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Author : Benard Kibet Sang

A Comparative Analysis On The Challenges As To The Formation And Formalities Of Online Contracts In Kenya

1.0 INTRODUCTION

The starting point regarding the law applicable to contracts in Kenya is the Law of Contracts Act. According to the Act, English Common Law of Contract, as modified by doctrines of Equity and Acts of Parliament of the United Kingdom, is applicable in Kenya. Therefore to know where to find the law on formation and formalities of contracts, applicable in Kenya, one has to look at the English Common Law, which is found in judicial decisions.

In order to form a contract, parties must first reach an agreement. The agreement is reached when one party (offeror) gives an offer that is accepted by the party receiving the offer (offeree). In addition to the agreement, there must be intention to create legal relations, and consideration. In short, for there to be a contract, the essential elements of offer, acceptance, intention to create legal intentions, and consideration, need to be there. However, regarding online contracting, and as this study discusses in the next heading 2, it is the elements of offer, as distinguished from invitation to treat, and acceptance, that are affected by online contracting, and which shall be interrogated in this paper.

On formalities, the general rule is that no formality is required to contract. Hence, contracts can be made informally, in that, no writing or other form is required. However, there are statutory exceptions that require that certain contracts must be made or evidenced in writing and even signed, for the same to be valid. Examples are contracts for disposition of interests in land and contracts of guarantee, which must be made in writing and signed by the parties. Further, the Land Registration Act 9 prescribes that every instrument effecting any disposition of land shall be executed by each party consenting to it. The execution is by way of appending a person’s signature or affixing the thumbprint or other mark as evidence of personal acceptance of that instrument. Disposition is defined to include an agreement to sell land, whereas instrument includes any writing that affects legal or equitable rights. This means that a land sale agreement is an instrument that is used for disposition of land. The land sale agreement must therefore be signed by the parties consenting to the sale. It goes without saying that only written agreements can be signed.

‘Writing’ and expressions referring to writing is defined to include printing, photography, lithography, typewriting and any other modes of representing or reproducing words in visible form. On the other hand, to “sign”, in relation to a contract, is defined to include the making one’s mark or writing one’s name or initial on the instrument as an indication that one intends to bind himself to the contents of the instrument. As this paper discusses in heading 2, the challenge arises as to how to satisfy this formalities while contracting online.

2.0. CHALLENGES AS TO THE FORMATION AND FORMALITIES OF ONLINE CONTRACTS IN KENYA
2.1. Formation of Online Contracts

As observed by Marco van der Merwe, online offer and acceptance is not a simple matter by any means. The reasons are because the rules pertaining to offer and acceptance for defined contracts are complicated; and that the rules applicable to existing contracts originated at a time when modern forms of contracting were a far-off glimmer on the horizon. Merwe is thus of the view that these rules have to be adapted to accommodate newer forms of communication which include internet communications.

It is important to ascertain when an offer, as distinguished from invitation to treat, has been made in respect of online contracts. This is because, as stated, an offer is made with the intention, actual or apparent, that it is to become binding as soon as it is accepted by the person to whom it is addressed. On the other hand, invitation to treat is not made with the intention that it shall be binding if the addressee assents to its terms. It is therefore necessary to distinguish online offers from invitations to treat.

Usually, the display of goods in a shop window, would amount to an invitation to treat, as opposed to an offer. This is because the customer will pick the goods and head to the pay counter and make an offer to buy the same. The shop will accept his or her offer whereupon the customer will pay for the goods. There can, however, be uncertainty over whether the display of goods over an internet website constitutes an invitation to treat or an offer. This is more so in a situation where the seller has limited stock of goods to dispatch or where the seller is prepared to sell to a limited class of persons.

It is also necessary to differentiate between an offer and acceptance for online contracts. This is because an offer that has not been accepted cannot give rise to a binding contract. So, what does the act of clicking on the 'OK' icon on a website amount to? Does it constitute acceptance of an offer to provide a service or a customer's offer to contract? Should it be an offer, then no contract will have been formed. However, should the same amount to an acceptance, then assuming that there was consideration and intention to create legal relations, then a binding contract will be formed.

While there have been no reported cases in Kenya, there have been incidences of display of wrong prices on the UK’s Amazon.co.uk website. Amazon.co.uk was once shut done over lunchtime following a rush of orders for pocket computers selling at £ 7.32, instead of the usual price of £ 192. In this case, customers received immediate and automatic confirmation of their 'purchases' by e-mail, and soon thereafter the site was pulled down and the product withdrawn. There has been no consensus as to whether or not binding contracts arose. My view is that once the confirmation e-mail was received, there was acceptance of the customer’s offer, and as such Amazon.co.uk was bound to supply the products at the displayed price, no matter how unrealistically low the prices were.

Amazon’s position was that its online Terms and Conditions state that there is no legal contract to sell to customers until Amazon sends them an e-mail confirmation that the item has been dispatched. No claim was however brought against Amazon and as such the court’s view in such a situation is not ascertainable. Were a similar situation to arise in Kenya, and in particular where there are no Terms and Conditions similar to that of Amazon, what would be the legal position?

