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UNIVERSITY OF NAIROBI

SCHOOL OF LAW

RESEARCH PAPER SUBMITTED IN PARTIAL FULFILLMENT OF THE BACHELOR OF LAW (LL. B)


COURSE.(GPR 400)

THE APPLICATION AND ENFORCEMENT OF ELECTRONIC CONTRACTS IN KENYA

BY: SERRO STANZA RAO


REG. NO: G34/35396/2010

SUPERVISOR: Prof. PATRICIA KAMERI MBOTE


MAY 2014

DECLARATION
I, STANZA RAO SERRO, do hereby declare that this is my original work to the best of my
knowledge and has not been submitted and is not currently being submitted for a degree in any
other university.

DATE: ...........................................

SIGNED:................
STANZA RAO SERRO

SUPERVISOR: Professor PATRICIA KAMERI MBOTE

DATE: ...........................................

SIGNED:................

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ACKNOWLEDGEMENT
I would like to express my profound gratitude to my supervisor, Professor Patricia Kameri Mbote
who gave me invaluable assistance, guidance and insightful comments in writing this
dissertation. Your critical thoughts and support went a long way in my completion of this
research.
Special thanks to my parents and siblings for all the support, both financial and otherwise, but
more so for the encouragement they gave me over the years as I pursued my education.
I would also like to thank my colleagues in the class of 2014 for the unforgettable constructive
academic experience and support. God bless you all.
I would also like to the University of Nairobi for giving me such a timely opportunity to
undertake my undergraduate course and for the facilities offered.
Last and most importantly I would like to thank The Almighty God without whom my efforts
would not amount to much and I am grateful for this far He has brought me.

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DEDICATION
This final work is dedicated to my parents, Mr. Patrick Serro and Mrs. Jesca Omai; and to my
two lovely sisters Everlyne Serro and Hulda Serro for their invaluable contribution in my life.

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Contents
CHAPTER ONE ................................................................................................................................................ 1
1.1.

INTRODUCTION ............................................................................................................................. 1

1.2.

BACKGROUND TO THE PROBLEM.................................................................................................. 2

1.3.

THEORETICAL/ CONCEPTUAL FRAMEWORK AND LITERATURE REVIEW ....................................... 4

1.3.1.

Theoretical Framework ......................................................................................................... 4

1.3.2.

literature Review ................................................................................................................... 5

1.4.

STATEMENT OF THE PROBLEM ..................................................................................................... 8

1.5.

HYPOTHESES .................................................................................................................................. 8

1.6.

BROAD ARGUMENT LAYOUT ......................................................................................................... 8

1.7.

OBJECTIVES OF THE RESEARCH ..................................................................................................... 9

1.8.

RESEARCH QUESTIONS SOUGHT TO BE ANSWERED ..................................................................... 9

1.9.

METHODOLOGY TO BE USED ...................................................................................................... 10

1.10.

CHAPTER BREAKDOWN ........................................................................................................... 11

CHAPTER TWO ............................................................................................................................................. 12


THE STATE OF E-COMMERCE LEGISLATION IN THE WORLD ................................................................... 12
1.0 THE ENVISIONED CHALLENGES OF E- COMMERCE TO THE EXISTING LAWS..................................... 12
1.1. The legal requirements for a valid contract ................................................................................. 13
1.2. The Area of Consumer Protection ................................................................................................ 14
1.3. Administration of the field of E- commerce ................................................................................. 15
2.0. Responses to the Challenges Brought By E- Commerce .................................................................. 17
2.1. The UNCITRAL (UNITED NATIONS COMMITTEE ON INTERNATIONAL TRADE LAW) Model Laws 17
2.2. The Position in the European Union............................................................................................. 20
2.3. The Position in the United Kingdom............................................................................................. 21
2.4. The Position in the United States ................................................................................................. 26
2.5. The Position in the Republic of South Africa ................................................................................ 30
CONCLUSION ........................................................................................................................................... 34
CHAPTER THREE .......................................................................................................................................... 37
1.0.

THE KENYAN POSITION ON ELECTRONIC COMMERCE ................................................................ 37

2.0.

STATUTES AND E- COMMERCE IN KENYA ................................................................................... 37

3.0.

E- COMMERCE LEGISLATION ....................................................................................................... 38

4.0.

DEVELOPMENTS TOWARDS an E- COMMERCE FRIENDLY WORLD ............................................. 39


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5.0.

A LOOK INTO KEY STATUTES AIMED AT E-COMMERCE.............................................................. 40

1.

THE KENYA INFORMATION AND COMMUNICATION ACT, 2012 ................................................. 40

2.

THE CONSUMER PROTECTION ACT, 2012 ................................................................................... 43

Conclusion ............................................................................................................................................... 46
CHAPTER FOUR ............................................................................................................................................ 47
1.0.

THE WAY FORWARD .................................................................................................................... 47

2.0.

The International Arena .............................................................................................................. 47

3.0.

Improving The Kenyan Legislation Process ................................................................................. 48

4.0.

Suggestions to the Enacted Legislation ....................................................................................... 49

5.0.

Recommendations....................................................................................................................... 51

CONCLUSION ........................................................................................................................................... 53
BIBLIOGRAPHY ............................................................................................................................................. 55

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CHAPTER ONE
1.1.

INTRODUCTION

The use of the internet in Kenya has become quite widespread over the past decade. This has
been facilitated by the mushrooming of cyber cafes as well as access to internet enabled smart
phones and tablets, coupled with the affordable nature of data costs for the internet by internet
service providers in the country. Kenya is estimated to have 19.6 million internet users as of June
2013; which accounts for almost half of the entire population of Kenya. This has mainly been
attributed to mobile phone internet connectivity which has also been boosted by the number of
promotions by internet service providers to encourage people to use the internet1. The
Government of Kenya has also played quite a role, outlined in VISION 2030 2, science,
technology and innovation are to be harnessed so as to stimulate technological and industrial
transformation. This led to the formulation of the Science, Technology and Innovation Policy and
Strategy which is in turn meant to provide

framework for the achievement of the goals of

VISION 2030 of which one of the key areas is that of Information Communication Technology.
One of the projects in pursuance to this has been the laying down of an under sea fibre optic cable
by the Government between the United Arab Emirates and Mombasa with the aim of boosting
Kenyas internet connectivity needs3. As a result of the internet penetration in Kenya, many
people have been able to procure goods and services in Kenya as well as from as from abroad as
well as offer the same to others.

The Communications Commission of Kenya, Quarterly Sector Statistics Report (April June 2013)
VISION 2030 is the national long term development blueprint that aims to transform Kenya into a newly
industrializing, middle income country by the year 2030
3
http://www.africa-business.com/features/kenya_cable.html (accessed 12/18/13. 11.50 a.m.)
2

1.2.

BACKGROUND TO THE PROBLEM

The area of business has been a key beneficiary of the internet. The nature of the internet has led
to the emergence of what can be termed as the electronic market place; while the new form of
conducting business has been coined as electronic commerce or e- commerce in short. The
internet has even been referred to as presenting a new consumer medium by Judge Preska 4. The
nature of the internet is that consumers can interact with businesses instantaneously, access
products and goods all over the world with the click of a mouse; hence making the internets
speed and interconnectivity a new challenge for legal systems to deal with5.
E- Commerce is a type of industry where the buying and selling of products and services is
conducted over electronic systems such as the internet or other computer networks. E- Commerce
draws on technologies such as mobile commerce, electronic funds transfer, supply chain
management, internet marketing, online transaction processing as well as electronic data
interchange6.
A contract comes into existence when an offer by one party is unequivocally accepted by the
other party; with both parties having the requisite capacity and some consideration passing
between them. This is coupled with the requirement that the parties must have intended to create
legal relations between themselves and that the purpose of the contract must also be a legal one. 7
An electronic contract is created in much the same way but with the exception of it being done
over the internet. In the traditional sense, most forms of transactions were conducted in person by
parties who had direct physical contact with each other as well as the commodity which was the
subject of their interaction.
4

American Libraries Association v. Pataki ,969F. Supp. 160 (S.D. N.Y. 1997)
st
Geraint Howells, Cyber Consumer Law and Unfair Trading Practices. 1 Ed. , Lancaster University Press 2005
6
http://www.duport.co.uk/advisor/legal-advice/contracts-and-internet.php (accessed 13/10/4 at 1.10 p.m.)
7
Chitty, J. Chitty on Contracts:General Principles, Vol. 1 (Sweet and Maxwell) 2008
5

With the growth of e- commerce in Kenya, the traditional rules that governed how the contract
relationship worked in the country face challenges brought about by the application of electronic
contracts in Kenya in doing e- commerce. An example is in the making of an offer to a potential
customer. In contract law there exists the exception of an invitation to treat8 whereby an action
will not amount to an offer. The most common example of an invitation to treat is whereby a
shopkeeper displays some goods on offer in front of his shop. As regards the internet, there is the
risk of uncertainty as to whether a web page statement or preliminary email should be treated as
an offer or not. Another aspect is that of the acceptance of the offer once it is made; in the
traditional sense for example, an offer need not be express and can actually be inferred from the
conduct of the offeree. However in the context of the internet where the parties only knowledge
of each other is via that medium, would the sending of an email or the filing of an automated
response amount to an acceptance. In the United Kingdom for instance, in a bid to curb the
challenges that were brought about by the use of e- commerce, certain regulations were enacted
of which they included the Consumer Protection (Distance Selling) Regulations 2000 and the
Electronic Commerce (EC Directive) Regulations 2002.

An invitation to treat is intended to provoke an offer from another party- Internet Law and Regulation. 4
Edition. Graham J.H. Smith

th

1.3.

THEORETICAL/ CONCEPTUAL FRAMEWORK AND LITERATURE


REVIEW

1.3.1.

