Cyber Law & Islamic

EthicsCICT3523

E-COMMERCE

DEFINITION

E-Commerce is the conduct of trade and commerce within the electronic environment of the global information economy.

According to Julian Ding the practice of e-commerce should consist of following elements:

a) There must be a commercial transaction. b) The transaction must be executed in an

electronic and digital medium. c) The physical presence of the parties to the

transaction is not a prerequisite. d) The system by which the transaction is

made exists in a public network.e) A system is considered to be an open

system f) The transaction is made regardless of

national boundaries.

BENEFITS OF E-COMMERCE

Cost saving - money, time and paper.

Increase of productivity. Increase of profitability. Access to customers anywhere

and anytime.

THE PROBLEMS

National existing legislation is either ‘outdated’ or ‘inadequate’ on the basis that it does not contemplate e-commerce or

It restricts the use of e-commerce by including requirements that do not easily translate into an electronic environment.

LEGAL OBSTACLES TO ELECTRONIC COMMERCE

1. Contract law 2. Evidence Law 3. Intellectual Property Law 4. Privacy 5. Financial Issues

FINANCIAL ISSUES Being an electronic network, electronic

commerce requires that payment must be made without using paper money. At present, the most common means of

effecting payment on the Internet is through the credit card systems.

There are disadvantages of using credit card whereby the customer has to disclose the number and it is a credit transaction so have to pay extra cost.

The practice is, the bank utilise what is called electronic fund transfer (EFT).

ELECTRONIC FUND TRANSFER (EFT)

EFT requires authentication to be done by the bank’s computer system that the request is in fact being made by an authorised party and would enable any purchaser to make payments for the purchase by instructing its banker to effect electronic fund transfer.

THE PROSESS 1. The seller must specify his bank account to the

buyer and other banking information. 2. If the buyer agreed to buy, he must then

instruct his bank to make the payment. 3. The buyer’s bank upon receiving the instruction

will have to authenticate that the instruction is genuine and not a fraud.

4. Once the authentication is done, the money be transferred.

5. The seller’s bank then confirms to the seller that it has received the money.

6. Once confirmation is received, the goods are allowed to be shipped.

THE PROBLEMS : JURISDICTION Identification of the location where an e-

commerce conducts its trade, to establish where the liability to tax is incurred.

This is because of the nature of an e-commerce; a) international in nature.b) provides service without any physical

presence. The laws on taxes are differ from

country to country.

OECD (Organization for economic co-operation & development) They endorsed the proposal guidelines

on taxation. One of the requirement is what is called

‘permanent establishment’. The vendor must have a fixed place of

business through which the business of an enterprise is wholly or partly carried on.

The problem is that whether a website or web-server can be considered to be a permanent establishment.

UK approach. In 1999, the UK government set out

policy on the taxation of e-commerce (adopted OECD guidelines).

US approach. Internet freedom tax.

Malaysia. No legislation which governs e-

taxation. Relevant statutes (Income Tax Act

1967 and Service tax Act 1975).

Cyber Law & Islamic

EthicsCICT3523

Legal issues in

cyber space

contracting

INTRODUCTION

The legal position of advertisement on the Internet.

Whether the transaction on-line is a valid contract or not?

How contract should be formed in an electronic environment?

Advertisement on the web-site

Advertisement is invitation to treat and not an offer.

It is just an invitation for further negotiation.

Exception; If a reasonable take it

seriously?

Whether the transaction is a valid contract or not? Normally, cyberspace contracting

takes place through Electronic Data Interchange (EDI), a technology and method that enables the transfer of information and legally relevant documents electronically to another for direct processing in other part’s information system.

Uniform Commercial Code (US) Based on three principles; liberal

construction, freedom of contract, good faith.

Parties may form a contract by any means sufficient to show agreement.

Writing includes printing, typewriting or any reduction to tangible form. Therefore EDI message stored on the hard disc should be sufficient ‘tangible form’ to qualify as writing.

