Electronic Business: Concepts, Methodologies, Tools, and Applications (4-Volumes) P197 ppsx

Upon acceptance of goods automatic at end of inspection period, the escrow company pays the buyer.8 Use of an escrow agent offers protections to both the buyer and the seller.. Beware of

The Second Law of the Playground:

The Trusted Third Party

If children cannot or will not engage in a

simul-taneous exchange they will often enlist the aid

of a trusted third party A parent or elder sibling

will be called upon to hold both prized toys and

deliver the items to each party

The third party is responsible for making sure

each party gets the bargained for item In legal

terms this is an escrow7 contract Use of an

es-crow protects both parties since the eses-crow agent

only releases the items upon proper receipt from

both parties Farago v Burke (1933) (The court

UXOHGWKDWWKHHVFURZDJHQWKDVD¿GXFLDU\GXW\

to both the buyer and seller to release funds only

upon performance of agreed upon obligations)

Moreover, the agent must release the items once

in proper receipt from both parties Moore v Trott

(1909) (The court ruled that once the agreed upon

conditions are met, the escrow agent must deliver

the items held in trust) Failure to release the items

subjects the escrow agent to liability Bruckman v

Parliament Escrow (1987) (The court ruled that

the escrow agent liable for intentional or negligent

failure to perform duty to buyer or seller)

Not surprisingly, this arrangement is available

for online transactions Typically transactions

with online escrow companies follow this basic

pattern:

1 Buyer and seller conclude their agreement

2 Buyer sends payment to escrow company

 (VFURZFRPSDQ\QRWL¿HVVHOOHURIUHFHLSW

of funds

4 Seller ships goods

5 Buyer receives and accepts or rejects goods

(limited time for inspection)

6 Upon acceptance of goods (automatic at end

of inspection period), the escrow company

pays the buyer.8

Use of an escrow agent offers protections to both

the buyer and the seller For the buyer, any risk

of not receiving the item or receiving the wrong item is eliminated The escrow agent cannot re-lease the funds until the buyer has had a chance

to inspect the goods

The seller is also protected by this arrangement First, the escrow agent is responsible for making sure that the funds really exist before notifying the seller to ship This eliminates the possibil-ity of things such as a check being returned for LQVXI¿FLHQWIXQGV

Use of an escrow company is not free of charge For example, escrow.com charges a minimum of

$25 for any transaction and uses a sliding scale that ranges from 3.25% to 0.89% of the total transaction value.9 For small transactions, the $25 fee is enough to render the service too expensive However, for larger transactions, the fee is modest compared to the potential risk For example, the escrow fee for the sale of a $7,500 item is $169, 2.25% of the sale price

'HVSLWH WKHVH EHQH¿WV IHZ DXFWLRQ EDVHG trades have made use of an escrow agent (Sor-kin, 2001) Sorkin suggests that escrow use is not more widespread because of the cost and the fact that users tend to ignore the risk involved in transactions

Unfortunately, use of an escrow company is not without its own risk First, the company must be

a trusted third party A common scam involving

escrow agents is where the escrow company is in reality a front for the scam artist, often the same person as the seller (Barrett, 2004)

-XVW ¿QGLQJ D SURSHU HVFURZ FRPSDQ\ LV D challenge For example, Sorkin (2001) suggested,

³WKHUH DUH VHYHUDO RQOLQH HVFURZ VHUYLFHV WKH best known of which is Tradenable (formerly i-Escrow).” Despite being the best known online escrow service during Sorkin’s research in 2001, Tradenable closed its doors in December of the same year (Rao, 2001) As with any online trans-action, updated research is critical for a prudent businessperson

Multiple Exchanges

Another way to limit risk is to spread it out over

multiple orders Rather than taking all the risk

in a single order, splitting it into smaller orders

will help to spread the risk out For example, if

our buyer wanted to get 12 wooden statues from

the Kenyan crafter, the parties could agree on

three separate shipments of four statues While

this will increase the cost of shipping and

insur-ance slightly, it helps protect both parties from a

complete loss on the entire order

This relatively simple method is attractive

because it helps both the buyer and seller mitigate

their risk without substantial cost

Risks in Misunderstanding the Deal

Regardless of the form of the transaction, the

parties should be sure to clearly communicate the

deal One of the problems with remote

negotia-tions is that the parties may interpret terms and

SURPLVHVGLIIHUHQWO\'RHV³JHQXLQHHERQ\´PHDQ

the same thing to the Kenyan seller and foreign

buyer? If shipping costs are not mentioned who

pays? Who bears the risk if the item gets lost or

damaged in the post?