Knowing the time that the contract was concluded is of paramount importance because this is when the contractual obligations and rights are deemed to arise. Therefore, what time is an online contract concluded? Is it the time of receipt or of sending the acceptance? When is an online order deemed to have been placed? Is it when it is received or when it is accepted? Is it when it enters a computer network or when it is drawn to the attention of a particular person designated as the recipient? What if the seller is on holiday and the email orders were not checked? How about if there is insufficient stock and the customer was not warned about delays?

There are views that because of the borderless nature of the internet, more often than not, online contracts are international transactions. I do not agree with this view given that there are numerous transactions that are concluded over the internet within the domestic borders. Nonetheless, the place of contract formation is of interest to international transactions. In the absence of express provisions by the parties or applicable international convention, how is the place of formation of the contract determined?

Further, regarding the place of contract formation, the international element is complicated in cases involving corporate transactions in particular where the computer of the offering company that first receives a reply may be located in one jurisdiction. The reply may then be transmitted automatically to a subsidiary or holding company located in a different jurisdiction. Therefore, the question that arises is, is the contract formed where the acceptance is sent, where it is received at the place of re-transmittance, where it is received at its last destination, or where it reaches the mind of the offeror?

In electronic contracting, the so called ‘shrink wrap’, ‘click wrap’ and ‘browse wrap’ contracts have raised fundamental questions about assent or acceptance in contracts. Firstly, in a ‘shrink wrap’ contract, for example, when purchasing off-the-shelf software, when the purchased product is received, it comes with additional terms and conditions in the packaging or in the accompanying documentation. Secondly, in a ‘click-wrap’, the purchaser is required to click “I agree” before the transaction will continue, the installation will proceed or the user will gain access to the web site. Thirdly, in the ‘browse wrap’ contract, the user will visit the pages of a web site where terms and conditions are posted that purport to bind anyone who uses the web site or its services. In particular, the question is about what types of conduct constitute assent or acceptance to terms and conditions. In particular reference to ‘’shrink wrap’ contracts, how should one treat the terms that are not proposed or disclosed until after the user has already agreed to go forward with the transaction and has tendered the required consideration?

As stated, it is a general rule that for acceptance to be valid, it must be communicated to the offeror, unless the need for communication is waived by the offeror. Thus, communication is key to acceptance of an offer. As such, when is acceptance deemed to have been effectively communicated over the internet? Should there be an application of the rule regarding instantaneous communication, so that receipt or deemed receipt by the offeror is key? On the other hand, should the postal rule be applied, so that the dispatch of the accepting e-mail or response form is effective?

2.2. Formalities of Online Contracts

The general rule is that no formality is required to contract. There are however statutory exceptions that require that certain contracts must be made or evidenced in writing and even signed, for the same to be valid. ‘Writing’ has been defined to include printing, photography, lithography, typewriting and any other modes of representing or reproducing words in visible form. There is no doubt that in traditional paper-based contracting, ‘writing’ can easily be carried out on a piece of paper. The issue that arises is whether online contracts can amount to written contracts. Would it be written contracts because the definition of ‘writing’ includes any other modes of or representing words in a visible form?

In traditional contracting, a party will simply indicate his or her assent to the terms of the contract by affixing his or her signature to a piece of paper. As defined ‘signature’ entails the making of one’s mark or writing one’s name or initial on the instrument as an indication that one intends to bind himself or herself to the contents of the instrument.

How then would the requirement for signature be fulfilled in respect of online contracts? Would it be sufficient that someone made a mark or typed out his or her name or initials at the bottom of the e-mail or contract? But, this would not be as unique as a handwritten signature that seeks to distinguish the signature as that of the person signing. Besides, the making of a mark or typing out of one’s name or initials in online contracts can easily be challenged as having been forged. This is because, unlike where a pen is used to create one’s signature on a paper, there is nothing unique or authentic about just typing a mark or initials on online documents-it can easily done by an impostor. In my view therefore, the courts would not add a lot of weight to this kind of online signing as compared with the traditional paper-based signature that is usually unique.

3.0.THE LAW ON FORMATION AND FORMALITIES OF ONLINE CONTRACTS IN KENYA

The relevant legislations regarding electronic transactions in Kenya are the Kenya Information and Communications Act (‘KICA’) as well the Evidence Act. The preamble to the KICA provides that one of the overall objectives of the Act is to facilitate the development of electronic commerce, which in this case is carried out by online contracting. Under KICA, the Communications Authority of Kenya (“CAK”) is bestowed with responsibility of promoting electronic transactions.

KICA states that the functions of CAK in relation to electronic transactions are to, (a) ensure use of reliable electronic records with a view of facilitating electronic transactions; (b) eliminate barriers to electronic commerce, for example, those relating to uncertainties over writing and signature requirements, with a view of facilitating electronic commerce; (c) promote confidence in the public about the integrity and reliability of electronic records and transactions; (d) foster the development of electronic commerce through the use of electronic signatures; (e) promote efficient public sector services by use of reliable electronic records; and (f) develop frameworks for minimization of forged electronic records and fraud in electronic commerce and transactions.

