Dela Cruz, Aimee Rose: The Rules on Jurisdiction and Conflicts of Laws Applied on Causes of Actions Arising from Online Purchases from e-Shops


I. Introduction

In this era of globalization and with the rise of multinational corporations, we witnessed how international merchandises penetrated our local market. Globalization made it possible for us to purchase imported goods in our local malls and department stores. However, although there was an increase in the volume, the choices were still limited. Due to importation costs, the retail prices of these products are quite costly.

The internet has provided a more effective way for countries and their economies to cross borders. The emergence of online shops paved the way for a relatively cheaper way of shopping locally and internationally. For international purchases, web shops offer the commodities in their actual price with minimal delivery charges as compared to their prices in the local market which are marked-up by the taxes and importation dues distributors are made to pay. Sometimes, e-stores even offer free delivery for advertising purposes. The difference in prices may also be attributed to the lower costs involved in keeping a website as compared to that of maintaining a physical store. As some websites charges are minimal, if not free of charge, its owners get the liberty to price their items competitively given the relatively small operational costs.

Apart from the competitive price, online shopping gives the consumer greater convenience. Would-be buyers need not leave the comfort of their homes or their offices as they can make purchases in front of their computers. It is possible to purchase an item from another country without having to travel or to visit their local distributors. Today, most multinational corporations maintain online shops to expand their market globally.

Another advantage of internet shopping is the wider choices [1] it gives to the consuming public. Online catalogs carry the latest collections which range from shoes, bags, perfumes, music albums, clothes, accessories, jewelries, toys, books, song, food among others. There are even sites which allow people to auction memorabilia, other collectibles and rare finds.

Finally, making an online purchase is relatively easier and more efficient. All it takes to make a purchase is to click on the preferred merchandise, accomplish the forms which require personal information, tick the “I agree with the Terms and Conditions” box and the transaction is done. Delivery will shortly follow based on the agreement and proximity of the parties’ location.

II. Philippine Setting

Online merchandising has now reached the Philippine shores as more Filipinos start to make businesses by utilizing the internet. Online shops have become popular in the country to budding entrepreneurs in introducing themselves to the consumers. Most of them use their online sites and social networks such as in multiply, sulit, tipid and even facebook to make themselves accessible to a large clientele who are also account users of these sites. Cupcakes by Sonja’s rise to fame was made possible by satisfied customers who blogged about her cupcakes. Axxes used to be a mere site in multiply and now it has its own branch in Mall of Asia. Belle de Jour planners were initially available through online purchases before they became available at the leading bookstores.

With the emergence of these online shops internationally and locally, internet has evolved into a global marketplace. However, although it has a number of advantages, we cannot countenance the fact that these online transactions may be used by other people to take advantages of others thereby causing them damage through breach, fraud and other similar acts. Hence, just like any other transactions, purchases made through e-shops are and ought to be governed by laws in order to protect the rights of both the seller and their consumers.

III. Definitions

Online shopping is defined as the process where consumers go through to purchase products or services over the Internet. An online shop, eshop, e-store, internet shop, webshop, webstore, online store, or virtual store evokes the physical analogy of buying products or services at a bricks-and-mortar retailer or in a shopping mall.

The metaphor of an online catalog is also used, by analogy with mail order catalogs. All types of stores have retail web sites, including those that do and do not also have physical storefronts and paper catalogs. Online shopping is a type of electronic commerce used for business-to-business (B2B) and business-to-consumer (B2C) transactions.

The term “Webshop” also refers to a place of business where web development, web hosting and other types of web related activities take place (Web refers to the World Wide Web and “shop” has a colloquial meaning used to describe the place). Buying online introduced new ways of reducing costs by reducing the number of staff needed. It is a more effective way of getting products to people and spreading into different demographics [2]. For purposes of this paper, webshop and such other similar terms are used interchangeably.

Online purchases are in the nature of a contract of sale with the distinct feature that the purchase involves the use of the internet, instead of a physical store. The contract itself is perfected, consummated and terminated via virtual communications, without the parties having to meet personally.

IV. Scope and Limitations of this Paper

For purposes of this paper, discussions will be limited to personal properties being sold in internet shops. Personal property are those which can be moved from place to place without injury to an immovable to which the object may be attached and not included in any of the ten paragraphs in Article 415 of the Civil Code [3]. This paper will be divided into sub-topics. The first part would tackle the causes of action for ordinary civil actions that will arise out purchases through the internet shops. Discussions however, will also cover to the extent applicable, criminal liabilities that may also be committed in the course of online purchasing under existing laws. The second part will deal on the issue of the courts’ jurisdiction and venue over these controversies both domestic and those involving a foreign element.

