Remarks on UCITA in Practice: Attorney Views
 
Volume VIII, Issue 1,
Fall 2001

Remarks on UCITA in Practice: Attorney Views
 
by: Richard Grier[*]
 
Cite As: Richard Grier, Remarks on UCITA in Practice: Attorney Views, 8 RICH. 
J.L. & TECH. 10 (Fall 2001) at 
http://www.richmond.edu/jolt/v8i10/article10.html.

{1}I agreed to talk about the default sections, which I'm going to talk about in 
just a minute. I learned this morning by listening to Mr. Ring, the default 
sections take up two-thirds of the Act. And I didn't realize that when I agreed 
to take up the default sections, but actually that's okay because the other 
thing I found during the day is that practically every other speaker you have 
heard has talked about default sections. Most of what I have to tell you, you've 
heard a little piece of already. What's different, though, is that I want to 
talk about it as a lawyer. Now you thought about it as an advocate. We've talked 
about it as an advocate. We've talked about it as a consumer. And we talked 
about it as a legislator, what's good or bad, what's right or wrong. And as 
lawyers you know that this stuff is interesting. That's not what matters. What 
matters is what is there. What is in the Act, and what does it mean for our 
clients. Now one of the things you will find when you start reading these Acts 
compared to what you have heard is that you will end up saying to yourself a 
time or two, "does it really say what I have heard?" And you need to keep asking 
yourself that question. Because as lawyers that's the analytical process we go 
through. I want to point out, as I go through briefly some of what are the most 
interesting default sections, what those sections are, and I want to encourage 
you to write the sections down and go at least read those sections.

{2}Now one other thing that's interesting to me as the beginning point, and that 
is this: Do our clients care about this thing? And right now my answer to myself 
is, I'm not sure they do. I had a meeting earlier this week for a presentation 
on technology. There's a consulting group, a fair size integrator, and then a 
representative of a continuing education section of a private university in 
Central Virginia. And I asked that group, do you think we ought to cover UCITA? 
Because we're going right to the time when UCITA is becoming active. And they 
all said, "Nah, people don't care about UCITA." And there's a reason why that 
may be true. You may have heard Delegate May and Mr. Ring say earlier that what 
UCITA does is to try to take the business practices already in place and codify 
[them]. I was talking to one of the other participants earlier today, and he was 
confirming that same notion. UCITA in a lot of ways takes what people have been 
doing and puts it into some form that makes it more recognizable and gives us as 
lawyers a better way to understand it. If that's true, then it helps me 
understand why they care less about it than we do. Now the thing is, I tend to 
think that my clients ought to care about something in direct proportion to how 
much trouble it is for me to figure it out. So this is the Act and Official 
Comments. You go through this sucker two or three times, and you tend to think 
your clients ought to care a lot. And so far they don't. Now I talked to Carla 
[Witzel], and Carla is from Maryland, Maryland adopted it in October, and she is 
going to say a little bit about what an avalanche of litigation has occurred in 
Maryland as a result of the adoption of UCITA in October. But there [are] 
actually a couple of other examples of a legislation that we thought was going 
to cause tremendous change. One is the ADA. You probably remember when the ADA 
came along people thought it's going to generate an enormous activity. It 
didn't. Y2K is another example, and that's an interesting combination of legal 
and technology. But for a lot of reasons a trillion dollars of litigation didn't 
happen. So there's reason to think that this might be a revolution quietly, that 
our clients maybe care less about it than we do. But that just remains to be 
seen.

{3}So with that introduction, let's talk about some of the basic default rules, 
and I want to give you some code sections, and I want you to go read them. 
Choice law and all of these are in 59.1, so I may say 59.1 or I might not, so 
choice law in Virginia is in [§59.1-501.9]. The default rule is that Virginia 
law applies. Now, the default rules assumes there's nothing in the contract. The 
issue of whether Virginia law applies is part of the general issue about whether 
there are sufficient contacts, sufficient presence so that Virginia law will 
attach. So you have a default ruling that it is subject to the other rules that 
we already are familiar with. I'm not supposed to talk too much about contract 
rights, but I will a little bit from time to time. The parties can and should 
say in the agreement what law applies. This is an area where you need to do that 
because, as you know, there are enormous questions about how contacts are going 
to be figured out. And the other party whoever that is will always argue that 
the case cannot be brought in Virginia.

{4}If you have it in the contract, then that may solve it. It may not. Here's 
why I say that. Virginia law says if you say in your contract that Virginia law 
applies, it does. Now the old rule, the UCC [Uniform Commercial Code] rule, was 
there had to be a reasonable relationship between the parties and a contract in 
order for that state's law to apply. Virginia decided not to put that in. That 
is not part of Virginia law. The law simply says if the parties agree that 
Virginia law applies, it applies. Now an interesting sort of correlative to that 
is (in fact, I asked Connie Ring this question after his presentation), why 
wouldn't everybody who cares, no matter where they live or work or their 
business is say in the contract that Virginia law applies so that UCITA would 
apply? And [Connie Ring] said a lot would. Now once they do that, you run into 
conflict of law issues in their own state. So if they're in California, have no 
connection to Virginia whatsoever, California law might have something to say 
about it. The Virginia law says that they can do it. And so, put your choice of 
law provision in your agreement.

