Exclusive Choice of Forum Clauses and Consumer Contracts in e-Commerce

Journal of Private International Law

Volumn 1, Issue 2, 2005, Pages 237-268

  Tang, Zheng ^a  

^a UNIVERSITY OF BIRMINGHAM   (United Kingdom)

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EID: 85057788310     PISSN: 17441048     EISSN: 17578418     Source Type: Journal    
DOI: 10.1080/17536235.2005.11424295     Document Type: Article

References (125)

1. Hague Conference on Private International Law, “Convention on Exclusive Choice of Court Agreements”, concluded on 30 June 2005, Art 2.1.a
2. For further discussion on this issue, see infra s C.1
3. See R, Hillman, J, Rachlinski, “Standard-form Contracting in the Electronic Age”, (2002) 77 New York University Law Review 429, 463–85; D Rice, “A Cyberspace Odyssey through US and EU Internet Jurisdiction over E-Commerce” (July 2001) Practising Law Institute, Patents, Copyrights, Trade marks, and Literary Property Course Handbook Series, 421, at 429, 518–20; American Bar Association, “Achieving Legal and Business Order in Cyberspace: A Report on Global Jurisdiction Issues Created by the Internet” (2000) 55 Business Lawyer 1801, para 2.4
4. Hillman and Rachlinski, n3, 464, 473
5. For the definition of electronic agent, see US Uniform Computer Information Transaction Act (UCITA) 2002, s 102(a) (27)
6. Hillman and Rachlinski, n3, 479
7. In the EU the sellers are required to provide his name, geographic address, and other information to the consumers, see Directive on Electronic Commerce, 2000/31/EC, art 5(1); Distance Contracting Directive, 97/7/EC, Art 5(1)
8. 8 The prerequisites also cover a wide range of issues, including the existence of an international element, the parties' capacity, the connection of the chosen forum with the disputes and the parties, etc. These issues are regarded as less important, and generate fewer challenges in e-commerce, so will not be discussed here
9. 9 It is usually not easy to delineate form and substance, for both of them concern the existence of consent and act to provide the safeguard as to consent. The civil law tradition is to determine the issue of substance according to the formal rules, while the common law tradition pays more attention to the substance instead of explicit forms
10. This delineation provides a wide definition for formal validity for the sake of certainty. See eg, M Giuliano and P Lagarde, “Report on the Convention on the Law Applicable to Contractual Obligations” (1980) OJ C282, 29; P North and J Fawcett, Cheshire and North's Private International Law (heareafter “Cheshire and North“) (London, Butterworths, 13th edn, 1999), 589; J Yackee, “A Matter of Good Form: The (Downsized) Hague Judgments Convention and Conditions of Formal Validity for the Enforcement of Forum Selection Agreements” (2003) 53 Duke Law Journal 1179, 1182, and fn 14 therein. Cf J Fawcett, J Harris and M Bridge, International Sale of Goods in The Conflict of Laws (Oxford University Press, 2005), para 21.38
11. See eg, Estasis Salotti v RUWA 24/76 [1976] ECR 1831; Caleries Segoura v Bonakdarian 25/76 [1976] ECR 1851
12. The civil law practice is mainly based on rules (and is known as the rule-based approach), while the common law practice is generally discretionary (known as the discretion-based approach)
13. See eg, Council Regulation 44/2001 on Jurisdiction and the Recognition and Enforcement of Foreign Judgments in Civil and Commercial Matters (Brussels I Regulation), Art 23.1; Hague Conference on Private International Law, Judgment Project, Summary of the Outcome of the Discussion in Commission II of the First Part of the Diplomatic Conference 6–20 June 2001, Interim Text (Interim Text 2001), Art 4.2; Hague Convention on Choice of Court Agreement, n1, Art 3.c
14. See Yackee, n10, 1192–93
15. 1205
