Rutgers Computer and Technology Law Journal
Copyright (c) 2000 Rutgers Computer and Technology Law Journal

26 Rutgers Computer & Tech. L.J. 215 (2000)

Adapting Contract Law to Accommodate Electronic Contracts: Overview and Suggestions

Donnie L. Kidd, Jr. * and William H. Daughtrey, Jr. **
(* B.A., University of Virginia, J.D., University of Richmond. He is former Lead Articles Editor of the University of Richmond Law Review. He is an Associate in the litigation section of Squire, Sanders & Dempsey, L.L.P., Washington, D.C. The views and opinions expressed herein are those of the authors and are not necessarily the views or opinions of Squire, Sanders & Dempsey, L.L.P. ** Professor of Business Law, Virginia Commonwealth University.)

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Contract law consists of a large body of rules and guidelines that address contract formation and enforcement. Stating the fundamental principle in basic terms, a contract is nothing more than "a promise or [a] set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty."   n86 Formation of a legally recognized contract requires an offer,   n87 acceptance,   n88 and consideration.   n89 Additionally, rules addressing specific issues of formation and enforcement supplement the basic definition.   n90
[*239]  Some contracts, depending on their subject matter, are governed by specialized areas of contract law that address the specific needs of certain bargaining relationships. An important subset exists for commercial contracts. Beyond some court interpretations under general contract law, contracts for the sale of goods receive unique treatment to promote commercial certainty, predictability, and uniformity. Article 2 of the Uniform Commercial Code (U.C.C.) is the foremost example of this "specialized" law for contracts, extending general contract law to address issues of importance in the formation and enforcement of certain commercial agreements, specifically the sale of goods. Outside the domestic arena, the United Nations Convention on Contracts for the International Sale of Goods   n91 may apply to the sale of goods among international parties.   n92 The most recent addition to the panoply of specialized contract law is the UCITA, which addresses transaction agreements for the exchange of computer information.
Provided the expanse of contract law to address an innumerable variety of agreements and relationships, application of traditional law to electronic contracts may seem perfunctory. After all, parties to an electronic contract appear to conduct themselves and expect others to conduct themselves in the same manner as they have under traditional rules. The fatal error, however, in this simplistic approach is that electronic contracts do not always fit the traditional framework that structures general contract law. Electronic contracts may never appear on a piece of paper, may involve instantaneous transactions, may involve minimal or no negotiation or interaction, and may involve no human interaction at all. Far from the concept of genteel business persons meeting together to negotiate with caution and deliberation, electronic contracts may be  [*240]  swift, inhuman affairs.   n93 Having identified the problem, the solution must seek to shape the law to fit the circumstances.
Since electronic contracts significantly alter the environment in which agreements are formed, the following sections of this article address several important issues regarding contract formation. These sections focus on electronic contracts for the sale of goods and other commercial transactions. Beginning with basic questions surrounding mutual assent in an electronic world, the discussion moves on to analyze additional issues involving contract formalities, characterization of electronic contracts, application of the U.C.C., and broader potential problems yet to be resolved.

A. Mutual Assent

Mutual assent consists of an offer by one party and an acceptance of that offer by another.   n94 Generally, failing to satisfy a "meeting of the minds" on the terms and content of an agreement means that no contract arises. Contract law liberalizes this fundamental requirement, however, through a set of rules and interpretations to determine when an offer is made and when a manifestation of assent is present.   n95 Although no formalities are required for making an offer, recognition of an acceptance requires additional rigor in order to rise to the level of mutual assent.   n96 While this manifestation of assent may arise by written document, spoken word, or other conduct,   n97 a valid contract exists if the manifestation demonstrates that a party intended to accept the terms of the offer by exchanging promises or performance.
[*241]  While not all electronically formed contracts demand legal inquiry into the existence of mutual assent, "point-and-click" contracts and EDI transactions present their distinct characteristics. Consider the following four examples:
Example 1: Shareware, Inc., develops a computer game. America Online (AOL) wants to create a virtual arcade for its Internet subscribers and wants to buy the exclusive rights to Shareware's game. AOL sends an e-mail from an Ohio-based computer to Patterson, Shareware's director of operations in Texas. The e-mail offers $ 50,000 in exchange for rights to the game. Patterson sends a reply by e-mail stating that Shareware will sign over the rights upon deposit of the $ 50,000 with a designated escrow agent.   n98
Example 2: Having sold its first game to AOL, Shareware wants to develop and market another. While logged onto a chat-room discussion of new game development strategies, Patterson sends a message to another person logged onto the room who is using the name "T-Mek." Responding instantly with his own typed message, T-Mek assures Patterson that Java-script is the wave of the future for game programmers and informs Patterson that he will sell Patterson an instruction book on Java programming. Patterson replies that he is interested, but only if the book costs twenty-five dollars or less and can be shipped within twenty-four hours. T-Mek agrees to the twenty-five dollars price, but wants forty-eight hours to ship the book. Patterson agrees and promises to wire the twenty-five dollars to T-Mek's address within seven days and T-Mek types "okay" in reply.
Example 3: Mario subscribes to AOL and visits its new virtual arcade. Mario plays a demo version of the game that Shareware sold and notices that the entire game may be purchased over the Internet from AOL. Interested, Mario follows a few links until he reaches a web page filled with legalese. At the top of the page is the phrase, "Virtual Arcade Game Purchase Agreement," followed by a series of provisions stating that the cost of the game is $ 10,  [*242]  that AOL is not responsible for content or damage, that all legal disputes will be governed by Ohio law and filed in Ohio courts, and provides a place for Mario to enter his credit card number. At the bottom are two clickable buttons that are labeled "accept" and "reject." Mario types in the necessary information and clicks the "accept" button.
Example 4: Shareware's programming staff consumes a large amount of junk food, and must continuously stock its vending machines. The company that stocks these machines uses an EDI system to accept orders and process them electronically for immediate shipment. In an effort to avoid frequent inventorying, Shareware develops a program for the vending machines that will keep track of the supply of food in the machines. When the inventory reaches a low level, the program automatically dials vending corporation's EDI system and places an electronic order to refill the machines. The vending corporation's EDI system confirms the order and transmits a purchase order to the warehouse for immediate shipment.
Each of the above examples involves a transaction that occurs within an electronic medium. Assuming that no other issues regarding contract formalities or formation are relevant, the sole issue for consideration is whether mutual assent (as defined by general contract law) is manifested.
The first two examples pose no significant problem for mutual assent. Following explication of the terms, the parties exchange promises in a manner no different than if they were sending letters or talking on the telephone. Although not face-to-face, the involved parties communicate between themselves to reach assent through the exchange of e-mail in Example 1, and by real-time chat in Example 2. Disregarding other issues, the language and conduct of the parties in each case manifests an intent to enter into a sales transaction.   n99
Unlike the first two scenarios, Examples 3 and 4 are problematic in the area of mutual assent. Neither example incorporates a  [*243]  "meeting of the minds" nor a contemporaneous exchange by conscious entities to set the terms of the agreement. Example 3 finds a person faced with a take-it-or-leave-it purchase agreement for software. Example 4 finds no person at all, but merely two computer systems exchanging pre-programmed data to order and ship merchandise. Whether either situation involves mutual assent deserves scrutiny.
Example 3 embodies the "point-and-click" contract or "shrinkwrap" agreement.   n100 Commonly used in software packaging, "shrink-wrap" contracts provide that an offeree accepts all provisions of the sales agreement simply by opening the software package.   n101 Similarly, when items are sold over the Internet, a "point-and-click" contract provides that by clicking on an "accept" button, a person accepts all provisions of the seller. The hallmark of these "agreements" is that they are non-negotiable and non-acceptance of any provision requires the buyer to refrain from opening the package or clicking the "accept" button.
"Point-and-click" contracts may lack mutual assent.   n102 Such a contract often contains numerous detailed provisions that many consumers may not read or may misunderstand, such that a meeting of the minds as to the provisions never occurs.   n103 By focusing on the seller's interests and demanding non-negotiable terms, the contract leaves nothing on which the parties voluntarily agree.   n104 A judicial finding of mutual assent would appear to be difficult in these circumstances.
While "point-and-click" contracts raise the issue of mutual assent, courts probably will enforce their terms. Several decisions have upheld the use of "shrink-wrap" contracts   n105 and the UCITA  [*244]  validates both "shrink-wrap" and "point-and-click" contracts.   n106 Additionally, the UCITA provision for manifesting assent expands the scope of conduct that demonstrates intent to accept an offer by expressly including "point-and-click" agreements.   n107 Provided with the liberal boundaries of mutual assent, the mere fact that an agreement is provided on a "take-it-or-leave-it" basis, without any opportunity for negotiation, will not likely prevent formation of a contract, albeit an electronic contract.
The problem suggested in Example 4 faces a similar legal conclusion. The significant circumstance in this scenario is that an electronic transaction occurs without any human involvement during the transaction; the offer, acceptance and mutual assent all occur between electronic agents. How can computers arrive at a meeting of the minds to produce an enforceable contract?
Although no reported case addresses this issue, the UCITA provides that transactions between electronic agents are enforceable contracts. Section 112, comment 3(c)   n108 states that an agreement involving an electronic agent   n109 may form a valid contract.  [*245]  Justifying the result through reduced transactional costs and enhanced purchasing capabilities, UCITA promotes the use of electronic agents while avoiding fundamental issues of assent. Agreeing that an electronic agent cannot assent "based on knowledge or reason to know" of the terms, comment 3(c) provides that assent is determined by whether the operations of the electronic agent system indicate assent.   n110 Thus, the electronic agent's "assent" is traced back to the human mind that programmed the system or entered the data that the system utilized to search for purchases and accept them.   n111 Regardless of whether the effectuating agents are human, electronic, or both, the concept of mutual assent has been broadened to include combinations of these types of effectuating agents.

