execution of contracts

27 August 2004

Debora Stella

The execution of contracts through electronic devices represents a current issue that is going to open new marketing scenarios. With the present article we would like to provide a few indications on the feasability to give execution to contracts by means of SMS and MMS taking into consideration the applicable law and the possible technical limits of this kind of operation.

Applicable Law

If it is in the interest of a service or goods provider to enter into supply or service agreements through electronic means under Italian laws, it should be evaluated against the relevant applicable legislation and, in particular, the Italian legislation on distance selling (Legislative Decree 22 May 1999, n. 185, which enforced the EU Directive 97/7/CE), the legislation on e-commerce (Legislative Decree 9 April 2003, n. 70, implementing the EU Directive 2000/31/EC) and the legislation on data protection (Legislative Decree 30 June 2003 n. 196, implementing in particular EU Directive 95/46/CE and EU Directive 2002/58/CE).

(i) Data Protection issues

Pursuant to art. 130 of the Italian data protection law, before any commercial proposal is sent via electronic means, and in particular via SMS or MMS, consent of the recipient must be obtained. This implies that the recipient should have received from either the provider of the goods or services or the direct marketer, information required by the Italian data protection law to be given in relation to data processing.

(ii) Contractual issues

Pursuant to the legislation on distance legislation and e-commerce, in addition to the information concerning data processing, the provider (or the direct marketer) is required at the same time to provide the consumer with a clear communication highlighting, inter alia:

(i) that the communication is a commercial communication

(ii) the subject on behalf of whom the commercial communication is made

(iii) that the recipient may refuse at any time any further commercial communication

In additional to the above information which has to be given to the recipient, before execution of the contract with the consumer, the provider (or the direct marketer) has to provide the consumer/recipient with the following essential information:

(i) the identity and address of the provider (or the direct marketer)

(ii) the main features of the good/service

(iii) the price of the good/service including applicable taxes

(iv) the payment and modalities for the supply of the service or of the delivery of the goods

(v) the termination right or exclusion of the termination right

(vi) the cost of communication between the provider and the consumer if different from ordinary tariffs

(vii) the duration of the offer

(viii) the minimum duration of the contract

(ix) the address where to notify claims related to the good/service

This information, as well as the contract terms and conditions, must be provided or made available to the recipient in a way which allows the recipient to store and reproduce it (the so-called “durable means” requirement).

The information requirements set out above are mandatory and neither the provider (or the direct marketer) nor the consumer can agree on any exemption or derogation from then on.

Contracts executed by means of SMS and MMS messages

In addition to the above, it should be noted that the execution of contracts by means of SMS and MMS messages raises some technical problems related to the full compliance of such operations with the requirements of law.

(i) Technical issues: complete information and durable mean

It is clear that compliance with the requirements for complete information on data processing and on the content of the contractual proposal may result in difficulties when the contract between the provider (or the direct marketer) and the consumer/recipient is restricted to electronic means such as SMS or MMS.

In addition, and assuming that complete information to the consumer/recipient is feasible via SMS or MMS, it should be noted that the provider (or the direct marketer) is also required to provide the consumer, before (or at the time of) execution of the contract, with information concerning the contract in writing or on a “durable mean”: the provider will have to manage the additional issues relating to the consumer’s right to obtain all the above information on a durable means which is usually unavailable to the most mobile phone handsets (without GPRS or “blue tooth” devices).

Therefore, for the time being, technical reasons (connected to the possibility of having all necessary information displayed and readable by the consumer, as well as properly amended by the latter, if required) are likely to bar innovative marketing campaigns using SMS or MMS channels.

(ii) Vexatious clauses

Another practical issue to consider in relation to execution of contracts via SMS – and within the limit of their validity in the case of the consumer – is the explicit and specific acceptance by the recipient of the so called “vexation clauses”, e.g. clauses providing for the limitation of liability, the withdrawal, etc.[1], included in the providers standard terms and conditions of the service/supply.

According to Italian law, these types of clauses are null and void unless specifically accepted in writing by the party adhering to them, i.e. the consumer/recipient. It is also evident that, in the absence of specific electronic means ensuring the validity of a written declaration from the recipient via SMS/MMS, that the contract would not be properly executed since the vexation clauses could not be duly accepted by the recipient via SMS or MMS messages.

In the light of the foregoing, and assuming that the provider would not easily be able with a simple SMS or MMS message to provide for all the aforementioned information, it will be necessary, at least, to direct the recipient/consumer to a web site displaying all the information and the terms and conditions of the service/supply and to provide them in a printable format.

[1] According to section 1341 of the Italian Civil Code, the “standard conditions prepared by one of the parties are effective as to the other, if at the time of formation of the contract the latter knew of them or should have known them by using the ordinary diligence”. These clauses refer to limitations on liability, the power of withdrawing from the contract, or of suspending its performance, or which impose time limits involving forfeitures on the other party, limitations on the power to raise defences, restrictions on contractual freedom in relations with third parties, tacit extension or renewal of the contract, arbitration clauses, or derogations from the competence of courts etc.