DISCREPANCIES EXISTING BETWEEN THE UNICITRAL MODEL LAWS AND THE LAWS IN TANZANIA

MZUMBE UNIVERSITY

FACULTY OF LAW

BACHELOR OF LAW

DISCREPANCIES EXISTING LAWS IN TANZANIA AND THE UNCITRAL MODELLAWS: A NEED FOR E-COMMERCE LEGISLATION

BY: LUKIKO LUKIKO

SUPERVISOR: MUGETA, I.L

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2013

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PAPER OUTLINEINTRODUCTION...................................................1

FORMATION AND VALIDITY OF CONTRACTS IN TANZANIA................2

UNCITRAL MODEL LAWS IN COMPARISON WITH TANZANIAN LAWS..........3

The Position of E-contracts...................................4

Position of E-signature.......................................6

Experience from other Jurisdictions...........................8

SUGGESTED SOLUTIONS............................................9

CONCLUSION....................................................10

REFERENCES....................................................11

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INTRODUCTION

The rapid growth of electronic communication and transactions has

brought a number of challenges to the existing laws in various

jurisdictions. It is undeniable that in most countries, most laws

were designed to regulate paper-based or physical environment

transactions than the electronic or digital environment

transactions. That being the fact, there has emerged great legal

and practical challenges relating to authenticity and

admissibility of electronic documents as reliable evidence in

courts of law.

The area of commerce and trade is one of the most areas affected

by the development of ICT. Traditionally, business and commerce,

especially contracts, had to be concluded on purely physical

environment. Parties could only conclude a contract by reducing

it into writing and signing to as evidence of intention to be

bound by its terms. Thus even the Law of Contract Act1 clearly

demonstrates that it was enacted to regulate transaction on the

physical world rather than in digital environment. The Evidence

Act2 (except with the amendment by Act No. 15 of the 2007) was

also not designed to accommodate electronic evidence as

admissible in courts of law.

1 [Cap. 345 R.E. 2002]2 [Cap. 6 R.E. 2002]

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Following uncertainties in laws of various jurisdictions on the

regulation of electronic commerce in terms of electronic

contracts and electronic signatures, the United Nations

Commission for International Trade Law (the UNCITRAL) came up

with Model Laws to guide states on enacting legislations to

regulate e-commerce. The commission enacted the UNCITRAL Model

Law on Electronic Commerce3 and the UNCITRAL Model Law on

Electronic Signatures4 to provide a guide for states to enact

their own laws on the same. However, it should noted that

Tanzania has not enacted any law to regulate the area based on

the UNCITRAL Model Laws, thus making the e-commerce hard to

regulate.

The area of contracts in Tanzania is still based on the common

law principles as enshrined in the Law of Contract Act which

requires certain formalities for there to be a valid contract.

There are usually three important formalities required for there

to be a contract namely; writing, signature, and some kind of

third party authentication or involvement such as notarial

execution.5 The rationale behind the requirement of these

formalities is based on two legal certainties, writing and

3 The UNCITRAL Model Law on Electronic Commerce with Guide to Enactment, 19964 The UNCITRAL Model Law on Electronic Signatures with Guide to Enactment, 20015 Mambi Adam, J (2010) ICT LAW BOOK: A Source Book for Information and Communication Technologies and Cyber Law, p. 13

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authentication (signature) and may be required by statute or by

the parties themselves.6

This paper is intended to draw inspiration on the discrepancies

that the laws in Tanzania have in dealing with e-contracts and e-

signatures when compared to the UNCITRAL Model Laws. The line of

reasoning shall be to elucidate the elements of a valid contract

and contract formation in Tanzania and the inconsistencies it has

in relation to e-contracts. Then the authors shall compare the

UNCITRAL Model Laws with the Laws in Tanzania to see the

discrepancies, if any, which exists and their legal and practical

implications.

FORMATION AND VALIDITY OF CONTRACTS IN TANZANIA

Section 10 of the Law of Contract Act provides that “all

agreements are contracts if they are made by the free consent of

parties competent to contract, for a lawful consideration and

with a lawful object ….” This provision requires free consent of

parties for there to be a valid contract; a contract without free

consent will be voidable.7 Thus parties must agree on the same

thing in the same manner i.e. consensus ad idem. However, with e-

contracts there are some contracts where a party would not have a

bargaining power over the contract. For example, when a user

downloads software and wants to install it on his computer he

will usually be required to click on a button showing that he

6 Ibid. p. 147 Section 19(1) of the Law of Contract Act

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agrees with the terms of the contract. However, there is always

no other option if the user don’t agree with terms. The user has

to choose between accepting and denying, and denying means he

will not access the service he wanted. This kind of contracting

can be termed as a “take it-or-leave it” contracts. There is no

free consent for the user because if he wants the software he

will have to accept the terms even unwillingly.