Parties to online transactions should take care

to clearly and carefully describe the terms of the

deal Many international commercial transactions

rely on special terms, called Incoterms, established

by the International Chamber of Commerce that

FOHDUO\GH¿QHWKHULJKWVDQGGXWLHVRISDUWLHVWR

a transaction.10 In business to consumer

transac-tions a consumer is not likely to understand terms

VXFKDV³&,)´$EHWWHUSUDFWLFHLVWRFOHDUO\VWDWH

the allocation of risks in the contract

)RU H[DPSOH ³7KLV SULFH LQFOXGHV VWDQGDUG

shipping by air and insurance from us to your

address The customer is responsible for any

custom duties or other costs.” Being clear at this

stage can prevent misunderstandings and will

help avoid disputes

Beware of the Payment Risks

In the event that the parties choose not to use an escrow agent, there is a risk that the payment will not reach the seller The level and nature of the risk varies with the payment method

Sorkin (2001) divides payment methods into traditional and online systems In 2001, according WR6RUNLQ³>S@HUVRQDOFKHFNVDQGPRQH\RUGHUV are the most commonly used payment mechanisms for online auction transactions.”11 However, the current trend has seen that increasingly, credit cards have become the main means of payment Moreover, personal checks are less likely to be used in international transactions given the

dif-¿FXOW\DQGFRVWZLWKFDVKLQJWKHP7KLVVHFWLRQ will examine the risks and advantages of each of the main payment systems

Personal Checks

Personal checks present a variety of risks for both parties For the seller, personal checks, in DGGLWLRQWREHLQJFRVWO\DQGGLI¿FXOWWRGHSRVLW FDQEHVXEMHFWWRUHMHFWLRQIRULQVXI¿FLHQWIXQGV

if the account does not have funds to cover the payment when cashed

)XUWKHUWKHUHLVDVLJQL¿FDQWGHOD\EHWZHHQWKH time that the check arrives with the seller and the point when the seller actually receives the funds This delay increases the risks Another problem ZLWKWKHGHOD\LQYROYHVÀXFWXDWLRQVLQH[FKDQJH rates The longer the time between the sale and WKH¿QDOGHSRVLWRIWKHIXQGVWKHJUHDWHUWKHULVN

of the exchange rate changing

A personal check also presents risks to the buyer With a check, the buyer has little recourse should something be wrong with the item ordered Once a check has been deposited there is virtu-ally nothing the buyer can do to stop payment For these reasons, personal checks are not an attractive method of payment

Money Orders

For the seller, money orders offer a bit more

protec-WLRQVLQFHWKH\DUHLVVXHGE\¿QDQFLDOLQVWLWXWLRQV

and not normally at risk for return due to

insuf-¿FLHQWIXQGV0RQH\RUGHUVGRKRZHYHULQFUHDVH

costs since the issuing institution will levy a fee

The seller is also likely to be charged a separate fee

to deposit the funds into her account In addition,

the money order physically has to travel from the

issuing institution to the seller This delay results

in similar exchange rate risks associated with the

personal check discussed

The buyer is similarly at risk when using

money orders Should something be wrong with

the order there is virtually nothing the buyer can

do to withhold payment on a money order For

these reasons, money orders are not very

attrac-tive

Cash

It almost goes without saying that cash is a highly

risky form of payment However, despite the

obvi-RXVULVNV6RUNLQREVHUYHG³>V@XUSULVLQJO\

cash is another popular payment mechanism for

online auction transactions.”