B. Formalities and Interpretation

Given that the liberalized concept of mutual assent may support the finding of an electronic contract, the next hurdle to overcome is determining whether an electronic contract is otherwise enforceable and, if so, how to determine its legal effect. Principally, these concerns focus upon compliance with contract formalities and rules of interpretation. Absent a coherent framework for enforcement of electronic agreements, predictability and commercial practicality suffer. Although general contract law and the U.C.C. have developed bright-line rules to address these issues,   n112 the electronic medium undercuts several basic assumptions that structure established rules. Whether a string of electronic bits stored in the memory cache of a laptop satisfies the writing requirement of the Statute of Frauds - or whether instantaneous messaging obviates the mailbox rule for delivery of acceptances - are issues that infect the core purpose of traditional contract formalities. While parties  [*246]  may assent to create electronic contracts, the enforcement and interpretation of these agreements as valid contracts is an equally vital concern for business.
The following discussion centers upon several key concepts, including the Statute of Frauds, delivery of communications, the parol evidence rule, and consideration. Following the initial decision to adapt existing contract law to the electronic medium, the authors' development of issues traces a path that attempts to retain the traditional concepts, yielding to innovation only when technology has rendered these concepts obsolete.
1. Statute of Frauds
A basic rule of contract law is that certain types of agreements must be in writing before they may be enforced.   n113 Absent a writing and the signature of the party charged, a court will refuse to enforce what may be an otherwise valid agreement that fits one of the six categories of contracts within the typical American Statute of Frauds.   n114 Employed over the years to guard against fraud and discourage perjury, the Statute of Frauds continues to require written contract in certain instances to "promote[] certainty and deliberation . . . while limiting memory problems when the contract terms are questioned in court."   n115
Although a long accepted tenet of contract law, the Statute of Frauds has not escaped exceptions and relaxation. For example, U.C.C. §  2-201 has liberalized the rule to require only a writing that contains a quantity term for the sale of goods.   n116 Moreover, no  [*247]  writing is required unless the contract price is $ 500 or more. So long as the writing provides a sufficient basis to determine that it is part of an actual transaction, the Statute of Frauds is satisfied.   n117 Further, the writing requirement may become inapplicable through part performance and where promissory estoppel may defeat a Statute of Frauds defense to yield a more equitable result.
Electronic contracts provide an opportunity to revisit the Statute of Frauds to determine its modern vitality. As previously mentioned, the rule requires a written memorial and the signature of the party charged   n118 - simple concepts in a paper-and-ink world that are obviously different in a paperless electronic universe. Thus, the question is whether the Statute of Frauds can apply to electronic contracts whose components simply do not fit the traditional interpretations of "writing" and "signature" that the Statute originally intended. Although several modern commentators view continued use of the Statute of Frauds as an outmoded anachronism,   n119 the Statute can retain its place and, the author's believe, in light of its purposes, should remain an integral part of contract law in the electronic world. To understand its continued importance, the concepts of "writing" and "signature" must be developed to fit the electronic environment.

a. What is a "writing"?   n120

The Statute of Frauds formulation implies that a "writing" is itself a basic and understood concept. Obviously, the term includes paper-and-ink "writings" on stationery, napkins or cardboard, but could also include spray-painted contract terms on a fifty-foot billboard or statements carved into the trunk of a tree.   n121 So long as the words were scratched onto a physical medium serving to "memorialize," or preserve, the agreement, the Statute of Frauds is  [*248]  satisfied. Numerous hypotheticals (e.g., the contract written in sand on the beach) were generated to raise an interesting problem. While these contracts are preserved in a tangible medium, the short duration of their existence poses a deeper question - does the Statute of Frauds require a writing qua writing, or is the writing necessary for some other purpose?   n122
The evolving definition of a "writing" in contract law points toward a more fundamental purpose served by the Statute of Frauds: preservation of the terms of a contract in a semi-permanent fixed medium.   n123 Although the Restatement (Second) of Contracts does not define "writing," the U.C.C. defines a "writing" as any "intentional reduction to tangible form."   n124 A "writing" preserves the agreement in a medium independent of the parties' memories and protects against the impermanence of oral promises that dissipate into thin air the moment they are made.   n125 If an agreement is recorded within a medium that preserves the intention of the parties, the writing requirement surely would be satisfied.
The current concern is whether electronic contracts classify as "writings." While a printed copy of a contract formed electronically is identical to any other "pen and paper" writing, the less certain case involves "paperless" electronic contracts that exist only in computer memories or on computer screens.   n126 Whether  [*249]  the terms of an agreement appear on a web page, in an e-mail, or within a word processing file, the terms are not "etched" onto a permanent medium; rather, the terms exist only as a continuous stream of electrons visible momentarily on a computer screen or as a long string of binary code cached in memory and processed by a program that enables one to view (and in many cases alter) the information. Electronic contracts are not "reductions" to a tangible form at all, but instead are an intangible composite of electricity, computer code, and algorithms that lacks any "fixed" status. Accepting this as true, how should the law enforce electronic contracts without requiring that each agreement or alleged agreement be reduced to a physical copy or print out?   n127
Although some commentators have advocated discontinuance of the Statute of Frauds for electronic contracts,   n128 the UCITA has imported the rule while revising the writing requirement.   n129 UCITA makes no reference "writings," but uses the term "record" in its place.   n130 While retaining the "tangible medium" prong,   n131 a "record" includes any information "that is stored in an electronic or other medium and is retrievable in perceivable form."   n132 When the information may be converted into perceivable form, the  [*250]  information exists as a record, apparently even if the recordation is only temporary.   n133 Further, fixation in the medium need not be permanent, so long as the information is capable of being recalled from a computer's memory, with or without the aid of a machine.   n134
Thus, UCITA section 201 presents the new and improved Statute of Frauds by using the concept of a "record."   n135 If a record indicates that a contract was formed and reasonably identifies the subject matter of the transaction, the "record requirement" is met. Integrating both U.C.C. and common law contract concerns,   n136 the intent of the rule follows traditional lines by focusing on formalities for significant transactions without imposing the requirement on smaller contracts of less significance (i.e., those under $ 5,000 or lasting for less than one year).   n137 If the record evidences that the contract falls within the scope of UCITA, is authenticated, and specifies the copy or subject matter involved, the formalities are satisfied.   n138 The formalities are met if the record is capable of being perceived, even if the record is not retained.   n139
If UCITA responds to the advent of electronic contract law, the Statute of Frauds' writing requirement is now evolving into an amorphous "recording" requirement. Parties need not "reduce"  [*251]  their agreement to a concise written document; rather, the parties merely need to "record" their agreement so that it could be read or heard again.   n140 Use of a computer screen to view a transcript of negotiations or a tape player to listen to an audiocassette of telephone bargaining is analyzed no differently than drafting a written document.   n141 If an independent electronic source contains authenticated evidence of agreement, the writing or record requirement is satisfied, even if that source exists only for a very short time.

b. What is a "signature"?

