From Lord Coke to Internet Privacy: The Past, Present, and Future of Electronic Contracting

Contract law is applied countless times every day, in every manner of transaction large or small. Rarely are those transactions reflected in an agreement produced by a lawyer; quite the contrary, almost all contracts are concluded by persons with no legal training and often by persons who do not have a great deal of education. In recent years, moreover, technological advances have provided novel methods of creating contracts. Those facts present practitioners of contract law with an interesting conundrum: The law must be sensible and stable if parties are to have confidence in the security of their arrangements; but contract law also must be able to handle changing social and economic circumstances, changes that occur at an ever-increasing speed. Contract law, originally designed to handle agreements reached by persons familiar with one another, evolved over time to solve the problems posed by contract formation that was done at a distance — that is, contract law had developed to handle first paper, then telegraphic, and finally telephonic communications. It has handled those changes very well. In the 1990s, however, things began to change. The rise in computer use by individuals coupled with the advent of the World Wide Web gave rise to two parallel developments, both of which challenged the law of contract formation. Increased computer use created a demand for software programs designed for the consumer market, and those programs were commonly transferred to users by way of standard-form licenses that were packaged with the software and thus unavailable before the consumer paid for the software. Also, parties in large numbers began to use electronic means — the computer — to enter into bargained-for relationships. The turn of the millennium brought two electronic contracting statutes, the Electronic Signatures in Global and National Commerce Act (“E-Sign”) and the Uniform Electronic Transactions Act (“UETA”), which removed any doubts that contracts entered into electronically could satisfy the Statute of Frauds. Encouraged by the certainty given by those statutes, internet businesses started offering contract terms on their websites, asking customers to consent to terms by clicking an icon, or by not seeking express assent at all by presenting terms of use by hyperlink. The ease of presenting terms comprised of thousands of words by an internet hyperlink makes it easy for a vendor in its terms of use and terms of service to ask us to give up privacy rights and intellectual property rights. Modern communications technologies therefore make it easier for parties to engage in risky transactions. Nevertheless, we believe that, with few exceptions, the common law of contracts is sufficiently malleable to address the problems arising out of that behavior and where it is not, regulation of contract terms is appropriate. This Article examines those developments