Part VII of the Evidence Act addresses the issue of the admissibility and proof of electronic records in judicial proceedings. According to the Act, electronic records are admissible in evidence, as long certain conditions are fulfilled. This in my view is meant to facilitate electronic commerce, including online contracting, by promoting public confidence about electronic transactions.

It is therefore apparent that KICA and Evidence Act have the objective of promoting electronic commerce. This study shall however examine if this objective has been adequately provided for in the Acts, in this case relating to formation and formalities of electronic contracting.

3.1. Formation of Online Contracts

Regarding formation and validity of contracts, KICA states that unless otherwise provided by the parties, offer and acceptance may be expressed by means of electronic messages. Further that contract shall not be denied validity and enforceability solely on the ground that it was created by use of electronic message(s).

Yes, KICA does recognise electronic offers and acceptance. That is not a big deal though. The big deal is with the manner in which the internet can complicate the applicability of the traditional rules on contract formation. Firstly, KICA does not make an attempt to distinguish between an offer and invitation to treat, when it comes to display of goods on a website. It could be said that the same has been left to interpretation using the usual contractual rules. However, the traditional rules of interpretation of contracts cannot be suitable for online shopping, in my view. This is because in the physical world, a customer picks the goods displayed on the shop window and heads to the counter to make an offer to buy the goods. If the shopkeeper accepts his or her offer, he or she will accept the customer’s payment in exchange for the goods.

On the other hand, in online shopping, there is no opportunity to appear before the shopkeeper. On clicking the ‘OK’ icon and paying for the goods by electronic means, the deal is as good as done. What happens if, because websites can be viewed by many people at the same time, there are numerous ‘purchases’ by customers, upon which there is no sufficient stock? These are matters that should be legislated on, in my view. Thus, given the peculiar nature of online shopping, there should be a substantive legislation to the effect that display of goods on a website amounts to an invitation to treat so that when the customer clicks the ‘OK’ icon, he or she will be making an offer. Should there be sufficient stock, the seller will accept the offer by dispatching or alerting the customer to collect the goods. In case of insufficient stock, the seller will not be liable for matters that are beyond his or her control, but should then refund the payments or restock his or her shop at the discretion of the customer who should otherwise be refunded for any payments made.

Secondly, KICA does not specify the place of contract formation. This is key, particularly regarding the jurisdiction that governs the contract, where no express specification is made. Is it at the place of sending or receipt of acceptance? Since electronic communications are instantaneous, and that receipt is key to communication of acceptance, it should be substantively provided that it is the place of receipt that is the place of contract formation. There is no need of leaving it to judicial interpretation when there is no harm in specifying. KICA also attempts to address the issue of communication of offer or acceptance in electronic transactions. It states that, unless otherwise agreed, acknowledgement of receipt may be given by any communication, automated or otherwise, by the addressee; or by any conduct of the addressee sufficient to indicate to the originator that the electronic communication has been received.

Further, where stipulated by the originator that electronic record shall only be binding on receipt of acknowledgement of such electronic record, then the electronic record shall be deemed to have never been sent by the originator, unless such acknowledgment has been received. Where not stipulated, and no acknowledgment has been received, the originator may give notice to the addressee stating that no acknowledgement has been received and specifying a reasonable time for receipt of the acknowledgment, non-compliance of which entitles him or her to treat the electronic record has having not been sent.

It is difficult to relate the above provision to a communication of acceptance in a contract situation. The provision is couched in a manner that is not specific to contract formation, but general electronic communication. Nonetheless, what I understand is that that KICA does not prescribe the rule that is applicable to electronic communication. It neither states that the rule regarding instantaneous communication nor postal rule is applicable. It leaves it open to freedom of contract, so that a party may chose to stipulate that an electronic record is only binding on him or her upon receipt. The party may as well not stipulate as such, but then is at liberty to notify the other party that he must receive the electronic communication within a reasonable time if he or she is to be bound. There is need for certainty. In my view, because electronic communications are instantaneous, the rule regarding instantaneous communication should be applicable so that it is only upon receipt of the communication that the recipient is bound. It would even be appropriate, in my view, if a provision in this regard is made with specific reference to electronic contracting and even endorsed in the Law of Contract Act.

The legal issues raised by the so called ‘shrink wrap’ contracts have not been addressed by KICA. As stated, in a ‘shrink wrap’ contract, for example, when purchasing off-the-shelf software, when the purchased product is received, it comes with additional terms and conditions in the packaging or in the accompanying documentation. Should there be legal recognition of terms that are not proposed or disclosed until after the user has already agreed to go forward with the transaction and has tendered the required consideration? In my view, terms that one has not been given an opportunity to scrutinize before making a purchase should not be legally binding on the customer. Thus, an online purchaser should be able to read the terms of the transaction before proceeding to do the purchase. These terms should be clearly stipulated to avoid uncertainty.