In addition to a "writing," the Statute of Frauds also requires the signature of the party charged with breaching the contract.   n142 A party who physically signs a contract with his or her full legal name satisfies the signature requirement; however, due to the liberalization in the application of the Statute of Frauds, a full signature has never been required to satisfy this element. Generally, any mark or symbol executed by a party who intends to use that symbol as its signature when signing the writing is legally sufficient.   n143 Initials, the letter "X," corporate letterhead, or even a thumbprint may serve as a signature so long as it appears anywhere on the contract and was executed or adopted with the present intent to authenticate the writing.   n144 The purpose of requiring a signature is not an empty formality, but serves to "authenticate" a contract (i.e., to identify the party and the party's intent to enter the  [*252]  agreement that the writing purports to establish).   n145
UCITA advances one step further by wholly abandoning the term "signature" in favor of the concept of "authentication."   n146 UCITA uses the term "authenticate" in place of "signature."   n147 Although the definition of "authenticate" expressly includes signing a record or adopting a symbol,   n148 the term's broad definition includes sounds, encryption, or any other process that indicates the intent of the party to identify itself, adopt or accept the terms, or verify the content of the record.   n149 The definition, while technologically neutral, requires that a process of authentication be commercially reasonable, and provide evidence of intent to authenticate as well as proof that the method was used.   n150 Although the comparison between "signing" a document and "authenticating" a record is inexact,   n151 authentication may be conceptualized as either a signature on the document or a signature by process applied to the document, either of which serves to indicate intent, acceptance, and verification.   n152 While the phrase  [*253]  "signature on the document" is rather easily understood, "signature by process applied to the document" is more difficult to understand. An explanation of digital signatures will provide an excellent foundation for the examination of signature by process.   n153

i. Digital Signatures and Authentication

Digital signature technology has become an important tool for businesses seeking to exploit electronic commerce.   n154 The reason the technology is playing a major role in electronic transactions is that digital signatures serve to verify and authenticate messages.   n155 Before explaining how digital signatures resolve authentication and verification problems for electronic contracts, however, a brief explanation of what they are and how their work is instructive.   n156
The process of creating a digital signature requires encryption or  [*254]  encoding.   n157 To begin, assume that Buyer types a message on her computer that she will send to Seller. Buyer could send the message as it is, but a third party could intercept the message or change its contents before Seller received it. Alternatively, Buyer could encrypt the message before she sends it to keep its contents secret and unchanged until Seller receives the message. To encrypt the message, Buyer's computer will use a complex mathematical formula (algorithm or "hash function"), or "key" to change the content of the message into an unintelligible string of symbols ("hash string").   n158 Anyone attempting to intervene before Seller reads Buyer's message will find only the incomprehensible hash string.   n159 Once Seller receives the message, he will decode or "unlock" the message using the same "key." This process is called "symmetric cryptosystem" or "private-key" encryption.   n160
Digital signature technology operates through a similar, though more complex, process known as "asymmetric cryptosystem" or "public-key" encryption.   n161 Each party has both a "private-key," which is used only by a single individual, and a "public-key," which is available to others.   n162 The keys are mathematically related, but it is mathematically improbable to derive the private key from the public key that others can access.   n163 Returning to  [*255]  Buyer, she will encode the message using her private key to create a "one-way hash result."   n164 This hash result is a "digital signature" that is unique both to Buyer's private-key and the particular message. When Seller receives the message, Seller will apply Buyer's public-key to the message to create a second hash result. The second hash result should match the first hash result so long as the message is encoded by Buyer's private-key and the message has not been changed since Buyer sent it. If the public-key does not work, Seller is alerted that the message supposedly sent by Buyer was not "signed" by her private-key and, therefore, the message likely is the product of an imposter.   n165 Additionally, if the public-key works, but the second hash result is not identical to the one-way hash result, seller knows that the message has been altered since Buyer signed it with her private-key.   n166
To complicate matters, suppose that Seller becomes concerned that the stream of messages from "Buyer" are from someone who is pretending to be Buyer.   n167 Seller would like to determine whether  [*256]  the person using Buyer's private-key is actually the Buyer. If only two parties are involved, the Buyer's identity is likely to remain unreliable. If an independent third party verifies Buyer's identity, however, reliability is restored. Recognizing this advantage, digital signature technology relies upon certification authorities ("CAs") to assure the identity of senders.   n168 CAs issue digital certificates that contain a user's public-key and verify that the user identified on the certificate holds the corresponding private-key.   n169
Digital signatures promote authentication of sender identity, data integrity,   n170 and non-repudiation.   n171 First, digital signatures provide a process to determine who sends a communication and determine the identity of the sender.   n172 Second, digital signatures provide information about whether the message has been altered.   n173 Third, if a digital signature demonstrates that a message has not been altered and identifies the sender, the sender is unable to repudiate either the contents of the message or that it was sent by her.   n174 Essentially, these processes restrain problems of verifying and authenticating electronic communications.
[*257]  The security that digital signatures provide has led to growing interest by numerous commercial industries seeking to exploit technology.   n175 A majority of states have adopted digital signature laws   n176 and others probably will follow suit upon introduction of UCITA, which "legitimizes" digital signatures for commercial contracts.   n177 The United States Congress has become involved, as well.   n178 The American Bar Association has published guidelines and promoted a national public-key system.   n179 Private companies, such as Verisign, Inc., are stepping forward as certification authorities to hasten the widespread use of e-commerce.   n180 Additionally, Intel has developed the Pentium III microchips with embedded serial numbers that can be used in conjunction with digital signatures not only to authenticate communications, but also to determine the specific computer that sent the communication.   n181 Moreover, governmental agencies and industries are beginning to recognize the value of digital signature technology.   n182
[*258]  ii. Digital Signatures as "Signature by Process to the Document"
Earlier, the law introduced "signature by process to the document" concept as an alternative to the traditional "signature on the document" concept.   n183 With the explanation of digital signatures, the meaning of the former phrase is easier to grasp. A "digital signature" is not a "signature" at all, but a process that uses encryption and algorithms to encode a document.   n184 The process, however, creates a product that uniquely identifies the particular individual who uses the process. Thus, when a person "digitally signs" an electronic record, she applies a process to the record, but that process specifically identifies her because she is the only person who uses the particular process.   n185 Additionally, use of the process raises an inference of intent to identify oneself with the particular record and adopt its content.   n186

c. Records, Authentication, and Electronic Contracts

Currently, as noted, the Statute of Frauds equivalent for electronic contracts demands a record authenticated by the party to be charged in order to be enforceable.   n187 The question posed initially, however, is whether the Statute of Frauds retains vitality in light of these changes or whether relaxation of the requirements eviscerates its stated purposes. The answer appears clearly to be that the Statute of Frauds remains both viable and potent for electronic contracts.
Although the "record" requirement is more lenient than the  [*259]  "writing" requirement,   n188 authentication serves to remedy issues raised by the relaxed rule. The definition of "record" includes any "fleeting fixation" of terms, so long as the record is capable of being perceived.   n189 Suppose person X asserts that person Y sent an e-mail accepting an offer or typed a contract on a word-processing program, but that the e-mail or contract was not saved to memory. Nonetheless, X sues Y, alleging that the record requirement was met by a "fleeting fixation" that was perceived on a computer screen for several moments.   n190 What prevents X from winning his lawsuit? The authentication requirement prevents the fraud. The Statute of Frauds requires not only evidence of the contents of a contract (record), but also requires evidence that the party charged intends to enter the contract and accepts its terms (authentication).   n191 If X cannot produce a record, he also is unlikely to produce any evidence of authentication.   n192
Earlier the discussion noted the liberalization of the authentication requirement to encompass both "signatures on the  [*260]  document" and "signature by process to the document."   n193 This expansion does not alter the Statute of Frauds' viability for two reasons. First, authentication merely expands available methods to evidence intent to enter an agreement, but the "new methods" appear to bolster identification rather than open the door to perjury. The use of processes to "sign" a document involves complex, statistically unique formulae that are identified with particular individuals and are more difficult to replicate than other types of signatures.   n194 Second, "authentication may be on, logically associated with, or linked to the record."   n195 Authentication is not merely evidence that a person intended to enter the alleged contract, but requires evidence that a party intended to enter a specific contract evidenced by a record that itself contains indicia of authentication.   n196 The Statute of Frauds operates healthily through the interrelation of a record and authentication; satisfaction of the rule is not permitted without the concurrence of both elements.   n197 Although both "record" and "authentication" are more expansive concepts than the traditional "signed writing," the terms achieve the same purposes in light of technology that no longer requires physical writings or signatures on a document. Rather than reinvent the wheel, electronic contract law has reformulated the requirements to achieve an identical purpose - leaving the Statute of Frauds as a prophylactic against fraud and perjured testimony.