The risks with cash are numerous First,

cur-UHQF\LVIUHTXHQWO\³ORVW´LQPDLOLQJ(YHQLILWLV

not lost there is no way to track that it was actually

received by the seller Second, counterfeit

cur-rency is a risk to the seller Third, depending on

the denomination and currency, the seller might

KDYHGLI¿FXOW\H[FKDQJLQJLW)RUH[DPSOHROGHU

bills are often not accepted

Credit Cards

Credit cards are increasingly becoming the

pay-ment means of choice for many online consumers

From the buyer’s perspective, a credit card allows

for the funds to be more quickly deposited reducing

risks of changes in exchange rates Moreover, with

a credit card payment there is no risk of return IRU LQVXI¿FLHQW IXQGV 3D\PHQW YLD FUHGLW FDUG DOVR UHPRYHV GLI¿FXOW\ ZLWK IRUHLJQ H[FKDQJH since the merchant can charge the customer in one currency and receive payment in another Finally, a one-click credit card order has fewer steps to allow the consumer to change her mind before the sale is completed

7KHFUHGLWFDUGLVQRWZLWKRXWGLI¿FXOW\IRUWKH seller however First, obtaining a merchant account LQRUGHUWRUHFHLYHFUHGLWFDUGVFDQEHGLI¿FXOWIRU small merchants In addition, credit cards take a percentage of every transaction from the payment thereby increasing the cost to the seller Finally, a buyer can dispute a charge through their credit card company and the seller will receive a chargeback until the matter is resolved While attractive to

a buyer, this uncertainty in payment makes the credit card less attractive to a seller

From the buyer’s perspective, a credit card KHOSVUHGXFHWKHULVNVVLJQL¿FDQWO\)LUVWPDQ\ cardholder agreements give the right to the buyer

to dispute charges In these cases, the credit card company will issue a chargeback to the merchant pending resolution of the matter (Sorkin, 2001) Moreover, federal regulations in the United States give a cardholder the right to dispute charges and requires the credit card company to conduct a reasonable investigation, 12 CFR 226.13 (2006) Finally, a credit card eliminates any risk with changes in exchange rates since the transaction occurs almost instantly

Some buyers are however reluctant to relin-quish their credit card numbers online for fear of interception by nefarious parties With the rise in awareness of identity theft, consumers are right-fully weary of releasing too much information

to unknown parties online There are ways to mitigate against this risk such as one-time use credit card numbers These numbers are issued

by the buyer’s credit card company and are linked

to their primary account The number can only be used for one transaction, thereby eliminating the

risk of future fraudulent charges on the same

ac-count Credit card companies continue to develop

safer methods for online transactions

Online Payment Systems

With the expansion of online commerce there

has been a parallel expansion in forms of online

payment eBay’s PayPal12 is the industry leader;

however, on June 29, 2006, Google introduced

a competing service, Google Checkout.13

Typi-cally these services stand in between a buyer

and a seller and help facilitate transfer of funds

In this sense, online payment systems resemble

credit card transactions and have most of the same

advantages and disadvantages

One added advantage is that although online

payment companies do not serve as an escrow

agent,14VHUYLFHVVXFKDV3D\3DOKDYHZHOOGH¿QHG

dispute mechanisms.15 If the parties conducted

their transaction under the umbrella of eBay there

LVWKHDGGHGEHQH¿WRIKDYLQJWKHDXFWLRQSD\PHQW

and dispute mechanism all operated by the same

corporate entity The advantages of this will be

further discussed in the third section

Cost is another advantage associated with

online payment systems For example, for

interna-tional transactions under $3,000, PayPal charges

the merchant 3.9% + $0.30.16 Google Checkout is

free through December 31, 2007, thereafter the

charge will be 2% + $0.20 per transaction.17 It is

also relatively easy for a merchant to establish

an account, comparatively easier than getting a

credit card merchant account

The online payment system is equally

attrac-tive to buyers The transaction happens nearly

instantaneously, they are well protected in the

event that they do not get the goods they bargained

for, and they do not have to relinquish their credit

card numbers over the Internet With an online

payment system, their personal information is

protected and their credit card number is not

released to the merchant

Reducing Risk Final Comments

Risk is something that cannot be completely eliminated from any transaction Even in the simultaneous exchange on the playground, the SDUWLHVUXQULVNVVXFKDVODWHU¿QGLQJODWHQWGH-fects They also face more immediate risks such

as being beaten up and losing everything In the online world there are unavoidable risks as well However, by structuring the exchange and using proper payment systems, both buyers and sellers can limit these risks

Despite these efforts, should a problem arise, what recourses might our seller and buyer avail themselves of in this online world? The third section discusses the various methods available for dealing with online disputes