3.2. Formalities in Online Contracts

While giving powers to the Cabinet Secretary to prescribe otherwise, KICA does not apply to any rule or law that requires writing or signatures in, (a) the making of a will; (b) negotiable instruments; and (c) title documents. So far, no regulations to the contrary have been made by the Cabinet Secretary, and as such electronic transacting is not legally recognized for the mentioned items. This in my view goes against the objective of the KICA, that is, promotion of electronic commerce by eliminating barriers resulting from requirements for writing and signature. In any case, about seven years later after the enactment of the legislation, the Cabinet Secretary ought to have made appropriate regulations.

Nonetheless, KICA goes on to stipulate that where any law provides that information or any matter shall be in writing, then, such requirement shall be deemed to have been satisfied if such information or matter is, (a) made available in electronic form; and (b) accessible for use later. On the face of it, any legal requirement for writing shall be satisfied if a document is produced in an electronic form as in the case of online contracts. This may also boost my argument that creation of documents online amounts to representations of words in visible form and thus meet the definition of what ‘writing’ is. As stated, ‘writing’ has been defined to include printing, photography, lithography, typewriting and any other modes of representing or reproducing words in visible form.

However, as stated, KICA has ruled out the application of electronic writing or signature in respect of wills, negotiable instruments and documents of title, thus diminishing the importance of recognition that electronic representation of words amount to writing. Further, ‘writing’ usually goes along with the requirement for signing. So, even if electronic contracts are recognised as being written contracts, how will the accompanying requirement for ‘signature’ be satisfied?

KICA allows the use of advanced electronic signature to be affixed in a manner prescribed by the Cabinet Secretary, upon which any legal requirement for authentication using a signature shall be deemed to have been satisfied. According to KICA, an advanced electronic signature means an electronic signature which: (a) is linked to the signatory in a unique way; (b) can identify the signatory; (c) is created by means that the signatory can maintain under his sole control; and (d) is linked to the data to which it relates and in such a way that any change to the data is detectable.

Similarly, the exemption of wills, negotiable instruments and documents of title to the applicability of the Act, in my view, also negates the attempt by KICA to satisfy any legal requirement for ‘signature’ by use of advanced electronic signature in online contracts. Further, as stated, the advanced electronic signature should be affixed in the manner prescribed by the Cabinet Secretary. The Minister therefore ought to make regulations prescribing the manner of affixing the advanced electronic signature. This has not happened so far, rendering this provision unimplementable. But I wonder why it was left to the Cabinet Secretary to prescribe on how a signature should be affixed! The manner of affixing the signature is rather obvious. The same is affixed after the writing in a manner that indicates one’s intention to be bound.

There also seems to be some unnecessary duplication that creates some variation in what amounts to an advanced electronic signature. Whereas section 2 of KICA defines what an advanced electronic signature is, section 83O prescribes the requirements that a reliable advanced electronic signature must meet. As stated, section 2 of KICA defines an advanced electronic signature to mean an electronic signature which, (a) is linked to the signatory in a unique way; (b) can identify the signatory; (c) is created by means that the signatory can maintain under his sole control; and (d) is linked to the data to which it relates and in such a way that any change to the data is detectable. On other hand, section 83O provides that a reliable advanced electronic signature must, (a) be generated through a signature-creation device; (b) be created by data that are solely linked to the signatory; (c) be created by data that is under the sole control of the signatory; (d) enable detection of subsequent alterations to the signature; and (e) enable detection of subsequent alteration of information that the signature relates to. Whereas, it may be assumed that an advanced electronic signature is generated by a signature-creation device, it would, in my view, be appropriate to state so in section 2 of the Act, just as stated in section 83O. Otherwise, I am of the view that, it would have been sufficient to make the definition of an advanced electronic signature in section 2 of the Act, only, without giving a further definition in section 83O.

In what appears to have been lack of clarity in the minds of the drafters, the legislation goes on to give discretion to the Cabinet Secretary, in consultation with CAK, to make regulations for electronic signatures. Does it now mean that there is a distinction between the advanced electronic signature and the electronic signatures anticipated? Why are there separate provisions for the advanced electronic signatures, from those of electronic signatures, and yet the advanced electronic signature is a form or electronic signature? In any case, these regulations have not been made by the Cabinet Secretary, rendering the use of electronic signatures non-operational.

The Evidence Act provides that, other than in a case of a secure signature, there must be proof that an electronic signature is that of the subscriber. In order to prove this, the court may direct that the person or the certification service provider produces the electronic signature certificate; or that any other person applies the procedure stipulated in the electronic signature certificate to verify the electronic signature purported to have been affixed by that person. Firstly, what is this secure signature that must not be proved in court? Secondly, are there certification service providers in Kenya? The Evidence Act does not prescribe what amounts to a secure signature. On the other hand, the electronic signatures, including the advanced electronic signature, anticipated by KICA, are meant to be secure. What then is this unsecure electronic signature that needs proof? Is it an electronic signature that is not produced by a signature-generating device, like typing out ones names after the text? There is need for clarity on this.

Certification services providers in Kenya are supposed to be licensed by CAK. KICA defines “certification service provider” to mean a person who has been granted a licence, by CAK, to issue a digital signature certificate. Now, ‘digital signature’ has been introduced. Is it the same as an electronic signature, or a form of an electronic signature? This in my view is a form of electronic signature since the word ‘electronic’ includes digital capabilities. Therefore, does it mean the certification service providers cannot issue certificates for other forms of electronic signatures? They should be able to. This needs to be clarified. It can be said that in so far as there are no licensed certification service providers in Kenya and hence the evidential value of electronic signatures is still in limbo.