C. Delivery

Another traditional rule governing the formation of contracts is the "mailbox" rule, which provides that an acceptance is effective upon dispatch,   n198 but a revocation of an offer is not effective until  [*261]  received by the offeree.   n199 Acceptance by a manner and medium acceptable under the circumstances renders it effective as soon as it leaves the offeree's possession, even if the acceptance never reaches the offeror.   n200 Revocation by the offeror, however, is not effective until receipt by the offeree.   n201 When the rule arose to remedy the problems of long distance negotiation by telegram or posted letter, the bright-line test worked well to establish when a contract is formed through delivery of an acceptance. Today, instantaneous communication by electronic means either complicates the rule or obviates its continuance for electronic contracts.   n202
Most electronic contracts are capable of formation within a matter of seconds, even between parties that are separated by vast distances.   n203 Regardless of whether an acceptance is communicated by an e-mail, typed within a real-time chat-room, or sent by one electronic agent to another using a dedicated EDI telephone line, the delivery of the acceptance is almost instantaneous, and unlikely to take more than a few minutes.   n204 If two-way communications are immediate, the rules governing offer and acceptance when parties are in the presence of each other may apply and prevent application of the mailbox rule.   n205 When parties  [*262]  can communicate with one another without a substantial lapse of time, the Restatement (Second) of Contracts requires application of the delivery rules used when the parties are negotiating face-to-face.   n206 Provided that the vast majority of electronic contracts will be formed by a method of communication that is substantially instantaneous, the mailbox rule should be of little import for electronic contracts. Thus, parties should anticipate that the rules governing communication of offers and acceptances by persons engaged in face-to-face negotiations will apply.

D. Interpretation: "Battle of the Forms" and Parol Evidence Rule

Assuming the existence of a valid contract enforceable within the Statute of Frauds, the next consideration is interpreting the contract's contents. This process may involve two distinct questions: first, what are the contents of the contract, and, second, whether the parties' agreement is limited to the contract's contents. If the contract is not evidenced by a single record, but consists of a series of communications, different terms may arise within the series and a "battle of the forms"   n207 arises concerning which terms the parties intended to incorporate into the agreement.   n208 Additionally, whether the agreement is contained in a single record or is a composite of several records, a party may attempt to introduce additional extrinsic evidence because the existing record did not contain all of the terms of the parties' agreement. If this happens, the court must then look to the parol evidence rule for construction of the contract.   n209
When an acceptance varies the terms of an offer, a "battle of the forms" issue arises concerning which terms the parties agree to and which terms are discarded.   n210 When common law applies, an acceptance must be the "mirror-image" of the offer - complying  [*263]  with the terms and manner of performance.   n211 If the acceptance fails to mirror the offer, it operates as a counter-offer and is therefore not an acceptance.   n212 Avoiding the effect of this rule, Article 2 of the U.C.C. provides that acceptance may be made "in any manner and by any medium reasonable."   n213 Additionally important, Article 2 provides that an acceptance providing additional terms may nonetheless operate as a valid acceptance of the offer.   n214 These different or additional terms, however, create a battle between the parties over which terms become part of the contract. If the parties are non-merchants, the additional terms merely become proposals that the other party is free to accept or reject.   n215 Provided the parties are merchants, the additional terms become part of the contract except under specific circumstances.   n216 Where the parties' conduct demonstrates that a contract exists, their agreement will include the terms they agree to and the supplemental "gap-filling" terms that Article 2 provides.   n217
Electronic contracts are as prone to "mirror-image" problems and the "battle of the forms" issues as are non-electronic contracts. Due to the wide variety of methods to contract electronically,   n218 these issues may arise in numerous ways. For example, a person assenting to a form contract that appears on an Internet site for downloading software will be limited to accepting the terms as they appear, but the same person will encounter fewer restrictions on the manner of acceptance if he bargains with another individual using  [*264]  e-mail. Given the "unrestricted nature of electronic contracting,"   n219 uniform interpretive rules are needed to determine which terms become part of the contract, or whether the "mirror-image" rule will apply to prevent contract formation. If the contract is within the scope of UCITA, a "battle of the forms" tracks the Article 2 rules.   n220 For an electronic contract outside the scope of UCITA, however, the "mirror-image" rule will likely apply.   n221
When the "mirror-image" rule applies to non-UCITA electronic contracts, no significant problem arises regarding contract terms. The attractiveness of electronic contracts is due in part to the efficiency and ease of negotiating and forming an agreement. The flexibility of the medium, however, also permits wide variance in the manner and method of communicating offers and acceptances.   n222 A strict application of the "mirror-image" rule would appear to defeat many otherwise valid contracts and render electronic contracting less desirable. Additionally, offerors would find solace only in boilerplate contracts limiting the manner of acceptance.   n223 Whether this temptation is a significant problem, however, is another question. First, most commercial contracts for standard goods or services are form contracts even when printed or written. Accordingly, no surprise or undue burden should be expected when formed electronically. Second, Article 2 has made a marked impact on the traditional "mirror-image" rule and shifted the trend toward advancing formation rather than delaying or frustrating it by strict adherence to inflexible rules. As an authoritative voice concerning electronic contracts, UCITA should establish a similar standard for electronic contracts and avoid the opportunity to reestablish a "mirror-image" rule for non-UCITA electronic contracts.   n224 Nevertheless, the disassociation of the  [*265]  "mirror-image" rule from contract theory comes a caveat: the ease of contracting electronically may lead to the ability to form contracts too easily.
Although the rule for electronic contracts should not be so rigid to prevent contract formation, neither should the rule become so lenient. A myriad of electronic communications may be construed objectively as binding contracts even though the parties may not have intended such a result. While a "mirror-image" rule would have minimal effect on commercial electronic agreements, a court's interest in denying enforcement of non-identical electronic offers and acceptances is not justified if it means returning to the "mirror image" rule's inflexibility. Instead, the leniency of Article 2 should apply to commercial agreements formed electronically rather than treat such contracts differently.
Once an electronic contract is established, a related problem concerns whether the stated terms are the only terms the parties intended. When litigation concerns the scope of the contract, should a court look only to the terms of the contract or should it include extrinsic evidence to construct the terms of an electronic contract? The parol evidence rule, thus, enters the picture.
The parol evidence rule is a canon of contract law preventing the introduction of extrinsic evidence under certain circumstances. When parties have reduced their contract to what appears to be a fully or partially integrated memorialization, no party may introduce evidence of communications prior to or contemporaneous with the contract's execution to vary its integrated terms.   n225 If an agreement is ostensibly only partially integrated, extrinsic evidence of consistent additional terms is admissible.   n226 The parol evidence rule gives stability to written agreements by preventing oral evidence to contradict the meaning of the writing, absent fraud or mistake in the writing's preparation.
Article 2 has adopted a variant of the parol evidence rule for the  [*266]  sale of goods.   n227 Although retaining the general prohibition on evidence of prior or contemporaneous communications to vary the terms of an integrated agreement, Article 2 permits supplementation of the terms "by course of dealing," trade usage, and "course of performance."   n228 Additionally, a presumption arises that an Article 2 contract does not contain all of the terms;   n229 UCITA contains the same general rule for electronic contracts,   n230 including the presumption that the contract is not fully integrated.   n231
The near universal adoption of the parol evidence rule provides strong support that the rule also should apply to electronic contracts. A concern, however, arises since the nature of electronic contracting promotes a series of records rather than a single integrated document.   n232 Many electronic contracts are likely to be formed by a series of communications containing various provisions and ancillary agreements.   n233 Even the simplest consumer transaction probably will involve a record of the offeror's terms in the form of an e-mail or Web page followed by an acceptance by separate e-mail or telephone call. In light of the expanded (and fragmented) negotiations that an increasingly varied communications medium provides, the parol evidence rule becomes an important doctrine when the court must determine the admissibility of prior or contemporaneous dealings. Although the rule may become more difficult to apply insofar as identifying when an integrated contract arises,   n234 the rule is essential in managing the potentially large number of communications that  [*267]  could be admitted or excluded when interpreting the contract. Further, as a rule of substantive contract law to determine a party's intent, no cogent reason exists to deny the continued viability of the rule on the ground that an electronic medium radically alters its application. The parol evidence rule should apply to electronic contracts to promote continued certainty, despite increasing challenges to the mechanical application of the rule to electronic contracts.

E. Consideration

Finally, although a contract requires consideration, the rules regarding this essential element are rather generous, favoring enforceability of promises.   n235 Consideration simply requires the bargained-for performance or return promise.   n236 Generally, a "peppercorn" of consideration is sufficient, and a court of law will not inquire into the adequacy of consideration so long as a bargained-for exchange is found.   n237 Regarding electronic contracts, consideration presents no novel problem. As with any other type of contract, an electronic agreement will require a bargained-for exchange consisting of performance or return promises.   n238 Thus, it appears that no unique distinction should be made regarding consideration for electronic contracts as opposed to other types of contracts.

