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THE E-COMMERCE ACT
Part II: Other Legal Issues
Author: JJ Disini
Source: The
Philippine Star
Date: July 11, 2000
Nothing is ever as simple as it seems. It may be
argued, for example, that the provisions of the Electronic Commerce Act
upholding the validity of electronic documents and signatures do not actually
amend existing law but merely reinforce the provisions of the Civil Code
which maintain that contracts are binding in whatever form they may take.
And yet despite the evident conclusion that the Electronic Commerce Act
is, on one level, superfluous, one realizes that there is nothing quite
as comforting as the unambiguous and express language of an Act of Congress.
Which leads us back to the inherent value of the statute, which is to
provide a secure legal environment necessary to encourage the growth of
electronic commerce. That does not mean, however, that the law is the
final word on electronic commerce. Far from it – for the law itself raises
perplexing issues.
Electronic Contracting. Consider
the “click-through” or “click-wrap” contracts commonly used throughout
the web. One would naturally conclude that since the law expressly permits
electronic contracting that all forms thereof would enjoy validity. However,
there is nothing in the law that categorically recognizes, more so authorizes
or legalizes such contracts. These agreements are usually thrust before
the user as a pre-condition to proceeding with a transaction and in the
haste to close the deal, few, if at all, would bother to read the clauses
before clicking the “I Accept” button. And assuming they do read the contract,
it is invariably in legalese – a form of English that is virtually incomprehensible
to all including some people trained in the law. Although American courts
seem to have upheld these contracts, there is reason to believe that our
courts may strike them down for being “contracts of adhesion” – take-it-or-leave-it
agreements where one of the contracting parties possesses no bargaining
power.
Problems of Proof and Evidence.
While the statute does provide some detail concerning the admissibility
of electronic evidence and guidance regarding their presentation, law
practitioners are still left to their devices to figure out the manner
in which a specific form of electronic evidence may be presented in court.
One will recall that famous video evidence where the words “Eto
na! Eto na! Pusila! Pusila!” emerged after some electronic enhancements.
Noone disputed the admissibility of that evidence nor the manner of its
presentation. However, it may be said that the videotape evidence really
consisted of magnetic data contained in a device (called a video tape)
which can be viewed only through a machine (called a video cassette player
connected to a television). The same would be true for say, a computer
file, which is composed of magnetic data contained in a device (called
a diskette or a hard drive) which can only be viewed through a machine
(called a computer). It remains to be seen, however, if electronic evidence
will be admitted as easily as video evidence.
Taxation. Section 23 of the Act
provides for the rules to determine where electronic documents are sent
and received. For some reason, the following sentence was included in
the law: “This rule shall also apply to determine the tax situs
of such transaction.” Tax situs helps determine the propriety of
applying either local or foreign tax law upon a transaction or an act.
How does Section 23 work? Assuming a Filipino in
the Philippines purchases a book from amazon.com -- under the Act, the
electronic documents evidencing the transaction are deemed to have been
sent from Manila (the place of residence of the buyer) and received in
Virginia (amazon.com’s place of business). Question: According to
the law, where is the tax situs of the transaction? (If anyone has an
answer, the writer would appreciate receiving an e-mail.)
If there are no easy answers, it is because the rule
respecting the place of dispatch and receipt of electronic documents was
intended to apply only when the law provides that certain documents must
be sent, received or presented in a particular place. For example, if
the parties agreed that an electronic promissory note were to be presented
at a particular place, then the rule can be used to determine if there
was proper presentment. The addition of the tax situs provision it seems
was both unnecessary and improper.
Banking. In response to the recent
closure of a bank, a provision in the Act was inserted providing that
the obligation of banks to comply with electronic instructions or approvals
to pay certain sums shall be “absolute” and exempt from any
competing lien – including those of the Government. Instead of addressing
a limited concern, the provision as written can be used to commit fraud
because a bankrupt company could, say, electronically instruct its bank
to remit its cash to off-shore accounts belonging to its principals. Under
the said provision, the obligation of the bank would be absolute and noone,
not even the Government, can stop the bank from remitting the money.
The issues raised above do not lend themselves to
an easy resolution. To be sure, there are other problems raised by the
law but space constraints do not allow for their discussion here. As with
everything, it is hoped that the initial shock delivered by the law will
be followed by a sober and rational implementation of the same. As mentioned
earlier, electronic commerce demands stability in the law to foster its
growth. Hopefully, the foregoing issues will not threaten such stability.
Atty. JJ Disini is currently drafting the Implementing Rules and Regulations
for the Electronic Commerce Act in behalf of a multi-agency task force
co-chaired by the DTI, DBM and the BSP. He is also a partner at Disini
& Disini Law Office (www.disini.ph).
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