Theoretical Framework

This paper will be influenced by several schools of thought. The first is the economic analysis of
law which is also referred to as law and economics. The influence of law and economics can be
seen in the way law and economics seems to set the agenda or at least the initial framework for
most discussions of policy in academic, legal and political debate. Part of the power of economic
analysis is that it presents a largely instrumental approach which fits well with the analysis and
evaluation of law. It forces the question: do these legal rules achieve the objectives at which they
aim and would alternative rules do any better?9
This view can also be related to the utilitarian maxim: the greatest good for the greatest
number10. Economics in general is built on the basic assumption that people are rational
maximizers of their satisfaction11. The theory of law and economics looks at market transactions
with the spectacles of utilitarianism so as to highlight that transactions are conducted because
they increase the sum of happiness. This is to mean that people transact because it is in their best
interest to do so.
Contract law can be said to be founded on economic efficiency and some combinations of
autonomy, corrective justice and the morality of promise keeping. Autonomy is explained
through the ideal of freedom of contract, the aspect of corrective justice is grounded on the fact

Brian Bix, Jurisprudence: Theory and Context (Sweet and Maxwell) P. 201- 227
The phrase is closely associated with Jeremy Bentham even though it is the theorist Francis Hutcheson who first
wrote: that Action is best which procures the greatest happiness for the greatest numbers; and that, worst,
which in like manner occasions misery - Francis Hutcheson, An Inquiry Into the Origin of Our Ideas of Beauty and
Virtue, Treatise II, Section III para VIII
11
Richard. A. Posner, The Problems of Jurisprudence (Harvard University Press, Cambridge, Mass., 1990) p.353
10

that a person harmed by a breach in contract seeks to collect damages from everyone who
breaches the contract.
John Lockes theory of private property can be used as a basis for validation of why one is
entitled to that which he has worked to earn. John Locke stated that each person has property in
his or her own person and therefore in his or her own labour.12
1.3.2.

literature Review

The writer Ian Walden is primarily concerned with the protection of consumers in cyberspace; a
term which is used to refer to the electronic market13. The writer in his book tries to explain the
manner in which the electronic market place works, the failures that can be experienced as well
as the most appropriate manner in which consumers could be protected within this sphere. He
raises the aspects of unfair commercial practices which include; unfair standardized terms and
conditions, commercial practices that are misleading or oblige customers to adhere to mandatory
online dispute resolution clauses or practices which do not disclose appropriate information to
consumers or which do not offer any means of redress for consumers should they feel aggrieved.
Ian Walden also raises the concerns that affect the enforcement of contracts made over the
internet due to the global nature of the internet14. He goes on to suggest that in order to counter
the unfairness of commercial practices and the tremendous lack of unified and comprehensive
rules that address these practices, a model based on fair trading principles should be adopted. The
objective of such a model would be to look at adopting similar solutions and interconnecting
similar principles at the international level when dealing with internet contracts.

12

John Locke, Two Treatises on Government, (student ed., Peter Laslett, ed., Cambridge University Press,
Cambridge 1988)
13
st
Geraint Howells, Cyber Consumer Law and Unfair Trading Practices. 1 Ed. , Lancaster University Press 2005
14
ibid

In Chapter10 of his book, Graham J.H Smith looks at the basic ingredients in the formation of a
contract such as: offer, acceptance, consideration, intention to create legal relations among others,
all carried out within the context of the internet. The focus of the particular chapter regarding the
formation of contracts over the internet clearly highlights the possible challenges that could affect
parties either with regard to compliance with existing regulatory laws or in the enforcement of
rights and duties inherent to the formed contract. For instance, the writer does point out that one
of the problems with electronic contracting over the internet is the determination of whether or
not the rule as regards instantaneous communications should apply or whether the postal rule is
the most appropriate analogy so that the dispatch of the accepting email or response could be
termed as valid response. Another aspect of note is the incorporation of terms into such contracts.
As a general rule, contracts will encompass terms that have been expressly agreed upon by the
parties in addition to those implied either by the courts or by law, however, a party may try to
incorporate standard terms into a contract via a web page. The basic rule is that for him to be
bound, the other party must have sufficient notice of the terms and they must be brought to his
attention prior to the contract being formed15.
Zheng Sophia Tang in her book is concerned with the proper solutions which private
international law can offer when dealing with electronic consumer contracts. Without such
solutions, she envisions that consumers will not be confident about purchasing online and
businesses will face unreasonable risk and participation costs in E-Commerce. The use of
updated and properly designed international rules is seen to be essential to the further
development of E-Commerce. The book aims to provide an answer to the urgent requirement for
legal certainty, security and justice in e-consumer contracts; its primary concern being the

15

th

Graham J.H. Internet Law and Regulation. 4 Edition.

existing approaches to jurisdiction and choice of law issues in e-consumer contracts in the
European Community and England as well as several highlighted jurisdictions. The book
proposes what the law should be so as to provide certainty to both contracting parties as well as
provide reasonable protection to consumers and to promote the development of E-Commerce16.

16

Lim, Justin. "Electronic Consumer Contracts in the Conflict of Laws, by Zheng Sophia Tang." Osgoode Hall Law
Journal 49.1 (2011) : 193-195.

1.4.

STATEMENT OF THE PROBLEM

The laws in Kenya deal with the area of commerce and technology separately; this has the effect
of meaning that they are inadequate in the subject matter of electronic commerce. This is further
compounded by the rapid advancement of technology and its subsequent application as it has
meant that the existing laws do not fully provide adequate protection to the rights of both
proprietors as well as the consumers who procure their services or goods.

1.5.

HYPOTHESES

1. Despite the validity of electronic consumer contracts, the enjoyment of rights and the
enforcement of duties pursuant to the contract may prove problematic should there be a
dispute originating from the electronic contract.
2. The current legislation as it stands regarding the enforcement of contracts is inadequate to
handle the challenges that may arise from electronic contracts in E-Commerce and as a result
the most applicable source of law is international law and conventions as well as a reference
to model laws.

1.6.

BROAD ARGUMENT LAYOUT

The existing laws in Kenya deal with the issue of commerce, contracts and electronic
communication separately even though e- commerce requires a framework that will encompass
all the three aspects. Consumer protection with regard to e- commerce is also inadequately
provided for in the laws of Kenya as it stands.

1.7.

OBJECTIVES OF THE RESEARCH

Main objective: The main objective of my study is to establish how electronic contracts are
operational in Kenya pursuant to e- commerce.
Specific Objectives:
1. To establish the procedural framework to be followed in the exercise of rights and duties
under such contracts e.g. which jurisdiction to be used where the two parties come from
different countries.
2. To establish the extent to which the law safeguards the rights of both the proprietors of ECommerce as well their customers

1.8.

RESEARCH QUESTIONS SOUGHT TO BE ANSWERED

1. What are the rights and duties of parties in an electronic consumer contract?
2. Which laws govern E-Commerce in Kenya?
3. Which laws and procedures can be applied in the regulation of E-Commerce in the
absence or inadequacy of domestic law?
4. How can a party enforce rights inherent to them pursuant to an electronic consumer
contract; which law is to apply or which jurisdiction will be applied where parties come
from different countries?

1.9.

METHODOLOGY TO BE USED

One of the methods that I will use to conduct my research will be the use of the library. The
library research will enable me access materials in the form of books, legislation, articles as well
as journals covering my area of research. This will provide me with a comprehensive and fairly
accessible source of information to enable me familiarise myself with my area of study so as to
enable me comprehensively conclude my research.
The second method of choice will be through internet searches. This will enable me to access
content be it books, journals or legislation which I may not be able to acquire physically.
Through internet searches as well I will be able to acquire information on my area of study
already conducted by other persons and therefore be able to discern it from my work through
analysis.

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1.10. CHAPTER BREAKDOWN


Chapter One:

Introduction

This part will entail a general idea to the topic of research as well as the manner in which the
research is going to be conducted. The main purpose of this section is to provide the reader with
an overall concept as to what the dissertation is about.
Chapter Two: The State of Electronic Commerce Legislation Around the World
This chapter will focus on the manner in which E- commerce is viewed and legislated on in other
parts of the world. This will involve looking at the UNCITRAL Model Laws and a comparison of
its application around the world.
Chapter Three: The Kenyan Position on Electronic Commerce
This chapter will focus on an analysis of the jurisdiction of Kenya with regard to the subject
matter, looking at the existing laws regulating E-Commerce .
Chapter Four:

Conclusion

This chapter will offer recommendations as to the general subject of E-Commerce in Kenya and
the potential way forward in its use in the country.

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CHAPTER TWO
THE STATE OF E-COMMERCE LEGISLATION IN THE WORLD
With the growth of the use of the internet in the early 1990s, particularly in the area of
commerce i.e. E-Commerce, the question of how to regulate the internet did become pertinent in
the minds of a lot of legislators around the world. E-Commerce had brought up new aspects in
relation to the mechanisms of operation of electronic contracts which was either new or which
presented grey areas in the law. The fact that E- commerce was an entirely new way of doing
business which in principal disregarded national barriers and the traditional methods of forming
contracts did little to help the situation.
Regulation of E- commerce was therefore faced with two key challenges; the changing nature of
the technology used meant that any enacted law had to be dynamic enough to not be rendered
obsolete within a short duration of time as well as the fact that the laws that were to be enacted
were to promote trade rather than stifle it, and as a result a compromise would have to be reached
so as to cater both for the aspect of regulation as well as the promotion of business17. There was
an argument by some that electronic contract standards should evolve from the business
community through practice and self-regulation18.

1.0 THE ENVISIONED CHALLENGES OF E- COMMERCE TO THE EXISTING


LAWS
There were basically three areas that were seen to necessitate the need for regulation in Ecommerce and they are:
1. The legal requirements for a valid contract

17

Swindells C et al, 'Legal Regulation of Electronic Commerce', 1998 (3) The Journal of Information, Law and
Technology (JILT). <http://www.law.warwick.ac.uk/jilt/98-3/swindells.html>
18
W.H. Thurlow, ELECTRONIC CONTRACTS IN THE UNITED STATES AND THE EUROPEAN UNION: Varying Approaches
to the Elimination of Paper and Pen (2001) ECJL 5(3). http://www.ejcl.org/53/abs53-1.html. (Accessed 6/05/2014)

12

2. The area of consumer protection


3. Administration of the field of E- commerce
1.1. The legal requirements for a valid contract

Common practice the world over required certain ingredients for a contracts to be seen as valid
and they included: the existence of a valid offer which unequivocally accepted by the other party,
both parties need to have the requisite capacity to enter into the contract, there must be a passing
of consideration and lastly this is coupled with the requirement that the parties must have
intended to create legal relations between themselves and that the purpose of the contract must
also be a legal one.19
With the increased use of E- commerce, it became apparent that the nature of the transactions
blurred these traditional features. Primarily, the paperless nature of electronic transactions
brought up questions of validity of the entire transaction particularly when a dispute was brought
before a court of law.
Beyond this, it was also common practice that signatures validated contracts and were the last
step in the formation process of not just business contracts but also the process of validating any
such documents. The problem was that the wording of the law as it stood meant that this had to
be done in person of which this was a clear challenge to the way E- commerce worked.
Another key challenge was the manner in which parties entered into the said contracts. Initially,
parties had only used the internet as a means of getting in touch with the other party and so
transacting parties would still end up meeting to conclude contracts in person. However, Ecommerce had got to the point that face to face meetings had been limited to a minimum in most

19

Chitty, J. Chitty on Contracts:General Principles, Vol. 1 (Sweet and Maxwell) 2008

13

transactions, and some that did do so, were also done through the internet as well 20. This
challenge was further compounded by the manner in which terms and conditions to contracts
were being incorporated into contracts. Particular interest was towards the methods of click
wraps, browse wraps and web wraps21. A browse wrap incorporates terms into an electronic
contract through use of a hypertext link the effect of which should a party fail to follow the link
then they might not see the terms and conditions22. A click wrap on the other hand is quite similar
to the browse wrap but for the terms and conditions to be effective will require positive assent to
the displayed terms e.g. an I AGREE button. A web wrap denotes a notice which requires
compliance with the websites terms and conditions before further use23.
A blanket problem pertaining to the application of the current law as it stood was the question of
just how much of the current law could be used to administer E- commerce.
1.2. The Area of Consumer Protection24

If anything, concerns from the public can be said to have been the most influential reason as to
why there was seen to be a need to regulate E- commerce. This was due to a myriad of reasons:
The nature of the internet made it quite easy for unsuspecting customers to be conned. This took
the form of non delivery of goods paid for, the delivery of substandard goods or on the flip side
failure by the customers themselves to pay for services.

