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With the advent of the internet, a person is now capable of

accomplishing certain tasks through electronic means. One time, my
professor in taxation assigned 15 cases for recitation and since I didn't
had a time to read them in the original, I asked a friend to e-mail me a
copy of his case digests. In a matter of seconds, I was able to receive the
needed file. Apart from electronic mails, web tech has also introduced a
different concept of commerce that transgressed the traditional image of
buy and sell. Highly technical in some aspects and relatively complex in
operation, this field introduced various issues on the subject of law.
Electronic commerce or E-commerce is yet to be legally recognized in its
fullest sense. Armed with the goal of joining the communication process
in promoting public awareness regarding the subject, it is therefore my
objective in writing this article to provide a "bird's eyeview" on the topic.
I may not be a cyberspace law expert, but with the present stand of our
legislators in addressing the internet, who is?

None of the existing laws anticipated the advent of electronic

commerce. As what the Philippine Internet Commerce Society has put
it, "Philippine laws deals exclusively with paper-based transactions and
regards paper documents as the highest form of evidence to prove their
existence. In some cases, such as the Statute of Frauds, validity depends
upon the existence of a writing. The Rules of Evidence admit only
original documents which must further be authenticated by, among
others, the identification of a signature."1 Obviously, our present laws
do not apply to on-line or virtual transactions. As a consequence, the
validity and enforceability of e-commerce transactions are faced with
legal uncertainty.
 Speaking at a Seminar-workshop on E-Commerce Policy held last
March 1, 2000, Supreme Court Administrator Alfredo Benipayo
stressed the need for "a legal framework that will support the far-
reaching changes that will be occasioned by going on-line. E-commerce,
to survive and thrive, requires that the virtual marketplace be
recognized as a real and functioning arena where the participants deal
in actual rights, concrete obligations, and contracts no less binding than
those in the real world. For that to happen, electronic documents must
necessarily be recognized as having the same validity and enforceability
of their paper counterparts."

What is E-commerce E-commerce can be defined as doing

business on the internet in all its various shapes and forms. This
definition is refined to mean transactions that are completed over the
internet, that is, selection, purchase and payment.2 With the internet, a
person can now communicate with another person irrespective of their
location, at such pace and expedience nothing compared to the
telephones, fax machines and the like. Communication carries with it
the opportunity to transact business, buy and sell goods or services, or
even pull together a virtual organization that will perform the entire
process of trading or merchandising. This technological advancement
has come to be known as electronic commerce or e-commerce.

Laws Relevant to Electronic Commerce

1. Contracts. The provisions of the New Civil Code on the law on

obligations and contracts will generally govern the validity of online
contracts. Under Art. 1305 of the NCC, a contract is a meeting of
minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service.
As long as the essential requisites concur, that is, there is consent,
 object certain and cause, then there is a valid contract. In online
contracts, however, issues as to forms and legal capacity of minors
are often discussed since the present rules governing them in paper
contracts may not be applicable in the case of online contracts.
Under the NCC, to prevent fraud and not to encourage the same,
certain agreements are required to be in writing so that they may
be enforced. Its chief characteristic is the provision that no suit or
action shall be maintained on certain classes of contracts or
engagements unless there is a note or memorandum thereof in
writing signed by the party to be charged or by his authorized
agent. Obviously, this law has no application to online contracts.
The legislators could have not possibly thought of digital signatures
when they had the statute of frauds in their agenda.

As to the incapacity of minors to enter into contracts, a computer

has no mind of its own to determine whether both or either of the
contracting parties have the capacity to contract. With the
increasing concern against internet pornography, however, certain
mechanisms are now designed to prevent minors from accessing
adult sites and/or online shops such as requiring the input of a
credit card account number (although it is possible for a minor to
use his father's credit card without the latter's knowledge). Filtering
softwares are also available to prevent unauthorized access to sites
with potentially offensive materials, such as NetNanny, Cyber-
Patrol and SurfWatch. These utilities requires age authentication
through certain means not accessible to minors.

2. Enforceability of "Web Wrap" licenses. A "web wrap"

agreement is when an online shopper is supplied with a copy of a
license agreement flashed on his or her computer screen and is
 instructed that by clicking on an "Accept" button, he or she is
deemed to have read and agreed with the terms of the license. In
some cases, the internet user is asked to choose between "enter" or
"do not enter". When the button "enter" was chosen, it is deemed
an acceptance of the terms of the agreement. Though the Supreme
Court has not ruled on the enforceability of "web wrap"
agreements, it is argued that all the requisites to a valid contract
are present in such agreements.3 It may even be pointed out that
such licenses falls under the category of contracts of adhesion, or
the take it or leave it contracts.

