Hailey College of Banking & Finance

July 16 - 22, 2007

Telecommunication is the pivotal element of all the developments being made in the present era by virtue of its aid to Web. The time required to make contacts between the people has now come down in seconds. Most of the benefits of these advancements are being enjoyed by the big organizations on world-wide basis. Now most of the companies have converted their production systems on JIT basis, and the products being produced have also been customized. Many big organizations have introduced such an ordering system for its customers that as soon as the customer finalizes its order for any specific product all the orders regarding the manufacture of such product are automatically generated to the relevant suppliers of parts and raw materials. Using such type of order processing the organizations all over the world have been able to save time and resources worth Billions of dollars. All such developments in business systems are actually the results of the advancements in telecommunication.

Providing legal cover to all transactions made on web is another aspect of such advancement. In order to securitize the Web business here are some electro-legal instruments that can be used to provide legal cover to the interested buyer and seller:


There should be expressed provisions in the laws that contracts can be formed through e-mail exchanges and also through EDI (electronic data interchange). The Contract Law should provide that contracts may be concluded in writing, and the term 'in writing' refers to a form which is capable of tangibly representing its content, such as written instruments, letters, and electrically or electronically transmitted documents (including telegrams, telexes, facsimiles, electronic data interchange, and e-mail), etc. If parties to a contract come to an agreement over the internet, but wish the final contract to be in traditional form, they can stipulate that this must be the case. If neither party makes this stipulation, then an electronic contract is adequate.


The Contract Law should state that, in general, contracts will be concluded through offer and acceptance. The contract is formed when the acceptance becomes effective. For offers and acceptances made electronically, if the addressee will designate a specific system to receive the electrically or electronically transmitted document, the offer/acceptance document will be deemed to have reached the offeree/offeror when it enters the designated system. If no system is designated, the offer/acceptance document is deemed to have reached the offeree/offeror at its first entry into any of the offeree/offeror's systems.

The offer or acceptance therefore becomes valid as soon as it goes through the gateway of a company's internal computer network. Here the allowance can be made for the possible failure of a company's internal computer system to deliver a message from the gateway to the intended recipient's computer, or address in any other way the issue of whether or not the offer or acceptance has ever actually been opened or read.


A uniform legislation should be made to accept the bills of exchange and promissory notes in the electronic form to preserve their expediency in international trade during the third millennium. In the absence, however, of such a uniform legislation and in order to effectively analyse whether or not it is feasible to substitute the negotiable instruments with electronic variants, it seems to be necessary to examine whether those electronic variants satisfy the requirements of the present law. To do so, we will have to analyse in detail their characteristics with those outlined in the Negotiable Instruments Act 1881 which is the main statutory body providing for paper-based negotiable instruments in Pakistan. Although, our analysis will concentrate mainly on bills of exchange, however, due to the similarities in their application, the same provisions will apply to promissory notes correspondingly.


The letters of credit (L/C) are one of the most important areas of financing in international trade. This means that L/C cannot remain unaffected by technological advancement since that would be a crucial limp in any attempt for automating the financing instruments.

Documentary credits emerged largely without the benefit of legislation and thus, few countries have laws requiring them to be drawn up in any particular form. In this regard ICC rules play very important role to promulgate international uniform law for the L/C. However, the need for reform was not only evident to commentators and legal analysts. The ICC started to realize the insufficiencies of the present rules as far as e-L/C are concerned. After various surveys and analysis a working group was formed to draft a supplement to the UCP500 for those transactions that consist of electronic documents or part paper part electronic documents. After a semi-annual meeting held in Istanbul, Turkey on 21-22 November 2000, the ICC Banking Commission decided to materialize the "UCP Supplement for Electronic Presentation" or, in other words, the 'e-UCP'. It has the aspiration to provide a number of definitions so as to allow current UCP terminology to accommodate the presentation of the equivalent of paper documents electronically and also with the aim to make available, where necessary, rules to allow UCP and the e-UCP to work together. The e-UCP will not be automatically applicable with UCP600. It was in fact developed as a supplement to UCP due to the strong sense at the time that banks and corporations together with the transport and insurance industries were ready to utilize electronic commerce. Unfortunately, the hope and expectation that surrounded the development of e-UCP has failed to materialize into day to day transactions and its usage has been, to put it mildly, minimal. Owing to this lack of usage, it was felt that this was not the right time to incorporate the e-UCP into the UCP600 and it will remain as a supplement albeit slightly amended to identify its relationship with UCP600


There are also the inadequacies of the documentary collections to work effectively within the technologically advanced commercial reality. To put it in few words, the goods travel faster than financial and commercial documents and the buyer cannot get possession of the goods without those documents. The modernization of the practice seems to be necessary for the further existence of the collections. The essence of the electronic collection would be to speed up the process while at the same time to ensure that the buyer would not be able to get hold of the goods without the authorization of the bank to which they have been consigned as required by the URC.


After having examined the degree and the reasons why, it is desirable to substitute at some point in the future the paper-based mechanisms of financing in international trade with electronic variants, and having assessed the justifications that make that replacement necessary, it seems to be essential to scrutinize whether such a development is also feasible.

In spite of the obvious advantages of electronic financing methods, there are some impediments posed by the long tradition of paper-based transactions that have to be defeated so as to be replaced. The traditional paper-based payment systems retain the advantages of predictability and stability. The former arises from the fact that the parties to the commercial transaction can predict the relevant risks arising form their use, and the latter is evident in the existence of a well-established legal regime behind those transactions. The need for an international uniform law governing not only financial aspects but also generally commercial transactions is even more apparent nowadays where trade attempts to be conducted through the Internet. Nonetheless, we have already discussed in an individual basis (while analyzing those instruments) some of these issues; there are some further difficulties that should be underlined.