16. See eg, Brussels I Regulation, Art 23.1(a); Hague Draft on Exclusive Choice of Forum Agreement, Art 3(c).,
17. See eg, Brussels I Regulation, Art 23.1(b); US case Nordyne, Inc v Int'l Controls & Measurements Corp, 262 F 3d 843, 847 (8th Cir 2001); New Moon Shipping Co v Man B & W Diesel AG, 121 F 3d 24, 31–32 (2d Cir 1997)
18. See eg, Brussels I Regulation, Art 23.1(c); English case: Circle Freight International Ltd (T/A Mogul Air) v Medeast Gulf Exports Ltd (T/A Gulf Export) [1988] 2 Lloyd's Rep 427, 433
19. Although it is not indispensable in all the states, a signature is very important and usually required for the validity of an agreement. See infra text C.1(a)(iii); CMV Clarkson and J Hill, Jaffey on the Conflict of Laws (London, Butterworths, 2nd ed, 2002), 76; Partenreederei ms Tilly Russ v NV Haven & Vervoerbedrijf Nova 71/83 [1984] ECR 2417, 2432 para 16
20. See eg, Switzerland's Federal Code on Private International Law, Art 5.1: “…The agreement may be made in writing, by telegram, telex, telecopier, or by any other means of communication which evidences the terms of the agreement by a text.”,
21. UNCITRAL's Guide to Enactment of the UNCITRAL Model Law on Electronic Commerce (1996): Introduction to the Model Law, The “functional-equivalent” approach
22. 22 UNCITRAL Model Law, Art 6
23. 23 Art 3.c(i)(ii)
24. Brussels I Regulation, Art 23.2. Before this legislation, in Porta-Leasing GmbH v Prestige International SA, Case 784/79, [1980] ECR 1517, the Court did not insist on the medium but on the fact the formal requirements aiming to ensure the consent of the parties has been expressed in a clear and precise way
25. For the functions of paper-based writing requirements, see UNCITRAL Guide to Enactment 1996, n21, para 48
26. See eg, Chinese Contract Law, 2001, Art 11: “a writing means a memorandum of contract, letter or electronic message (including telegram, telex, facsimile, electronic data exchange and electronic mail, etc.), which is capable of expressing its content in a tangible form.”
27. 27 UNCITRAL Model Law, Art 8(1), Art 8(3)(a).,
28. Brussels I Regulation, Art 23.1(a).,
29. For the formal validity of the agreement evidenced in writing, the parties' confirmation is required. See Galeries Segoura Sprl v Firma Rahim Bonakdarian, Case 25/76 [1976] ECR 1851; F Berghoefer GmbH and Co Kg v ASA SA, Case 221/84 [1985] ECR 2699. Cf Powell Duffryn plc v. Wolfgang Petereit, Case 214/89, [1992] ECR I–1745
30. Colzano v RÜWA C24/76 [1976] ECR 1831
31. Cass com, 27 Feb 1996, RCDIP 1996, 732, at 734, H.G.-T
32. Mellon First United Leasing v Hansen 705 NE 2d 121(Ill App Ct 1998) at 125–26; Tandy Computer Leasing v Terina's Pizza, Inc 784 P 2d 7 (Nev 1989) at 8
33. For example, a jurisdiction clause can only be seen by scrolling down the screen, and there is no obvious reference directing the consumers to this clause
34. See: Ticketmaster Corp v Tickets.com, Inc, 2000 WL 5253 90 (CD Cal Mar 27, 2000) (the court held the user was not bound by the terms, because the website was in the form that the user could escape viewing the terms by linking to other pages, or needed a great effort in order to reach the terms to read them). Cf Caspi v Microsoft Network, LLC 732 A 2d 528 (NJ Super Ct App Div 1999) (the court held the terms binding despite the user being easily able to accept it without reading)
35. Federal Trade Commission, Dot Com Disclosures, http://www.ftc.gov/bcp/conline/pubs/buspubs/dotcom/index.html, accessed on 21 June 2005
36. 36 UNCITRAL Model Law, Art 5 bis
37. For example, no signature requirement for a contract to be formally valid exists in Japan. Also see: Roberts & Schaefer Co v Merit Contracting, Inc 99 F 3d 248, 252–53 (7th Cir 1996)
38. See EU case Partenreederei, n19, para 16; Italian Civil Code, Art 2702; German case Bundesgerichtshof [BGH] [Supreme Court], 22 Feb 2001, available at http://www.curia.eu.int/common/recdoc/convention/en/2001/29–2001.htm, accessed on 23 June 2005. Cf Powell Duffryn, n 29, but this should not be applied in non-negotiable consumer contract