20

http://ecommerce.internet.com (accessed 11/03/2014)


th
J.H. Smith, Internet Law and Regulation. (Thomson: Sweet and Maxwell) 4 Ed. P. 820
22
th
In the case of Hubbert v. Dell Corporation, App. Ct., 5 Dist., No.02-L-786 8/12/05, the court used the analogy
that a hypertext was merely a way for a contracting party to view all the terms of a contract, in the same way that a
party to a written contract could turn the pages to a written contract and as a result all pages formed part of the
contract regardless of whether a party viewed them.
23
In the case Ticketmaster Corp v. Tickets.com inc C.D. Cal., March 7, 2003, it was held that a contract was capable
of being formed where a prominent notice on the homepage stated that further use of the website was subject to
terms of use published on the site.
24
http://www.justia.com/business-operations/e-commerce/ (accessed 9/03/2014)
21

14

Access to information had become of great importance to consumers as well. Such information
included, information about the companies or entities conducting businesses, full disclosure about
the terms and conditions as well as costs incidental to transactions entered into among others.
In general, there was the overall need to educate consumers about E- commerce. This would help
create a consumer friendly market place with the end result of ensuring that consumers
understand their rights and responsibilities when participating in E- commerce.
Privacy rights had also become an issue as some online proprietors had started misusing
information acquired from customers.
The aspect of enforcement as well as determination was clearly highlighted as an area of concern.
An example was how could a customer resident in Kenya who through e-Bay, bought a book
from a man in Japan, be able to enforce his rights should the book fail to arrive.
1.3. Administration of the field of E- commerce

The new dynamic Created by E- commerce necessitated reaction from law makers in principle as
it is a common known principle that the law cannot allow to exist a lacuna. This expression in no
means makes a case that there be regulation of an area for the sake of regulation but with regard
to E- commerce, there indeed was a need to regulate particularly with the interests of the public
and the governments at heart. This went against the opinions of those who felt that the area could
have greatly benefited from self regulation25. Of particular interest to banking authorities were
the new online payment systems which were feared due to continuous non regulation could be
used to launder money.

25

W.H. Thurlow, ELECTRONIC CONTRACTS IN THE UNITED STATES AND THE EUROPEAN UNION: Varying Approaches
to the Elimination of Paper and Pen (2001) ECJL 5(3). http://www.ejcl.org/53/abs53-1.html. (Accessed 6/05/2014)

15

The question of jurisdiction was also one that needed addressing. This was due to the confusion
of which law would be used or which courts could enforce online transactions whereby there
were parties from different states; which could even be compounded where neither made the
contract in their state of origin.
Of key concern to the governments were the lost revenues in taxes. As E- commerce operated in
cyber space, it was quite difficult for the government to administer taxes against business that
were exclusively online. This was further compounded by jurisdiction issues on who had the right
to tax. An example is in the case of Quill Corporation v. North Dakota26, the Supreme Court in
the United states affirmed that presence in the United States was required for a corporation to
have a substantial nexus to the state. This ruling was quite favourable to internet retailers. It is
such instances that prompted a review of the law to cover E- commerce proprietors as well27.

26

504 U.S. 298 (1992). Available at www.law.cornell.edu/supct/html/91-0194.zo.html (Accessed 6/05/2014)


E-Commerce: An Introduction <http://cyber.law.harvard.edu/ecommerce/disputes.html> [accessed
12/03/2014].
27

16

2.0. Responses to the Challenges Brought By E- Commerce


The manner in which countries sought to tackle the challenges of E- commerce was different,
however, all were in agreement that that the area required regulation. Suggestions did arise that
due to the global nature of E- commerce that the new laws to be enacted should be harmonised.
However, as of that time, the area was so new that there were no laws to be harmonised while
others still clamoured for self regulation28. A key debate on how E-commerce law would be
formulated was whether it would be technology specific or technology neutral. Technology
specific laws would clearly pin point the specific forms being used to conduct E-commerce while
the technology neutral would cater primarily to the subject matter. The fear for going towards the
direction of technology specific was that legislators ran the risk of the law being outdated by
technological improvements while the risk of focusing on a technology neutral law was that it
may turn out to be too vague when it came to enforce. It was in between the two points that
countries would decide which laws to enact pursuant to E- commerce.
2.1. The UNCITRAL (UNITED NATIONS COMMITTEE ON INTERNATIONAL TRADE LAW)
Model Laws

The United Nations Commission on International Trade Law (UNCITRAL) is a subsidiary body
of the General Assembly. It plays an important role in improving the legal framework for
international trade by preparing international legislative texts for use by States in modernizing the
law of international trade and non-legislative texts for use by commercial parties in negotiating
transactions. UNCITRAL legislative texts address international sale of goods; international
commercial dispute resolution, including both arbitration and conciliation; electronic commerce;
insolvency, including cross-border insolvency; international transport of goods; international
payments; procurement and infrastructure development; and security interests. Non-legislative

28

W.H. Thurlow, ELECTRONIC CONTRACTS IN THE UNITED STATES AND THE EUROPEAN UNION: Varying Approaches
to the Elimination of Paper and Pen (2001) ECJL 5(3). http://www.ejcl.org/53/abs53-1.html. (Accessed 6/05/2014)

17

texts include rules for conduct of arbitration and conciliation proceedings; notes on organizing
and conducting arbitral proceedings; and legal guides on industrial construction contracts and
countertrade29.
With regard to the area of E-Commerce, there are two key model laws; The Model Law on E-Commerce
and the Model Law on Electronic signatures. The Model Law on E-Commerce is meant to help states
enhance their legislation in relation to electronic communication as well as serving as a reference aid for
the interpretation of existing international conventions and legal instruments30. This view was echoed by
Kenyas representative to UNCITRAL who further stated that it could help countries transition to a more
paperless way of doing business31.
Part 1 of the Model Law covers issues such as the application of legal form requirements to data
messages, the evidential weight to be accorded to data messages and matters relating to the
communication of data messages. It seeks to adopt a functional approach in the sense that it provides
criteria to which once data messages fulfill, they enjoy the same level of legal recognition as
corresponding paper documents performing the same function32.
The Model Law on Electronic Signatures has the aim of harmonizing minimum standards of signature
reliability. In the context that most contracts require signatures to substantiate or validate a contract, the
model law provides for the occasion of when such a signature is electronic rather than the traditional
sense. Under the model law it is stated that where the law requires the signature of a person, that
requirement is met if an electronic signature is used that is as reliable as was appropriate for the purpose,
in light of all the circumstances, including any relevant agreement33.

29

http://www.uncitral.org (Accessed 22/04/2014)


Christoph Glatt, Comparative Issues in the Formation of Electronic Contracts (United Kingdom) International Law
Journal (1998)
31
http://www.un.org/News/Press/docs/1996/19960923.gal3000.html (Accessed 16/04/2014)
32
Chapter II, ibid (30)
33
Article 6(1) of the UNCITRAL Model Law on Electronic Signatures
30

18

It should be noted that Model Laws only serve as a point of reference in legislative matters and such
when countries do decide to legislate on particular matters tackled my modeled laws, they strictly need not
adhere to the wording of the Model Laws.
In addition to the model laws, there are also other international conventions that are applicable to the area
of E-Commerce as well as international trade. The United Nations Convention on the Use of Electronic
Communications in International contracts as well as the United Nations Convention on Contracts for the
International Sale of Goods (CISG) do come to mind. The former applies to the use of electronic
communication in the formation or performance of a contract between parties whose places of business
are in different states34. The convention however is not applicable to transactions such as; contracts
concluded for personal, family or household purposes, transactions on a regulated exchange, foreign
exchange transactions, inter- bank payment systems or inter-bank payment agreements among others. The
CISG on the other hand is concerned with contracts of sale of goods between parties whose places of
business are in different states; when the states are contracting states to the convention or when the rules
of private international law lead to the application of the law of a contracting state 35. However, just as the
United Nations Convention on the Use of Electronic Communications in International contracts is limited
in terms of its applicability excluding contracts concluded for personal, family or household purposes so
too is the CISG, although this exemption will not apply where the buyer had no knowledge that the
contract was entered into for such a purpose36.

