Newspaper Articles

This collection of articles was published in the Detroit Legal News from 1995-1997. All were written in the infancy of the modern Internet, before the landscape surrounding Internet legal and business issues began to develop. Access to the Internet largely consisted of dial-up connections on a 14.4 kbs modem or slower. Both the technology and state of the law have evolved considerably since these were first published.

Electronic Transactions Are Becoming Routine

Originally published July 24, 1996

The convergence of computers and telecommunications devices has allowed for paperless business transactions among entities of all sizes.

In order to save costs and improve efficiency, the federal government and many corporations are demanding supplier use of electronic technologies as a -condition of doing business. As a result, electronic commerce, Internet-based and otherwise, will continue to grow well into the next millennium.

Electronic commerce is the electronic exchange of business documents and information using data transfer technology. Current tools for electronic commerce include electronic data interchange (EDI), e-mail, computer bulletin boards, fax machines, bar coding and electronic funds transfer.

On the immediate horizon is Internet-based EDI and widespread Web-commerce - on-line purchases and sales of commodities and services over the Internet using digital cash or other payment mechanisms.

Electronic commerce has gained acceptance in the business community for a number of reasons, the most important being the tremendous cost and time-savings potential resulting from the elimination of paperwork and conventional delivery methods. Other advantages include error reduction through. elimination of re-keying of data and improved inventory and production management.

The most common vehicle for electronic commerce currently used by business and industry is EDI. EDI is the computer-to-computer exchange of business information among trading partners based on a set of standard protocols.

Once the domain of large corporations and their most trusted suppliers, EDI is currently used on a daily basis by more than 50,000 companies of all sizes in a variety of industries, including manufacturing, retail, utilities, pharmaceutical and health care. These businesses use EDI to send purchase orders, invoices, shipping notices, acknowledgements and other business and transaction documents.

In many industries, supplier use of EDI is mandatory. Moreover, as a result of new government procurement policies emanating from various executive orders and the adoption of the Federal Acquisition Streamlining Act of 1994, a majority of all government procurement will be conducted through electronic commerce and EDI.

Simply put, in near future you will be unable to do business with the government and many industries without electronic commerce and EDI capabilities.

EDI allows the transmission of data between computers with limited human intervention. At the heart of EDI is the use of uniform standards which allow communications among otherwise incompatible computers or data formats.

There are two principal standards used for EDI-based transactions. ANSI X12, developed by the American National Standards Institute, is the most popular North American standard. EDIFACT is the most popular international standard. These widely accepted standards set forth protocols for creating, formatting and sending data between businesses using EDI.

Because of the variety of business computers and available software, incompatibility among systems is common. EDI software is used to translate data to a standard format, such as X12, which is intelligible to the systems of all parties to the particular transaction.

Suppliers who are required to establish EDI capabilities can implement EDI through a service bureau which handles their EDI transactions. They may also obtain software for use on a dedicated standalone PC or for integration with other computers within the organization. While an integrated approach is the most expensive - typically costing $6,000 to 20,000 to set up - it offers the ability to combine EDI transaction data with other systems, including inventory management, accounts receivable and general ledger programs.

The parties to an EDI transaction are commonly referred to as "trading partners." Historically, trading partners have been parties with established or pre-existing business relationships who engage in a number of repeated transactions of the same nature. The rules regarding the EDI-activities among the trading partners are typically set forth in a written agreement negotiated and adopted through conventional contracting procedures.

Most trading partner agreements contain provisions similar to those found in many common business forms and documents. There are also a variety of EDI-specific provisions covering topics such as required standards, transaction security, message retention, obligations for system failure and message corruption, and identification of electronic messages and signatures.

Many EDI transactions are facilitated through use of value added networks or VANs. VANs are third parties to the EDI relationship who provide a variety of transmission-related services, including data storage and forwarding services, auditing and tracking of transactions, recovery of lost data, and technical support.

VANs also provide subscriber-based services, such as registration of trading partners, request for quotation (RFQ) posting, automatic bid submission, and market and business opportunity analysis.

EDI has historically been conducted on a party-to-party basis, directly or with a VAN intermediary. Pre-existing business ties between the trading partners are common, Efforts to implement widespread Internet-based EDI systems are well under way. In addition to increased cost savings, Internet based EDI offers the ability to establish dynamic multi-lateral relationships. Business transactions may be on a one-time basis or may evolve into stable bilateral relationships.

There are few reported cases involving legal disputes among parties to a conventional EDI transaction. In instances where the trading partner agreement doesn't resolve the dispute, the need to maintain the favorable relationship leads to resolution. However, trading partner agreements can be vague, cumbersome or ineffective, particularly in multi-lateral relationships with unfamiliar parties.

As the use of conventional and Internet-based EDI expands, an increase in legal disputes surrounding EDI based transactions is a virtual certainty.