IV. Online Purchase as a Contract of Sale

Causes of action for ordinary civil actions under the Rules of Court are acts or omission by which a party violates a right to another [4]. Thus, any violation of the rights of the parties may give rise to an action against the other. These rights and obligations are created by virtue of the contract entered into by the parties which partakes the nature of a sale. A contract of sale under Article 1458 of the Civil Code of the Philippines is where one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other to pay therefor a price certain in money or its equivalent.

A contract of sale is perfected by the mere meeting of the minds of the parties. Applying the foregoing to an internet purchase, the buyer is deemed to have expressed his consent by agreeing on the terms and conditions laid down in the page where transaction is being made. As for the seller’s part, a notice will be sent confirming the transaction based on the mode of payment stipulated.

The terms of payment is agreed upon once the prospective buyer selects the modes enumerated therein which could either be in cash, credit card or even other electronic modes such as SmartMoney, G-Cash, among others. Once payment has been settled, delivery usually takes three days to one week depending on what was agreed upon.

Just like any other contracts, in case of breach or default, both of the contracting parties have the remedy to enforce the same under the provisions of the New Civil Code. Article 1495 sets forth the obligation of the vendor to deliver and to warrant the condition of the object of the sale. Hence, in the event the vendor fails to delivery the thing sold, the buyer has a cause of action against him which is to file for an action for specific performance with damages. The defense that the thing was lost prior to delivery will not in any manner diminish the liability of the seller following the principle of res perit domino that it is the owner of the thing who bears the consequences of its loss and that the general rule under Philippine jurisdiction is after perfection but before delivery, the risk is borne by the seller under the rule of res perit domino.[5]

In addition to the obligation to deliver, upon delivery of the thing sold comes with it the seller’s warranty of the object’s condition. The warranty may be implied or expressly agreed upon by the parties. However, any affirmation of the value of the thing, or any statement purporting to be a statement of the seller’s opinion only, shall not be construed as a warranty, unless the seller made such affirmation or statement as an expert and it was relied upon by the buyer.[6]

Since proof of payment is often required before the seller delivers, the instances where a buyer would default payment is very minimal. However, in case the seller and the buyer has already reached a perfected contract of sale and the buyer refuses to pay the said amount, the seller may opt not to delivery the object of the sale or if there is any forfeit his reservations.

V. Legal enforceability of online transactions

As discussed in the preceding section, as a contract, online purchases give rise to the creation of obligations which both parties must fulfill. Failure to do so gives the other party the recourse to enforce the performance of such obligation. The demand must be made through an extrajudicial demand, which is a condition precedent before a court action may be filed. The issue that needs to be addressed now is whether online purchases have the force and effect of valid transactions that may be proved before our courts of law although consummated through the internet.

First, to address the question, reference should be made on the definition of an electronic data message and an electronic document as defined under our Electronic Commerce Act (E-commerce Act). An electronic data message refers to information generated, sent, received or stored by electronic, optical or similar means [7], while an electronic document is an information or the representation of information, data, figures, symbols or other modes of written expression, described or however represented, by which a right is established or an obligation extinguished, or by a which a fact may be proved and affirmed, which is received, transmitted, stored, processed, retrieved or produced electronically [8].

In view of the above definitions, the messages exchanged between the parties containing the agreements and stipulations concerning the price, quality, quantity, manner of payment, delivery among other things that the parties entered into an online sale, partakes the nature of an electronic data message. Likewise, these messages or exchanges fall among the electronic documents as they establish mutual obligations between the parties.

Such being the case, as expressly provided for under the E-Commerce Act, information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the data message purporting to give rise to such legal effect, or that it is merely referred to in that electronic data message [9]. Hence, parties to an online transaction may validly enforce any agreements they had using the electronic document and or electronic data message as proof so long as the authenticity, integrity and reliability of the document is retained.

A legal action involving an electronic document or an electronic data message would only involve the parties to the online sale, the buyer and the seller. However, since this involves the use of the internet, imperative to address the question on whether the service providers may also be held liable for any of the acts committed by its users. In cases where the store owner also owns the site, the situation is relatively straightforward, however, when the store owner is different from the service provider, distinction must be made.

