New Jersey Law Journal August 27, 2007

E-commerce merchants, like their medieval predecessors, often use their own lex mercatoria, or merchant law, in lieu of traditional law.

E-Commerce Communities Employ Medieval Justice

Internet sellers employ extra judicial remedies similar to merchant law

By Jonathan Bick

Bick is counsel to WolfBlock Brach Eichler of Roseland and is an adjunct professor of Internet law at Pace Law School and Rutgers Law School. He is also the author of 101 Things You Need To Know About Internet Law [Random House 2000].

            E-commerce merchants, like their medieval predecessors, often use their own lex mercatoria, or merchant law, in lieu of traditional law. On-line marketplace managers, like those people who managed medieval fairs, regularly require participants to change their behavior or face banishment. Medieval merchants resolved difficulties in accord with notions of fair dealing rather than invoke a specific body of substantive principles. Consequently, e-commerce participants may find the substantive law of merchants is applicable to e-commerce.

            E-commence merchants are required to transact business despite the lack of inter-jurisdiction commerce regulations. And, like their medieval predecessors, they cannot generally afford the time or cost of using local justice systems. As such, they resort to communal self help remedies.

            When e-commerce merchants deal with customers, they employ a commonly accepted set of protocol that supersedes the local commercial customs and substantive local laws. The use of such protocol does not shield the merchants from domestic law. E-commerce business professionals can be subjected to local jurisdictions. If a vendor has customers in a jurisdiction that may be deprived of their liberty, goods in a jurisdiction which may be seized, or a store front in a jurisdiction which may be forcibly closed, then a local government may impose its law.

            For common transactions, however, e-commerce merchants depend upon voluntary compliance. Such compliance is relatively easy to enforce. The Internet is highly structured with respect to the display of goods, payment and delivery. The identity of a customer is identifiable through his Internet Protocol address, just as the face of the customer was easily identified in medieval times.

            Consider the following similarity between medieval and Internet merchants. Medieval merchants displayed their goods prior to sales, conducted their business at the front of their tents, as apposed to behind their tents, publicly acknowledged the payable of goods and delivered the goods at the time of payment. E-commerce vendors describe their goods on the Internet prior to the sales, conduct their business using Internet protocols, as apposed to private networks, secure electronic payment and deliver goods after payment has been received.

            The medieval merchant law represented a dispute resolution process free of the oppressive control of local laws, which satisfied the merchant's needs. Such a legal process satisfies the needs of e-commerce professionals, as well. Merchant law is applicable to e-commerce because its broad principles are widely shared across time and place. In particular, the three most applicable principles are that justice should be swift and fair, that mercantile customs should be respected, and that the place of sale should not result in special costs.

            Merchant law is the convergence of best practices and communal self help. It is a substitute for merchants taking the law into their own hands. Merchant courts were established to hear cases arising out of transactions associated with medieval fair, many of which would naturally be commercial in nature. Merchant law is simply the "law of the market." It is similar to common law in matters such as prosecutions, defenses, defaults, delays, judgments and executions of judgments. Merchant law differs from the common law in three general ways. First, it delivers a judgment more quickly. Second, merchant law promoted fair play. Third, results were based on experience rather than on precedent.

            Merchant law includes some general principles. First, merchant law should move quickly. Records of merchant courts show most matters are resolved the day they are brought. Defendants who fail to appear are declared in default and the plaintiffs are entitled to seize those goods that had been attached to secure the defendants' appearance.

            Second, the substantive principles on which merchant law operates seem in large measure to be general principles of fair play. Three principles applicable to e-commerce are: promises ought to be kept; debts ought to be paid; and trespasses ought to be punished.

            Third, the outcomes of the application of merchant law are a result of expedience, not one preoccupied with the labored examination of statute and precedent. When a certain matter is considered, the consideration is only about the determination of the facts, and not about the principles that justified the action.

            Once merchant law is applied to a matter, the implementation of the results is tantamount to remedies. For example, an aggrieved party may be allowed to keep a deposit, seize a good or organize a boycott. When used without challenge, self-help does not depend on formal invocation of the judicial system and, thus, provides the rapid resolution that Internet and e-commerce legal difficulties sometimes require.

            Today some e-commerce sites, such as e-bay, act as the successor of medieval fairs. Normally e-commerce sites, like fairs of yore, have codes of conduct and people who enforce such codes. Also like medieval fairs, e-commerce sites may use their ultimate sanction to prevent future code violations, which is preventing past violators from future participation.

            The term "self-help" refers to private actions taken by those involved in a transaction to prevent or resolve disputes without assistance from a court, a governmental official or a disinterested third party. Merchant law is one type of self-help. It differs from most self-help, in that it is sanctioned by a group. In medieval times the group typically included fellow merchants. Today, the group usually includes on-line marketplace associations.

            The situations in which self-help may be invoked are varied. For example, on line orders may be suspended by the Web site operator when a user of the site fails to pay fees. Advertisements that violate the marketplace's terms of use agreement may also be suspended.

            Other examples of Internet related self-help include the withdrawal of previously deposited software source code with the user or a third party to be used in the event the code owner breaches a license contract (usually due to bankruptcy). Similarly, Web site producers and Internet network management firms are increasingly required to secure surety bonds to be paid in the event of a certified breach.

            A party may be required to deposit software that will ensure a merchant’s ability to continue to effectively use a Web site in the event of the operator’s inability to perform. In addition, surety bonds, in the form of performance or payment bonds, are common devices in the construction industry that are now being used in the Internet software and network management service industries.

            Medieval parties to a dispute rarely needed the aid of the local sovereign to enforce a merchant court's decision. The on-line marketplace disputes resolutions similarly operate without the benefit of state enforcement of contracts.

            Merchant courts have traditionally been conceived as highly informal affairs. When a fair-related dispute would arise, it would be resolved by four or five of the merchants applying generally recognized principles and customs. As e-commerce difficulties are brought to the attention of on-line marketplace associations, those difficulties are similarly dispatched.

            As medieval traders who refused to comply with a decision risked their reputation exclusion from trading, e-merchants face similar risks. E-commence site boards associated with e-commerce community sites use the threat of ostracism by the e-community as a means of enforcing a decision.