F. Characterization of Electronic Contracts

Up to this point, the analysis of electronic contracts has relied upon provisions of Article 2, UCITA, and general contract law without strictly applying any particular law to the discussion. Now, however, the distinctions among the various applicable laws require elaboration. When enforcement of an electronic contract is sought, a court is unlikely to examine the issues using a heterogeneous mixture of general and specialized contract law.  [*268]  The source of law that the court applies will depend upon the predominant subject matter of the contract.

1. Goods, Services, and Computer Information Transactions

Considering electronic contracts, three kinds of contracts are of special importance.   n239 First, contracts for transactions in goods are governed by Article 2 of the Uniform Commercial Code.   n240 Goods are anything that is "movable at the time of identification"   n241 and must exist at the time any interest in them passes.   n242 Second, UCITA applies to computer information transactions.   n243 A transaction in computer information requires the acquisition, development or distribution of information that is "in an electronic form that is obtained from, accessible with, or useable by, a computer," particularly information that is susceptible to immediate modification or perfect reproduction.   n244 Lastly, service contracts generally are governed by common law and predominantly address personal services rather than the transfer of goods.
Although seemingly bright-line definitions of special types of contracts have been carved, a contract often satisfies several different descriptions. When confronted with a "hybrid" or "mixed" contract, a court must determine which law governs.   n245  [*269]  Thus, if a contract requires both goods and services, such as a construction contract, a court must discern the character of the contract to determine whether Article 2 or general contract law governs.   n246 When characterizing a mixed contract, a court is likely to employ the "predominant purpose" test,   n247 but may opt for alternative methods, especially the "gravamen of the action" test.   n248 Although mixed contracts present complications in litigation, agreements with different subject matters are unexceptional in practice and routine in consumer transactions.   n249

2. Electronic Contracts

As already noted,   n250 no special law of "electronic contracts" exists since electronic contracting is a method of forming agreements, not a subset based upon any specialized subject matter. Nevertheless, the prior discussion clearly reveals the burden that electronic contracts place upon existing contract law and the potential problems of applying existing rules to electronic commerce.   n251 Although UCITA addresses many of these changes insofar as it encompasses some transactions that are uniquely electronic, not all electronic transactions are within the scope of UCITA.   n252
[*270]  The key problem for courts facing electronic contract issues now becomes clear. On the one hand, a unique "law of electronic contracts" appears to be unnecessary and redundant. The purposes of general contract law continue to apply to electronic transactions (even if the terminology is archaic), and it is unnecessary to reinvent contract law to achieve an identical result possible under current law.   n253 A specialized law of electronic contracts would add little to the existing rules other than duplicative statements of law subtly rephrased to encompass electronic contracting.   n254
While the use of UCITA to resolve basic issues plaguing electronic contracts is an apparent solution, its use is not a complete solution. UCITA presumes that most, if not all, contracts are mixed contracts governed by multiple bodies of contract law.   n255 UCITA provides a source of contract law only if the mix of subject matter in the agreement includes issues arising within its scope.   n256 UCITA, however, is applicable only if an UCITA issue is presented to the court or if an UCITA subject is the predominant (but not the only) purpose of the contract.   n257 UCITA has limited application to many commercial transactions.   n258
Given the narrow focus of UCITA, is it proper to use selective portions of UCITA as guidelines that apply to all electronic contracts? Alternatively, do UCITA's provisions concerning electronic contracts merely clarify existing law, such that their use as guides is both helpful and encouraged? Although the answer is  [*271]  unclear, UCITA appears only to rephrase existing law to address electronic contracts, rather than radically altering the purpose and effect of the law for electronic contracting. UCITA provides guidance for understanding the process of electronic contracting.
If this analysis is accepted, the subject matter of the electronic agreement will determine the governing rules. The application of those rules, however, is likely to be interpreted in light of UCITA's provisions regarding the formation, interpretation, and enforcement of electronic contracts.