DEALING WITH DISPUTES

The short answer is that for the vast majority

of online international transactions, if a dispute arises, the aggrieved party has already lost By WKHWLPHWKHSDUW\KLUHVDODZ\HU¿OHVDFDVHDQG eventually prevails in court, the party will prob-ably have expended more than the value of the dispute Moreover, even if the party prevails and obtains a judgment, enforcement of a judgment in the foreign jurisdiction of the other party will be prohibitively expensive if not altogether impos-sible The traditional judicial system fails small and medium enterprises engaged in international transactions

Online Dispute Resolution (ODR) offers hope and better access to justice for these parties There are many interpretations of the scope of ODR This chapter will use the commonly cited

$PHULFDQ%DU$VVRFLDWLRQGH¿QLWLRQ

ODR is a broad term that encompasses many forms of alternative dispute resolution (ADR) that incorporate the use of the Internet, websites, email communications, streaming media and other

information technology as part of the dispute

resolution process Parties may never meet face

to face when participating in ODR Rather, they

might communicate solely online.

7KLVGH¿QLWLRQPDNHVLWFOHDUWKDW2'5LVDZLGH

concept contemplating a variety of methods of

FRPPXQLFDWLRQ 0RUHRYHU 2'5 LV D ÀH[LEOH

concept that will expand to include new forms of

communication as they come into existence

ODR can be broadly divided into three

cat-egories: online negotiation, online mediation, and

online arbitration This section will analyze these

categories and evaluate them from the perspective

of a small to medium enterprise

Advantages of ODR Over Traditional

ADR

ODR has many advantages over traditional ADR

First, ODR is convenient since it eliminates the

need to travel great distances to meet face-to-face

It is also relatively inexpensive and generally

much faster than its traditional counterparts

Moreover, most ODR methods do not require the

assistance of an attorney Finally, ODR offers an

online environment already familiar to our online

seller and buyer They chose to enter into their

relationship online; it only makes sense to resolve

any disputes in the same environment

Online Negotiation

At its essence, negotiation is no more than the

parties discussing their dispute in an attempt

to resolve it If the parties can come to mutual

understanding, they can end their dispute and

perhaps continue their business relationship

Ponte (2005) argues that face-to-face

negotia-WLRQLV³RIWHQDJDPHRIEULQNPDQVKLSERWKVLGHV

posture and make excessive demands and offers

to settle…in short, a game of legal ‘chicken.’”

Moreover, in face-to-face negotiation, people

often employ pressure tactics and other strategies that make it very stressful Online negotiation eliminates many of the problems For example, intimidation tactics that rely on physical presence are obviated online Online parties are forced to address the merits of the dispute rather than rely

on other tactics

While online negotiation can be done entirely

by the parties such as through an exchange of e-mail, there are two types of online negotiation WKDWLQYROYHWKHKHOSRIDWKLUG³SDUW\´18: assisted negotiation and automated negotiation

Assisted Negotiation

Assisted negotiation involves the use of informa-tion technology to help the parties organize their thoughts (Kaufmann-Kohler, 2004, p 13) By way

of example, Kaufmann-Kohler cites software that helps organize proposals from both sides Normally the assistive software is designed

to help the parties identify the issues and move towards a mutually agreeable settlement Square-Trade19 is an example of a site offering assisted negotiation services At SquareTrade, assisted negotiation is free of charge If the parties cannot reach a resolution, SquareTrade offers other ODR services for a charge

The advantage of assisted negotiation is that it

is easy, free (in the case of SquareTrade), and has

a very high success rate According to Katsh and Rifkin (2001), SquareTrade direct negotiations have an 80% success rate (p 24)

SquareTrade is closely aligned with eBay and RIIHUVDSURFHGXUHWRVSHFL¿FDOO\DGGUHVVQHJDWLYH IHHGEDFNRQH%D\6TXDUH7UDGHDOVRRIIHUVD³VHDO program” that is similar to the trusted third party FHUWL¿FDWLRQGLVFXVVHG(VVHQWLDOO\6TXDUH7UDGH incorporates several of the strategies to help reduce risk and increase trust between parties