Again, there has to be offer and acceptance for there to be a

valid contract. The communication of an offer and acceptance

under the Law of Contract Act is based on the postal rule as

contained in Adams v. Lindsell8 and House Fire Insurance v. Grand.9 The

general position is that where the communication is made by post

the contract arises on the date the letter of acceptance is

posted in due course. Signer L.J argued that: the acceptor in posting

the letter has put it out of his control and done an extraneous act the matter, and

shows beyond all doubt the each side is bound.10 Section 4(2) of the Law of

Contract Act provides that the communication of an acceptance is

complete– (a) as against the proposer, when it is put in a course

of transmission to him, so as to be out of the power of the

acceptor; (b) as against the acceptor, when it comes to the

knowledge of the proposer. Such rules are likely to be affected

in the e-contracts environment.

8 (1818) 1 B & Ald.6819 (1879) L.R.4EX.DN.2610 ibid

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Due to the nature of our laws and limited computer legal

knowledge for our courts the courts could face a dilemma in

answering the following legal issues. For instance in Cyberspace

contracts, where is the contract, actually, formed, how is it

formed and what ways can acceptance be communicated? Can a

computer accept an offer and send a contract? All these legal

issues are not yet covered by the Law of Contract Act thus

creates hardships in dealing with e-contracts.

The laws in Tanzania neither cover distance selling contracts nor

recognize Cyber space or digital signatures. What the laws say is

that, the contract must be in writing and duly signed or

authenticated before a witness. With e-commerce this arrangement

is no longer applicable hence affecting the former laws which

have to face changes and reforms to accommodate e-commerce

principles.11

UNCITRAL MODEL LAWS IN COMPARISON WITH TANZANIAN LAWS

As shown in the discussion above, the law on cyber contracts and

cyber signatures has been codified in the UNCITRAL Model laws.

However, there Tanzania has not adopted such changes and that why

this paper now wishes to exploit the discrepancies that Tanzania

laws have in dealing e-contracts and e-signatures.

11 Law Reform Commission, Final Report on E-Commerce and Cyber crimes, 20065

The Position of E-contracts

Article 5 of the UNCITRAL Model Law of E-commerce (hereafter

referred to as the Model law on e-commerce) provides that

Information shall not be denied legal effect, validity or

enforceability solely on the grounds that it is in the form of a

data message. Article 5 embodies the fundamental principle that

data messages should not be discriminated against, i.e., that

there should be no disparity of treatment between data messages

and paper documents. It is intended to apply notwithstanding any

statutory requirements for “writing” or an original. The gist of

this article is to give to electronic contracts the same legal

effect as is given to paper based contracts.

In Brantley v Wilson12 prospective buyers of a parcel of real estate

exchanged a series of e-mail messages with its owner. When the

sellers decided not to sell the parcel to the buyers, the buyers

sued for specific performance. The defendants argued that they

did not intend to form a contract through their e-mail messages.

The e-mail messages exchanged by the parties contained the price

of the property, the financial terms, a proposed allocation of

the closing costs, and a description of the land. The sellers

argued that the e-mails were negotiations in anticipation of a

contract that would eventually be embodied in a paper agreement.

The court ruled that if the parties had agreed to conduct

12 (2006) U.S Dist. Lexis 177226

transactions by electronic means, the communications could have

formed an enforceable contract.

The above position clearly shows that online contracts can be

enforced as any other contract. However, the most important

questions concern the determination of when and where a contract

is made and which laws will govern the transaction.13 Article

11(1) of the Model Law on e-commerce provides that:

In the context of contract formation, unless otherwiseagreed by the parties, an offer and the acceptance of anoffer may be expressed by means of data messages. Where adata message is used in the formation of a contract, thatcontract shall not be denied validity or enforceability onthe sole ground that a data message was used for thatpurpose.

One of the features of this model law is that it recognizes data

messages as a valid and enforceable means of forming contracts.

It deals not only with the issue of contract formation but also

with the form in which an offer and an acceptance may be

expressed.