n86 RESTATEMENT, supra note 19, §  1.
n87 See id. §  24 (stating that an offer is an act or promise that grants another the power to create a contractual relationship).
n88 See id. §  50(1) (defining acceptance as a manifestation of assent to the offer's terms). See also id. §  22(1) (stating that an offer and acceptance manifest mutual assent to the contractual relationship and its terms). The three basic requirements for an assent are (1) acceptance is made only by the offeree, (2) acceptance must be unconditional and unqualified, and (3) the offeree must be aware of the offer and intend acceptance. See FARNSWORTH ON CONTRACTS §  3.13 (1990).
n89 See RESTATEMENT, supra note 19, §  71(1) (defining "consideration" in terms of a bargained-for exchange of promises or performance).
n90 See id. § §  24 to 33 (making of offers); § §  50 to 69 (acceptance of offers); § §  71 to 90 (requirements of consideration and contracts enforceable without consideration); §  110 (statute of frauds); § §  152 to 177 (mistake, duress and undue influence); § §  234 to 256 (performance); § §  347 to 377 (remedies). An underlying premise of all contract law is the ability to negotiate face-to-face. See Raymond T. Nimmer, Electronic Contracting Legal Issues, 14 J. MARSHALL J. COMPUTER & INFO. L. 211, 211-13 (1996).
n91 Convention on Contracts for the International Sale of Goods, January 1, 1980.
n92 The Convention applies only to the sale of goods among contracts between parties that are members of different ratifying states. Notably, the Convention does not contain a Statute of Frauds provision. See id. art. 1; see also STREET, supra note 38, §  1-7. Additionally, the Convention applies unless the contract expressly excludes the Convention.
n93 See, e.g., UCITA §  102, cmt. 25 (1999) (noting that in automated transactions one must "take into account that the electronic 'actions or messages of one or both parties which establish the contract' are not necessarily undertaken by a human agent").
n94 See RESTATEMENT, supra note 19, §  24.
n95 See generally STUCKEY, supra note 23, §  1.01[1] (discussing the general law governing contract formation).
n96 See supra note 88 (noting the three requirements for acceptance). Additionally, an offeree generally must provide notice to the offeror of acceptance. See RESTATEMENT, supra note 19, §  56.
n97 See RESTATEMENT, supra note 19, §  19; see also U.C.C. §  2-204(1) ("A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract.").
n98 Cf. CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1260-61 (6th Cir. 1996) (involving contract negotiations by e-mail between a software developer and an Internet subscriber service).
n99 See, e.g., U.C.C. §  2-204(1); UCITA §  202(a) (1999) (Formation in General) ("A contract may be formed in any manner sufficient to show agreement, including offer and acceptance or conduct of both parties or operations of electronic agents which recognize the existence of a contract.").
n100 See STUCKEY, supra note 23, §  1.02[3].
n102 See id. (noting that "point-and-click" contracts also may constitute adhesion contracts and fail for lack of consideration).
n103 See id.
n104 See STREET, supra note 38, §  1-8(b). While a "point-and-click" agreement raises issues for mutual assent, it removes "mirror-image" rule problems by strictly limiting the method of acceptance. See infra notes 212-25 & accompanying text.
n105 See ProCD, Inc. v. Zeidenberg, 908 F. Supp. 640 (W.D. Wis. 1996), rev'd, 86 F.3d 1447 (7th Cir. 1996) (holding that a "shrink-wrap" contract is enforceable even though the purchaser did not have the opportunity to bargain for or object to the terms); Arizona Retail Sys., Inc. v. Software Link, Inc., 831 F. Supp. 759 (D. Ariz. 1993) (holding that "shrink-wrap" license agreement bound the original purchaser but not subsequent purchasers who had not seen the agreement prior to delivery). But see Step-Saver Data Sys., Inc. v. Wyse Tech., 939 F.2d 91 (3d Cir. 1991) (holding that warranty exclusions and remedy limitations in "shrink-wrap" contract were unenforceable under the U.C.C. as modifications that were not disclosed to the buyer); Vault Corp. v. Quaid Software Ltd., 655 F. Supp. 750 (E.D. La. 1987), aff'd, 847 F.2d 255 (5th Cir. 1988) (holding "shrink-wrap" license agreement unenforceable as an adhesion contract in violation of federal copyright law).
n106 See UCITA §  112 (1999) (Manifesting Assent; Opportunity to Review). See also UCITA §  112, cmt. 5 (providing illustrations involving "shrink-wrap" contracts).
n107 See UCITA §  112, cmt. 5, illus. 3 (clicking "I agree" button is a manifestation of assent to the terms of an on-line license agreement).
n108 See id., cmt. 3(c).
n109 See UCITA §  102(a)(28) (defining "electronic agent" as "a computer program, or electronic or other automated means, used by a person to initiate an action, or to respond to electronic messages or performances, on the person's behalf without review or action by an individual at the time of the action, or response to a message or performance."). The term "electronic agent" has been defined to recognize "automated means for making or performing contracts." See UCITA §  102, cmt. 18 (commenting on the definition of "electronic agents").
n110 See UCITA §  112, cmt. 3(c).
n111 A contract formed by electronic agents can be defeated through unconscionability, fraud or electronic mistake. See UCITA §  206, cmt. 3 (1999); see also UCITA §  111 (1999) (Unconscionable Contract or Term).
n112 See generally RESTATEMENT, supra note 19, § §  17-69 (mutual assent), § §  71-90 (consideration), §  131 (Statute of Frauds), § §  201-29 (interpretation and construction); U.C.C. §  2-201 (Statute of Frauds), §  2-204 (formation in general), §  2-206 (offer and acceptance), §  2-207 (additional or different terms).
n113 See RESTATEMENT, supra note 19, §  131(a) (stating that the writing must "reasonably identify the subject matter," indicate that a contract has been made, and contain the essential terms); see also U.C.C. §  2-201 (stating the Statute of Frauds provision for contracts for the sale of goods of $ 500 or more).
n114 The five types of contracts within the Statute of Frauds are as follows: promises in consideration of marriage, contracts that cannot be performed within one year, contracts transferring an interest in land, executor's contracts, and guarantor contracts. See RESTATEMENT, supra note 19, §  110. Note that the sixth type of contract, a contract for the sale of goods for $ 500 or more, is not governed by the typical American Statute of Frauds. These are now explicitly governed by the Statute of Frauds section of the U.C.C.. See id. (citing U.C.C. §  2-201).
n115 STUCKEY, supra note 23, §  1.01[2].
n116 See U.C.C. §  2-201. In fact, the quantity term itself need not be stated accurately to satisfy the requirement. U.C.C. §  2-201 cmt. 1.
n117 See U.C.C. §  2-201 cmt.1.
n118 See RESTATEMENT, supra note 19, §  131; U.C.C. §  2-201(1).
n119 See, e.g., STREET, supra note 38, §  1-9(b)(3).
n120 For a short description of "writing" and "signature," see Anecki, supra note 9, at 406-07.
n121 See 2 RONALD A. ANDERSON, UNIFORM COMMERCIAL CODE §  2-201:132 (3d ed. 1997) (stating that a "writing" includes any "intentional reduction to tangible form").
n122 The Statute of Frauds itself provides a simple answer to this question by requiring a writing that provides specific evidence of an agreement and contains specific information. See RESTATEMENT, supra note 19, §  131(a)-(c) (requiring that a writing identify the subject matter, indicate an agreement, and contain the essential terms); U.C.C. §  2-201, cmt. 1 (noting that a writing must evidence a contract, include authentication, and specify a quantity term). Thus, the Statute of Frauds does not just require a writing, but a writing that contains specific information and serves a specific evidentiary purpose.
n123 The U.C.C. only requires an intentional reduction to tangible form and contains no provisions concerning the preservation of a writing. See U.C.C. §  1-201(46) (1977); see also UCITA §  201, cmt. 3(b) (1999) ("This section does not require that the record be retained or contain all material terms of the contract or even be designated as a contract.").
n124 See 2 ANDERSON, supra note 121, §  2-201:132.
n125 Interestingly, a tape recorded conversation of an oral contract, although preserved on physical tape, is unlikely to satisfy the Statute of Frauds writing requirement. But see UCITA §  102, cmt. 49 (defining "record" to include "a tape recording of an oral conversation").
n126 The Ninth Circuit has held that loading software from a disk into the computer's random access memory constitutes fixation in a tangible medium for cases involving copyright infringement. See MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 518-19 (9th Cir. 1993).
n127 See, e.g., Department of Transp. v. Norris, 474 S.E.2d 216, 218 (Ga. Ct. App. 1996), rev'd on other grounds, 486 S.E.2d 826 (Ga. 1997) (holding that a facsimile transmission was not a "writing" that satisfied the Statute of Frauds"). The Georgia Court of Appeals noted that "beeps and chirps along the telephone line is not a writing, as that term is customarily used. Indeed, the facsimile transmission may be created, transmitted, received, stored and read without a writing, in the conventional sense, or a hard copy in the technical vernacular . . . ." Id.
n128 See STREET, supra note 38, §  1-9(b)(3).
n129 Compare UCITA §  201, cmt. 3(b) (1999) (commenting upon the scope of the definition of "record"), with 2 ANDERSON, supra note 121, §  2-201:132 (defining "writing").
n130 See UCITA §  102(a)(54) (1999).
n131 Id. (describing a "record" as including "information that is inscribed on a tangible medium").
n132 Id. Note that "electronic" is defined broadly as "open-ended, technology neutral, and encompasses forms of information processing technology that may be developed in the future." Id. §  102 cmt. 24.
n133 See id. §  102, cmt. 47. A "record" includes text stored in a computer's memory that could be printed, an audio-tape, and video recordings. See id.
n134 See id.
n135 Section 201 requires that a contract lasting more than one year or having a value of $ 5,000 or more is not enforceable absent a record authenticated by the party to be charged. See UCITA §  201(a)(1) (1999). The record must indicate that a contract was formed and reasonably identify the copy or subject matter to which the record itself refers. See id. Notably, the section mirrors the provisions of U.C.C. §  2-201 by providing exceptions to the rule for part performance, judicial admissions, and merchant confirmation orders. See id. § §  201(c), (d).
n136 See UCITA §  201, cmt. 1 (noting that the "record" requirement addresses both the concern for a writing when the contract price is above a certain threshold amount as well as the common law concern for a writing when a contractual relationship exists for more than a year).
n137 See UCITA §  201, cmt. 3.
n138 See id.