Many countries have legislated laws on e-commerce. In Asia, 5 countries have legislated the laws on e-commerce such as Singapore (1998), Brunei and Filipina (2000), Thailand (2001), Myanmar (2004).

The Malaysian Parliament passed the Electronic Commerce Act 2006 (ECA),

The Electronic Commerce Act 2006 (“the Act”) was enacted and came into force on 19th October 2006.

DOES ISLAM APPROVES E-COMMERCE?

The problems arise when there is no express ayah in the text as regard to the new arising matter. Hence it is important to refer to the existing principles in usul al-fiqh and apply these principles to the current situation whenever it is possible.

DOES ISLAM APPROVES E-COMMERCE?

The problems arise when there is no express ayah in the text as regard to the new arising matter. Hence it is important to refer to the existing principles in usul al-fiqh and apply these principles to the current situation whenever it is possible.

Hadith “What Muslim deem to be good is

good in the sight of God.”

It is submitted that if the practice e-commerce has been actively anticipated by members in a society and it is proven that such practice does not create any disharmony or inconvenience, such the widespread practice of e-commerce is accepted.

E.g : Online shopping.

Maslahah also should be taken into consideration for the derivation of new laws. However, this does not mean that the Muslim can freely make laws with whatever they desire but the interest of man is based on the Lawgiver Himself.

There is some flexibility in coming out with new principles as regard to current issues. In laying down the new principles, it is important that one should not contradict any clear injunctions and basic Islamic principles. In cases where Islamic law is silent, reference to the man-made laws are possible as long as the regulations are not against Syari’ah.

Therefore, Islam approves electronic commerce because it gives lots of benefits to mankind as long as the laws regulating it is in line with Islamic law.

Here, we want to discuss what is the Islamic law governing law of contract.

E-COMMERCE AND THE ISLAMIC LAW OF CONTRACT

The basic rule is that trade is permissible in Islam.

Essential elements of a valid contract in Islam; 1. Offer and acceptance (sighah al-

aqad). 2. The contracting parties. 3. The subject matter of a contract.

1. OFFER AND ACCEPTANCE As regard to offer and acceptance,

the most important element behind this requirement is consent (rida).

Voluntarily consent from the parties and the consent of the object.

Surah 4:29 “O you who believe! Eat not your

property among yourselves in vanities: But let there be amongst you traffic and trade by mutual goodwill”

How to ascertain the consent of parties who are contracting through the Internet? What should be a criteria to determine there is consent between the parties.

In e-commerce, the consent is obtained once the buyer click the mouse and accept the offer by the seller in the internet and the popular method of payment is using the credit card.

2. THE CONTRACTING PARTIES The next requirement is that the consent

must be made by a competent person who has the qualities of prudence (aqil) and majority (baligh).

Hence to make e-commerce be accepted in Islam, the parties reach the age of majority.

In the Internet, should have a control and mechanism to ensure the parties involved are competent to enter into an agreement. By requesting the identity card numbers, one may know whether a person is competent or not.

3. THE SUBJECT MATTERS The subject matters or the transaction itself

must be free from the following elements, such as riba, maysir and gharar.

E-commerce has the potential to be exposed to the practice of riba when the parties involved use conventional credit card method for payment. When the buyer is not capable to pay what he has spent, the bank will charge a high interest and this interest be considered as riba. Although the subject matter of the transaction but it becomes void when they are other elements, which is unlawful in the eyes of shariah.

CONCLUSION The ethics of doing an e-commerce in

Islam can be summarized as follows; a) The agreement is enforceable b) The existence of mutual consent by both

parties. c) The contract is free from the elements of

uncertainties (gharar).d) The contract is free from the elements of

riba. e) The wealth acquisition or consideration in the

contract is not gained through unlawful sources (batil) and

f) The contract does not involve any kind of game of chance or gambling (maysir).