39. See eg, French case: Compagnie Generale Transatlantique v Peltier freres, Cass req, 2 Mar 1909, s 1909, 1–384; Italian non-Regulation law, Italian Code of Civil Procedure, Art 2
40. See eg, Hague Conference on Private International law, M Dogauchi and T Hartley, “Preliminary Draft Convention on Exclusive Choice of Court Agreements: Draft Report” (Prel Doc No 25), para 78.,
41. See Hague Conference on Private International Law, P Nygh and F Pocar, “Preliminary Draft Convention on Jurisdiction and Foreign Judgments in Civil and Commercial Matters” (Prel Doc 11), 46.,
42. As to how to test the reliability and security of an electronic signature or any other means, the technique criteria in The Electronic Signature Regulation 2002 can be borrowed. An electronic signature or any other means to prove the user's consent is regarded as reliable and safe, if the method used can ensure that the signature or other indication is uniquely linked to the signatory, is capable of identifying the signatory, is created using means that the signatory can maintain under his sole control, and is linked to the data to which it relates in such a manner that any subsequent change of the data is detectable
43. 43 UNCITRAL Model Law, Art 7.,
44. See Specht v Netscape Communications Corp 150 F Supp 2d 585 (SDNY 2001) (the court held the action of clicking the “download” button cannot be regarded as assent to the agreement but only an intention to obtain the products)
45. See ProCV v Zeidenberg, 86 F 3d 1447 (7th Cir 1996)
46. 46 This requirement fundamentally questions the validity of browse-wrap contracts in electronic consumer transaction. It is assumed that in this way, the consumers more easily ignore what has been represented on the screen, and they are not professional enough to predict that the behaviour of entering a website or downloading a product will result in a submission to a foreign jurisdiction
47. See the preliminary documents for Convention on Choice of Court Agreement in the Hague Conference on Private International Law, which are available at www.hcch.net; United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) Art II(3); UNCITRAL Model Law on International Commercial Arbitration, Art (8). This approach has also been accepted by Rome Convention to determine the substantive validity of choice of law clauses.,
48. The Brussels I Regulation has not established any rules on substantive validity of a choice of forum clause, however, in the EU case law, the ECJ has preferred to use uniform community-law to ascertain the actual will of the parties, see RÜWA, n11; Francesco Benincasa v Dentalkit Srl (Benincasa), 269/95, [1997] ECR I–3767; Transpori Castelletti Spedizioni Internazionali SpA v Hugo Trumpy SpA (Castelletti), 159/97, [1999] ECR I–1597. For detailed discussion, see A, Briggs and P, Rees, Civil Jurisdiction and Judgments (London, LLP, 3rd edn, 2002), para 2.97
49. Nygh and Pocar, n41, 43
50. 50 There is no consensus as to how the choice of law rules can be designed to provide both certainty and fairness. For detailed discussion on the pros and cons of different choice of law rules as regards substantive validity of jurisdiction clauses, see Hague Conference Judgment Project reports, especially, Prel Doc Nos 7, 19, 20, 21.,
51. 51 Some experts on the Hague Conference have expressed the view that uniform provision on sub stantive validity should be included in the convention, at least in the future. See Prel Doc No 7, para. 107; Prel Doc No 9, p 37.,
52. 52 However, the guidelines and tests provided this section will not touch any area other than the jurisdiction clauses in electronic consumer contracts. This section is also not supposed to provide uniform definition on any traditional concept such as fraud, misrepresentation, mistake, etc.,
