Industries Sdn Blid [2002] ILPr 17. 185-86. Although
these cases are dealing with non-exclusive prorogation jurisdiction clauses, it is assumed that the
principle can be applied to exclusive jurisdiction clauses.
10' See supra subsection D2(b)(i).
I0 For example, the chosen forum now requires the foreigner to obtain a visa for entr. which it did

112
113

not at the time of contracting.


Such as the consumer suffers bankruptcy afterwards, or suffers some physically disability which
makes foreign litigation oppressive.
For example, the consumer subsequently changes his residence to one more distant friom the chosen forum which makes the litigation unpredictably expensive and inconvenient.
See "The Eleftheria", supra n 92, 110.

October 2005

Journal of Pivate InternationalLaw

263

court, or make litigation impossible. This relief can only be granted by comparing the possible litigation costs and the value of the subject matter. If the former
is far higher and will prevent an ordinary person from accessing justice, it can be
regarded as a strong cause against enforcing the jurisdiction clause. Further, it is
necessary to point out that in an online adhesion contract, only the adhesion
party can rely on this test to escape a jurisdiction clause.
3. Conclusion
Compared with the current rule-based approach in the Brussels I Regime," 4 the
common law principle seems more appropriate for e-commerce, where the
choice of forum clause should be given more value. However, the over-flexible
discretion procedure, as well as the tradition to respect its own jurisdiction,
greatly limits the effect that a choice of forum clause is given according to this
principle, and creates unnecessary uncertainty. A proper approach should provide both primacy to a valid exclusive jurisdiction clause, and a pragmatic test to
create predictable, unified and logical exceptions. According to the above analysis, it is suggested to use the rule-based frame approach, but also to include
discretion-based content, to form a new approach, to ensure that a valid choice
of forum clause is prima facie effective with certain exceptions. '15It is suggested
that qualified exceptions should go beyond the normal "natural forum" concerns, and enter into the area of unforeseeable material factors at the time of
contracting and the absence of justice.'' 6

E.

SUGGESTION OF A NEW MODEL FOR EXCLUSIVE JURISDICTION


CLAUSES IN ELECTRONIC CONSUMER CONTRACTS

1. The Need for a Detailed, Flexible and Certain Approach


As we have discussed above, the present approaches face a many challenges in
e-consumer contracts. The rule-based approach generally ensures the certainty
and protection of the weaker party, but unreasonably limits the function of a
jurisdiction clause in c-consumer contracts. The formal requirement, although it
has already been partially reformed for the development of e-commerce, needs
further interpretation in e-contracts. The absence of corresponding rules on substantive validity undoubtedly opens the door for unlawfulness and injustice. The
"three qualifications" approach actually directs courts to deny the effect of a
choice of forum clause in a consumer contract even if the parties actually conBrussels I Regulation, Art 17.
1'5 A similar approach has been suggested in Interim Text 2001, supra n 13, Alternative B. variant 1,
Art 7.5, 7.6.
I16 For detailed suggestion, see injia s E(l)(d).
''4