n139 The exact meaning of this statement is not made clearer by the commentary, which provides an ambiguous treatment of the "record requirement." See id. cmt. 3(b).See UCITA §  102(a)(54) (defining "record" as including any stored information that is "retrievable in perceivable form").
n140 See UCITA §  102(a)(54) (defining "record" as including any stored information that is "retrievable in perceivable form").
n141 See UCITA §  102, cmt. 47 (1999) (stating that both text stored in computer memory and tape recordings of oral conversations satisfy the definition of "record").
n142 See RESTATEMENT, supra note 19, §  131 (writing must be "signed by or on behalf of the party to be charged"). See also U.C.C. §  2-201(1) (writing must be "signed by the party against whom enforcement is sought").
n143 See U.C.C. §  1-201(39) (1977) (a signature includes "any symbol executed or adopted by a party with present intention to authenticate a writing").
n144 See U.C.C. §  1-201, cmt. 39. Although the variety of potential "signatures" that serve to authenticate is quite large, determination of whether a mark or symbol is a signature rests upon "common sense and commercial experience." Id.
n145 See id. (noting that "authentication" is added to the definition of "signature" to clarify that a complete signature is not required). Authentication merely requires indicia that the document is what it purports to be, namely, a contract that binds the signatory.
n146 Cf. U.C.C. §  4A-201 (requiring methods of authentication for security procedures, including encryption and identifying codes); U.C.C. §  5-104 (requiring authentication for records of letters of credit); REVISED U.C.C. §  8-113 (1996) (noting that either a signed writing or authenticated record may evidence a contract for transactions in securities, but is not required).
n147 See UCITA §  201(a)(1) (1999). See also UCITA §  102, cmt. 4 (1999) (authentication "replaces 'signature' and 'signed,'" terms that are more "adequate for what once were paper-based requirements").
n148 See UCITA §  102 (a)(6)(B). Note that the commentary states that the term "authenticate" is "technologically neutral." Id. cmt. 4.
n149 See UCITA §  102(a)(6)(B).
n150 See UCITA §  102, cmt. 4.
n151 See id. Generally, a "signature" involves displaying some type of mark on the document itself. An "authentication" also may be made on a document, but could involve a process that is "logically associated with, or linked to the record" that is authenticated. Id. This concept of "signature as process" is best exemplified by digital signature technology. See infra Section IV.B.1.b.i.
n152 Cf. UCITA §  102(a)(5) (defining an "attribution procedure" as a process established to "verify that an electronic authentication, display, message, record, or performance is that of a particular person or to detect changes or errors in the information . . . . including a procedure that requires the use of algorithms or other codes, identifying words or numbers, encryption, or callback or other acknowledgment."); and UCITA § §  107, 108.
Note that the term "authentication" in digital signature technology retains two distinct meanings. See UCITA §  102(a)(6)(A), (B) (1999). Although "authentication" applies to the process of encrypting a message to create a digital signature, "authentication" sometimes refers to another party's action to confirm (or "authenticate") that an encrypted message was sent by a particular individual. See id. cmt. 4. When analyzing the authentication requirement for the purposes of the Statute of Frauds, only the first meaning of the term is relevant for digital signatures.
n153 Note that the term "authentication" in digital signature technology retains two distinct meanings. See UCITA §  102(a)(6)(A), (B) (1999). Although "authentication" applies to the process of encrypting a message to create a digital signature, "authentication" sometimes refers to another party's action to confirm (or "authenticate") that an encrypted message was sent by a particular individual. See id. cmt. 4. When analyzing the authentication requirement for the purposes of the Statute of Frauds, only the first meaning of the term is relevant for digital signatures.
n154 See Russell B. Stevenson, Jr., The Regulation of Electronic Payment Systems: Ten Obvious Observations, Glasser LegalWorks (1998), at *122 (addressing how digital signature technology provides the foundation for secure on-line payment systems), available in Westlaw, JLR Database; see also JONATHAN ROSENOER, CYBERLAW: THE LAW OF THE INTERNET 237-47 (1997) (discussing digital signature technology and state digital signature laws).
n155 See Don Clark, Overcoming the Hurdles: Virtual Safety, WALL ST. J., June 17, 1996, at R21.
n156 Cf. STREET, supra note 38, §  1.5 (defining general terms used in digital signature discussions).
n157 A concise, step-by-step explanation of how digital signature technology works is available in James Hill, Lock and Load, BUS. L. TODAY, Nov.-Dec. 1998, at 8. See also Charles R. Merrill, Proof of Who, What and When in Electronic Commerce Under the Digital Signature Guidelines, 129, 135-37 (PLI Pat., Copyrights, Trademarks, & Literary Prop. Course Handbook Series No. G0-000E, 1998) (explanation and examples of how digital signature technology works); Clark, supra note 155 (brief explanation of public-key encryption).
n158 See Hill, supra note 156, at 10-11.
n159 A person could "break" the code and decipher the message, but breaking most computer encryption codes would require several thousand years of continuous analysis. See Thinh Nguyen, Note, Cryptography, Export Controls, and the First Amendment in Berstein v. United States Department of State, 10 HARV. J.L. & TECH. 667, 669 n.14 (1997).
n160 See Merrill, supra note 156, at 133.
n161 See id.
n162 See id. Recall that a "key" is merely terminology to describe the algorithms that encode and decode messages.
n163 See id. at 134.
See id. Note that use of the private key to create a digital signature is the intentional act that serves to authenticate the message. See UCITA §  102(a)(5) (1999) (defining "attribution procedure"); UCITA §  102(a)(6) (defining "authenticate"); see also UCITA §  107 (Legal Recognition of Electronic Record and Authentication; Use of Electronic Agents); UCITA §  108 (Proof and Effect of Authentication).
n164 See id. Note that use of the private key to create a digital signature is the intentional act that serves to authenticate the message. See UCITA §  102(a)(5) (1999) (defining "attribution procedure"); UCITA §  102(a)(6) (defining "authenticate"); see also UCITA §  107 (Legal Recognition of Electronic Record and Authentication; Use of Electronic Agents); UCITA §  108 (Proof and Effect of Authentication).
n165 See Merrill, supra note 156, at 134. Note that this is the alternative definition of "authentication" that is not essential for UCITA's definition of that term. See supra note 153 and accompanying text.
n166 Note that in the example above, Buyer did not encrypt the message itself, but only applied her own private-key to create a digital signature. See Merrill, supra note 157, at 133-34. If Buyer wanted to encrypt the text itself, she would (1) use the Seller's public-key to encrypt the message and (2) use her private-key to create a digital signature. The Seller would then (3) use her private-key to decode the message before she posted the information and (4) readers could then use Buyer's public-key to examine the digital signature. See id.
Additionally, use of the digital signature to determine if the message has been altered is described as the "integrity" function. See UCITA §  102, cmt. 4 (stating that authentication may be used to confirm the record's content or the sender's identity); see also supra notes 148-52 and accompanying text (discussing the uses of authentication).
n167 Note that this is the alternative definition of "authenticate" for digital signature technology that is useful to understand, but does not concern the "authentication" requirement for the Statute of Frauds. See supra note 153.
See supra note 153. Note that UCITA does not require a certification authority, but permits any authentication procedure that is commercially reasonable. See UCITA §  108(b); see also UCITA §  102, cmt. 3 (1999) (noting that "attribution procedure" may include an agreement made through third party provider).
n168 See supra note 153. Note that UCITA does not require a certification authority, but permits any authentication procedure that is commercially reasonable. See UCITA §  108(b); see also UCITA §  102, cmt. 3 (1999) (noting that "attribution procedure" may include an agreement made through third party provider).
n169 See, eg., ROSENOER, supra note 154, at 240-41. Note that CAs digitally sign the certificates to verify that the certificate itself is issued by the CA and not an unknown source. See id.
n170 See UCITA §  102, cmt. 4 (1999) ("The ordinary effects [of authentication] are (i) accepting an agreement, and (ii) adopting of a record or specific term(s). Authentication may serve other functions such as confirming the content of the record or identifying the person. What effects are intended are determined by the context and objective indicia associated with that context.").
n171 See Merrill, supra note 156, at 133 (noting also that if CAs provide time stamps, "when" a message was sent also can be verified).
n172 See Hill, supra note 157, at 8-10.
n173 See id.
n174 See id.
n175 See William M. Bulkeley, Information Age: Electronic Signatures Boost Security of PCs, WALL. ST. J., June 7, 1993, at B7 ("'standardized digital signature will be more important for commerce than the invention of the computer. . . .'"). Provisions concerning authentication, or "attribution," of a communication using a digital signature (or similar procedure) are new features of UCITA. See Anecki, supra note 9, at 409-10.
n176 See Thomas J. Smedinghoff, Overview of State Electronic and Digital Signature Legislation, Glasser LegalWorks (1998), at *239, available in Westlaw, JLR Database; John P. Tomaszewski, Comment, The Pandora's Box of Cyberspace: State Regulation of Digital Signatures and the Dormant Commerce Clause, 33 GONZ. L. REV. 417, 422 (1998).
n177 See Hill, supra note 157, at 12.
n178 See Bill Expected to Support Electronic Signatures, SEC. WK., Jan. 18, 1999 at 7 ("It is unlikely their [electronic signatures'] usage will become commonplace, especially in the securities industry, until there is a law validating their use and rendering them legal and binding.").
n179 See Merrill, supra note 156, at 132.
n180 See Don Clark, The Internet: Buying the Goods, WALL ST. J., Dec. 7, 1998, at R14.
n181 See Jeffrey Kutler, Electronic Commerce: Vendors to Use Intel Serial Number Design, AM. BANKER, Mar. 2, 1999, at 16 (noting that serial numbers were designed for added protection in e-commerce sites and chat-rooms).
