E-Commerce : E-commerce: Evolution. Meaning and Type, Payment Mechanism in Cyberspace, Advertising and Taxation vis-a-vis E-commerce, Consumer Protection in Cyberspace, Online Contracts, Forms of Online Contracts, Features of Online Contracts, Issues Emerging from Online Contracting,

1. Commerce and Cyberspace

2. E-Commerce
 Electronic commerce (E-Commerce ) is a process, which
is happening with the help of Information and
Communication Technologies.
 It is important to note that phrases, like ‘e-
business’, ‘ ‘e-commerce’, Internet business, Net
commerce etc. are commonly being used these
days.
 Thus for the sake of clarity e-commerce should be
distinguished from e-business.
 In fact, e-commerce is a subset of e-business

3. E-COMMERCE EVOLUTION
 For over a century these telecommunication devices
became an integral part of the commercial enterprises
all over the world. Later, in the early 1960s, computers
were increasingly used to disseminate information
across geographical space.
 Though telegraph, telephones, telex and facsimile were
still the relied upon options, nevertheless the big
corporations opted for Electronic Data Interchange
(EDI).
 EDI saves money because the computer, and not an
office staff, submits and processes orders, claims, and
other routine tasks. EDI began in the 1960s as a
computer-to-computer means of managing inventory,
bill presentment, shipment, orders, product
specifications, and payment.

4. TYPES OF E-COMMERCE
 E-commerce occurs in various forms and between
various entities in the market. It is necessary to consider
the various forms that Internet commerce embodies in
order to understand the implications for taxation.
 E-commerce can be categorised in four ways:
1. Business to Business (B2B)
2. Business to Consumer (B2C)
3. Consumer to Business (C2B)
4. Consumer to Consumer (C2C)

5. Types of E-Commerce

6. Business to Business (B2B)
 It is a new name given to EDI. As the name suggests, it is
a business platform involving two independent or even
dependent business entities.
 In B2B version of online transaction(s) the
manufacturing organization takes a lead in setting up a
business platform.
 Example B2B:

7. Business-to-Consumer (B2C)
 It refers to a business platform, involving a business
entity and consumers.
 It is a retail version of e-commerce known as e-tailing.
 Selling goods or services through web based shops.
 Example B2C:

8. Consumer-to-Business (C2B)
 It is an innovative retail-marketing platform, where a
business entity offers a variety of packages or options to
entice the online customer
example:
 It represents a consumer business platform, which is for
the consumer, by the consumer. It is referred to as
online ‘consumer-to-consumer’ auctions. Almost
anything can be offered on such online platforms.
example:
Consumer-to-Consumer (C2C)

9. PAYMENT MECHANISM IN CYBERSPACE
 Payment mechanism in cyberspace is all about paying
for goods and/or servicesordered or consumed using
modern means of information technology.
 ELECTRONIC FUND TRANSFER (EFT)
 Electronic Fund Transfer means transferring
money from one bank account to another in the
same (intra bank) or different bank branches (inter
bank).
 EFT has been in use since 1960s when banks first
started using proprietary EDI network to share
banking information.

10.  The Electronic Clearing Services (ECS)
 The Electronic Clearing Services (ECS) ‘credit
scheme’ and the Electronic Clearing Services
(ECS) ‘debit scheme’ are two activity lines, which
have become important vehicles for furthering
improvements in customer services.
 In ECS – credit, a series of electronic payment
instructions are generated to replace the paper
instruments.
 The system works on the basis of a single debit
transaction triggering a large number of credit
entries.

11.  Electronic Cash
 E-cash is a pre-paid system. Consumers buy electronic tokens
and build up electronic funds for use over the Internet. It is
stored in an electronic device such as a chip card or computer
memory.
 Electronic Wallets
 E-wallets can be useful for making a series of micro payments
online for example, downloading MP3 music file, paying for
an online article etc.
 Smart Card
 Smart cards use a micro controller chip embedded in the
card. The cards can be purchased and reloaded again and
again.
 Digital Cheques
 It is a cheque in the electronic form. Here, the consumer uses
his digital signatures to sign an e-cheque. The consumer fills
in the cheque online and then sends it via a secure server to
the recipient.

12. ONLINE PAYMENTS AND THE INFORMATION
TECHNOLOGY ACT, 2000
 When the Information Technology Act, 2000 came into
effect on October 17, 2000 it was non-applicable to the
negotiable instruments, like promissory note, cheque
and bill of exchange but subsequently to facilitate e-
commerce related transactions.
 The Central Government amended the Negotiable
Instruments Act, 1881 and brought in forth the
Negotiable Instruments (Amendment and
Miscellaneous Provisions) Act, 2002 to recognise “a
cheque in the electronic form” (e-cheque) and “a
truncated cheque”.

13. Advertising On the Web
 Online Ads:
 Banner Ads, Sponsored Search Ads, Pay-per-
Sale ads.
 Targeting:
 Show to particular set of viewers.
 Measurement:
 Accurate Metrics: Clicks, Tracked Purchases.
 What is being Sold:
 Pay-per-Click, Pay-per-Action, Pay-per-
Impression
 Pricing:
 Auctions

14. History of Online Advertising
1994: Banner ads,
pay-per-
impression
Banner ads for Zima
and AT&T appear on
hotwired.com.
1998: Sponsored search,
pay-per-click 1st-price
auction
GoTo.com develops keyword-
based advertising with pay-
per-click sales.
2002: Sponsored search,
pay-per-click 2nd-price
auction
Google introduces AdWords, a
second-price keyword auction
with a number of innovations.
1996: Affiliate
marketing, pay-per-
acquisition
Amazon/EPage/CDNow
pay hosts for sales
generated through ads
on their sites.