Under the E-commerce Act, the service provider shall not be liable to any civil or criminal liability in respect to the electronic document or electronic data message if the liability is founder on the obligations and liabilities of the parties under the electronic data message or electronic document. [10] Hence, since an online sale created rights and obligations between parties, the service provider may not be held liable in case of conflicts arising from the transaction. It is only quite logical considering that the being a private agreement between the parties, the service provider is not privy to its terms and hence, should not be made accountable for any of its breach or non-performance.

VI. Consumer Act of the Philippines

The fact that the transaction was made through electronic document or electronic data message does not render it outside the scope of Consumer Act of the Philippines (Consumer Act). Section 33 (c) of the E-commerce Act provides that violations of the Consumer Act and other pertinent laws committed in transactions covered by e-documents shall be penalized with the same penalties as provided in those Code. Hence, if the same involves a sale of merchandises that defraud the public, or those which are inimical to their health and welfare, the same may be tried applying the provisions of the Consumer Act notwithstanding the fact that they are electronic transactions.

VII. Access Devices Regulation Act

Since the transactions may be settled through use of credit cards, Access Devices Regulation Act of 1998 otherwise known as Republic Act 8484 finds application in these transactions. The said law penalizes the use of counterfeit, unauthorized access and even those fraudulently applied for. Thus, when one uses a credit card in purchasing online, he may be penalized under this law if he the same is counterfeited, unauthorized or fraudulently applied.

VIII. Jurisdiction and Venue of Action in Ordinary Civil Cases

The existence of one of more causes of action will suffice to commence a civil suit. Having established the validity and enforceability of online transactions and the remedies thus available to enforce the rights and obligations created by them in case they were violated, the ultimate concern of the plaintiff would be the proper court where the action must be filed.

Jurisdiction is the power to hear and determine the controversy before it [11]. It is vested by law and may not be subjected to stipulations between the parties. Jurisdiction over the subject matter is determined by the allegations in the pleadings while jurisdiction over the parties is acquired by the filing of the complaint on the part of the plaintiff and upon service of summons on the person of the defendant.

Since jurisdiction is conferred by law, the parties may not agree on which court will have jurisdiction over any possible litigation in case of breach or non-performance in their contracts. To do so will run counter against public policy, which is a limitation imposed by law [12] on the autonomy of parties to fix the terms of their agreements. This rule however admits exceptions, such as when the transaction involves a foreign element, i.e. one of the transacting parties is located or is a citizen of another country. In such case, the parties may adopt a borrowing statute that will govern the terms of their contract, which must be given effect by the Courts. In the absence of such, our courts may or may not assume jurisdiction and if it does, may choose to apply our own laws or the laws of the other countries depending on the circumstances attendant to the case.

For domestic online transactions, the jurisdictional amount should be observed in determining the proper court where the civil action must be filed. As for the parties, if the same may be readily identified, i.e. when the online store is a duly registered corporation maintaining an online shop, the complaint may be filed against it. Service of summons to a corporation under the Revised Rules of Court may only be served to the president, general manager, corporate secretary, treasurer or in-house counsel.[13] This enumeration is exclusive and hence, service of summons to any other person will not vest the court jurisdiction on the person of the corporation.

For partnership, service must only be made on the person of the managing partner.[14] For foreign corporations licensed to do business in the Philippines, summons may be served to their resident agent or in the absence of a resident agent, to the Securities and Exchange Commission or to any government agencies having control over the purpose of the said foreign corporation. [15]

In case of private persons, if the owner of the site may be identified, then he must be named in the complaint. When the true identity of the defendant may be not identified with certainty, he may be sued as an unknown owner or by such other designation as the case must required and upon discovery of his identity or true name, the pleading must be amended accordingly [16]. Although it is possible for someone to create an account or a website in the internet without disclosing his true identity, there are ways, though tedious, where the same may be traced using the Internet Protocol Address and the Media Access Control MAC Address or the physical address provided for an ethernet/network device [17].

Venue of actions, unlike jurisdiction, may be subjected to stipulation between the parties, but in the absence of such agreement, venue may either be at the place of residence of the plaintiff, or any of the defendant, or in case of a non-resident, where he may be found at the election of the plaintiff. [18] Corporations and partnerships may be sued in the city or municipality of its principal place of business.

IX. Conflicts of Laws

Jurisdiction, in the realm conflicts of laws, jurisdiction has essentially the same definition with the added element of possible enforceability in foreign states, subject of course, to the rights of said states [19]. Foreign element necessitates the application of the conflict of laws. A foreign element is present in a controversy when the circumstances necessitate the application of the laws of two or more different states. Thus, if an online sale involves a party who is a resident, a citizen or a subject of another country, then there is a foreign element that would require the application of the conflicts rules.