n182 See Computer Gives Blessing to Digital Signatures, BANK MUT. FUND REP., Jan. 19, 1998, at 1 (detailing the Office of the Comptroller's authorization for national banks to use digital signatures for transactions), available in 1998 WL 5109871; Electronic Commerce: SIA Panel Takes Steps to Create Facility to Aid Authentication, Privacy Efforts, BNA SEC. L. DAILY, Sept. 3, 1998 at D5 (noting the securities industry's establishment of a "root certificate authority" for monitoring signatures), available in Westlaw, 9/3/1998 SLD d5; George Anders, Online: It's Digital, It's Encrypted-It's Postage, WALL ST. J., Sept. 21, 1998, at B1 (describing the Postal Service's "digital postage" project).
n183 See supra text accompanying notes 153-54.
n184 See UCITA §  102(a)(6) (1999) (defining "authentication").
n185 See supra notes 163-67 and accompanying text (discussing private keys composed of encryption algorithms that produce unique products).
n186 See UCITA §  108(b) (stating that use of a "commercially reasonable attribution procedure" for authenticating records authenticates the record as a matter of law).
n187 See UCITA §  201(a)(1) (1999).
n188 The principal difference between the two is that under UCITA, a record does not have to be signed to be authenticated, see UCITA §  102(6), whereas the U.C.C. requires a signed writing, see U.C.C. §  2-201.
n189 The "fleeting fixation" problem may appear to involve two distinct concerns. First, one may imagine an electronic contract that is typed on a word-processor or memorialized by an e-mail that is erased from memory once it is read. The contract simply does not exist anymore in any form and its fixation was fleeting, but neither was the contract entirely ephemeral to place it outside the Statute of Frauds. Second, one may consider the same contract, but this time the word-processing file or e-mail is saved to memory. One does not print out every file nor does one continuously display the text on the computer screen. Instead, the information is stored as a code in memory and recalled later. While in memory, the "contract" is nothing more than a long series of code that is unintelligible without a computer program to display the information in perceptible form. The term "record" would appear to apply more aptly to this second consideration-a contract that does not exist "physically" in any fixed medium, but that can be recalled at a later time in a form that may be perceived within a fixed medium.
n190 See UCITA §  102 cmt. 47 (1999) (noting that a record merely "must be in, or capable of being retrieved in, perceivable form").
n191 See UCITA §  201(a)(1).
n192 Although an authentication may exist separately from a record, the Statute of Frauds requires proof of an authenticated record, or, in other words, proof of an authentication and a record that are combined or logically related to one another. See UCITA §  201 cmt. 3(b)-(c).
n193 See supra notes 153-54 and accompanying text.
n194 See supra notes 162-67 and accompanying text (noting the unique nature of digital signatures produced from high-level encryption algorithms).
n195 UCITA §  102 cmt. 4 (1999).
n196 See id.
n197 See UCITA §  201.
n198 See RESTATEMENT, supra note 19, §  63(a). The rule requires the offeree's reasonable diligence and also correctly address the communication to the proper location. See id. § §  66, 67.
n199 See RESTATEMENT, supra note 19, §  68 cmt. a.
n200 See id. §  63(a).
n201 See id. § §  42, 68. Note that instances of crossed acceptances and rejections also may occur by the offeree who sends both an acceptance and rejection, rendering the application of the mailbox rule less palatable.
n202 See STUCKEY, supra note 23, §  1.02[4][c] (discussing the "mailbox" rule and electronic contracts).
n203 See supra notes 21-42 and accompanying text (noting the Internet's capabilities).
n204 One could conceive of situations where an acceptance and a revocation are typed in a chat-room that uses a periodic "refresh" every minute to update messages, such that the communication is not truly instantaneous. Additionally, one could send an e-mail acceptance to a re-mailer or to an out-box that delivers gathered e-mails at specific intervals, while in the meantime the offeror has delivered his revocation. Whether these are justifications for an "e-mailbox" rule or simply instances of hard cases that would make bad law is unclear, but the ability of computers to "stamp" messages with the date and time would make application of the rule a simple task. See STUCKEY, supra note 23, §  1.02[4][c] n. 108.
n205 See id. §  1.02(4)(c).
n206 See RESTATEMENT, supra note 19, §  64 cmt. a (noting that when the parties are face-to-face, an "offeree can accept without being in doubt as to whether the offeror has attempted to revoke his offer or whether the offeror has received the acceptance").
n207 See U.C.C. §  2-207 (1977).
n208 See UCITA §  204 (1999). This section is analogous to U.C.C. §  2-207.
n209 See id. §  301.
n210 See id. §  204.
n211 See RESTATEMENT, supra note 19, §  58.
n212 See id. §  59.
n213 U.C.C. §  2-206(1)(a) (1977).
n214 See id. §  2-207(1) (noting that the acceptance is valid, "unless acceptance is expressly made conditional on assent to the additional or different terms"). Note also that different terms, rather than mere additional ones, in an offer and acceptance drop out of the contract and the U.C.C. default rules fill the gap created where the parties' actions demonstrate that a contract exists. See Northrop Corp. v. Litronic Ind., 29 F.3d 1173, 1179 (7th Cir. 1994).
n215 See U.C.C. §  2-207(2).
n216 The terms do not become part of the merchant's contract if the "acceptance expressly limits acceptance to the terms," the terms "materially alter" the agreement, or if notification of objection to the terms is provided. See id.
n217 See id., §  2-207(3).
n218 See supra notes 21-42 and accompanying text (discussing potential processes to enter electronic contracts).
n219 STUCKEY, supra note 23, §  1.02[4][a].
n220 See UCITA §  204 (1999).
n221 See STUCKEY, supra note 23, §  1.02[4][a].
n222 See supra notes 95-112 and accompanying text (noting the various ways to negotiate, structure and memorialize an electronic contract).
n223 The epitome of "boilerplate" electronic contracts are the currently prevalent "point-and-click" Internet contracts. See supra notes 101-09 and accompanying discussion; see generally STREET, supra note 38, §  1-8 (discussing on-line agreements in the context of shrink-wrap licenses).
n224 Compare U.C.C. §  2-207 (1977) (additional or different terms), with UCITA §  204 (acceptances with varying terms).
n225 See RESTATEMENT, supra note 19, § §  213-215.
n226 See id. §  216. The determination of whether a contract is fully or partially integrated is a question of the parties' intent as determined by the court. See id. §  210.
n227 See U.C.C. §  2-202 (1977).
n228 See id. §  2-202(a).
n229 See WHITE & SUMMERS, UNIFORM COMMERCIAL CODE §  2-10 (3d ed. 1988).
n230 See UCITA §  301 (1999).
n231 See id. §  301, cmt. 3 ("Records of an agreement are to be read on the assumption that the course of prior dealings between the parties and the usage of trade were taken for granted when the record was drafted").
n232 See STUCKEY, supra note 23, §  1.02[4][b].
n233 See id.
n234 The simplest method to "manufacture" an integrated agreement is to insert a merger clause within one of the communications to create a presumption of integration. See id. (discussing merger clauses).
n235 See RESTATEMENT, supra note 19, §  79.
n236 See id., supra note 19, §  71(2) (1979); see also id. §  90 (addressing promissory estoppel as a substitute for consideration).
n237 See STUCKEY, supra note 23, §  1.01(2)(b).
n238 See UCITA §  202 (1999).
n239 Two important points are emphasized at this juncture. First, an electronic contract is not a special type of contract, but a method of contracting. A special kind of contract is identified by the subject matter of the contract rather than the manner in which the contract is formed. Second, since contracting electronically is only a process for creating contracts, many different kinds of contracts for virtually any type of subject matter may be created electronically. The discussion here focuses on contracts for goods, services, and licenses in information since these types of contracts are often encountered in electronic commerce.
n240 See U.C.C. §  2-102 (1977).
n241 Id. §  2-105(1).
n242 Id. §  2-105(1), (2).
n243 See UCITA §  103(a) (1999).
n244 See id. §  102 cmt. 11. UCITA defines "computer information transaction" and notes that merely because parties communicate electronically "does not bring" the underlying transaction within the scope of UCITA. Id. §  102(11).
n245 See JOHN K. HALVEY, 1 COMPUTER LAW & RELATED TRANSACTIONS §  5-2(A) (1994) (discussing the issue of whether a sale of computer hardware and software is a mixed contract for goods and services). See also Anecki, supra note 9, at 399-400 (noting a sizeable gap between the law governing the sale of goods and the proposed law governing licenses in information).
n246 Characterization of electronic transactions as goods or services is also an issue for application of state sales and use taxes. See Edward A. Morse, State Taxation of Internet Commerce: Something New Under the Sun?, 30 CREIGHTON L. REV. 1113, 1130-38 (1997).
n247 The "predominant purpose" test examines the overall transaction and applies the law of the predominant subject matter to the whole contract. See, e.g., UCITA §  103(b)(2) ("In all cases not involving goods, this [Act] applies only to the computer information or informational rights in it, unless the computer information and information rights are, or access to them is, the primary subject matter, in which case this [Act] applies to the entire transaction").
n248 The "gravamen of the action" test determines which subject matter is in dispute and then applies the specialized law of that particular subject. See UCITA §  103 cmt. 4(a). UCITA uses this approach whenever a computer information transaction is mixed with a Uniform Commercial Code subject matter.
n249 See UCITA §  103 cmt. 4.
n250 See supra note 239.
n251 See STREET, supra note 38, §  1-3 (discussing novel issues for drafting electronic agreements); see also UCITA §  102 cmt. 3 (1999) (noting that the terms "signed" and "signature" are terms replaced by "authenticate").
n252 See UCITA §  103(d) (excluding financial services transactions and various entertainment and broadcast contracts).
n253 See supra notes 129-40 and accompanying text (discussing how the Statute of Frauds requirement has remained identical in purpose under UCITA).
n254 See supra notes 129-40 and accompanying text. See also UCITA §  103 cmt. 4 ("In modern commerce, most contracts are governed by multiple sources of contract law").
n255 See UCITA §  103 cmt. 4.
n256 See id. ("Since virtually all contracts of all types involve 'mixed' law, the issue is not whether multiple sources of contract law apply, but to what extent this Act applies in lieu of another law.").
n257 See UCITA §  103 cmt. 5(f) (1999). UCITA provides special rules, however, when "goods," as defined by U.C.C. Article 2, are involved. See id. §  103(b)(1).
n258 See UCITA §  103(d)(6) (excluding application of the Act when various Articles of the U.C.C. apply). See also UCITA §  103 cmt. 4(a) (discussing mixed contracts involving computer information and U.C.C. Article 2 goods).