Automated Negotiation

If the parties are disputing over a single issue such

as price, automated negotiation can be a useful

tool Some scholars refer to automated

negotia-WLRQDV³EOLQGELGGLQJ´3RQWH &DYHQDJK

p 39) These systems allow the parties to enter

their offers but do not reveal the amount to the

RWKHU SDUW\ ³,I WKH RIIHUV DUH ZLWKLQ D FHUWDLQ

range, often 30 percent, of each other, the parties

[automatically] agree to settle and split the

differ-ence” (Katch & Rifkin, 2001, p 61)

In addition to being simple and low cost or free,

these systems also protect the offers in the event

that no settlement is reached In other words, a

party is not forced to reveal its bottom line during

the negotiations Cybersettle20 is an example of a

site offering automated negotiation services

One limitation of automated negotiation is

that it normally can handle cases with only one

variable in dispute, such as price If the parties

are disputing price and an apology, the simple

software cannot account for both variables

A relative new site called SmartSettle21 has

much more sophisticated software that allows for

multivariable negotiations Essentially,

SmartSet-tle lets the parties assign their own values to the

different variables For example, one party might

value an early payment more than a higher total

payment This party would be willing to accept

a lower total payment if it was made relatively

quickly SmartSettle allows these interests to be

taken into account and should result in better

settlements than in traditional blind bidding would

allow Since SmartSettle is relatively new, there

LVQRWHQRXJKGDWDWRGUDZDQ\¿UPFRQFOXVLRQV

but it looks promising

Online Mediation

Online mediation started in the United States in

July 1996 (Kaufmann-Kohler & Schultz, 2004,

S,QWKH¿UVWFDVHDQRQOLQHRPEXGVRI¿FH

helped mediate a dispute between a Web site owner

and a newspaper.22 Within less than a month, the RPEXGVRI¿FHKHOSHGWKHSDUWLHVUHDFKDPXWXDOO\ agreeable solution

At its essence, online mediation is the use of a third party (a real person unlike assisted negotia-tion) to help resolve a dispute between two or more parties Since this process necessarily involves a third party, the cost increases dramatically over the often free online negotiation process In fact, sites such as SquareTrade offer negotiation free

of charge, relying on online mediation to provide income to the company

Mediation can be helpful since the neutral third party can listen to both sides and offer suggestions

to help move the parties to settlement In the case

of SquareTrade, an eBay seller can get negative feedback removed Given the importance of the feedback rating to parties, this can be a strong motivation to use these services

The success rate of online mediation is

dif- ¿FXOWWRDVVHVVVLQFHPRVWUHVROXWLRQVDUHFRQ¿-dential (Kaufmann-Kohler & Schultz, 2004, p 26) Kaufmann-Kohler and Schultz estimate that RQOLQHPHGLDWLRQDWOHDVWDVRI³GRHVQRW appear to have scaled great heights There are over 25 providers of online mediation, but none seems very active except SquareTrade” (p 26

citation omitted) As of December 2006,

accord-LQJWR6TXDUH7UDGHLW³KDVKDQGOHGRYHUPLOOLRQ disputes across 120 countries in 5 languages.”23 Unfortunately, SquareTrade does not break down its cases in to negotiation and mediation

In any case, mediation can be a useful tool for resolving disputes Given the increase in cost, it

is more appropriate for larger disputes than for negotiation The parties should try online negotia-tion, only if that fails should they escalate things

to mediation

Online Arbitration

The online negotiation and mediation methods result in a mutual agreement in successful cases Arbitration is different; the parties submit their