In summary, whereas Kenyan law has given legal recognition to online written offers and acceptance, the same has not adequately addressed the complications that internet poses to the application of the traditional rules of contract formation. This is particularly in respect of the distinction between offer and invitation to treat for display of goods on websites; the applicable rule regarding communication of acceptance; the place of contract formation; and the issues raised by the so called ‘shrink wrap’ contracts. Further, in as much as Kenyan law recognises online written contracts, the accompanying requirement for signature can still not be achieved legally. This is because of the lack of regulations as well as certification service providers to facilitate the implementation of the provisions on electronic signatures.

The next section discusses and analyses how other jurisdictions regulate the formation and formalities of online contracts.

4.0.COMPARATIVE ANALYSIS

This section is dedicated to comparing the Kenyan situation with those of the UN Commission on International Trade Law (“UNCITRAL”), The United Kingdom (“UK”), United States of America (“US”) and South Africa (“SA”).

UNCITRAL is a body of the UN specializing in commercial law reform worldwide, and comes up with model laws to be adopted by member states. The UNCITRAL texts that are relevant to formation of electronic contracts are: the 2005 UN Convention on the Use of Electronic Communications in International Contracts (“The Convention on e-Communications”); and 1996 - UNCITRAL Model Law on Electronic Commerce with Guide to Enactment, with additional article 5 bis as adopted in 1998 (“the Model Law on e-Commerce”). Though UNCITRAL laws are concerned with international trade, they are relevant in the sense that online transacting is the key form of carrying out international trade because of its speed and low cost.

The UK, US, and SA have taken steps to address the problems and challenges in this study. Thus, the UK Electronic Communications Act 2000 (“UK e-Communications Act”) and Electronic Signatures Regulations 2002 (“UK e-Signatures Regulations”), are relevant to this study. On the other hand, the US has enacted the Uniform Electronic Transactions Act (“UETA”). South Africa has legislated on electronic transactions through the Electronic Communications and Transactions Act, 2002 (“SA e-Communications Act”).

4.1. Formation of Online Contracts
4.1.1. Invitation to Treat, Offer and Acceptance

According to the Convention on e-Communications , “communication” means any statement, declaration, demand, notice or request, which includes an offer and the acceptance of an offer that the parties are required to make in connection with the formation or performance of a contract. There is no equivalent definition in the Kenyan situation. KICA does not define what communication is. It is necessary for KICA to define that communication includes the making of offers and acceptance, in order to make it clear that electronic communications also covers the formation of online contracts.

Unlike UK e-Communications Act, UETA, SA e-Communications Act, and KICA (which are silent), the Convention on e-Communications has gone ahead to distinguish between invitation to treat, and offers or acceptance in respect of electronic transactions. It states as follows:
A proposal to conclude a contract made through one or more electronic communications which is not addressed to one or more specific parties, but is generally accessible to parties making use of information systems, including proposals that make use of interactive applications for the placement of orders through such information systems, is to be considered as an invitation to make offers, unless it clearly indicates the intention of the party making the proposal to be bound in case of acceptance.

Going by the convention, the display of goods on a website amounts to an invitation to treat, unless otherwise stated by the owner of the site. This creates certainty and there is no reason why Kenya should not borrow from it.

4.1.2. Time and Place of Contract Formation

Unlike the Kenyan situation, the Convention on e-Communications, the Model Law on e- Commerce, UETA, and the SA e-Communications Act, set rules on how to determine the time and place of dispatch and receipt of electronic communication, which includes communication of offers and acceptances. Accordingly, the time of dispatch of an electronic communication is deemed to be the time when the communication leaves an information system under the control of the originator or of the party who sent it on behalf of the originator. If the electronic communication has not left an information system under the control of the originator or of the party who sent it on behalf of the originator, the time of dispatch is the time when the electronic communication is received.

The Convention on e-Communications provides that the time of receipt of an electronic communication is the time when it becomes capable of being retrieved by the addressee at an electronic address designated by the addressee. Further, that an electronic communication is presumed to be capable of being retrieved by the addressee when it reaches the addressee’s electronic address. This has been reflected in the Model Law on e-Commerce and UETA.

The SA e-Communications Act provides that an agreement concluded between parties by means of data messages is concluded at the time when the acceptance of the offer was received by the offeror. So is it when it reaches the address of the recipient or when the recipient actually opens and reads the message? What happens if the recipient actually reads the message and keeps quiet? The Convention on e-Communications and Model Law on e-Commerce, give clearer provisions in that they state that the time of receipt of the message is when the same is capable of being retrieved by the recipient.