34

Article 1 of the United Nations Convention on the use of Electronic Communications in International Contracts
Article 1, United Nations Convention on Contracts for the International Sale of Goods.
36
Prof Franco Ferrari and M Ll, Brief Remarks on the Conclusion of Contracts on the Internet and the United
Nations Convention on Contracts for the International Sale of Goods ( CISG ) Brief Remarks on the Conclusion of
Contracts on the Internet and the United Nations Convention on Cont, 2000, 301307.
35

19

2.2. The Position in the European Union


It has been identified that the goal of the European Union(EU) is to primarily facilitate trade, investment
and mobility of citizens across member states37. The EU presents the challenge of requiring that laws
relating to this goal should be uniform across all member states. Pursuant to the regulation of ECommerce generally and in particular the aspect of electronic contracts, the EU did enact several
directives: The Distance Contracts Directive (DCD) 1997, The Electronic Commerce Directive (ECD)
2000 AND THE Electronic Signatures Directive (ESD) 199938.
The DCD 1997 is geared towards consumer protection with its primary function being setting out the
contents of contracts with the aim of aiding consumers who are known to have weaker bargaining
positions in transactions39. Due to the fact that the DCD does not specifically point to what form of
communication it will apply to, its provisions will therefore be subject to the ESD and ECD.
The ECD applies to all information society services40 provided by service providers in the EU. Of key
note in the Directive is the recognition and promotion of use of electronic contracts. Article 9 states that
states are required to give effect to electronic contracts and forbids the creation of barriers to their use or
the denial of legal validity based solely on the form. The ECD is however only applicable as between
member states of the EU, and as a result trade with non member states is not particularly facilitated by the
Directive41.
Article 1 of the ESD states that the objective of the Directive is to facilitate the use of electronic signatures
and to contribute to their legal recognition while ensuring the proper functioning of the internal market by

37

N. Burrows, European Community: The Mega Mix (Boston: Kluwer Law International 1996)
Directives are used as legislative tools by the EU and they set out a binding result which must be achieved within
a set time period through a member states domestic legislation, but it leaves the form and method up to the
individual state.
39
Council Directive 1997/7/EC,(2000) OJ L178/1, available at http://europa.eu.int/eur-lex/en/lif/dat/1997/en
397L0007.HTML
40
An Information Society Service under Article 2 of the Directive refers to any service normally provided for
remuneration at a distance by electronic means and at the individual request of a recipient of services.
41
W.H. Thurlow, ELECTRONIC CONTRACTS IN THE UNITED STATES AND THE EUROPEAN UNION: Varying Approaches
to the Elimination of Paper and Pen (2001) ECJL 5(3). http://www.ejcl.org/53/abs53-1.html. (Accessed 6/05/2014)
38

20

implementing a legal framework. The ESD sets out the framework for the recognition of electronic
signatures and certification service requirements for the member states. Article 2 defines an advanced
electronic signature as having the following features: it is uniquely linked to the signatory, it is capable of
identifying the signatory, it is created using means that the signatory can maintain under his sole control
and it is linked to the data to which it relates in such a manner that any subsequent change of the data is
detectable. An electronic signature means data in electronic form in, affixed to or logically associated
with, a data message, which may be used to identify the signatory in relation to the data message and to
indicate the signatorys approval of the information contained in the data message42.
2.3. The Position in the United Kingdom
Following the passing of the ECD, DCD and ESD, the United Kingdom did enact several regulations
which started with the passing of the Electronic Communications Act of 2000 which was closely followed
by the Consumer Protection Regulations 2000 and the Electronic Commerce Regulations 2000. The
reform of the law governing E-Commerce was not only in accordance with

the European Union

Directives, but also the view that so that the United Kingdom stay competitive in the era of the computer
transactions, it was necessary that the law reflects both existing and anticipated developments in trading
practices so that the United Kingdom does not become a less attractive place for doing business43.
Despite the enactment of the new regulations in relation to the E- commerce, it is of interest to note the
considerations which the United Kingdom took into account to aid in the content of their regulations. The
Law Commission was tasked with a review of the law to advice on areas that could be improved, areas
that required enactment of new laws and most importantly, the areas that in the current state already
satisfied the requirements of the EU regulations; therefore forming the platform for a review of the UK
law44. It was the opinion of the Law Commission that with regard to the making of contracts online, the

42

Article 2 United Nations, Model Law on Electronic Signatures Guide to Enactment, 2001.
Formal Requirements and I N Commercial Transactions, Law Commission ELECTRONIC COMMERCE: FORMAL
REQUIREMENTS, 2001.
44
A report by the Law Commission termed ELECTRONIC COMMERCE: Formal Requirements In Commercial
Transactions ADVICE FROM THE LAW COMMISSION
43

21

country need not make any new provisions as this was already satisfied by the existing statutory writing
and signature requirements.
The arm bit of the enacted regulations is quite broad and not necessarily restricted to the area of Ecommerce. In 2002, the UKs Department of Trade and Industry45 concurred with this view that the
regulations did not only apply to buying and selling online. A key term to help in determining application
of the regulations is the definition of the term information society service which refers to any service
normally provided for remuneration at a distance by electronic means and at the individual request of a
recipient of services46. The European Court of Justice in its ruling in the case of Google France SARL,
Google Inc v. Louis Vuitton Malletier SA and others (2010)47 emphasized that for a service to fall within
the definition of an information service there must be evidence that the service features all the elements of
that definition.
2.3.1. Specific Problems Dealt With
I) Incorporation of Terms
The general rule is that contacts should only contain the terms to which the contracting parties agree to.
However, this is supplemented by additional terms which are implied either by the courts or by statutes.
Regulation 9 of the Electronic Commerce Regulations 2002,requires the following information has to be
provided where contracts are concluded electronically:
1. The different technical steps to follow so as to conclude the contract
2. Whether the concluded contract will be filed by the service provider and whether it will be
accessible
3. The technical means for identifying and correcting input errors prior to placing of an order
4. The languages offered for the conclusion of the contract

45

This name was later changed to the Department for Business, Innovation and Skills in 2009
Article 2 of the Electronic Commerce Directive
47
CJEU Reference c- 236/08
46

22

Under the regulations, a service provider is also expected to make available to the recipient of a service,
terms and conditions applicable to the contract48. These requirements are also subject to those terms
already provided for under common law as well as statutes such as the Sale of Goods Act.
The Consumer Protection Regulations 2000 further detail information that is required prior to conclusion
of the contract and they include: a description of the main characteristics of the goods or services, the
price of the goods inclusive of taxes, the arrangement for payment, delivery or performance, the existence
of the right of cancellation except for those instances excluded49.
In the practical sense of things, service providers do incorporate terms and conditions via web pages. The
general rule is that for a party to be bound by any incorporated terms, one must have sufficient notice of
the terms and they must be brought to his attention prior to conclusion of the contract 50. To comply with
this provision, service providers will often provide a dialog box which requires one to either decline or
accept the terms and conditions of the service provider; or a web page prior to conclusion of a contract
will redirect the user through a link to a separate window containing the terms and conditions51.
ii) Information Requirements
Regulation 7 of the Consumer Protection Regulations 2000 lists requirements that a seller needs to bring
to the attention of the buyer prior to conclusion of the contract and they include: the identity of the
supplier, the total cost price of the goods including any taxes and freight charges, the period for which the
offer remains valid, the arrangements for payment delivery or performance among others. The Electronic
Commerce Regulations 2002 particularly in regulation 6(1)(c) states that the provider of an information

48

Regulation 9(3) of the Electronic Commerce Regulations 2002


Regulation 7(1)(a) of the Consumer Protection Regulations 2000
50
Williams v. America Online inc (2001) WL 135825- The plaintiff alleged that installation of the defendants
software had caused unauthorised changes to his computer. He was able to adduce expert evidence showing that
the changes to his computer were made at the beginning of the installation process before he had the opportunity
to agree to the terms of service. The court found in his favour
51
th
J.H. Smith, Internet Law and Regulation. (Thomson: Sweet and Maxwell) 4 Ed. P. 820
4949

23

society service is expected to provide his details, and particularly his e-mail address to enable contact with
him to be rapid, direct and in an effective manner52.
iii) Right to Rescind the Contract and the Right to Cancel
Where a service provider fails to make available, a means of allowing a prospective user a means of
allowing him to identify and correct input errors, then such a user will be entitled to rescind the contract
unless a court

having competent jurisdiction orders to the contrary on application of the service

provider53.
The right to cancel the contract is made effective through a notice of cancellation. A notice of cancellation
is a notice in writing or in another durable medium, available and accessible to a supplier which however
expressed indicates the intention of the consumer to cancel the contract. The effect of the notice of
cancellation is to treat the contract as if it had not been made. With regard to the supply of goods, a
consumer is entitled to a period of seven working days from the day the contract was made for him to
exercise the right. An additional three months is available where the supplier had not supplied the
consumer with relevant information as per Regulation 854. The right to cancellation is however not
available to certain contracts such as contracts: for the supply of goods or services which market forces
determine the price and not the supplier, for gaming, betting and lottery services or for the supply of audio
or visual recordings or computer software if they are unsealed by the consumer among others55. After the
cancellation of a contract, the supplier is expected to reimburse the consumer any sums paid already or the
subsequent a related credit arrangement. This is however subject to returning of any goods delivered to the
consumer as well56.

52

The CJEU in Bundesverbandverband v.Deutsche Internet Versicherung (2008) confirmed that in order to be able
to respond to consumers promptly, a company may need to provide other methods of communication beyond its
postal and e-mail address.
53
Regulation 15 of the Electronic Commerce Regulation 2002
54
The Consumer Protection Regulations 2000
55
Ibid, Regulation 13
56
ibid

24

iv) Performance57
Unless otherwise agreed, a supplier is to perform a contract within a maximum of 30 days from the day
the consumer sent his order. Where the supplier is unable to perform the contract due to unavailability of
the goods or service, then he is expected to inform the consumer as well as reimbursing him any money
that he may already have paid.
A contract which had not been performed within the period for performance shall be treated as if it had not
been made, save for any rights or remedies which the consumer has as a result of the non performance.
The Regulations do however provide reprieve to the supplier in that, where he is unable to provide the
goods or services ordered by the consumer, then he may provide substitute goods of equivalent value and
price. This reprieve is however only available if such a provision was included in the contract and that the
supplier had provided the consumer with all the required information prior to conclusion of the contract.