53. See generally Briggs, Rees, n48, para 2.97
54. 54 The term “electronic error” has been introduced in US UCITA, s 213
55. 55 See UCITA, s 213(b).,
56. For example, in Specht, n44, the court held that since the licence terms only appeared after the user downloaded the software, the downloaded software was not protected by the licence
57. However, these clauses are valid in traditional contracts. See Coreck Maritime GmbH v Handelsveem Bv and Others, C387/98, [2000] ECR I–9337; Powell, n29
58. Such as the tickets for transportation; see eg, National Express fun fare ticket purchasing procedure, http://www.gobycoach.com, accessed on 24 June 2005
59. For example, the time limit is set up for normal transaction without any convincing reason and/or together with an over-lengthy draft of contractual terms
60. See eg, Burke v Goodman 114 SW 3d 276, at 280 (Mo App ED 2003); Swain v Auto Services, Inc 128 SW 3d 103, (Mo App ED, 2003), etc
61. 61 Such as more attractive price, more convenient purchase, or favourable service, etc.,
62. See Inter-American Convention on Jurisdiction in the International Sphere for the Extra territorial Validity of Foreign Judgments of 24 May 1984 (La Paz Convention), Art 1(D). The Hague Convention of 25 November 1965 on the Choice of Court, Art 4(3). The US Uniform Commercial Code, Section 2–302(1). Also see the US Federal case: Colonial Leasing Co of New England, Inc v Pugh Brothers Garage, 735 F 2d 380 (9th Cir 1984)
63. Art 5(1). See also Océano Grupo Editorial SA v Roció Murciano Quintero C-240–243/98 [2000] ECR I–4941, para 24
64. See eg, M/S Bremen and Unterweser Reederei, GmbH v Zapata Off-Shore Co 407 US 1 (1972) (“The Bremen”); Williams v American Online, Inc 2001 WL 1358 25 (Mass Super Ct, 8 Feb 2001); Lamb v Megaflight, Inc 26 SW 3d 627 (Tenn Ct App, 2000)
65. See A, Leff, “Unconscionability and the Code–the Emperor's New Clause” (1967) 115 University of Pennsylvania Law Review, 485
66. J Bruch, “Forum Selection Clauses in Consumer Contracts: An Unconscionable Thing Happened on the Way to the Forum” (1992) 23 Loyola University of Chicago Law Journal 329, 333
67. 68 UCITA s 113(a) defines “opportunity to review” as a term “available in a manner that ought to call it to the attention of a reasonable person and permit review”.,
68. See eg, Capsi v Microsoft Network, LLC 732 A 2d 528 (NJ Super Ct App Div, 1999); Specht, n46
69. See eg, Rudder v Microsoft Corp. [1999] 2 CPR (4th) 474 (Ont Super Ct Justice, 8 Oct 1999)
70. For example, some states give full effect to a valid jurisdiction clause by entertaining the prorogated jurisdiction and declining jurisdiction if they are not chosen, see Civil Code of Quebec, Art 3148; other states only recognize the effect of jurisdiction clause in its prorogation sense but not derogation
71. Such as the approaches adopted in the Brussels Regime. However, many other rule-based countries still apply the general rule to consumer contracts owing to the delayed response of legislation to consumer protection. This approach is outdated and obviously unreasonable
72. See eg, Switzerland's Federal Code on Private International Law, of Dec 1987, Art 114.2 states: “The consumer may not waive in advance the venue at his domicile or place of habitual residence.” Art 120.2 also rejects the effect of choice of law in consumer contract
73. See generally s B
74. See Brussels I Regulation, Art 17, Art 23
75. Art 17.1
76. Art 17.2
77. Art 17.3
78. 79 It is assumed the second qualification can be reasonably applied in e-contract, so that this section will focus on studying only the first and third qualifications
79. See eg: P, Jenard, “Report on the Convention of Jursidiction and the Enforcement of Judgments in Civil and Commercial Matters”, (Jenard Report), [1979] OJ C59/1, 32; Nygh, Pocar, n41, 53