Regarding acknowledgment of receipt, the Kenyan law (KICA), SA e-Communications Act have similarities with that of the Model Law on e-Commerce. This is because both provide that, unless otherwise agreed, acknowledgement of receipt may be given by any communication, automated or otherwise, by the addressee; or by any conduct of the addressee sufficient to indicate to the originator that the electronic communication has been received. However, KICA and the Model Law on e-Commerce, go on to state that where stipulated by the originator that electronic record, or data message, shall only be binding on receipt of acknowledgement of such electronic record, then the electronic record shall be deemed to have never been sent by the originator, unless such acknowledgment has been received. Where not stipulated, and no acknowledgment has been received, the originator may give notice to the addressee stating that no acknowledgement has been received and specifying a reasonable time for receipt of the acknowledgment, non-compliance of which entitles him or her to treat the electronic record has having not been sent

However, unlike KICA, the Model Law of e-Commerce provides that where the acknowledgement of receipt by the addressee is received by the originator, there is a presumption that the related data message was received by the addressee. However, the presumption does not imply that the data message corresponds to the message received. This because the communication sent by the originator may be corrupted on receipt by the addressee, and as such the addresses should not be bound by information that is not the same as that sent by the originator. This is an important provision that should not have been left out in KICA.

It seems the Convention on e-Communications, the Model Law on e-Commerce, UETA and the SA e-Communications Act, rule out the applicability of postal rule to electronic communication of offers and acceptances. This is because they lay emphasis on receipt of the communication, in an apparent recognition that electronic communications are instantaneous. Therefore, the rule regarding instantaneous communication is applicable and should be specified in KICA.

According to the Convention on e-Communications, the Model Law of e-Commerce, UETA and the SA e-Communications Act, the place of dispatch of the electronic communication is at originator’s place of business, whereas the place of receipt is the addressee’s place of business. ‘Place of business’ is presumed to be the location indicated by that party, unless otherwise demonstrated; and where not indicated, and a party has more than one place of business, then the place of business is that which has the closest relationship to the relevant contract, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract. Further, if a natural person does not have a place of business, his or her place of business is his or her habitual residence.

Unlike the Convention on e-Communications, Model Law on e-Commerce, UETA, and KICA, the SA e-Communications Act has gone ahead to specify the place of contract formation. The SA e-Communications Act provides that an agreement concluded between parties by means of data messages is concluded at the place where the acceptance of the offer was received by the offeror. KICA should make such a clarification.

4.1.3. The ‘Shrink Wrap’ Contracts

Just like in Kenya, these other jurisdictions have not addressed the legal issues raised by the so called ‘shrink wrap’ contracts. As stated, in a ‘shrink wrap’ contract, for example, while purchasing off-the-shelf software, when the purchased product is received, it comes with additional terms and conditions in the packaging or in the accompanying documentation. Should there be legal recognition of terms that are not proposed or disclosed until after the user has already agreed to go forward with the transaction and has tendered the required consideration. In my view, terms that one has not been given an opportunity to scrutinize before making a purchase should not be legally binding on the customer.

4.2. Formalities of Online Contracts
4.2.1. Requirement for ‘Writing’

Regarding the requirement for ‘writing’ the Convention on e-Communications provides that the requirement is met by an electronic communication if the information contained therein is accessible so as to be usable for subsequent reference. The Model Law on e-Commerce has reflected this position by stating that that a requirement for ‘writing’ can be fulfilled by a data message if the information contained therein is accessible so as to be usable for subsequent reference.

Whereas the UK e-Communications Act and Regulations are silent on this, the UETA and SA e- Communications Act also have provisions to the effect that the requirement for writing is met if information is produced in electronic form that is available for subsequent use or retention by the recipient. All these are similar to the Kenyan situation, where KICA provides that where any law provides that information or any matter shall be in writing, then, such requirement shall be deemed to have been satisfied if such information or matter is, (a) made available in electronic form; and (b) accessible for use later. On the face of it, there is no doubt that the requirement for ‘writing’ has adequately been recognized by law. How about the accompanying requirement for ‘signature’?

4.2.2. Requirement for ‘Signature’

When it comes to the requirement for signature, the e-Communications Convention, the Model Law on e-Commerce, and the Model Law on e-Signature, stipulate that the requirement is met in relation to an electronic communication if: a method is used to identify the party and to indicate that party’s intention in respect of the information contained in the electronic communication; and the method used is either as reliable as appropriate for the purpose of the electronic communication, and proven in fact to have fulfilled the functions of identifying the party and indicating his or her intentions.

It is apparent that the convention and the model laws do not make it mandatory that there be a signature. Instead, if the purpose for which a signature is required, is fulfilled, then the requirement for signature should be deemed to have been met. The convention seems to make it flexible and easy for parties to fulfil the requirement for signature, unlike in the Kenyan situation which requires that there be an electronic signature. Signature, in my view, is the most appropriate way of authenticating and identifying a document to a person. Therefore, there ought to be use of electronic signature that satisfies the purpose for which a signature is a requirement, that is, identifying a party and his or her intentions to be bound by the information.

The Model Law on e-Signature, as well as KICA provide that an electronic signature is considered to be reliable for the purpose of identifying a party and his or her intention, if the signature creation data is solely linked to the signatory; the signature creation data were at the control of the signatory, and no one else; any alteration to the signature is detectable; and that any alteration made to information, which the signature relates to, after the time of signing, is detectable.