57

ibid

25

2.4. The Position in the United States

The United States of America has been quoted as having the highest number of electronic
transactions. It is therefore to be expected that in turn they have a comprehensive legal
framework to deal with the area of E- commerce. The federal system of government employed by
the United States of America has meant that the response to the need for regulation of Ecommerce has been met by both federal and state laws58.
Prior to the enactment of any positive legislation, the administration of E- commerce had relied
on the trade usages and customs and in the event of disputes and conflicts, it was down to the
interpretation of the existing laws by the courts to cater for arising challenges. This had the effect
of meaning that the courts expanded the interpretation of statutory definitions as well as creating
analogies to create a coherent set of rules to cater for E- commerce59.
The UNCITRAL model laws were a great influence on the structure with which the US would
take on its legislation. In July 1999, the National Conference of Commissioners on Uniform State
Law (NCCUSL) approved the Uniform Computer Information Transactions Act (UCITA) and
the Uniform Electronic Transactions Act (UETA) as model laws to be adopted by the states. The
primary purpose of UCITA was to bring uniformity and certainty to the laws that apply to
information technology transactions. It would specifically govern areas of E- commerce such as
software licensing, online access as well as other transactions in computer information60. UCITA
recognizes authentication even if in electronic form and provides that electronic contracts are
valid if shown that the party against which enforcement is sought authenticated a record
58

Swindells C et al, 'Legal Regulation of Electronic Commerce', 1998 (3) The Journal of Information, Law and
Technology (JILT). <http://www.law.warwick.ac.uk/jilt/98-3/swindells.html>
59
W.H. Thurlow, ELECTRONIC CONTRACTS IN THE UNITED STATES AND THE EUROPEAN UNION: Varying Approaches
to the Elimination of Paper and Pen (2001) ECJL 5(3). http://www.ejcl.org/53/abs53-1.html. (Accessed 6/05/2014)
60
http://www.justia.com/business-operations/e-commerce/ (accessed 9/03/2014)

26

sufficient to indicate that a contract has been formed and which reasonably identifies the copy or
subject matter to which the contract refers61. Acceptance and validity are satisfied if the medium
used is reasonable in the circumstances of the transaction.
UETA on the other hand applies to electronic records and signatures in commercial or
government transactions62. Of great interest is the fact that UETA goes beyond the provisions of
the UNCITRAL model law on E- Commerce by providing explicitly that electronic signatures
and documents are in satisfaction of laws requiring signed and/ or written contracts. Its provisions
are however meant to complement any laws already enacted by the individual states. Despite this
provision, many states have modified their existing digital signature laws and replaced them with
UETA provisions.63
With regard to electronic signatures, the Electronic Signatures in Global and National Commerce
Act (E- SIGN Act) was signed into law in 2000 with the aim of implementing a national uniform
standard for all electronic transactions that encourage the use of electronic signatures, electronic
contracts and electronic records. However, similar to the UETA, the E- SIGN Act is not meant to
alter any existing law and as a result, should there already be any federal or state law applying to
a transaction, that same law will subsist64. The E- SIGN Act has adopted quite a broad definition
for what an electronic signature is; it includes an electronic sound, symbol or process attached to
or logically associated with a contract or other record and executed or adopted by a person with
the intent to sign the record. It has been argued that due to this broad definition, telephone

61

Section 201 (a)(6) UCITA


Section 7 UETA
63
http://www.uetaonline.com (accessed 9/03/2014)
64
http://www.justia.com/business-operations/e-commerce/ (accessed 9/03/2014)
62

27

keypad agreements65 may be enforced under the Act. The American Bar Association Information
Security Committee released its PKI Assessment Guidelines which were meant to serve as a
foundation for a code of best practices with regard to digital signatures 66. It addresses issues such
as controls, procedures and policies to ensure trustworthy digital signatures.
From a consumer protection standpoint, the E- SIGN Act is of great importance. It has
established consumer consent requirements; validity requirements for electronic signatures,
electronic contracts and records; retention requirements for electronic contracts and records;
notarization rules and national uniform standards for the banking, insurance and stock industries.
This provisions can be seen to closely follow those of the UNCITRAL model law on Ecommerce. But despite this approach of moving to a more paperless system, the Act still does
require certain documents to be sent on paper and they include critical notices such as insurance
and mortgage cancellations, court orders, product recalls or hazardous materials shipment.
As a means of regulating marketing practices of businesses online, the US congress enacted the
CAN-SPAM Act of 2003 (Controlling the Assault of Non- Solicited Pornography and
Marketing). It regulates the corporate use of emails for marketing. The Act contains content and
procedural requirements, gives regulatory authority to the Federal Trade Commission (FTC) to
deal with violators. It establishes fines of 250 $ per email sent in violation of the Act and up to $
2 million with provisions for special damages whereby there was wilful or knowing violation.
Jurisdiction can be divided into three types: prescriptive jurisdiction, adjudicative jurisdiction and
enforcement jurisdiction67. Prescriptive jurisdiction allows a sovereign state to legitimately apply
its legal norms to conduct; adjudicative jurisdiction limits judicial power with regard to what
65

An example of a telephone keypad agreement is whereby a user is asked press 1 to agree


http://www.bmck.com/ecommerce/topic-pki.htm (Accessed 9/03/2014)
67
Henry Perritt who was the Dean of Chicago- Kent Law School.
66

28

disputes a states courts and tribunals can adjudicate on, while enforcement jurisdiction
determines to what extent the states organs may enforce the laws and decisions of the legislature
and judiciary. The question of jurisdiction with regard to E- commerce was generally related to
the impracticality of trying to enforce a contract over which the court has no control over68.
Despite the fact that each of the 50 states have their own substantive commercial laws and court
systems, under the Full Faith and Credit Clause of the United States Constitution69 and the
Implementing Act of 1970, judgements in one state are enforceable in all other states. However,
as interpreted by the supreme court in the case of Shoe Company v. Washington70, for a state to
be able to exercise personal jurisdiction over a non resident defendant or foreigner, the defendant
must have had sufficient minimum contacts with the state to justify jurisdiction.
Specifically with regard to the internet, in the case of Zippo Manufacturing Co. v. Zippo Dot
Com, Inc71 which involved a dispute over domain names the effect of which there was question
of when can jurisdiction be exercised. The court was of the opinion that jurisdiction should be
determined by the level of interactivity and commercial nature of the exchange of information
that occurs on a website. In the case the court found that it had jurisdiction over an out of state
vendor from California.
It has been stated that as a matter of prudence, those conducting businesses through websites
should limit such sites to passive activities. This has the effect of meaning that they do not allow

68

Cyber.law.harvard.edu/ecommerce/disputes.html (Accessed 26/02/2014)


Article iv, section 1
70
326 U.S 310 (1945)
71
952 F. Supp. 1119 (W.D. Pa. 1997)
69

29

the entry into contracts with customers online72. This is furthered by the inclusion of choice of
law clauses as well as forum selection.
This may however prove to be inconsequential to foreigners residing outside the United States as
unless the United States has signed an agreement with their respective countries to enforce
judgements from either country, it will be of no use.
2.5. The Position in the Republic of South Africa

The Republic of South Africa in tackling what E- commerce considered that the public should be
actively included in the process of making the legislation. It was the opinion of the government
that E- commerce touched on all the major aspects of economic life all while integrating many
elements of technology, infrastructure, business operation and public policy. It was of great
importance that these elements operate together to yield maximum results to the public. Ecommerce was seen to require new skills and forms of industrial organisation which would
require input from both social and political angles73.
As part of its agenda to include all sectors in enacting new laws, the government developed the
Green Paper on Electronic Commerce for South Africa For Public Discussion in the year 2000,
which was to serve as the policy paper to be followed in addition to the 1999 Discussion Paper on
the same topic.
The Green Paper identified the following underlying principles as being key to the development
of an E- commerce policy for South Africa74: the quality of life, international benchmarking, a
consultative process, flexibility, technology neutrality, supporting a private sector led and
technology based solutions and initiatives, forging a public- private partnership and finally,
72

Cyber.law.harvard.edu/ecommerce/disputes.html (Accessed 26/02/2014)


The executive summary of the Green Paper on Electronic Commerce for South Africa For Public Discussion
74
Par 1.2 the Green Paper on Electronic Commerce for South Africa
73

30

supporting small, medium and micro enterprises and the informal sector. The green paper further
identified the main focus areas as the need:

For confidence in the security and privacy of transactions performed electronically

To enhance the information infrastructure for electronic commerce

To establish rules that will govern electronic commerce

To bring the opportunities of E- commerce to the entire population

Based on these focus areas, it suggested that the following themes should be central to the policy:
1. Legal and regulatory issues- this would include the legal framework to be adopted,
contractual and trade laws, taxation and intellectual property rights
2. Building trust in the digital economy- this was to be achieved through consumer
protection laws as well as privacy and security measures
3. Access, infrastructure and enabling technologies- electronic payment systems and their
regulation, domain naming
4. Maximising the benefits: economic and social impacts
The Green paper envisioned that the process of actualization would be carried forward through
four stages; the formulation of the Discussion Paper in July 1999 followed by the Green Paper in
October 2000, this was to be followed by a publishing of the White Paper in the second quarter of
2001 and finally enactment of specific legislation from the year 200175.
As a starting point, a discussion paper on e-commerce was prepared and it is available at the
following website: http://www.ecomm-debate.co.za. Issues and questions raised in the ecommerce Green paper are targeted at two distinct audiences; people who are knowledgeable in
75

Par 1.4 ibid

31

the subject, such as experts and professionals; and individuals and enterprises who use ecommerce as a medium to communicate, produce, sell and deliver. The issues are contentious and
are being debated at the national and international level.
The Electronic Communications and Transactions Act 2002 (ECTA) emerged as the legislation
to regulate E- commerce and is the primary point of reference with regard to the area. There are
also several policy documents of importance to E- commerce76:

The National Information Society and Development Plan 2007 which was created as per
section 5(1) ECTA

The National Integrated ICT Policy Colloquium held on 19th April 2012 which sought to
spearhead a national ICT Policy

The 2 primary documents of reference with regard to E- commerce; the UNCITRAL Model laws
on Electronic Commerce and Electronic Signatures was also of great influence to the laws to be
enacted. Despite not being party to the United Nations Convention on the Use of Electronic
Communications in International Contracts, 2005, it is still used as a source of law.
2.5.1. Formation of Contracts

Regarding the formation and validity of agreements ECTA states that an agreement is not
without legal force and effect merely because it was concluded partly or in whole by means of
data messages. In South Africa, as in other jurisdiction in Africa, a legal contract requires the
consent of both parties, whether in writing or orally. The Electronic Communications and
Transactions Act 25 of 2002 lay the foundation to enable e-mail contracts and legally binding
digital signatures. Section 11 of ECTA recognises the legal status of electronic data. Section 13

76

C.B. Ncube. Electronic Transactions Law: Introduction to Electronic Transactions Law (Department of Commercial
Law, University of Cape Town)

32

deals with digital signatures, and specifies that an electronic signature generally satisfies the legal
requirement of a contract, unless it is otherwise specified. The Act further states that an
agreement concluded between parties by means of data messages is concluded partly or in whole
by means of data messages. at the time when and place where the acceptance of the offer was
received by the offeror.
2.5.2. Jurisdictional Aspects

ECTAs Section 22(2) provides that the place of the contract is the place where the acceptance of
the offer is received. Then section 23(c) states that a data message must be regarded as having
been received at the addressees usual place of business or residence. In an on-line contract then
through a computer network it will mean that an acceptance by a customer where the data
message is sent to the dealer (assuming that he is the offeror), the place of the contract will be
where the dealer is deemed to have received the message which, in terms of ECTA is dealers
usual business address.55 In ecommerce,
e-mail use has become prevalent. ECTA now clarifies the position. The place of contract will be
where the contract was concluded by means of email, which is, the dealers (offerors) usual
place of business77.
2.5.3. Consumer Protection

