E-Contracting Challenges

A decade ago, IT — through its innovations in business process reengineering — led the way in breaking down the inefficiencies within companies. Firms in the new millennium now face relentless pressure to perform better, faster, cheaper, while maintaining a high level of guaranteed results. Firms must thus focus on their core competencies and outsource all other activities. Working with a partner, however, requires breaking down the inefficiencies between organizations and coping with frequent change across the entire end-to-end value chain. In this new world of collaborative commerce and collaborative souring, a standard business process is simply inadequate. Using e-contracts to build new business relationships and to fulfill e-contracts through the Internet are important trends. E-contracting is however not a new concept. The history of e-contracting can be reviewed from legal and technology aspects. Over the last 20 years or so, a growing body of research in artificial intelligence has focused on the representation of legislation and regulations (Sergor, 1991). As specific regulations, contracts are used to regulate the actions of twoor multi-party interactions. Gardner (1987) has developed contract formation rules. Her work concerns legislation about the nature of exchanges that lead to contractual relations. The ALDUS project and Legal Expert project investigated drafting the Sale Goods contract (ALDUS, 1992) and the United Nations Convention on contracts for the international sale of goods (Yoshino 1997, 1998), respectively. Detailed information on developing logic-based tools for the analysis and representation of legal contracts can be found in Daskalopulu (1997, 1999). The law regards contracts as collections of obligations; research in this area includes automated inference methods, which are intended to facilitate application of the theory to the analysis of practical problems. The purpose of a legal e-contracting system is to clarify and expand an incomplete and imprecise statement of requirements into a precise formal specification. In the early 1990s, the development of EDI (electronic data interchange) was a significant movement for electronic commerce. EDI was considered a term that refers solely to electronic transactions and contracts (Justice Canada, 1995). EDI requires an agreement between trading partners that not only dictates a standard data format for their computerto- computer communications, but also governs all related legal issues of EDI usage. In 1987, the first set of EDI rules was named the Uniform Rules of Conduct for Interchange of Trade Data by Teletransmission (UNCID, 1987). In 1990, the American Bar Association (ABA) published a Model Trading Partner Agreement and Commentary, together with an explanatory report (Winn & Wright, 2001). In 2000 IBM submitted to OASIS (for standardization) the first example of an XML-based EDI TPA language, called Trading Partner Agreement Markup Language (tpaML). While the EDI standard introduced efficient communication channels between companies, its implementation was not widely accepted due to its high installation costs, lack of flexibility, and technological limitations (Raman, 1996). With the development of the Internet, electronic contracting began to be interpreted in broader terms. In this new view, an e-contract is not only used as a legally binding agreement between a buyer and seller, but it can also used across different workflow systems to cross different organizational business processes (Koetsier, Grefen, & Vonk, 1999; Kafeza, Chiu, & Kafeza, 2001; Cheung, Chiu & Till, 2002) to integrate different Web services (Cheung et al., 2002, 2003). E-contracting has become synonymous with business integration over electronic networks.