80. Briggs and Rees, n48, 81 and n 345 therein
81. The Electronic Commerce Regulation 2002 (transporting into UK law the majority provisions of the Electronic Commerce Directive 2000/31/EC) keeps silent in this area
82. See eg, Malta Electronic Commerce Act 2001, Art 10(a): “…an electronic contract is concluded when the addressee has received from the originator, electronically, the acknowledgement of receipt of the addressees' consent…”
83. Internet service providers usually will provide an internet user with the domain name required without careful investigation of the user's real location. It is possible for someone resident outside the UK to register a domain name with “.uk.” In addition, besides country code top-level domains (TLDs) there are generic TLDs, eg, “.com” and “.net”, which will not give the internet user any hint about the probable location of the other party.,
84. The IP address tells us no more than the location of the computer, which can only indicate the location of the user during the communication, but not more.,
85. For example, the consumer can purchase something during a short holiday, and provide a temporary address for delivery
86. “Electronic Commerce and International Jurisdiction”, Ottawa, 28 Feb–1 Mar 2000, Prel Doc No 12, Hague Conference on Private International Law, 7
87. The e-consumers' weaker position can be protected by strict and high standard prerequisites
88. From the economics point of view, without an effective and enforceable choice of forum clause, the e-business may incorporate the cost and risk of global jurisdiction into the price of the products provided online. See eg, Carnival Cruise Lines, Ltd v Shute 499 US 585 (1991) gave the economic rationale that “passengers who purchase tickets containing a forum clause…benefit in the form of reduced fairs reflecting the savings that the cruise line enjoys by limiting the for a in which it may be sued”
89. According to this policy the court has discretion to give effect to the choice of forum clause. See eg, English case: The Chaparral [1968] 2 Lloyd's Rep 158, Akai Pty Ltd v Peolple's Insurance Company Ltd [1999] ILPr 24; US Federal case: The Bremen, n64; Canadian cases: ZI Pompey Industrie v ECU-Line NV [2003] 1 SCR 450; Australian case: Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 230–31, 259
90. According to this policy, the court has discretion to maintain its jurisdiction despite a valid jurisdiction clause. Although a court will be very reluctant to disregard a valid jurisdiction clause, it does make this discretion in limited circumstances where it is considered the parties are amenable to the jurisdiction of the trial forum and the ends of justice will be better served by a trial in this country. See English cases: Citi-March Ltd v Neptune Orient Lines Ltd [1996] 2 All ER 545; Air Nauru v Niue Airlines Ltd [1993] 2 NZLR 632; Aratra Potato Co Ltd v Egyptian Navigation Co (”The El Amria“) [1981] Lloyd's Rep 119, CA; US cases: Wm H Muller & Co v Swedish American Line Ltd 224 F 2d 806 (2d Cir 1955); Carbon Black Export Inc v The SS Monrosa 254 F 2d 297 (5th Cir, 1958)
91. The approach has been set up in a cornerstone case “The Eleftheria” [1970] P 94, 110, repeated in The El Amria, n91, and has been confirmed as accepted by a large number of cases in the Commonwealth thereafter. See Akai Pty Ltd, n90; Citi-March Ltd, n91; Voth v Manildra Flour Mills Pty Ltd, 171 CLR 538; Oceanic Sun Line, n90, at 230–31, 259; ZI Pompey, n90. For more detailed discussion, see generally Cheshire and North, n10, 339, 350–355, 370–73
92. ZI Pompey, n90, at para 20
93. See Akai Pty Ltd, n90, at 52
94. See MacShanno v Rockware Glass Ltd [1978] AC 795, at 812, 828; The Sidi Bishr [1987] 1 Lloyd's Rep 42, 43
95. See Lubbe v Cape plc [1999] IL Pr 113 at 126, CA