cases to a third party for a ruling In this sense,

arbitration is more hostile in that both (and in some

case neither) agree with the ultimate ruling

The process normally involves the parties

submitting their cases to an arbitrator or a panel

of arbitrators The parties are required to set

out both the facts and the legal basis for their

arguments This often requires the assistance of

legal counsel, further adding to the costs The

DUELWUDWRUVZLOOUHYLHZWKH¿OLQJVWDNHHYLGHQFH

through videoconference or other means, and

render a judgment

The primary problem, aside from cost, is the

fact that enforcement of the agreement is not

assured In the case of a mutually agreed upon

resolution through negotiation or mediation, it is

more likely that the parties will comply with the

DJUHHPHQWVLQFHWKH\DI¿UPDWLYHO\DJUHHGWRLW

In arbitration, the parties may disagree with the

DUELWUDWRU¶V¿QGLQJVDQGUHIXVHWRFRPSO\ZLWKWKH

decision The issue of enforcement of an arbitral

award is similar to enforcement of a court

deci-sion In both cases, small or medium businesses

ZLOO¿QGWKDWHQIRUFHPHQWLVERWKH[SHQVLYHDQG

in many cases nearly impossible

Ultimately, online arbitration suffers from too

many of the shortcomings of traditional courts to

be of much use to small and medium businesses

doing international business These businesses

are advised to try to solve their disputes through

negotiation or mediation

CONCLUSION

Returning to the Kenyan seller and foreign buyer,

in order for their transaction to occur, they must

overcome the problems of lack of trust and high

risk To address these problems, before the

transac-tion occurs, both parties can take steps to increase

their trustworthiness Further, once they agree to

proceed with the transaction, there are steps they

can take to reduce the risk to both sides

If a problem arises, the buyer and seller can UHVROYHWKHLUGLVSXWHHI¿FLHQWO\DQGWRWKHVDWLV-faction of both parties through the use of online dispute resolution

A seller should look at joining a private marketplace that offers all of these services For example, eBay has ways to track reputation and offers good methods of communication through both asynchronous and synchronous communica-tion methods eBay’s ownership of PayPal offers a relatively risk free method of ensuring payment for goods Finally, eBay also has a relationship with SquareTrade, allowing sellers to avail themselves RI WKLUG SDUW\ FHUWL¿FDWLRQ RQOLQH QHJRWLDWLRQ and online mediation services This integrated approach makes online marketplaces such as eBay very attractive for merchants

One problem that this reveals is that online justice is increasingly becoming privatized This privatizing of justice has caused some to argue WKDW³H%D\ODZ´LVGHYHORSLQJRXWVLGHRIWKHSXEOLF legal system Common disputes are being resolved FRQ¿GHQWLDOO\DQGZLWKRXWRYHUVLJKWE\WKHMXGLFLDO branch Without feedback over the problems, the courts and the legislature cannot react and make the necessary changes to laws

Although the legal system has failed the small and medium enterprise engaged in online inter-national transactions, should the private sector provide private justice? While less of a concern

to the enterprises, this should be a concern for policy makers

FUTURE RESEARCH DIRECTIONS The Traditional Economy

This chapter has focused on traditional transac-tions involving the sale of goods between remote parties Online payments and dispute resolution systems will continue to evolve to help facili-tate these types of transactions As this area is still relatively undeveloped, there will be many

$V D QHHG LV LGHQWL¿HG SDUWLHV ZLOO UXVK WR

provide services such as is the case with e-escrow

services Many of these services will be similar

in nature to existing services There will also be

LQQRYDWLYH PHWKRGV RI DGGUHVVLQJ WKH VSHFL¿F

concerns with online commerce Researchers

should look for needs that need to be addressed

and consider their own innovative methods of

solving them

The Virtual Economy

Although this chapter addressed transactions

in the traditional economy, increasingly, trade

is being done in virtual goods As commerce

expands into the virtual space, so will disputes

)RU H[DPSOH PDQ\ FRPSDQLHV KDYH RI¿FHV LQ

the virtual world of Second Life Moreover, as

recently as September 2006, according to Colin

Rule, eBay’s Director of Dispute Resolution, the

most often traded commodity on eBay consists

of virtual goods These virtual goods range from

gold for online games such as World of Warcraft

to real estate in other virtual worlds Online,

virtual dispute resolution will eventually come

to these online worlds

These online worlds exist in a grey area in

terms of legal enforcement Courts are reluctant

to enforce contracts for virtual goods In fact, in

early 2007, eBay decided to ban the sale of virtual

items from online games (Pham, 2007) eBay’s

an-nouncement underscores the legal uncertainties,

³:HFDQ¶WVD\GH¿QLWHO\LILW¶VOHJDORULOOHJDO´

Who is the actual owner of these virtual goods,

the company providing the environment or the

³FLWL]HQV´ WKHPVHOYHV" +RZ VKRXOG D FRQWUDFW

be enforced in an online world? This virtual

economy and its real disputes is an area ripe for

additional research

REFERENCES

American Bar Association Task Force on

E-Com-merce and ADR (2002) Addressing disputes in

electronic commerce Final Report and

Recom-mendations Retrieved December 9, 2006, from www.law.washington.edu/ABGA-eADR

Barrett, R (2004) Take the money and run: Fake online escrow services target big-ticket

buyers Consumer Reports Retrieved September

8, 2006, from http://www.consumerwebwatch org/dynamic/e-commerce-investigation-take-the-money-and-run.cfm

Black’s Law Dictionary (6th ed.) (1990) Saint Paul: West Publishing

Chauhan, J (2003) Online dispute resolution systems: Exploring e-commerce and

e-securi-ties Windsor Review of Legal and Social Issues,

15, 99.