15. Banner Ads

16. Pay-Per-Impression
 Pay-per-1000 impressions (PPM): advertiser pays
each time ad is displayed
 Models existing standards from magazine, radio, television
 Main business model for banner ads to date
 Corresponds to inventory host sells
 Exposes advertiser to risk of fluctuations in market
 Banner blindness: effectiveness drops with user
experience
 Barrier to entry for small advertisers
 Contracts negotiated on a case-by-case basis with large
minimums (typically, a few thousand dollars per month)

17. Pay-per-click (PPC):
 Pay-per-click (PPC): advertiser pays only when user
clicks on ad
 Common in search advertising
 Middle ground between PPM and PPA
 Does not require host to trust advertiser
 Provides incentives for host to improve ad displays

18. CONSUMER PROTECTION IN CYBERSPACE
 E- CONSUMER SUPPORT AND SERVICE
 E-commerce is more about personalised support and
service.
 E-consumer is a seeker of information before he
makes a buy decision. Hence, the ability to collect
product information and make comparisons between
the different product offerings from different providers
is often viewed as one of the main competitive
challenges of shopping and is therefore a key aspect of
the online shopping experience Significantly, at e-
marketplace, an e-consumer is not alone.

19.  E-mail Support
 E-mails are the best means of communication
between the consumer and the Organization
 Newsgroups, Chat Rooms, Message Boards, Blogs
 These services allow consumers to communicate
with one another. These are often being used to
share knowledge and create a self-help group. In the
present day environment, such services help in
creating awareness among consumers.
 FAQs
 Frequently Asked Questions are common consumer-
service resources.
 Consumer Service Information
 It provides relevant information to the consumer, which
may include product specifications, compatibility charts,
pricing, warranty details.

20.  Feedback Forms
 These are the forms through which customers can
complain or provide valuable comments about the
service and the products provided by the
organization.
 Help Desk
 Help desk support system in a form of toll free number,
provides real time help to consumers. It works 24×7,
wherein call center executives listen to complaints and
grievances and try to solve problems

21. ONLINE CONTRACTS
 An online contract is formed over the Internet when an
offer is made and an acceptance is received. The offer
could be made by a seller (service provider) using an e-
mail or a website.
 The buyer on receipt of an offer, places an order and
the seller confirms receipt of the order. In fact, it was
the United Nations Commission on International Trade
Law (UNCITRAL) Model Law on Electronic Commerce,
which for the first time articulated about the nature of
online contract mechanism in terms of its formation
and validity.

22. FORMS OF ONLINE CONTRACTS
 Online contracts cover the gamut of online business
behaviour, whether it is business-to-business (B2B)
or business-to-consumer (B2C).
 These contracts may exist in various forms, like EDI
contracts, access contracts, click-wrap contracts
and web-wrap contract

23.  Electronic Data Interchange (EDI) Contracts
 EDI refers to the process by which goods are
ordered, shipped, and tracked computer -to-
computer using standardised protocol.
 It permits the “electronic settlement and
reconciliation of the flow of goods and services
between companies and consumers”
 Access Contract
 Internet service providers like Satyam, VSNL, and
MTNL etc. provide facility of Internet access, but
others like Rediff, Sify and Yahoo provide web mail
services and proprietary content to their
subscribers.

24.  Click-wrap Contracts
 Click-wrap contracts are commonly used in connection
with e-business transactions.
 It is being used to bind the user to ‘terms of use’
contract facilitating online sale or purchase of goods and
services. The goods can be tangible or intangible
(digital).
 Web-wrap Contracts
 It represents purported contract terms in a separate link
but does not require the reader to click to indicate
agreement.
 It is also being referred to as “browsewrap” contract. It
is typically structured as a license agreement.

25. FEATURES OF ONLINE CONTRACTS
 The Indian Contract Act, 1872 lays down that for a
contract to exist there has to be a proposal, and an
assent to the proposal, which transforms into a
promise. A promise supported by consideration
becomes an agreement and an agreement enforceable
by law is a contract

26.  ESSENTIAL FEATURES OF A CONTRACT
 Under the Indian Contract Act, 1872 the formation of a
contract is a two-limb process, involving firstly, a
communication of proposal from first party to the
second and secondly, a communication of acceptance
from the second party to the first.
 Pre-requisites of a Valid Contract
 In order to have a valid contract there should be a
proper offer/proposal by an offeror [section 2(a)] and
its acceptance by an offeree [section 2(b)]. Proposal
must be supported by consideration [Section 2(d)] and
the agreement must be made by free consent of the
parties [sections 13-22].

27. ISSUES EMERGING FROM ONLINE CONTRACTING:
 Electronic contracts, by their very nature, are dynamic
and often multi layered transactions. With a layered
contract, agreement to a contract may not occur at a
single point in time.
 There exist a chain of successive events – e-offer,
eacceptance, consideration etc., combination of which
may lead to electronic contract formation

28.  Capacity to Contract
 To rely on an electronic message, the parties should take
steps to make sure the contract is binding, e.g., that the
essential terms of the contract are manifested, agreed
upon, and that the persons who are parties to the
electronic “contract” have the legal competence and
capacity to enter into an agreement.
 E-mail Box Rule
 Traditional contract law (common law) does not permit
silence or inaction to constitute acceptance. Acceptance
requires that an offeree communicate his assent to the
terms of the offer.

29.  Electronic Authentication
 The common law of contract has evolved over a period
of many centuries. It has crystallized the concept of
“pen-paper-and-signature” as physical means of
authenticating a contract.
 Choice of Law
 Courts will apply the law of the jurisdiction that has the
most points of contact with the contractual relationship.