In the case of Angeles vs. Calasanz, the SC held that the terms of a
contract of sale which has the characteristics of a contract of
adhesion must be construed and interpreted against the party who
drafted it, especially if the interpretation will help effect justice to
buyers who, after having invested a big amount of money, are
sought to be deprived of the same through the application of a
contract, clever in its phraseology, condemnable in its lopsidedness
and injurious in its effect which, in essence, and in its entirety is
most unfair to the buyers.4

3. Reproduction of published works. Most of the people seek

access to the internet to obtain information which they either
download to their personal computers or print a copy of the same
for whatever purpose they may use them. The present statute in the
Philippines on intellectual property rights is R.A. 8293 otherwise
known as the "Intellectual Property Code of the Philippines" which
was approved on June 6, 1997 and took effect on January 1, 1998.
Under the law on copyright, "published works" are defined as
works, which, with the consent of the authors, are made available
to the public by wire or wireless means in such a way that members
of the public may access these works from a place and time
individually chosen by them. Written articles published in a
website is an example of such work that is protected by the code.
Works are protected by the sole fact of their creation, irrespective
of their mode or form of expression, as well as of their content,
quality and purpose.5 The general rule is that if you copy without
permission, you will be liable for copyright infringement.

It is noteworthy to explain that not all works are protected and that
the mere act of copying is not by itself an act of infringement. First,
no protection shall extend to any idea, procedure, system method
or operation, concept, principle, discovery or mere data as such,
even if they are expressed, explained, illustrated or embodied in a
work; news of the day and other miscellaneous facts having the
character of mere items of press information; or any official text of
a legislative, administrative or legal nature, as well as any official
translation thereof.6 Second, the fair use of copyrighted work for
criticism, comment, news reporting, teaching including multiple
copies for classroom use, scholarship, research and similar
purposes is not an infringement of copyright.7 The code further
provided that the private reproduction of a published work in a
single copy, where the reproduction is made by a natural person
exclusively for research and private study, shall be permitted,
without the authorization of the owner of copyright in the work.8
The copyright in works shall be protected during the life of the
author and for fifty years after his death. Any person infringing any
right secured by the code shall be punished by imprisonment
ranging from one year to nine years, plus a fine ranging from P
50,000.00 to P 1,500,000.00. If you really want to play safe, the
 best way to avoid being sued for infringement of intellectual
property right in cyberspace is to simply ask permission to use the
information you are downloading or copying. It's worth the effort!

4. Credit Card Transactions. I have a personal experience in

purchasing a password from a British webpage where I used the
password to gain access to their site for a period of one year. The
price was quoted in US dollars and the service may be availed of
through credit cards. I simply typed my credit card's account
number and there it was, on my next credit card billing statement, I
was charged the corresponding amount. I didn't even had to sign
any receipt, the transaction was consummated as simple as 1-2-3.
Disclosing your credit card's account number is extremely risky,
and in buying goods online, one should choose a company that is
reputable and prominent. Also, if you are a credit cardholder, you
should be more watchful of your card's whereabouts. The law
relevant to this issue is R.A. 8484 otherwise known as the "Access
Devices Regulation Act of 1998". The state recognizes the recent
advances in technology and the widespread use of access devices in
commercial transactions. Access Device was defined as any card,
plate, code, account number, electronic serial number, personal
identification number, or other telecommunications service,
equipment, or instrumental identifier, or other means of account
access that can be used to obtain money, good, services, or any
other thing of value or to initiate a transfer of funds (other than a
transfer originated solely by paper instrument). Any person
committing any of the acts constituting access device fraud shall be
punished by a fine of P 10,000.00 or twice the value obtained by
the offense, whichever is greater and imprisonment ranging from 6
years to 20 years.
5. Lawsuit against foreign corporations. In conducting
commerce electronically, a Filipino may want to transact with a
foreign corporation and in some unfortunate cases, the former end
up filing a suit against the latter. Question: May the Filipino sue the
Foreign Corporation? May the foreign corporation maintain any
action, suit or proceeding in any court of the Philippines? Under
the Corporation code, license is necessary for a foreign corporation
to do business in the Philippines.9 The purpose of the law requiring
the license is to subject the foreign corporation doing business in
the Philippines to the Jurisdiction of its court. If the foreign
corporation transacts business in the Philippines without a license,
then it shall not be permitted to maintain or intervene in any
action, suit or proceeding in any court or administrative agency of
the Philippines; but such corporation may be sued or proceeded
against before Philippine courts or administrative tribunals on any
valid cause of action recognized under Philippine laws.10

In the case of Pacific Micronesian Line, Inc. vs. del Rosario, the SC
held that one single or isolated transaction does not constitute
"doing business", and that transactions which are occasional,
incidental and casual, not of a character to indicate a purpose to
engage in business do not constitute the doing or engaging in
business contemplated by law. In order that a foreign corporation
may be regarded as doing business within a State, there must be
continuity of conduct and intention to establish a continuous
business.11 Essentially, each case must be decided in the light of its
peculiar circumstances.