{5}With regard to choice of forum, it's right behind that: [§59.1-501.10], 
there's no default rule on choice of forum. But Virginia law says you can choose 
a forum provided it's not done for the purpose of defeating the rights of the 
other party. It goes on to say as long as there's a business reason for it, then 
most likely it will be followed, unless it's a mass market transaction. Now the 
rule in the mass market transaction, as modified by a little bit of legislation 
in the past, it not only has to be specifically stated, and in all contracts it 
has to be specifically stated, it has to be conspicuous. Well now, do you think 
a sophomore at Stanford cares that the $30 piece of software conspicuously 
states that Virginia is the forum for a suit? So, saying it's conspicuous, 
that's something, but for me it doesn't do a whole lot. So look at the basic 
rules, and include both of those in your basic contract.

{6}The issue of receipt is in [§59.1-501.2]. Basically it's in the definition 
rules, and we've heard a lot of discussion about this issue of receipt. And the 
words, you'll have fun with the words, you have to pack so much stuff into 
statutory language that you end up with stuff like this: receipt occurs when the 
notice or a record comes "into existence in an information processing system or 
at an address in that system in a form capable of being processed by or 
perceived from a system of that type by the recipient"[1] . . . I won't read the 
rest of it. The criticism of that rule is an e-mail sent to your e-mail address 
is deemed received. And that's true whether you read the e-mail or not. It's 
true whether you have an e-mail filter system or not, whether you have any other 
kind of system that keeps you from getting the e-mail or looking at it. But you 
know it's very similar to the rule we've always had about mail. Mail is valid 
when sent [by regular mail] if properly addressed, or [to a] valid address. So 
it's not much different from the rule we've always had. It's made more 
complicated by the technology, but the fundamentals of the rule are not that 
different.

{7}Manifest assent, you've heard a lot about that from a lot of different 
speakers. This is the shrinkwrap versus clickwrap, and I think we sort of 
described that assent requires that you see the terms of the agreement. One way 
or another, you have to see the terms of the agreement in order to manifest 
assent. And the statute says you have a reasonable opportunity to reject it 
after you see the terms of the agreement. What's reasonable depends on the 
circumstances of the case. Part of the issue there is whether after you already 
have it, are you going to take the trouble to reject it. And, again, that's 
really in the hands of the consumer or the purchaser in [the] case of a 
nonconsumer transaction.

{8}There are some statute of frauds type rules. In [§ 59.1-502.1], a contract 
requiring payment of $5,000 or more for the duration of more than a year needs 
to be documented either in writing or in some form that does document it, either 
electronically or otherwise. So there is that kind of rule regarding those 
contracts. We talked about the battle of the forms, that's in [§ 59.1-502.4], 
and it's the usual rules with a wrinkle. The standard rule, you know, you send a 
contract to the other side, they make a change in it, and then send it back to 
you. Then, three rules [apply]. [The] first rule [is], if the change they have 
made materially changes the essence of the transaction of the contract, then 
there is no contract unless you have an agreement. Now there's a related rule 
that says if their change requires that you agree to it, whether or not it 
changes the essence of the contract, then that also applies. But the basic rule 
is they sent it back, if it changes the essence of the contract, there's no 
contract unless you agree. And there's no surprise there. [The] second rule 
[is], which is a little bit of a surprise, if it does not change the essence of 
the contract, but it makes certain changes in the contract, then you have a 
contract, but those changes that have been proposed are not agreed [to]. So you 
have to agree on those or else they're not part, they're not terms of the 
contract that's been agreed to. The third thing that you should watch out for, 
is a rule that says if the parties are merchants, then, if you are a merchant 
and a change in provisions comes back to you, that term will be deemed accepted 
unless you respond to it. Now, as I was looking at the definition of merchant, 
and I encourage you to look at that, there is a special rule for merchants that 
you need to be aware of and be careful about.