The requirements of the model law are still with uncertainties

when compared with the Law of Contract Act. Such uncertainties

include a consideration as whether a contract can validly be

concluded by electronic means. Such uncertainties may stem from

the fact that, in certain cases, the data messages expressing

offer and acceptance are generated by computers without immediate

human intervention, thus raising doubts as to the expression of13 Lloyd, I.J. (2011) Information Technology Law, 6th Ed, p. 443

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intent by the parties. Another reason for such uncertainties is

inherent in the mode of communication and results from the

absence of a paper document.

Under the Law of Contract Act, a contract has to be entered into

between people of sound mind who has capacity to contract.14

Therefore, in case a programmed computer enters into a contract

with a natural person is there said to be a valid contract? The

UN Convention on the Use of Electronic Communications in

International Contracts answers this question in affirmative,

stating that:

A contract formed by the interaction of an automated messagesystem and a natural person, or by the interaction ofautomated message systems, shall not be denied validity orenforceability on the sole ground that no natural personreviewed or intervened in each of the individual actionscarried out by the automated message systems or theresulting contract.15

Another uncertainty is on the mode of dispatch of the

communication. In information technology it is not uncommon to

find that communication is done without parties knowing where the

location of the server is. Sometimes e-mails and data messages

may be retained by an e-mails service provider without knowledge

of the sender, and may be delayed in some cases. The model law

provides that when a communication has been put into such a

server machine so as to be out of the control of the originator

14 Section 11(1) of Cap 34515 Article 12 of the UN Convention on the Use of Electronic Communications in International Contracts, 2007

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then it is deemed that an offer has been made. The issue is

whether such mechanism is compatible with section 4(2) of the Law

of Contract Act for it to be enforceable in Tanzania.

The most important issue is whether, where electronic contracts

meet the requirements of the LCA, such documents could be

admissible as evidence in court. The answer is yes under article

5 of the model law but the position in Tanzania is still not

settled. The amendments made to the evidence Act in 200716

provides for admissibility of e-evidence in criminal proceedings

and for civil cases only relating to bank records. The law has

not extended to cover data messages from other fields of civil

litigations such as contract law. Therefore, even if a contract

could be concluded online, it would still be unenforceable in

Tanzania, in so far as its electronic contents would be

inadmissible in court.

Position of E-signature

“Electronic signature” means data in electronic form in, affixed

to or logically associated with, a data message, which may be

used to identify the signatory in relation to the data message

and to indicate the signatory’s approval of the information

contained in the data message.17 The requirement of signatures

being affixed to a document is provided in various legislation,

leave alone in contracts and some documents the signing is

16 Act No.15 of 200717 Article 2(a) of the UNCITRAL Model Law on Electronic Signatures

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required to be witnessed by a third party.18 For contracts, there

is no provision in the LCA making it mandatory for contracts to

be signed nevertheless this requirement is contained in other

laws. Particularly, section 64 of the Land Act19 requires that:

(1) A contract for the disposition of a right of occupancy or any derivative right in it or a mortgage is enforceable in a proceeding only if–

(a) the contract is in writing or there is a written memorandum of its terms;

(b) the contract or the written memorandum is signed bythe party against whom the contract is sought to be enforced. (emphasis supplied)

Similarly, section 9 of the Sale of Goods Act20 provides that “a

contract for the sale of any goods … shall not be enforceable by

action … unless some note of memorandum in writing of the

contract is made and signed by the party to be charged or by his

agent in that behalf.”

That being the position, the problem of authentication of

documents by e-signatures has attracted juristic attention both

in academic study and legal practice. The Model law on e-commerce

18 For example under the Companies Act, section 5(1) requires the memorandumof association of a company to be dates and signed in the presence of at leastone attesting witness; Also paragraph 19 of the Law of Wills (Local CustomaryLaw (Declaration) (No. 4) Order, Government Notice (GN) 436/1963, Schedule 1,Laws of Wills [Sheria za Wosia], in Judicature and Application of Laws Act,TANZ. LAWS SUBSIDIARY LEGIS. [CAP 358 R.E. 2002]) requires that The testatorshall sign the written Will if he knows to read and write; if he isilliterate, he should put the mark of his right hand thumb. Under para 20 itis provided that “Witnesses should attest the signature or the mark of thetestator, and also sign the Will.”19 [Cap. 113 R.E. 2002]20 [Cap. 214 R.E. 2002]

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provides under Article 7 that: where the law requires a signature

of a person, that requirement is met in relation to a data

message if:

(a) a method is used to identify that person and to indicatethat person’s approval of the information contained in thedata message; and(b) that method is as reliable as was appropriate for thepurpose for which the data message was generated orcommunicated, in the light of all the circumstances,including any relevant agreement.