Providers of goods and services are obliged to make certain information available to consumers
on Web sites where such goods or services are offered. The particular information required
include: the merchant's full name and legal status; physical address and telephone number;
security procedures, policies and any code of conduct that the merchant subscribes to; and the
manner of payment and the full price of goods or services, including transport costs, taxes and
77

Z. NTOZINTLE JOBODWANA, E-Commerce and Mobile Commerce in South Africa: Regulatory Challenges.( Journal of
International Commercial Law and Technology Vol. 4, Issue 4 (2009):

33

any other fees or costs. There are certain transactions that are excluded from the ambit of the
legislation. Included in the list of excluded electronic transactions are: financial services,
insurance and reinsurance operations, banking services and operations relating to dealings in
securities; auctions; the supply of foodstuffs, beverages or other goods intended for everyday
consumption; and; transactions where the price for the supply of goods or services is dependent
upon fluctuations in the financial markets and which cannot be controlled by the supplier 78.
These provisions seem to mirror the specific provisions provided for under the UKS Consumer
Protection Regulations 2000 which are modeled on the EUS Directives.
The commercial providers are also expected to provide consumers with an opportunity to review
the entire electronic transaction, to correct any mistakes and to withdraw from the transaction,
before finally placing any order. In cases where a merchant fails to comply with this obligation,
the consumer can cancel the transaction within fourteen days of receiving the goods or services
under the transaction. In term of section 43, the consumer is also entitled to a "cooling-off
period" and can cancel without reason any transaction within seven days from the date of receipt
of the goods.The protection given to consumers under Chapter VII applies irrespective of the
legal system applicable to the agreement in question. Any provision in the agreement that
excludes any rights guaranteed under the Chapter is null and void.

CONCLUSION
The primary feature that can be clearly pointed out about E- commerce is the fact that it is not
conducted on paper. It is from this basic feature that it can be drawn the conclusion that the laws
as they stood at the emergence of E- commerce were termed inadequate. It is with this view in
mind that the United Nations Commission on International Trade Law came up with the blue

78

Section 42 ECTA

34

print for regulating E- commerce through the UNCITRAL Model laws on E- commerce and
electronic signatures.
It cannot be denied that it is the UNCITRAL model laws which have been looked up to as
guidance for the enactment of legislation to regulate E- commerce. The legal systems looked into
clearly relied on the said documents but there are points of divergences which could be attributed
to historically having different legal structures, cultures as well as attitudes79.
The United States is seen to implement an equivalent threshold with regard to electronic contracts
as it is contemplated by UNCITRAL. Of particular interest however is the fact that despite the
number of enacted legislation, the United States can be seen to favour a more market driven form
of regulation. This is highly welcome by the business world who feel they are not shackled by the
law as technology advances. This has however been enabled by the growth of favourable
jurisprudence with regard to consumer protection in the American courts, in the interpretation of
statutes. The courts have been more willing to evolve the existing common law through the use of
analogy and judicial interpretation, to move along with technological advancements80.
The United Kingdom motivation towards the enactment of new legislation with regard to Ecommerce seems purely due to the EU Directives and the need to show compliance with the
same. However with regard to certain transactions such as those dealing in land and requirements
for succession matters will still have to comply with the old requirements on writing. The

79

W.H. Thurlow, ELECTRONIC CONTRACTS IN THE UNITED STATES AND THE EUROPEAN UNION: Varying Approaches
to the Elimination of Paper and Pen (2001) ECJL 5(3). http://www.ejcl.org/53/abs53-1.html. (Accessed 6/05/2014)
80
D.L. Kidd and W.H. Daughtrey, Adapting Contract Law to Electronic Contracts: Overview and Suggestions,
(2000) 26 Rutgers Computer & Tech. Available at http://cyber.law.harvard.edu/ilaw/Contract/Kidd_Full.html

35

position differs with that of the United States. The UK has clearly adopted the notion that
common law is inadequate to deal with new technologies81.
Closer home in South Africa, the manner approached seems to resemble that on the UK with
regard to the legislation enacted. However, the approach taken is what is more fascinating. A
reading of the Green Paper on Electronic Commerce for South Africa clearly shows that the
government wanted to make the process all inclusive; inviting comments and providing a
platform for the discussion of the laws that would be most appropriate from all stakeholders. This
to a certain extent despite it being defferent mirrors the United states position of letting the
market regulate itself but with the checks and balances of the government having the final say.
The Unites States therefore provides the most liberal way of legislating for E- commerce, while
the United Kingdom provides a basis for the manner to overhaul your existing legislation with
regard to E- commerce, however, it is South Africa that gives the best model for a developing
country on how to adapt to the changes of technology and most importantly the approach to take.

81

Murray, Andrew D. (2000) Entering into contracts electronically: the real W.W.W. In: Edwards, Lilian and Waelde,
Charlotte, (eds.) Law and the Internet: a Framework for Electronic Commerce. Hart Publishing, Oxford, UK, pp. 1736.

36

CHAPTER THREE
1.0.

THE KENYAN POSITION ON ELECTRONIC COMMERCE

The constitution of Kenya is the supreme source of law in Kenya and all other laws gain their
validity from it82. The Judicature Act provides that the courts of Kenya will use the following in
addition to the constitution as sources of law: all written laws and Acts of the Kenyan Parliament
and of the United Kingdom cited in part I of the schedule as modified by part II of the schedule,
the substance of common law, the doctrines of equity and statutes of general application in force
in England before 12th August 1897, African Customary Law as so long it is not repugnant to
justice and morality, Islamic law83. Kenya is also bound by the general rules of international law
as well as any treaty or convention ratified by Kenya84. Statutes in the form of Acts of Parliament
form the bulk of the legislation in Kenya together with the regulations made pursuant to those
Acts and subsidiary legislation.

2.0.

STATUTES AND E- COMMERCE IN KENYA

Kenya as a common law county by virtue of being a former colony of Britain had certain
perceptions with regard to electronic records and transactions drawn from the jurisprudence of
the colonial master85. This view can be best highlighted by the case of R v. Governor of Brixton
Prison, exp Levin86 where the court was of the opinion that the evidential status of a computer
printout was no different from that of the photocopy of a forged cheque i.e. inadmissible.
However, as the use of technology in the day to day life of people increased, it became quite
difficult to ignore such contribution; the law was bound to take cognisance of the fact that

82

Article 2 of the 2010 Constitution


Section 3 of the Judicature Act
84
Article 2(5) and (6) of the 2010 Constitution
85
Anthony Akulo, Development of a Legal Framework for E- Commerce in Kenya: Ideas for Today and Tomorrow
(ICT Seminar 8/9/2008)
86
(1997) (hl) All ER P.289
83

37

mechanical means has replaced human effort87. It is in this vain that the Evidence Act88 was
amended to include printed material produced by a computer as first hand evidence without the
need for further proof or production of the original89. This might have been one of the most steps
towards the march of Kenya towards a more electronically friendly era.

3.0.

E- COMMERCE LEGISLATION

As the use of E- commerce grew, its nature and character of operation meant that there was no
fitting shoe law or statute that could be said to exclusively apply to it. As a result, a breaking
down of the elements encompassing what E- commerce characterised would have to be done.
The Law of Contract Act90 would be relied upon to cover the fundamental aspects of contracts to
be supplemented with rules of common law and doctrines of equity. The Sale of Goods Act91
would govern all matters in relation to the transactions of goods in Kenya. Under the Act, goods
included all chattels personal other than things in action and money, and all emblements,
industrial growing crops and things attached to or forming part of the land which are agreed to be
severed before sale or under the contract of sale92. Of importance to the area of commerce would
be the implied conditions and warranties provided for under the Act as well as provisions relating
to the passing of property in transactions93.

87

Owners of Motor ship Sapparo Maru v. Owners of Steam Tanker Statute of Liberty (1968) 2 All ER P.195
CAP 80 Laws of Kenya
89
Section 65, ibid
90
CAP 23 Laws of Kenya
91
CAP 31 Laws of Kenya
92
Section 2(1), ibid
93
Part II and III, ibid
88

38

4.0.

DEVELOPMENTS TOWARDS an E- COMMERCE FRIENDLY WORLD

It became quite clear that the existing framework of laws was inadequate to the new challenges
being brought about by E- Commerce and to further protect Kenyas financial might within the
region of East Africa, it became necessary to legislate for E- Commerce.
The Electronic transactions Bill, 2007 was lauded for bringing Kenya into the 21 st century as so
far as electronic transactions were concerned94. The main contributions to be made by this piece
of proposed legislation were particularly the validity and enforceability of any digitised
information. Similar to the provisions of the UNCITRAL Model law on E- Commerce, the Bill
stated that where the required that information to be in writing, such requirement would be
fulfilled if the information would be in an electronic version which was accessible and
intelligible, which could be used for future reference.
The Bill in the form that it stood unfortunately never came to pass; but on the flip side, the spirit
of what the Bill was to contain was instead transferred to the Kenya Information and
Communication Act (CAP 411 A)95. The Act creates the framework legislation for the
information, communications, media and broadcasting sub-sectors. Pursuant to the Act, several
regulations were also created. Specifically to E- Commerce, the Consumer Protection
Regulations and the Electronic Transactions Regulations. The Kenya Information and
Communication Act was said to be Kenyas best attempt at the UNCITRAL Model Law on ECommerce96.
The National Payment Systems Act, 2011 was enacted with the aim of making provisions for the
regulation and supervision of payment systems and payment service providers. This would be of
94

http://michaelmurungi.blogspot.com (Accessed 26/01/2014)


The Act is also referred to as the Kenya Information and Communication Act, 1998
96
ICT Lawyer Michael Murungi
95

39

great help to electronic transactions whereby physical did not change hands, but instead
electronic cash through credit and debit cards as well through mobile money transfer 97. The
European Union Directive on Electronic Money 2000/46/EU: Article 1 (3)(b) gives a definition
that is a technologically elite version of the traditional notion of a legal tender. According to it,
electronic
Monetary
(i)

cash
value
stored

as

represented

by

on

claim
an

is:
on

the

issuer

which

electronic

is:

device;

(ii) issued on receipt of funds of an amount not less in value than the monetary value issued;
(iii) accepted as a means of payment by undertakings other than the issuer.

The Consumer Protection Act98 was enacted in 2012 to provide for the protection of the
consumer, prevent unfair trade practices in consumer transactions and to provide for matters
connected with and incidental thereto.

5.0.

