Legal and Ethical Environment of Business - Essay Example

Legal and ethical environment of business Before the UCC and the UCITA, Article Section 8 of the U.S. Constitution set out the rudimentary principles that regulated commerce. It allowed Congress to collect taxes and duties, to borrow money and to coin it, establish uniform rules on the subject of bankruptcies as well as providing for the counterfeiting of securities (www.topics.law.cornell). As a result, it lays out a basic framework for the regulation of commerce activities which are later set out in the Uniform Commercial Code. The objective of the UCC is to harmonize commerce and trade transactions between the fifty states in the USA; the provisions in the Constitution under Article 1, section 8 may be seen to have achieved the same objective. For example, Section 8 specifically seeks to “regulate commerce with foreign nations and among several states and with the Indian tribes”. (www.topics.law.cornell). Moreover, it also sets out the distribution of powers among the centre and the states, by setting out the arming and disciplining of the militia as the province of the central government while the appointment of the officers and the training of the militia are to be reserved by the States. In this way, this part of the Constitute sought to provide some form of overall regulation of trade and commerce occurring between the different states. Since this section also sets out the principles of borrowing and coining money as well as fixing standards and providing for punishments of illegal commerce activities such as counterfeiting of money, it did provide an overall system of governance in the area of commerce, which makes it the effective precursor of specific legal provisions such as the UCC and UCITA. 2. Article 2 of the UCC specifically deals with the rules regulating the formulation of contracts and the procedures association with the repudiation of contracts and any breach that occurs (Rumbaugh, 2004). As opposed to this, the UCITA is specifically formulated to regulate e-commerce and computer associated transactions. The UCC also has a more pervasive role because it deals with a much wider range of issues that have been found to be relevant in contract and have been applied over the years, such as consideration, breach of contract, the battle of forms and similar issues, which allows it to play a more pervasive role. As opposed to this, the UCITA poses an entirely different set of regulatory issues which arise in the context of the technological environment. These issues are still developing, such as software piracy, difficulties in detecting infringement and similar issues, all of which cannot be dealt with easily and require considerable flexibility in the legislation to incorporate changes. 3. The sale of a product in a legal sense is effectively the complete transfer of a product from one party to the other. Thus, when a sale occurs all the rights associated with the product and its use will be transferred from the seller to the buyer, so that the seller relinquishes any and all of his or her hold over it. Any further use or exploitation of the product that is sold will rest exclusively in the domain of the buyer and all rights associated with the product will pass to the buyer. Thus for example, if the product is a particular software, then the seller will lose all rights to modify the product or benefit from further adaptations or versions of the software. Licensing a product however, achieves only a limited transfer of rights on a particular product. When a product is licensed, the seller still retains the ownership rights over the product and only allows the licensor to make use of the product for specific uses and specific periods of time which are clearly set out. A licensor cannot therefore make use of the product in any manner which is not sanctioned under the license, neither can the licensor resell the product to anyone else or benefit from further modifications or improvements to the product. The ownership, title and ultimate rights over the product will still with the Seller, who can revoke the license at any time. In the case of a sale however, the seller loses all rights to the product and cannot get it back in any way other than buying it back from the seller. 4. At the outset, the UCITA was visualized as a regulatory measure that would merely supplement the provisions already spelt out in the UCC, regulating trade and commerce activities in the area of computer based transactions. However, there were some specific factors that were peculiar to the computer industry, which were quite dissimilar from the general trend for other kinds of commercial transactions and these were the reasons why UCIRA was formulated as a separate regulatory measure. These differences are spelt out below: (a) Most computer based transactions were license arrangements rather than direct sales. For instance, customers using various software packages, or offices modifying and tailoring software to suit the particular requirements of their industry did not allow them proprietary rights over the software, or a complete transfer of ownership rights in the property, such as that associated with the sale of other products.(www.www.cni.org) (b) There were a larger number of small sized computer firms involved in the computer industry rather than large corporations. (c) Issues such as privacy and free speech and their potential violations were involved in computer based transactions. The “unprecedented growth rate of the software industry” was bringing about changes to the economic sphere that had to be dealt with in a new and different manner because there were no similar precedents that could be applied on the basis of the UCC.(www.cs-faculty.stanford.edu) (d) there is a greater importance associated with the freedom to contract in technology transactions; for instance the availability of the online environment has provided for an ease and facilitation in contract not easily available in other sectors. But it also gives rise to other implications, such as the fact that stealing and piracy of products over the internet may be difficult to detect, so breach of contract and related issues can be much more difficult to prove in the context of technology. As a result, they may need different kinds of measures to deal with the complex issues that are raised in the context of computer based transactions and there was a need to formulate separate rules an d regulations to regulate ecommerce. (e) the Government needs a greater degree of impartiality in these computer based transactions because it cannot restrict the expansion of e-commerce and must ensure that it remains technologically neutral rather than supporting one firm or the other. As a result, it cannot intrude into the realm of contractual transactions between buyers and sellers of e-products to the extent that it is able to regulate the sale of other products. (f) There are issues of copyright and intellectual property rights arising in the field of software and technology which are peculiar to computer technology and are not easily replicated or found in other commerce sectors. As a result, they need to be separately regulated rather than being grouped into the same framework as other kinds of commerce transactions. In view of all these factors which did not fit easily into the existing regulatory framework of the UCC, the UCITA was formulated as a separate set of regulations. References: “US Constitution – Article 1 Section 8”, Retrieved August 17, 2010 from: http://topics.law.cornell.edu/constitution/articlei Licensing vs buying information: legal and policy implications; retrieved August 16, 2010 from: http://www.cni.org/tfms/2001a.spring/handout/Licensing-DArsenault2001Stf.pdf Rumbaugh, Charles, 2004. “The new (and improved) Article 2 of UCC, retrieved August 16, 2010 from: www.rumbaugh.net/docs/UCC-newFinal_NCMA_Article.pdf The Uniform Computer Information Transaction act. Retrieved August 16, 2010 from: http://www-cs-faculty.stanford.edu/~eroberts/cs201/projects/ucita/history.html Read More