Generally, the purpose of signature requirement under the

physical world is to authenticate a document.21 Furthermore, when

a signature is affixed to a document or contract of sale it

symbolizes an intention to be legally bound. The model law

provides that a signature is valid if there is a reliable method

to identify the person involved and to indicate that person’s

approval of the contents of that data message. Article 6(3) of

the UNCITRAL Model Law on Electronic Signatures provides the

grounds on which a signature can be said to be reliable. Of

importance in this discussion are grounds (a) and (c) which

provides that a signature is reliable if the signature creation

data are, within the context in which they are used, linked to

the signatory and to no other person; and if any alteration to

the electronic signature, made after the time of signing, is

detectable; respectively.

21 Mambi Adam, J (2010) ICT LAW BOOK: A Source Book for Information and Communication Technologies and Cyber Law, p. 97

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Therefore, under the Model Laws, e-signatures are valid and have

the same force and legal effect as any physical signature

provided that their reliability is satisfied. However, Tanzania

has not yet moved into adopting the Model laws on e-signature.

This might be due to the reason that ICT is at its initial stages

for takeoff, with very few IT experts in the country who could

help in detecting the reliability of e-signature. For example, an

e-signature which was first signed on a paper then scanned and

affixed to a Microsoft word document would look like a picture in

the document, upon which another person could deal otherwise,

e.g. copying the signature and using it in other documents which

the original maker had not intended to be bound.

Experience from other Jurisdictions

Some countries provide for the legal recognition of e-contracts

and e-signatures. The UNCITRAL Model laws have been adopted by

some countries including South Africa, Australia, Britain, and

the U.S. on the other hand the EU adopted the Electronic Commerce

Directive22 which contains provisions that highlight the legal

recognition of electronic contracts in the situation where

domestic laws require that contracts be made in certain forms

under paper based methods. Article 9 of the said Directive

provides that:

“Member states shall ensure that their legislation allowscontracts to be concluded electronically. Member statesshall in particular ensure that the legal requirements

22 See Directive 97/7, OJ 2000 L 178/112

applicable to the contractual process neither prevent theeffective use of electronic contracts nor result in suchcontracts being deprived of legal effect and validity onaccount of their having been made electronically.”

In South Africa, the Electronic Communications and Transactions

Act specifically regulate electronic communications including e-

contracts and e-signatures. This law recognizes e-contracts and

gives them validity same as is provided under the UNCITRAL model

laws. On e-signatures this Act provides that: “where the

signature of a person is required by law and such law does not

specify the type of signature, that requirement in relation to a

data message is met only if an advanced electronic signature is

used.”23

In Australia, the government has developed security standards and

module of authentication electronically. For instance, the

Australian Taxation Office public key infrastructure provides

businesses with digital certificates so that they can

authenticate themselves to gain access to personalized services

within the Business Portal and Electronic Commerce Interface.24

This enables businesses to access government transactions online.

In the US, efforts to codify the law governing electronic

contracts have met with mixed success. The federal Electronic

Signatures in Global and National Commerce Act and the state

23 See section 12(1) of the Electronic Communications and Transactions Act24 Mambi Adam, J (2010) ICT LAW BOOK: A Source Book for Information and Communication Technologies and Cyber Law, p. 110

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Uniform Electronic Transactions Act, have been very successful,

largely because they address only a narrow range of all the

issues raised by technological innovation in contracting

practices.25

In early shrink-wrap cases, US courts showed a reluctance to

enforce strictly standard form contracts. In Arizona Retail Systems,

Inc. v. Software Link, Inc.26 the court held that the shrink-wrap license

might be part of the contract with regard to the first sale of a

copy of software. When the licensee placed an order by telephone

after having inspected that first copy and the licensor did not

insist in that phone call that the terms in the form contract

were part of the agreement, the shrink-wrap license terms were

deemed not to be included in the subsequent telephone order

contract. In later shrink-wrap cases, however, courts have been

more willing to enforce all the terms in shrink-wrap licenses. In

ProCD, Inc. v. Zeidenberg,27 Judge Easterbrook of the Seventh Circuit

held that a shrink-wrap license included with a CD-ROM containing

a non-copyrightable database was enforceable to limit the rights

of the purchaser of the CD.

Generally, experience from other countries shows that, many

countries around the world have moved into adopting or enacting

25 Jane K, Winn and Jens Haubold; “Electronic Promises: Contract Law Reform and E-Commerce in a Comparative Perspective” accessed through http://www.law.washington.edu/Directory/docs/Winn/Electronic_Promises_Revised.pdf 26 831 F. Supp. 759 (D. Ariz. 1993).27 86 F.3d 1447 (7th Cir. 1996).