The allegations in the complaint read together with the proper jurisdiction laws confer jurisdiction to the court. Hence, if the issues in the complaint involve a violation of the rights of its subjects and violation against Philippine laws, our courts may take cognizance of it. Upon assumption of jurisdiction, the forum may apply its internal or domestic law when the law of the forum expressly so provides in its conflicts rules, when the proper foreign law has not been properly pleaded and proved and when it falls in any of the exception to the application of the proper foreign law. [20] Among these exceptions is when the parties have adopted a borrowing statute which will govern the procedural or substantial aspect of their relations.

Hence, an online transaction between a Filipino and an America may provide that American law will govern their contract. The borrowing statute or the law that the parties intended to govern their relations may be enforced only in so far as they do not contradict our laws and sound public policy of the forum. [21]

Courts ordinarily would refuse to assume jurisdiction if the case does not fall within its coverage. But even though possessed with jurisdiction, forums may also refuse to try the case on the ground of forum non-convenience. Some of the grounds to invoke forum non-convenience are when the evidence and the witnesses may not be readily available, when the dockets of our courts are clogged, when the forum has not particular interest in the controversy and when there are other open courts which may take cognizance of the matter. [22]

Considering that the other party to the online transaction may be located outside the territorial jurisdiction of the Philippine courts, the provision of the Rules of Court on extra-territorial service of summons must be observed. Rule 14 Section 15 enumerates the modes to serve the summons to a defendant who does not reside and is not found in the Philippines. One of the modes is to effect personal services by tendering it to the person of the defendant, through publication in a newspaper of general circulation in such place and for such time as the court may order, in which case a copy of the summons and order of the court shall be sent by registered mail to the last known address of the defendant, or in any other manner the court may deem sufficient [23]. Without a proper service of summons, the defendant has the recourse to move for the dismissal of the case because as far as his person is concerned, the court does not exercise jurisdiction.

X. Conclusion

The foregoing discussions reveal that there are existing laws that govern in general these online transactions. The fact that they were consummated through the internet and/or in between countries do not divest our local courts jurisdiction over them. This is may be somewhat comforting for us considering that these transactions are relatively novel, new and somewhat too technical too some. In the coming years, with the advent of advanced technology, we can expect an increase in the volume of consumers of a more sophisticated webshops with enhanced features. With development under its way, the law should not be left lagging behind. Our existing laws should be tailored to meet the exigencies and the demands of modern age technology and the complexity of human relations brought about by these changes.


Endnotes

[1] Wikipedia.org/wiki/online shopping accessed on 20 June 2009.

[2] Wikipedia.org/wiki/online shopping accessed on 20 June 2009.

[3] Tolentino, Arturo M. Commentaries and Jurisprudence on the Civil Code of the Philippines. 1992. p. 23

[4] Rule 2. Section 2. 1997 Rules of Civil Procedure.

[5] Villanueva, Cesar L. Philippine Law on Sales. 1998. p.163

[6] Article 1546. The New Civil Code of the Philippines.

[7] Section 5 (c) Electronic Commerce Act of the Philippines.

[8] Section 5 (f) Ibid.

[9] Section 6. Electonic Commerce Act of the Philippines.

[10] Section 30. Ibid.

[11] Herrera vs. Baretto, 25 Phil 245; De La Cruz vs. Moir, 26 Phil 213 cited in Philippine Conflicts of Laws. Paras, Edgardo L. 1996. p.25

[12] Article 1306.Civil Code of the Philippines.

[13] Rule 14 Section 11. 1997 Rules of Civil Procedure.

[14] Ibid.

[15] Sec 128. Corporation Code of the Philippines.

[16] Rule 3. Section 14. 1997 Rules of Civil Procedure.

[17] Guerrero, Michael Vernon. Technology and the Law. 16 July 2008. p.1

[18] Rule 4. Section 2. 1997 Rules of Civil Procedure.

[19] Fenwick. International Law. 1948.p 42 cited in Philippine Conflicts of Laws. Paras, Edgardo L. 1996. p.25

[20] Paras, Edgardo L. Philippine Conflicts of Laws.1996. p.39

[21] Ibid. p.94

[22] Ibid. p.36.

[23] Rule 14. Section 15. 1997 Rules of Civil Procedure.



Author licensed this article under Creative Commons Attribution 3.0 Philippine license

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