Chapter 16 Answer guidance to end of chapter questions

1. How (legally) do electronic contracts differ from traditional contracts? In your opinion have the E-Commerce Directive and Regulations solved the unique problems of e-contracts?

This is an open question asking students to generally discuss the distinctions between traditional and e-contracts and to address the legal changes made by the E-Commerce Directive and Regulations. A starting point would be to note that there is noting intrinsically legally interesting about electronic contracts. Informal contracts may be concluded and enforced with little to no formality: Consensus ad idem is really all that is required. A discussion of issues of communication at a distance and contractual trigger leads to a discussion of Arts.9-11 of the Ecommerce Directive. A discussion of standard terms such as the Amazon ones helps to illustrate the discussion. A discussion of terms and contractual triggers would round out the answer. If the student wanted to they could go a little further to discuss formal contracts but this is not necessary.

2. Do you agree with Lord Hodge’s conclusion that ‘no-one, including a court, can stop the performance of a smart contract? The courts will not be able to cancel the performance of the contract.’ Why or why not?

To answer this question I would expect the student to discuss in order:

1. What “smart contracts” are by reference to Raskin’s definition “A smart contract is an agreement whose execution is automated. This automatic execution is often effected through a computer running code that has translated legal prose into an executable program” and that when taken together with Surden’s definition we get a working definition that a smart contract is “a contract in which elements of the agreement have been recorded in computer code and which may execute those elements by code.”
2. A clear explanation of how smart contracts function including self-enforcing provisions and the role of blockchain authentication.
3. Legal implications arise through the attempts to “trial proof” smart contracts through self-help and automated enforcement. How can, as Lord Hodge says, a court take control over something which is designed to avoid the oversight of courts.
4. The Law Commission approach to defining smart contracts as ‘smart legal contracts’ to distinguish true legal contracts from the encoding of agreements or promises which fall short of meeting this requirement.
5. An analysis of the argument that smart contracts do not remove the role of the court; they merely vary the route to court. While ‘they automate execution this does not remove subjective dispute and disagreement’, meaning that ‘smart legal contracts do not obviate the value and role of judicial adjudication.’

3. The requirements needed to obtain a qualified electronic signature are far too onerous and mean there is no comparison between a simple manuscript signature and the qualified electronic signature which is designed to replace it. Until a simpler method of replicating the manuscript signature is found for the digital environment, the use of electronic signatures will remain uncommon.

Discuss.

To answer this question I would expect the student to discuss in order:

1. The distinction between the form and function of a signature as outlined by Chris Reed.
2. The identification of Reed’s three primary functions of a signature and to question whether form is important for these functions.
3. A short history of e-signatures from the UNCITRAL model law to the current e-IDAS Regulation with a focus on the question of whether the EU went wrong in favouring one form of e-signature in the Electronic Signatures Directive of 1999.
4. A definition of a qualified electronic signature in context. i.e what are electronic signatures, advanced electronic signatures and qualified electronic signatures under the e-IDAS Regulation.
5. A discussion of the form of qualified electronic signatures, including PKE Encryption and the role of certification agencies.
6. Based on the above the student should critically discuss the form and functionality of qualified signatures as the question directs.