Im pretty sure there are several other laws pertinent to electronic

commerce. In the meantime, however, allow me to conclude this
 part of the topic and proceed to the nextareas in e-commerce
where there is no applicable law at all.

Issues that may arise in Electronic Commerce

1. Admissibility of Electronic Documents in Court. Supposed I

was offered to enter into a contract by a friend based in Cebu and
she sent me the offer via an electronic mail. I decided to accept the
offer so I e-mailed her back manifesting my acceptance. Question:
In proving the consummation of a valid contract, is a copy of my e-
mail admissible as evidence in court? Does the printed copy of my
e-mail constitute an original document as defined under the Rules
of Evidence? The legal recognition of electronic documents and the
admissibility and evidentiary weight of data messages are among
the legal uncertainty that impedes the growth of Philippine e-
commerce. The absence of clear guidelines is one of the main
reasons for e-commerce's relatively slow growth in the country, as
companies, particularly foreign investors, remained wary of taking
the plunge. Precisely, this is one of the highlights introduced by the
proposed e-commerce bill, as it seeks to recognize electronic
signatures the way normal signatures are recognized and the
admissibility and evidentiary weight of digital data as evidence.
2. Taxation. At present, the Bureau of Internal Revenue has not
issued any regulations regarding electronic commerce. Besides,
with its poor level of performance in the collection of taxes imposed
on the real world, I don't think it is smart to address the issue on
online taxation at this stage.
3. Importation. The importation of softwares into the Philippines
through the internet is a typical day-to-day transaction in this
computer age.Unfortunately, it is not clear how the customs and
 tariff code will apply in this scenario. The law did not categorically
include the importation of an article through electronic means as
within the definition of "importation". Under sec. 1202 of the Tariff
and Customs Code, By this time, perhaps you will agree with me
that in the virtual world, "places" are not confined within borders.
Here, the impact of an activity is global. On the contrary, the local g
o v e r n m e n t cannot enforce its rules on the global population. It
is difficult which rule or law applies. In practice, the transmission
of software into the Philippines by electronic means is not being
monitored.

4. Digital Signatures. Electronic signature refers to any distinctive

mark, characteristic and/or sound in electronic form, representing
the identity of a person and attached to or logically associated with
the data message or any methodology or procedures employed or
adopted by a person and executed or adopted by such person with
the intention of authenticating or approving an electronic
document.12 There is no law that recognizes digital signatures.
5. Encryption Policy. There is no law that deals with encryption.
6. Domain Names. Domain names are chosen on a first-come-first-
serve basis. Some companies provides free hosting for domain
names while others will normally charge you on a yearly basis.
There is no registry for Domain Names in the Philippines.

Present Status of E-Com in the Philippines

Legal problems such as conflicts of law, the determination of

jurisdiction, taxation, the treatment of digital intellectual property, the
regulation of certification authorities, the criminalization of on-line
offenses, the settlement of domain name disputes and the protection of
online consumers are among the issues which our legislators should
take into account in this growing age of computer world. Other issues
such as privacy and personal data protection, trademarks,
indecency/pornography, internal security/sedition, and data transfer
restrictions should also be considered. According to Senator Ramon
Magsaysay Jr., author of the proposed law on electronic commerce
(Senate Bill No. 1902), there are presently 150,000 households in the
country with internet access equivalent to 500,000 to 600,000 internet
users who can benefit extensively from the proposed law. The
Philippines is expected to be the fourth country in the Asian region next
to Malaysia, Singapore and Korea to allow online business transactions
with the expected passage of the electronic commerce law. As sponsored
by Senator Magsaysay, "if the bill becomes a law, the electronic
document will have the same effect as a written document, and shall be
admissible in court. An electronic document that becomes part of the
data of either party, whether it stays in the server or hard disk, as long
as it is not tampered with, is considered original. This legislation is long
overdue."

Sooner or later, the Philippines will encounter problems brought

about by e-commerce. This is but a natural consequence of the
increasing online users in the country. If caught unprepared, like what
happened to the "I Love You" virus, the country will be left without a law
to resolve whatever dispute that will arise in the futurethe near future.

Comments are welcome at bhound@i-next.net

* LLB. 2000, Article Editor, UB Law Journal

1 Position paper of the Philippine Internet Commerce Society
2
Latest trends:e-commerce, Randy Batholomew, Accountants' Journal
3 APEC legal guide to Philippine E-Commerce.
4
G.R. No. 42283, March 18, 1985
5 Sec. 172.2, Chapter II, Part IV, R.A. 8293
6
Sec. 175, Chapter IV, Part IV, R.A. 8293
7
Sec. 185, Chapter VIII, Part IV, R.A. 8293
8 Sec. 187.1. Chapter VIII, Part IV, R.A. 8293
9
Sec. 126, Corporation Code
10 Sec. 133, Corporation Code
11
96 Phil. 23
12
sec. 5, Chapter I, Part II, SB 1902