A LOOK INTO KEY STATUTES AIMED AT E-COMMERCE

1. THE KENYA INFORMATION AND COMMUNICATION ACT, 2012

The provisions relating to E- Commerce are found in Part VIA of the Act that applies to
electronic transactions.
The Act primarily sets up the Communications Commission of Kenya which with regard to Ecommerce shall have the following functions99:
1. Facilitate electronic transactions by ensuring the use of reliable electronic records
2. Facilitate E- Commerce and eliminate barriers to it
97

http://michaelmurungi.blogspot.com/search?q=internet+regulation+in+kenya (Accessed 26/01/2014)

98

Act No. 46 of 2012


Section 83C of the Kenya Communication and Information Act, 2012

99

40

3. Promote public confidence in the integrity and reliability of electronic records and
electronic transactions
4. Foster the development of E- commerce through the use of electronic signatures
5. Promote and facilitate efficient delivery of public sector services by means of reliable
electronic records
6. Develop sound framework to minimize the incidence of forged electronic records and
fraud in E-Commerce and other electronic transactions
A key contribution of this Act is the fact that it has given legal recognition to electronic records
and states that any requirement of the law that requires information to be in writing, the same
shall be satisfied if the information is in electronic form and in a form accessible for subsequent
reference100. This provision mirrors that of the evidence Act with regard to evidential weight of
electronic records. It should however be noted that the first provision in Part VIA of the Act is the
explicit exclusion from this provision of transactions relating to the execution of wills, negotiable
instruments and documents of title, which as a result will still have to be evidenced in writing in
the traditional form101. This provision is further augmented by the legal recognition of electronic
signatures as so long as the circumstances warrant it and the signature is in accordance with the
provisions of section 83O(3), which include that the signature be generated through a signature
creation device linked to the signatory and no other person. These provisions are clearly in line
with the provisions of UNCITRAL Model Laws pertaining to the promotion of electronic
commerce102.

100

Section 83G of the Kenya Communication and Information Act, 2012


Section 83B, ibid
102
Articles 6 and 7 of the UNCITRAL Model Law on Electronic Commerce provide that as so long as the traditional
legal requirements of writing can be fulfilled; this includes signature requirements, the transaction should not be
denied validity.
101

41

In the formation of contracts, unless otherwise agreed, an offer and acceptance of an offer may be
expressed by means of electronic messages103. Considering the most direct means of
communication online is through electronic mails, the Act has stipulated that communication
between the originator and the addressee of an electronic message, a declaration of intent or other
statement shall not be denied legal effect, validity or enforceability solely on grounds that it is in
electronic form104. An electronic message shall be attributed to the originator if it was sent by the
originator himself or a person authorised by him.
Of key note are the offences created under Part VIA which are quite new in the context of Kenya.
With particular reference to E-Commerce, the Act has criminalised the following:
1. The unauthorised access to a computer system105
2. The unauthorised access to and interception of a computer service106
3. The unauthorised modification of computer material i.e. data held in a computer system107
4. The unauthorised disclosure of a password, access code or other means of gaining access
to a computer system108
5. Electronic fraud109
The contributions of the Kenya Information and Communication Act to the operation of ECommerce are of great benefit to both the proprietors of businesses as well as the consumers.
However it must be noted that with regard to the general rules of contract, the traditional rules
under both common law and equity will still apply. As such, the Act, can be seen to merely
103

Section 83J of the Kenya Communication and Information Act, 2012


Section 83K, ibid
105
Section 83U, ibid
106
Section 83W, ibid
107
Section 83X, ibid
108
Section 83Z, ibid
109
Section 84B, ibid
104

42

augment the existing laws with regard to E- Commerce rather than formulation of an entirely new
body of laws to govern the area.
2. THE CONSUMER PROTECTION ACT, 2012
One of the key instigants of formulation of laws is public policy. To build public confidence in
transactions, it must be seen that a consumer will not be defrauded and where such does happen,
he has a stipulated course of action against the party responsible. The Act in question specifically
looks to safeguard consumer rights110 , deal with unfair practices, as well as detailing the rights
and obligations of parties in consumer contracts. The Consumer Protection Act is inferred to
apply to any form of transaction whether electronic or not and as such its provisions can be
applied to protect electronic transaction consumers.
It is expected under the Act that the goods and services provided by suppliers will be of
merchantable quality111. The implied conditions and warranties applying to the sale of goods
under the Sale of Goods Act shall apply with necessary modifications to goods that are leased,
traded or otherwise supplied under a consumer agreement112. It is also specifically stated that any
provision that purports to negate or vary any implied condition or warranty under the Sale of
Goods Act or any condition or warranty under the Act is void.
Any ambiguity that allows for more than one reasonable interpretation of a consumer agreement
provided by the supplier to the consumer or of any information that must be disclosed under this
Act shall be interpreted to the benefit of the consumer113.

110

Part II and IV of The Consumer Protection Act no. 46 2012


Section 5(1) of The Consumer Protection Act no. 46 2012
112
Section 5(2), ibid
113
Section 7, ibid
111

43

A recipient of unsolicited goods or services has no legal obligation in respect of their use or
disposal114. Unsolicited goods or services refer to goods or services which the consumer did not
request.
It is considered an unfair practice where the supplier of goods makes false representations which
may include a representation that the goods or services are of a particular standard, quality, grade,
style or model, if they are not115; of which stated unfair practices are prohibited. Any agreement,
whether written, oral or implied, entered into by a consumer after or while a person has engaged
in an unfair practice may be rescinded by the consumer and the consumer is entitled to any
remedy that is available in law, including damages116.
Part IX of the Act is of particular interest to any user of electronic commerce as it contains
procedures for consumer remedies.
A consumer is entitled to cancel any consumer agreement as so far as it is in accordance with the
Act. The effect of such action is that it will be as if the agreement never existed in the first
place117. Where the consumer cancels the consumer agreement, the supplier shall, unless the
contrary is provided for in the agreement, (a) refund to the consumer any payment made under
the agreement or
any related agreement; and (b) return to the consumer in a condition substantially similar to when
they
were delivered all goods delivered under a trade-in arrangement or refund to the consumer an
amount equal to the trade- in allowance118. The consumer on the other hand shall take reasonable

114

Section 9(1), ibid


Section 12(1)(c), ibid
116
Section 16(1), ibid
117
Section 79, ibid
118
Section 80, ibid
115

44

care of the goods that came into the possession of the consumer under the agreement or a related
agreement for the prescribed period.
The Act does not stop a consumer from seeking redress from the appropriate court as well; where
successful the court may order that the consumer recover the full payment to which he or she is
entitled under this Act; and all goods delivered under a trade-in arrangement or an amount equal
to the trade-in allowance. In addition the court may order exemplary or punitive damages or such
other relief as the court considers proper119.
As can be expected from the fact that E- Commerce more often than not covers parties from
different jurisdictions, the question of whether or not a Kenyan court would have jurisdiction is
bound to arise. Case law has shown that the Courts where the contract was concluded will have
jurisdiction over any dispute arising120.
In the case of Raytheon Aircraft Credit Corporation and Another v. Air Al-Faraj Limited121, in
his obiter dicta, Githinji JA stated that there are no rules of the court prescribing the procedure for
the challenging of the jurisdiction of the High Court by a foreign defendant who has been sued in
Kenya for breach of contract.
However, in instances whereby the contracting parties had a choice of forum clause as well as
well as choice of law, the court where an application is made contrary to the provisions of the
contract may have no other choice than to uphold private international law on the status of law
and exclusive jurisdiction clauses in international commercial agreements122.

119

Section 84, ibid


Karachi Gas Co. Ltd v. H. Isaaq Civil Appeal No. 61 1963
121
{2005} 2 KLR 47
122
Brinkibon Ltd. V.Stahag Stahl G,m.b.H (H.L(E) {1983} 2 A.C 35
120

45

Conclusion
Kenya being a former colony of Britain has in the past looked up to its colonial master with
regard to the enactment of legislation governing similar areas. Most of the laws in existence are
actually the same as they were left by our colonial masters. It is with this background that the
influence of common law and doctrines of equity seem to have found a foothold in kenyas
jurisprudence.
Despite the fact that E-Commerce is an entirely new area of law, Kenya, similarly to the United
States of America, has opted to only enact minimal legislation; opting instead to rely on already
established principles to govern the area. This has the effect of requiring that the courts make
informed decisions on current situations using the existing laws pertaining to the law of contract
as well as the sale of goods.
Kenya has made bold steps towards moving to a more electronic friendly world; but despite those
steps, there are still certain areas that remain uncaterred for while there are others which are quite
ambiguous. Despite the efforts made therefore, more still has to be done to fully implement the
vision projected by the UNCITRAL Model Law on E- Commerce.

46

CHAPTER FOUR
1.0.

THE WAY FORWARD

Kenya is seen as a regional powerhouse when it comes to matters of commerce and as a result,
Kenya has always been looked up to to some extent as a pace setter when it comes to policy
formulation; be it in the form of legislation and regulations or simple forward thinking policies. It
is with this view that it can be seen that Kenya was the first country in the region to enact
legislation to cater for the growing E- commerce sphere.
Despite the progress made by Kenya with regard to the area of E- commerce, more can still be
done. This chapter aims to highlight areas of weakness in the enacted statutes, as well as suggest
possible areas of improvement. A look at international best practices will also offer insight into
what Kenya may adopt from other countries.

2.0.

The International Arena

There is yet to exist a convention that governs E- commerce in its entirety in the world, however,
the UNCITRAL Model Law on E- Commerce is as close as it gets. The contribution with which
the model law has made with regard to the enactment of municipal legislation around the world is
cannot be summed up though indeed it can be termed to be successful.
Due to the international nature of E-commerce, it has been necessary that there be a convention
but due to a multiplicity of issues, coming up with one has been quite difficult hence the role of
the UNCITRAL Model laws which are non binding in nature and instead provide a background
for enactment of municipal legislation123. It is with regard to the formulation of such model laws
that Kenyas voice needs to be heard. Kenya needs to take a more pro active approach in the
participation of the meetings that deliberate the provisions of such international instruments. This

123

http://www.uncitral.org (Accessed 22/02/2014)

47

would be a key way to ensure that Kenyas interests do gain a foothold in the world and to some
extent, represent the position of Kenyan municipal should one of Kenyas demand make it into
the final document.

3.0.