96. See Spiliada Maritime Corpn v Cansulex Ltd [1987] AC 460, at 478; Trendtex Trading Co v Credit Suisse [1980] 3 All ER 721, at 734
97. See Bank of Baroda v Vysya Bank Ltd [1994] 2 Lloyd's Rep 87, 96
98. See Middle East Banking Co SA v Al-Haddad (1990) 70 OR (2d) 97
99. See Islamic Arab Insurance Co v Saudi Egyptian American Reinsurance Co [1987] 1 Lloyd's Rep 315, 319
100. See Oppenheimer v Louis Rosenthal and Co AG [1937] 1 All ER 23
101. See Carvalho v Hull, Blyth (Angola) Ltd [1979] 3 All ER 280
102. 103 See UNCITRAL Model Law Art 10(1),
103. Art 10(3) permits the party using the services of any other person to retain data message records, providing that the accuracy, reaccessibility and integrity can be guaranteed
104. 105 An ISP is a company that provides access to the internet.,
105. See “The El Amria“, n91; Citi-March, n91; New Zealand case: Apple Computer Inc v Apple Corps Sa, High Court of New Zealand, 17 IPR 123, 19 Feb 1990
106. See British Aerospace Plc v Dee Howard Co [1993] 1 Lloyd's Rep 368, at 376; The Society of Lloyd's v Peter Everett White (No 2) [2002] ILPr 11
107. See Mercury Plc v Communication Telesystems Ltd [1999] 2 All ER (Comm) 33; Sinochem International Oil (London) Ltd v Mobil Sales and Supply Corp [2000] 1 Lloyd's Rep 670, at 679–80; JP Morgan Securities Asia Private Limited v Malaysian Newsprint Industries Sdn Bhd [2002] ILPr 17, 185–86. Although these cases are dealing with non-exclusive prorogation jurisdiction clauses, it is assumed that the principle can be applied to exclusive jurisdiction clauses
108. See subsection D2(b)(i)
109. 110 For example, the chosen forum now requires the foreigner to obtain a visa for entry, which it did not at the time of contracting
110. 111 Such as the consumer suffers bankruptcy afterwards, or suffers some physically disability, which makes foreign litigation oppressive
111. 112 For example, the consumer subsequently changes his residence to one more distant from the chosen forum which makes the litigation unpredictably expensive and inconvenient
112. See “The Eleftheria“, n92, 110
113. Brussels I Regulation, Art 17
114. A similar approach has been suggested in Interim Text 2001, n 13, Alternative B, variant I, Art 7.5, 7.6
115. For detailed suggestion, see infra s E(1)(d)
116. See Re RealNetworks, Inc, No. 00 C 1366, 2000 WL 6313 41 (ND Ill, 8 May 2000), 6
117. See Pollstar v Gigamania Ltd No CIV-F-00-5671, 2000 WL 3326 6437 (ED Cal, 17 Oct 2000); Specht, n 44
118. See Specht, n44, 593–95
119. See Scott v Bell Atl Co, 726 NYS 2d 60 (App Div 2001)
120. 121 See UCITA s 213.,
121. 122 If the restrictions' only function is to prevent the consumer from reading without any economic efficiency, these restrictions is unreasonable
122. Such as a time-limit, or the content of clause is not continually available, such as a pop-up window, which will disappear in a short period of time, RealNetworks, n117, at 6; FTC's Cot Com Disclosure guidelines, n35
123. 124 See UCITA s 213. However, the consumer is also required to act in good faith, by taking prompt action, to prevent undue disadvantage of the business
124. 125 It is usually not possible to require the consumer to retain the records of the whole contracting process for future reference if he tries to base his claim on substantive invalidity. Thus, it is fair to require the business to carry this burden. The retained records should be accurate and integral, which can reshow the exact process the consumer encountered, including the steps taken, the font, the color of the background, etc.,
125. Mere inconvenience and extra expenses are not enough to avoid an otherwise valid choice of forum clause, unless the inconvenience is of such gravity. See eg, Bremen, n64, at 18; Security Watch, Inc v Sentinel Systems, Inc, 176 F 3d 369, at 374–75 (6th Cir, 1999), etc