The UK e-Communications Act provides that an electronic signature related to an electronic communication is admissible as evidence as to the authenticity of the communication. This just gives legal effect to electronic signatures. There is nothing that Kenya can borrow from this since electronic signatures are already recognised by KICA.

UETA provides that an electronic signature can fulfil the requirement for signature. It defines ‘electronic signature’ to mean an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record. This is a wide and flexible definition because it includes the use of sound and process as e- Signatures. According to UETA, the electronic signature is attributable to the person if it was the act of the person, which act may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.

The SA e-Communications Act provides that in situations where the law requires a signature, but does not specify the type of signature, such a requirement is satisfied with respect to data message only if an advanced electronic data message is used. Otherwise, other types of electronic signatures may be used. However, these electronic signatures must satisfy the purpose of identifying the signatory and signifying his approval of the information. Unlike for the Model Law on e-Signature, KICA, and UETA, the SA e-Communications Act does not, unfortunately, elaborate on what will enable an e-Signature satisfy the purpose of identifying the signatory and indicating his or her intention to be bound.

Whereas KICA has some similar provisions with the Model Law on e-Signature, UETA, UK e- Communications Act, and the SA e-communications Act, there are no regulations to facilitate the implementation of the law (KICA). The regulations should be made by the Cabinet Secretary. One cannot talk of e-Signatures without mentioning certification service providers. According to the Model Law on e-Signature, a certification service provider is a person that issues certificates and may provide other services related to electronic signatures. Therefore, a certification service provider would provide the software or platform for creation of electronic signatures and thereafter issue certificates for the same, if called upon to. An example of such service provider is the US based RightSignature LLC which provides a platform for creation of online-signatures and issues accompanying certificates.

The Kenyan definition of what a certification service provider is, limits the function of such a service provider to only issuing certificates for digital signatures. KICA defines a certification service provider to mean a person who has been licensed to issue a digital signature certificate. Firstly, this means that a service provider cannot be licensed to provide e-Signature creation services. Who then can provide such important services that need regulation? Secondly, why has KICA restricted the definition to ‘digital signatures’ only? Is a digital signature the same as an electronic signature, or a form of an electronic signature? This in my view is a form of electronic signature since the word ‘electronic’ includes digital capabilities. Therefore, does it mean the certification service providers cannot issue certificates for other forms of electronic signatures? They should be able to. There is need for amendment of this definition to allow certification service providers to issue electronic signature certificates and also perform other electronic signature services including those of e-Signatures creation.

The UK e-Signature Regulations set out the rules that electronic signature certificates must meet. The Regulations also list the requirements that certification service providers must meet before being licensed to perform electronic signatures services. The regulation of electronic signatures certifications in these ways is important to guarantee the integrity of e-Signatures. The Kenyan Cabinet Secretary, who is yet to make such rules, can borrow from the UK experience.

Having done a comparative analysis, the next part proceeds to conclude and give recommendations.

5.0.CONCLUSION AND RECOMMENDATIONS

This paper has shown that Kenya has made some steps in legislating on electronic commerce, which is facilitated by online contracting. This legislation is contained in the Kenya Information and Communications Act (“KICA”) and the Evidence Act . However, the legislation has some shortcomings on formation and formalities of contracts, which may hinder the overall objective of promotion and facilitation of e-Commerce. These shortcomings as well the recommendations for reform on the same are summarised below:

5.1. Formation of Online Contracts
5.1.1. Invitation to Treat, Offer and Acceptance

Electronic communication is an aspect that distinguishes online contracting from the traditional paper-based ones. Offers and acceptances would therefore have to be communicated using electronic means. It is therefore necessary to define communication to include the making of offers and acceptances with a view of entering into contracts-KICA has not done so. This paper therefore proposes that KICA borrows from the 2005 UN Convention on Electronic Communications (“Convention on e-Communications”) , which defines “communication” to mean any statement, declaration, demand, notice or request, which includes an offer and the acceptance of an offer that the parties are required to make in connection with the formation or performance of a contract. This will make it clear that electronic communications also apply to formation of online contracts.

KICA does not distinguish between invitations to treat and offers, in respect to online contracting. This is more so when it comes to the display of goods on a website. This study proposes that KICA be amended to distinguish between electronic invitation to treat and offer, as in the case of the Convention of e-Communications discussed in this article. By doing so, there shall be no doubt that the display of goods on a website amounts to an invitation to treat, unless otherwise stated by the owner of the site. This creates certainty.

5.1.2. Time and Place of Contract Formation

The time and place of contract formation is necessary to ascertain when and where contractual obligations arose. KICA does not set rules on how to determine the time and place of dispatch and receipt of electronic communication, which include communication of offers and acceptances. KICA can borrow from the Convention on e-Communications, 1996 - UNCITRAL Model Law on Electronic Commerce with Guide to Enactment, with additional article 5 bis as adopted in 1998 (“Model Law on e-Commerce”), the US Uniform Electronic Transactions Act (“UETA”), and the Electronic Communications and Transactions Act, 2002 (“SA e-Communications Act”).

