Protecting electronic transactions

Okay, here's your legal lesson for the day. Jason Epstein, an attorney at Baker Donelson Bearman & Caldwell in Knoxville, Tenn., explained to me the three types of legal contracts for electronic transactions that exist online today. I, in turn, am sharing this wisdom with you.

First up is the "assent by use" agreement. This contract is posted discreetly on a Web site and says something to the effect that "by browsing or using this site, you agree to the terms of this agreement." Most times, users don't even know that this agreement is somewhere on the site.

Epstein says this type of agreement can be likened to the shrink-wrap licenses you find on software. Often, there is a document inside that says by opening and using the product, you've agreed to the terms in the agreement. Epstein says the shrink-wrap licenses have been upheld in courts, which means the "assent by use" contract could be, as well.

The second agreement is referred to as "clickwrap." In this case, a user must click on a dialogue or checkbox in order to proceed with a transaction. In other words, before you can get something from the vendors, you have to agree to the terms outlined in the agreement.

The third agreement relates to digital signatures. Digital signatures, which are in their infancy, are the most reliable way on the Web right now to secure information. Legally, digital signatures guarantee authentication, or that the person is who he says he is, and nonrepudiation, or that the person can't deny he made the purchase.

Epstein says the assent by use agreement is the most popular on the Web today. "This method is for e-commerce companies that are less concerned about contracts and want few barriers to commerce," he says. Companies such as direct marketers are most likely to use this option, he says.

The clickwrap version is most appealing to software vendors for licensing downloads. Vendors can display the terms of use on a screen before letting users access their products and services.

Finally, companies doing million-dollar deals over the Web employ digital signatures.

Epstein says both the market and the law will help shake out which method will be most used in the coming months. "The market will make a business decision about what contract will work best," he says. "But the assent by use contracts will proliferate if the courts uphold them."

Sandra Gittlen is events editor for Network World's Seminars and Events Group. Previously, she was managing editor of Network World Fusion and senior reporter covering Internet research and standards for Network World magazine. She can be reached at sgittlen@nww.com.

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