Electronic Data Interchange: Uses and Legal Aspects in the Commercial Arena, 12 J. Marshall J. Computer & Info. L. 511 (1994)

The John Marshall Journal of Information Technology & Privacy Law, Dec 1994

Electronic Data Interchange (EDI), computer-to-computer communication, allows rapid exchange of information and is capable of dramatically increasing commercial efficiency. Faster than mail, personal meetings and communication via telephone, EDI will include recordkeeping, communication between governments, retail use and healthcare streamlining. EDI may pose future evidentiary problems including proving the source and content of the message. Numerous techniques may offer greater reliability of authentication of electronic messages by creating an audit trail when EDI is used. Using EDI for commercial transactions involving the sale of goods raises questions of contract law and the Uniform Commercial Code regarding the statute of frauds and the parole evidence rule. Since such EDI transactions are signed writings, are stored on a hard disk drive and have some symbol identifying the parties, EDI transactions will satisfy the statute of frauds. EDI transactions will make the parole evidence rule, allowing the admittance of a trading partner agreement to prove additional contract terms, a necessity given the difficulty of including all the terms agreed upon in the EDI message. The reduction in cost associated with EDI will ultimately benefit the consumer. The greater efficiency afforded by EDI is imperative to United States companies seeking to compete in a global market. Fortunately, United States contract law concerning EDI will not hinder the development of EDI in the commercial setting.

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Electronic Data Interchange: Uses and Legal Aspects in the Commercial Arena, 12 J. Marshall J. Computer & Info. L. 511 (1994)

The John Marshall Journal of Information Technology & Privacy Law Volume 12 Issue 4 Journal of Computer & Information Law Electronic Data Interchange: Uses and Legal Aspects in the Commercial Arena, 12 J. Marshall J. Computer & Info. L. 511 (1994) Robert W. McKeon Jr. 0 0 Follow this and additional works at: - Article 1 by ROBERT W. McKEON, JR.* Electronic Data Interchange ("EDI") is computer-to-computer communication. EDI is broadly defined as the exchange of coded electronic mail messages which originate in the sender's computer and travel to the recipient's computer.' EDI is revolutionizing communication be* Member of the New York State Bar; Licence sp6ciale, Universit6 libre de Bruxelles (1992); J.D., Case Western Reserve University (1991); M.A., Middlebury College (1988); A.B., College of Holy Cross (1987). Special thanks to Stuart N. Brotman, Esq., Chairman of the International Communications Committee, Section of International Law and Practice, American Bar Association. 1. Benjamin Wright, AuthenticatingEDI: The Location of a Trusted Recordkeeper, 4 SorrwARE L. J. 173 (1991). Computers think in terms of binary digits. A binary digit, or bit, is either a zero or a one. The computer recognizes a zero or one based on voltage or current streams, sequences or fluctuations. When the voltage or current is on, i.e. above a certain threshold limit, a one is registered. When the voltage or current is zero, or below this threshold, a zero is registered. A group of eight bits (zeros and ones) is called a byte. The American Standard for Character Information Interchange ("ASCII") has developed a code permitting 255 various symbols (letters, punctuation marks and numerals). Each symbol, e.g. the letter lower-case "a", is derived from various eight bit combinations of zeros and ones. Therefore, the computer uses the ASCII code to translate a byte (eight bits) to one of 255 characters recognizable by humans. Digital communication via telephone cable involves sending data to a modem. The modem converts the digital impulses, representing bits, to analogue (frequency). The information is then transmitted over a telephone cable to a recipient modem. This modem then deconverts from analogue back to digital for the recipient computer. When fiber optic cables are used, a modem transmits information by a stream, sequence or fluctuation in the levels of light intensity. Computers have two levels of memory. The first is called Random Access Memory ("RAM"). RAM is the working memory of the computer, and data in RAM is lost once the computer is turned off. Data in RAM is reproduced for permanent storage on the hard disk drive of the computer, also known as secondary storage. The ability to store a transmission, or modify it,is the distinguishing factor between computers and facsimile ("fax") machines. With a transmission between fax machines, the only processing which occurs is the compression and decompression of bits. The decompression results in a copy of the original, and the transmission cannot be stored (extween suppliers and purchasers. They will now be able to electronically exchange information within a matter of seconds. This more efficient communication is critical to keeping administrative costs down, and makes US industry more competitive.2 Companies in Europe have already been using EDI to increase efficiency. As stated best by one European businessman, "we can't afford to be inefficient."'3 This article will analyze in three respective sections: EDI, evidentiary issues posed and commercial contracts. I. ELECTRONIC DATA INTERCHANGE EDI messages are transmitted via telecommunication systems, usually by telephone networks or satellites. These systems are faster and more efficient than mail, personal meetings or telephone communications.4 Currently, between 80 and 85 percent of EDI trading partners communicate using a third party service provider.5 A. GREATER EFFICIENCY BY LOGGING ORDERS WITH EDI EDI messages are structured and coded in alphanumeric characters according to a syntax already agreed upon by the sender and receiver. 6 cept as duplicated on paper). However, a fax received by a computer can be stored and altered before printing. Chris Reed, AuthenticatingElectronicMail Messages - Some Evidential Problems,4 SoFrwARE L. J. 161, 163 (1991). The terms compression and decompression simply refer to the process whereby only the bits necessary to transmit the symbols on a page are sent over the cable (compression), and the receiving fax decompresses in order to duplicate the page which was sent (i.e. spacing and location of symbols on the page). 2. See PCS Health Systems Inc. Activates New Interactive Computer Network for Health Care Transactions,BUSINESS WIRE, Sept. 7, 1993. [hereinafterPCS Health Systems Inc.]. 3. Bruce Fox, To Tesco, EDI is Nothing New; U.S. Supermarkets Lag Behind UK Chain; Electronic Data Interchange, CHAIN STORE AGE ExEcUTIVE wrrH SHOPPING CENTER AGE, July, 1993 at 40. (...truncated)


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Robert W. McKeon Jr.. Electronic Data Interchange: Uses and Legal Aspects in the Commercial Arena, 12 J. Marshall J. Computer & Info. L. 511 (1994), The John Marshall Journal of Information Technology & Privacy Law, 1994, Volume 12, Issue 4,