Edelman, B (2006, September 6) Adverse

Selec-WLRQ LQ RQOLQH ³WUXVW´ FHUWL¿FDWLRQV Retrieved

from http://www.benedelman.org/publications/ advsel-trust-draft.pdf

Epstein, L (2001) Symposium: Alternative dis-SXWHUHVROXWLRQLQWKHWZHQW\¿UVWFHQWXU\&\EHU e-mail negotiation vs traditional negotiation: Will cyber technology supplant traditional means of

settling litigation? Tulsa Law Journal, 36, 839.

Ewing, G P (2002) Technology and legal prac-tice symposium issue: Using the Internet as a resource for alternative dispute resolution and

online dispute resolution Syracuse Law Review,

52, 1217.

Katsh, E., & Rifkin, J (2001) Online dispute

UHVROXWLRQUHVROYLQJFRQÀLFWVLQF\EHUVSDFH San

Francisco: Jossey-Bass

Kaufmann-Kohler, G., & Schultz, T (2004)

Online dispute resolution challenges for con-temporary justice The Hague, The Netherlands:

Kluwer Law International

Lodder, A R., & Zeleznikow, J (2005) Article:

Developing an online dispute resolution

environ-ment: Dialogue tools and negotiation support

sys-tems in a three-step model Harvard Negotiation

Law Review, 10, 287.

My virtual life: A journey into a place in

cyber-space where thousands of people have imaginary

lives Some even make a good living Big

adver-tisers are taking notice (2006, May 1) Business

Week.

Ogunnaike, L (2006, November 26) ‘Yours truly’

The e-variations New York Times Retrieved

December 9, 2006, from http://www.nytimes

com/2006/11/26/fashion/26email.html?ex=1165

726800&en=dcac567c9dbefa8a&ei=5070

Pham, A (2006, February 3, 2007) eBay bans

auctions of virtual treasures: Players of online

games spend big on digital loot But the site is

worried about legal issues Los Angeles Times,

p Business 1

Ponte, L., & Cavenagh, T D, (2005) CyberJustice

online dispute resolution (ODR) for e-commerce.

Upper Saddle River, NJ: Pearson Education,

Inc

Rao, R (2001) Tradenable reaches the end of the

road Online reporter Retrieved September 2007,

from LexisNexis (3183239)

Rule, C (2002) Online dispute resolution for

business B2B, e-commerce, consumer,

employ-PHQWLQVXUDQFHDQGRWKHUFRPPHUFLDOFRQÀLFWV.

San Francisco: Jossey-Bass

Rule, C (2006) Comments at Center for

Informa-tion Technology and Dispute ResoluInforma-tion

Cyber-week conference Sept 25-29, 2006 http://www

odr.info/cyberweek2006/program.php

Selis, P., Ramasastry, A., & Wright, C S (2002,

June) Bidder beware: Toward a fraud-free

mar-ketplace—Best practices for the online auction

industry :DVKLQJWRQ 6WDWH $WWRUQH\V 2I¿FH

Retrieved December 9, 2006, from http://www

atg.wa.gov/consumer/Publications/auction_best_ practices082302.doc

Shah, A (2004) Using ADR to resolve online

disputes Richmond Journal of Law &

Technol-ogy, 10, 25.

Sorkin, D E (2001) Payment methods for

con-sumer-to-consumer online transactions Akron

Law Review, 35, 1.

Tusser, T (1557) Five hundred points of good

hus-bandry Liverpool, UK: Kessinger Publishing.