Improving The Kenyan Legislation Process

The formulation of legislation is seen as the best way in the process of regulation of a matter. In
Kenya, all legislative power is derived from the people and vested in Parliament who may
delegate this power further to other relevant and competent bodies124. It is from this provision
that parliaments laws gain their legitimacy. The composition and diversity of Kenyas
parliament in a functioning democracy is meant to ensure that the laws enacted do cover a wide
range of aspects while encompassing the needs and aspirations of the people. As much as the
people do express their views through their elected representatives in the formulation of
legislation, at times it would be much better to hear from the horses mouth; the people
themselves.
While drafting its legislation to cater for E- commerce, The Republic of South Africa took quite
an inclusive approach when collecting views from the public as well as other stakeholders. As
part of its agenda to include all sectors in enacting new laws, the government developed the
Green Paper on Electronic Commerce for South Africa For Public Discussion in the year 2000,
which was to serve as the policy paper to be followed in addition to the 1999 Discussion Paper on
the same topic.
The Green Paper identified the following underlying principles as being key to the development
of an E- commerce policy for South Africa125: the quality of life, international benchmarking, a

124
125

Article 94(1) of The Constitution of Kenya 2010


Par 1.2 the Green Paper on Electronic Commerce for South Africa

48

consultative process, flexibility, technology neutrality, supporting a private sector led and
technology based solutions and initiatives, forging a public- private partnership and finally,
supporting small, medium and micro enterprises and the informal sector. The green paper had the
view of collecting information from people who are knowledgeable in the subject, such as experts
and professionals; and individuals and enterprises who use e-commerce as a medium to
communicate, produce, sell and deliver.
Using such an approach while drafting future laws relating to E- Commerce would be of great
help to the public in general.

4.0.

Suggestions to the Enacted Legislation

The Kenya Information and Communication Act is Kenyas best attempt at emulating the
provisions of the UNCITRAL Model Law on E- Commerce126. However, the Act is not perfect
and certain writers have suggested on areas that could be improved.
The Act was formulated to consolidate a number of laws relating to ICT, telecommunications as
well as E- Commerce. At the time when amendments were being made, the Electronic
Transactions Bill was still in existence and instead quite a number of its provisions were shifted
to form part of the Kenya Information and Communication Act. Would it not have been better to
enact the Bill as an Act rather than transfer its provisions to form a part? This is a question which
may fully be answered further down the road as the Act gains its footing. It is also towards this
point that another question has been raised as to whether or not, the Communications
Commission of Kenya has been given too wide a mandate to the extent that it may not be able to
properly administer all of its functions effectively. To aid in this, a suggestion would be to create

126

An article by Michael Murungi titled ELECTRONIC CASH: TIME FOR A PARADIGM SHIFT IN E-COMMERCE
LEGISLATION http://www.michaelmurungi.blogspot.com (Accessed 26/01/2014)

49

a board answerable to the commission that would be in charge of the various aspects covered by
the Act i.e. Electronic transactions and E- commerce. Such a board would not necessarily serve
as a regulator but instead could also act as an advisory body to the Cabinet Secretary responsible
as well as the Communications Commission of Kenya on matters relating to E- commerce and
electronic transactions.
One of the key starting provisions of the Act is its exclusion of three transactions namely:
execution of wills, negotiable instruments and documents of title from being considered in the
context of the Act127 with regard to their writing requirements under law, hence cannot use
electronic signatures. It is this same view that has been adopted by the United Kingdom as well
as japan.
The ICT lawyer Michael Murungi has taken issue with this; particularly with regard to
negotiable instruments as he sees it to interfere with operation of electronic cash 128. This is also
seen to go against the objectives of the UNCITRAL Model Law on E- commerce with regard to
the promotion of electronic commerce. This is quite an important area as a key proponent in Ecommerce is the use of electronic cash. The National Payment Act 2011 is as well quite vague in
the use of electronic cash in operation. Considering the frequent use of this operation, further
regulations should be made with regard to electronic cash. The use of electronic cash is tied
together quite literally with the area of mobile commerce. The use of mobile funds transfer in
Kenya has become quite an integral part of the day to day runnings of the average man. The use
of mobile phones as the primary access point to the internet in Kenya also highlights the quite

127

Section 83B(1) of The Kenya Information and Communication Act


What is electronic cash? One author has defined it as:
Monetary value charged and stored on an electronic support, in the form of a smart card or incorporated into the
memory of a computer (Batalla 2001, p. 81).
128

50

obvious hole missing in the Kenya Information and Communication Act with regard to the
regulation of mobile commerce in at least the same manner as E- Commerce.
Despite their being mechanisms to bring disputes before the courts, the Act could have made
provisions expressly detailing the aspect of cyber jurisdiction of the courts with regard to matters
involving foreigners. As things stand, enforcement of jurisdiction with regard to foreigners would
generally be subject to reciprocity standards set by the nation from which the foreigner comes
from.
As the Act is still relatively new with regard to its provisions, its limitations can only be further
exposed as times wears on and parties start to bring matters before the courts for deliberation. It
is my expectation that once such arise, parliament will take necessary steps to build on to that
which the Act already encompasses. This can be further helped by the Cabinet Secretary in
charge of the area who can come up with regulations to ease any burdens arising in the operation
of E- commerce.

5.0.

Recommendations

1. Kenya should consider developing an E- commerce curriculum in Kenyan schools from


the lowest levels of education. The manner in which business is taught in schools is that
the more traditional forms of business; from the operation of a simple kiosk to the
management of retail stores, is given quite the emphasis from personal experience. New
ways of doing business, more so in the electronic world need to be taught to students from
an early age as not only will it empower the students, but it will also serve as a foundation
for further improvement on the way business is done.
2. Programmes should be intensified on the use of E- commerce and the rights of parties to
such transactions. It is a commonly used proverb that knowledge is power; however when
51

people have limited access to such information it is as good as the same information being
denied. Public awareness is key for the success of the provisions of legislation meant to
both promote E- commerce as well as safeguard the interests of the consumers who use it.
3. The government should come up with ways to promote Kenya to the world as a preferred
destination as a provider of electronic transactions as well as an electronically friendly
market for use of E- commerce. This would be in accordance with the promotion of Ecommerce as set out in the UNCITRAL Model Law on Electronic Commerce. Kenya can
use its economic might within East and Central Africa as a platform for the furtherance of
this cause by being a benchmark for the rest of the countries that are yet to adapt their
own framework with regard to the advancement of E- commerce.
4. The government should monitor international best practices in relation to the uniform
conclusion of contracts to better retain Kenyas competitiveness in the international
market. The UNCITRAL Model Law on E- commerce has been with us for close to
twenty years and within that time frame a lot has changed in the manner electronic
commerce is conducted. It would only be prudent of Kenya to keep a breast with what
other developing countries such as South Africa or even the emerging markets of China
and Brazil are doing to keep within striking distance of the worlds economic powers with
regard to staying competitive.
5. There should be a review of the rules for service out of jurisdiction for contracts arising
from E- commerce.
6. The government should consider evaluating its tax policies in relation to E- commerce to
increase its revenue collection. The electronic nature with which E- commerce operates
has made it quite difficult for a lot of governments to levy taxes on entities which lack
physical presence in their respective countries.
52

7. Looking into the protection of business proprietors online and not only at consumers. The
consensus in the minds of many is that consumers are the weaker parties in transactions
and as a result it has always been prudent to first and foremost protect them; however it
could be of great benefit to also protect business proprietors as they are also prone to
similar threats such as fraud that consumers face. It would also serve to reinforce
confidence in business operators to establish their businesses in Kenya as the law is
friendly to both them and consumers.

CONCLUSION
The sanctity of contracts in Kenya is a principle that is clearly adhered to by the courts; the
question therefore of whether or not electronic contracts are enforceable in Kenya is not one
without an answer. It is also clear that in the regulation of the broad area of electronic commerce
in which electronic contracts fall into, reliance has to be made to the age old principles of
common law and the doctrines of equity so as to supplement the provisions of statute. The
evolving nature with which electronic transactions evolve on a daily basis make it nearly
impossible for the law to cater for every little thing and as a result it seems that the law will
always be playing a game of catch up. However, within the principles of equity and the doctrines
of equity are a solution which have proven to stand against the test of time and can continue to be
applied by the courts with proper consideration of the arising circumstances.
However, constant review will have to be done of the enacted statutes to see their efficacy as
times do change and the use of electronic commerce becomes more prevalent in the whole of
Kenya and not just in the urban area. The recommendations stated earlier could also do no harm
if actually implemented rather will only seek to further improve the steps made towards an
electronic friendly world.

53

Despite the challenges stated with regard to Kenyas E- commerce framework, it can still be
stated that the overall opinion of things is that Kenya is responsive to the changing times and
particularly the evolution of commerce. It is with this view in mind that I state that as things
progress, Kenya will surely move with the world in the doing of business.

54

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Regulatory Challenges.( Journal of International Commercial Law and Technology Vol. 4, Issue
4 (2009):
D.L. Kidd and W.H. Daughtrey, Adapting Contract Law to Electronic Contracts: Overview and
Suggestions, (2000) 26 Rutgers Computer & Tech. Available at
http://cyber.law.harvard.edu/ilaw/Contract/Kidd_Full.html
Anthony Akulo, Development of a Legal Framework for E- Commerce in Kenya: Ideas for
Today and Tomorrow (ICT Seminar 8/9/2008)
An article by Michael Murungi titled ELECTRONIC CASH: TIME FOR A PARADIGM SHIFT
IN E-COMMERCE LEGISLATION
WEBSITES
http://www.africa-business.com
http://www.duport.co.uk
http://ecommerce.internet.com
http://www.justia.com
http://www.uncitral.org
http://www.un.org
http://www.uetaonline.com
http://www.bmck.com
Cyber.law.harvard.edu
http://michaelmurungi.blogspot.com
http://www.uncitral.org
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www.law.cornell.edu
TABLE OF STATUTES
Kenya Communication and Information Act, 2012
The Consumer Protection Act no. 46 2012
The National Payment Act 2011
INTERNATIONAL LAWS
UNCITRAL Model Law on Electronic Signatures
United Nations Convention on the use of Electronic Communications in International Contracts
United Nations Convention on Contracts for the International Sale of Goods.
United Nations, Model Law on Electronic Signatures Guide to Enactment, 2001.
REPORTS AND REGULATIONS
A report by the Law Commission termed ELECTRONIC COMMERCE: Formal Requirements In
Commercial Transactions ADVICE FROM THE LAW COMMISSION
Electronic Commerce Regulations 2002
Consumer Protection Regulations 2000
Green Paper on Electronic Commerce for South Africa
The Communications Commission of Kenya, Quarterly Sector Statistics Report (April June
2013)
VISION 2030
The executive summary of the Green Paper on Electronic Commerce for South Africa For
Public Discussion

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