{9}A couple of rules on number of users. You've heard a lot of talk about 
exclusiveness and limitations on use. Again, if you have a contract that 
provides the limitations on use that applies, [and] if you don't say how many 
users can be made available, then the rule is that there will be a reasonable 
number taking into account the commercial circumstances. That's an interesting 
rule. But again, if you want to restrict use, you better restrict use. Because 
otherwise somebody's going to have to figure out what "commercial circumstances" 
are, and you have to deal with that. Duration contract, [under §59.1-503.8], the 
default rule is, what a surprise, a reasonable time given in light of the 
circumstances, and a contract can be terminated in the future. The rule about 
termination is in [§59.1-506.16]. You should look at because it requires 
reasonable notice for termination if it is an access contract, and you've heard 
a little discussion about an access contract to an [application service 
provider]. Access contracts can be terminated immediately. Other contracts, you 
have to give reasonable notice to terminate. They can't necessarily be 
automatically terminated. There's an interesting default rule on termination in 
[§ 59.1-506.16] that describes the terms of the contract that survive 
termination. And this is what happens when you try to apply the new sort of the 
new technology to the old rules. The default rule is on a plain, ordinary 
termination the following things survive the termination: Obligation of 
confidentiality (that's probably not a surprise); obligation of nondisclosure; 
contractual limitations on use, if there are any; the obligation to return 
everything; the choice-of-law forum applies; obligation to arbitrate, if it's in 
the agreement; a term limiting the time for commencement of action, so a 
restriction on time for bringing a suit; an indemnity term; a term limiting the 
remedy; [and] an obligation to provide accounting. So take a look at the terms 
that apply even in the event [of] the termination of the agreement.

{10}Breach of contract rules are interesting and potentially a trap for the 
unwary, that's in § 59.1-507.1. Breach and remedy together: for every breach of 
contract, you're entitled to damages for breach. However, you're not entitled to 
terminate a contract for every breach. In order to terminate the contract, the 
default rule is that the breach has to be a substantial failure of an essential 
element of the agreement. Now that might be the rule now, but it just seems to 
be that goes a little bit beyond what I would have thought the normal rule is. 
It's a pretty serious requirement in order to terminate the contract on account 
of breach. The other rule that you should be aware of, if there is a breach then 
the party that is harmed has to give notice of their objection to the breach 
within a reasonable period of time or they waive the remedies of the breach. You 
know, we are accustomed to our contracts, so this can be changed by contracts. 
We're accustomed to contracts that say that the remedies apply whether or not 
you make any statement of that under the default rules. That's not the case. If 
the client has a remedy, they have to assert it.

{11}The self-help rules, the panel before didn't get to talk too much about 
that, actually I don't get to talk much about it either. The basic self-help 
rule, we have always been familiar with this, you can have self help as long as 
it's not a breach of peace, or there's no foreseeable risk of personal injury or 
physical damage to other parties. And that rule is still going to apply here. 
What we talk about are those time bombs, that the thing that you can put in 
someone else's system that can shut it down. And what Virginia law has done is 
put in place a number of things that ought to scare your client to death before 
they set that thing off. There's a 45-day notice. There's a provision that makes 
them liable if there's something called substantial harm to public safety or 
great harm to the public interest substantially affecting third persons. There's 
a set of rules that make it risky to set those bombs off. And, of course, as you 
may have heard earlier there's also rules in the mass market transaction that 
you can't do that in any case. So read the rules, that are in [59.1-508.15] 
about self help carefully. And while it's tempting for your client to have one 
of those and to set off, it may have a lot of risk to it that you want to be 
careful about.

{12}The changes by the General Assembly this time around were covered along the 
way. The best outline of those changes is one that followed Delegate May's 
presentation. Between that and the way you've heard about the changes, I think 
you pretty much picked up what's been changed. By in large I think they are 
enormous improvements on the Act. Fundamental work on the Act continues. Those 
changes helped the self help by making it clear that [there is] a lot of 
flexibility for the Consumer Protection Division to provide rules and 
regulations to protect mass market transactions and consumers. And so, in that 
regard, for your clients you have to look at not only the law, but what rules 
and administrative regulations are promulgated over time. Thank you.

ENDNOTES

[*]. Richard L. Grier is a partner in the Richmond office of Troutman Sanders 
Mays & Valentine LLP. He is a member of the American Bar Association Section on 
Technology Law, the Virginia Bar Association Intellectual Property Section and 
Health Law Section and a member of the Intellectual Property Section of Troutman 
Sanders. Mr. Grier was born in Charlotte, North Carolina. He received his 
Undergraduate Degree at Duke University and his Law Degree at the University of 
North Carolina and was admitted to the bar in Virginia in 1971. He has been a 
frequent speaker on technology subjects including "Changing Business to 
E-Business, Lorman Education Services, August 2000; Program Chairman, Greater 
Richmond Technology Council, Business to Business Technology Conference, July 
2000; "E-Law in the E-Business Environment," Greater Richmond Technology Council 
1999 E-Business Conference, October 1999; "Y2K and You," Continuing Legal 
Education, Bar Association of the City of Richmond, November, 1998. Mr. Grier is 
a member of the Executive Committee and Secretary of the Greater Richmond 
Technology Council, he is Chairman of the Board of Trustees of the Virginia 
Health Care Foundation and Vice President of the Board of Trustees of the 
Richmond Memorial Foundation.

[1]. VA. CODE § 59.1-501.2(a)(52)(ii) (Michie 2001).

Copyright 2001 Richmond Journal of Law & Technology