Whitman, M (2006) Keynote address

Proceed-ings of eBay shareholders convention Audio

transcript of the keynote available at: http://www wsradio.com/internet-talk.cfm/radio/ebay-key-note-2006.htm

CASES

Bruckman v Parliament Escrow, 190 Cal App 3d 1051 (Cal Ct App 1987)

Farago v Burke, 262 N.Y 229 (N.Y 1933) Moore v Trott, 156 Cal 353 (Cal 1909)

REGULATIONS

12 CFR 226.13 (2006)

ADDITIONAL READING

Fisher, R., & Brown, S (1988) Getting together

building relationships as we negotiate New

York: Penguin

Fisher, R., & Ury, W (1991) Getting to yes:

Negotiating agreement without giving in New

York: Penguin

Ury, W (1993) Getting past no negotiating your

way from confrontation to cooperation New

York: Bantam

Web Resources

Center for Information Technology and Dispute

Resolution, http://www.odr.info/

Center for Information Technology and Dispute

Resolution has a very comprehensive listing of

materials in their online library, http://www.odr

info/library.php

International Forum on Online Dispute

Resolu-tion, http://www.odr.info/liverpool/

Findlaw is an excellent site for getting general

OHJDOLQIRUPDWLRQKWWSZZZ¿QGODZFRP

The United States Small Business

Administra-tion has very good informaAdministra-tion for small business

owners; http://www.sba.gov/

ENDNOTES

1 $³92,3PH´EXWWRQLVDOLQNRQD:HESDJH

that allows a user to instantly commence a

voice over IP (VOIP) telephone call with the

party Skype is one such VOIP service

2 http://www.bbbonline.org/

3 http://www.webassured.com/

4 http://www.squaretrade.com/

5 For example, TRUSTe (http://www.truste

org/³LVDQLQGHSHQGHQWQRQSUR¿WHQDEOLQJ

trust based on privacy for personal

informa-tion on the Internet We certify and monitor

web site privacy and email policies, monitor

practices, and resolve thousands of consumer

privacy problems every year.”

6 ³6HFRQG/LIHLVD'YLUWXDOZRUOGHQWLUHO\

built and owned by its residents.” It offers

an environment where people can sell

vir-tual goods for online currency that can be

H[FKDQJHGIRU³UHDO´FXUUHQF\KWWSVHFRQ-dlife.com/

7 ³(VFURZ$OHJDOGRFXPHQWVXFKDVDGHHG

money, stock, or other property delivered

by the grantor, promisor or obligor into the hands of a third person, to be held by the latter into the happening of a contingency

or performance of the condition, and then

by him [or her] delivered to the grantee, promisee or obligee A system of document transfer in which a deed, bond, stock, funds,

or other property is delivered to a third per-son to hold until all conditions in a contract IRUIXO¿OOHGHJGHOLYHU\RIGHHGWRHVFURZ agent under installment land sale contract until full payment for land is made.” Black’s Law Dictionary, sixth edition, page 545, West publishing Co 1990, Henry Campbell Black, M A

8 For example see https://www.escrow com/solutions/escrow/process.asp (visited September 8, 2006)

9 https://www.escrow.com/support/calculator asp (visited September 8, 2006)

10 http://www.iccwbo.org/incoterms/id3045/

index.html Also see http://www.iccwbo.

org/incoterms/wallchart/wallchart.pdf for

a handy chart depicting the differences in the terms

11 Sorkin cites Andy Roe, E-Payment Reluc-tance, AuctionWatch.com (Mar 2, 2001),

at http://www.auctionwatch.com/awdaily/ features/reluctance/ (noting that over 80%

of eBay sales involve payment by personal check, money order, or cashier’s check); National Consumers League, supra note 2 (noting that 69% of buyers pay by check, money order, or cashier’s check)

12 http://www.paypal.com/

13 https://checkout.google.com/

14 For example, in PayPal’s help section WKH\VSHFL¿FDOO\VWDWHWKDWWKH\DUHQRWDQ escrow agent https://www.paypal.com/ cgi-bin/webscr?cmd=_help-ext&nodeid  OHD¿G  SULRUBWUDQVDFWLRQB id=33405&answer_id=16777216 (accessed December 9, 2006)

and a seller and help facilitate transfer of funds

In this sense, online payment systems resemble

credit card transactions and have most...

posture and make excessive demands and offers

to settle…in short, a game of legal ‘chicken.’”

Moreover, in face-to-face negotiation, people

often employ pressure tactics and. ..

informa-tion on the Internet We certify and monitor

web site privacy and email policies, monitor

practices, and resolve thousands of consumer

privacy problems every