Accordingly, the time of dispatch of an electronic communication should be deemed to be the time when the communication leaves an information system under the control of the originator or of the party who sent it on behalf of the originator. If the electronic communication has not left an information system under the control of the originator or of the party who sent it on behalf of the originator, the time of dispatch is the time when the electronic communication is received.

The time of receipt of an electronic communication would be the time when it becomes capable of being retrieved by the addressee at an electronic address designated by the addressee. Further, that an electronic communication should be presumed to be capable of being retrieved by the addressee when it reaches the addressee’s electronic address.

KICA should also state that where the acknowledgement of receipt by the addressee is received by the originator, there is a presumption that the related data message was received by the addressee. However, the presumption should not imply that the data message corresponds to the message received. This because the communication sent by the originator may be corrupted on receipt by the addressee, and as such the addresses should not be bound by information that is not same as that sent by the originator.

It is thus clear that the rule that should apply to electronic transactions is that regarding instantaneous communication, as opposed to the postal rule. This is because electronic communications are instantaneous, as compared to post. It follows that the time of online contract formation should be the time when the acceptance of the offer is received by the offeror.

The place of dispatch of the electronic communication would be at the originator’s place of business, and the place of receipt being the addressee’s place of business. ‘Place of business’ will be presumed to be the location indicated by that party, unless otherwise demonstrated; and where not indicated, and a party has more than one place of business, then the place of business should be that which has the closest relationship to the relevant contract, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract. Further, if a natural person does not have a place of business, his or her place of business should be his or her habitual residence.

The rule regarding instantaneous communication also determines the place of contract formation. Thus, online contracts should be deemed to be concluded at the place where the acceptance of the offer was received by the offeror.

5.1.3. The ‘Shrink Wrap’ Contracts

As stated, in a ‘shrink wrap’ contract, for example, when purchasing off-the-shelf software, when the purchased product is received, it comes with additional terms and conditions in the packaging or in the accompanying documentation. The issue that arises is there should there be legal recognition of terms that are not proposed or disclosed until after the user has already agreed to go forward with the transaction and has tendered the required consideration. This paper proposes that the law makes it clear that terms that one has not been given an opportunity to scrutinize before making a purchase should not be legally binding on him or her.

5.2. Formalities of Online Contracts
5.2.1. Requirement for ‘Writing’

Kenyan law makes it clear that a legal requirement for ‘writing’ can be satisfied by electronic contracting. KICA provides that where any law provides that information or any matter shall be in writing, then, such requirement shall be deemed to have been satisfied if such information or matter is, (a) made available in electronic form; and (b) accessible for use later. On the face of it, there is no doubt that the requirement for ‘writing’ has adequately been recognized by law. Issues arise as to the accompanying requirement for ‘signature’.

2.2.2. Requirement for ‘Signature’

When it comes to the requirement for signature, KICA provides that the same can be satisfied by use of an advanced electronic signature which is as reliable as was appropriate for the purpose for which the electronic message was generated or communicated. An electronic signature is considered to be reliable for the purpose for which the electronic message was created, if: the signature is generated through a signature-creation device; the signature creation data are solely linked to the signatory; the signature creation data were under the control of the signatory and no one else; any subsequent alteration to the electronic signature is detectable; and any subsequent alteration made to the information, to which the signature relates, is detectable.

KICA can also be as wide and flexible as possible, like UETA which defines e-Signatures to include sound and process. UETA defines ‘electronic signature’ to mean an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record. Whereas KICA has provisions with respect to e-Signatures, there are no regulations to facilitate the implementation of the same. The regulations should be urgently made by the Cabinet Secretary.

The meaning and function of certification service providers are not adequately provided for in KICA. KICA’s definition of a certification service provider limits the function of such a service provider to only issuing certificates for digital signatures. It defines a certification service provider to mean a person that has been licensed to issue a digital signature certificate. Firstly, this means that a service provider cannot be licensed to provide e-Signature creation services. Who then can provide such important services that need regulation? Secondly, why has KICA restricted the definition to ‘digital signatures’ only? Is a digital signature the same as an electronic signature, or a form of an electronic signature? This in my view is a form of electronic signature since the word ‘electronic’ includes digital capabilities. Therefore, does it mean the certification service providers cannot issue certificates for other forms of electronic signatures? They should be able to. There is need for amendment of KICA to allow certification service providers to issue electronic signature certificates and also perform other electronic signature services including those of e- Signatures creation.

The UK e-Signature Regulations set out the rules that electronic signature certificates must meet. The Regulations also list the requirements that certification service providers must meet before being licensed to perform electronic signatures services. The regulation of electronic signatures certifications in these ways is important to guarantee the integrity of e-Signatures. The Kenyan Cabinet Secretary, while making the regulation on e-Signatures, can get important tips from the UK experience.

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Benard Kibet Sang has a wide experience in Conveyancing, Commercial, and Corporate law having had an opportunity of representing a wide range of clients, especially banks, financial and mortgage institutions, micro-finance institutions, public corporations and other lending institutions in the practice relating Security documentation and/or perfection, Law of Business Associations.

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