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specific laws in their jurisdictions aimed at regulating

electronic transactions and issues arising from e-commerce and e-

signature. Tanzania has not yet decided to cope with this

development move in legislating specific laws of e-transactions;

the Electronic and Postal communications Act,28 still does not

regulate issues of e-signature and e-contracts.29

SUGGESTED SOLUTIONS

The discussion above has pointed out the discrepancies that exist

in our laws when electronic transactions are concerned. It is the

recommendations of this paper that the government and policy

makers should do the following. First is to adopt or enact laws

on e-commerce and e-signature issues. This will enable

individuals and businesses that wish to transact electronically

to have a more secure environment in contracting and transacting.

Second is to amend the evidence Act and broaden the scope of

electronic evidence that is admissible under the Act. The current

position of the Evidence Act, though courts have tried to adopt a

more liberal way, does not provide enough opportunity for parties

who transact electronically to be assured the legal

enforceability of their transaction. Thirdly is to amend those

laws which require writing and signing of document as mandatory

requirement to recognize data messages as legally valid.

28 Act No. 3 of 201029 Part II of the Act deals with Electronic Communications; it seems to have contemplated only normal communications via media, mobile phones, and the internet, but not to regulate e-commerce issues.

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CONCLUSION

It is of interest to stress at this ending that, Tanzania being a

country whose economy is growing within the diversity of

technological advancements has no reason for raging behind such

development trend. With the increasing globalization and

technological interconnectedness, Tanzania has to do whatever it

takes to remove the discrepancies that exist in her laws in

dealing with e-contract and e-signature issues.

The government has to promote technology and commerce/trade. In

the contemporary world these two fields go together and where

there is a lacuna in the laws to regulate such fields then

individuals are at risk in case they transact in such unregulated

environment. The government should not adopt the policy of

“transact at your own risk” but should make sure that people have

a safe transactions environment by enacting laws.

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REFERENCES

International Instruments

The EU Electronic Commerce Directive, Directive 97/7, OJ 2000 L

178/1

The UN Convention on the Use of Electronic Communications in

International Contracts, 2007

The UNCITRAL Model Law on Electronic Commerce with Guide to

Enactment, 1996

The UNCITRAL Model Law on Electronic Signatures with Guide to

Enactment, 2001

National Laws

The Companies Act [Cap. 212 R.E. 2002]

The Electronic and Postal communications Act, No. 3 of 2010

The Electronic Communications and Transactions Act (SA)

The Evidence Act [Cap. 6 R.E. 2002]

The federal Electronic Signatures in Global and National Commerce

Act (U.S)

The Land Act [Cap. 113 R.E. 2002]

The Law of Contract Act [Cap. 345 R.E. 2002]

The Local Customary Law (Declaration) (No. 4) Order, Government

Notice (GN) 436/1963, Schedule 1, Laws of Wills [Sheria za17

Wosia], in Judicature and Application of Laws Act, TANZ. LAWS

SUBSIDIARY LEGIS. [CAP 358 R.E. 2002]

The Sale of Goods Act [Cap. 214 R.E. 2002]

The State Uniform Electronic Transactions Act (U.S)

The Written Laws (Miscellaneous Amendments) Act, No. 15 of 2007

Cases

Adams v. Lindsell (1818) 1 B & Ald.681

Arizona Retail Systems, Inc. v. Software Link, Inc 831 F. Supp. 759 (D. Ariz.

1993)

Brantley v Wilson (2006) U.S Dist. Lexis 17722

House Fire Insurance v. Grand (1879) L.R.4EX.DN.26

ProCD, Inc. v. Zeidenberg 86 F.3d 1447 (7th Cir. 1996)

Books

Lloyd, I.J. (2011) Information Technology Law, 6th Ed, New York: Oxford

University press

Mambi Adam, J (2010) ICT LAW BOOK: A Source Book for Information and

Communication Technologies and Cyber Law, Dar es Salaam: Mkuki na

Nyota Publishers

Online Materials

Jane K, Winn and Jens Haubold; “Electronic Promises: Contract Law

Reform and E-Commerce in a Comparative Perspective” accessed

through18

http://www.law.washington.edu/Directory/docs/Winn/Electronic_

Promises_Revised.pdf

Law Reform Commission, Final Report on E-Commerce and Cyber

crimes, 2006 accessed through

http://www.lrct.go.tz/download/position-paper/Positionpaperon

e-COMMERCEadobe.pdf

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