Warranting Data Security

Massive data security breaches have grabbed headlines in the past few years. The data thieves responsible for these breaches have stolen the credit and debit card data of customers of retailers such as TJ Maxx, DSW Shoe Warehouse, BJ’s Wholesale Club, and the Hannaford grocery store chain. A thief in control of this payment card data, which can include debit and credit card numbers, expiration dates, security codes and personal identification numbers, has the ability to open new credit accounts and make charges on existing consumer accounts. These data breaches leave individuals fearful that their personal information will be used in ways that will disrupt their financial transactions and damage their credit.Consumers affected by data breaches understandably feel exposed to serious financial harm, even in the absence of liability for fraudulent charges. A consumer’s credit score affects her ability to finance important purchases, and the events that occur in aftermath of a data breach can negatively affect that score. Because these losses are not addressed by existing privacy and payment system statutes, consumers have attempted to recover them using various common law theories, but have uniformly failed in recovering anything for these losses. In this paper, prepared for a symposium on Data Security and Data Privacy in the Payment System, I will discuss the cases in which consumers have been denied recovery for losses arising out of data breaches, and then focus on one argument made by the plaintiffs in the Hannaford case, the argument that, under Article 2 of the Uniform Commercial Code (U.C.C.), every time a retailer accepts a payment card from a buyer, it warrants that its payment system is secure.While a warranty of data security might be a good idea, Article 2, because of its limitation to the sale of goods, is not the best place for it. Instead, courts could impose a common law warranty of data security, under which all sellers would warrant that their chosen payment system is secure. Below, I will make some arguments supporting a non-waivable common-law warranty of data security that is drawn both from the Article 2 warranties and the warranties in Articles 3 and 4 of the U.C.C., which apply to negotiable instruments and the check collection system. I will then compare the problem of ensuring safe data transactions today to the problem of ensuring the habitability of rental housing in the mid-20th century, which judges addre

Digital Age Standard Form Contracts under Austalian Law: Wrap Agreements, Exclusive Jurisdiction, and Binding Arbitration Clauses

Despite the widespread use of end user agreements ( EULAs ) within international e-commerce, their enforceability under Australian law has yet to be adjudicated. Legislative reform and judicial clarification of contract standards may be required for Australian courts to validate the methods of standard form contracting used in the digital age. While existing Anglo-Australian nules regarding contract formation may be adequate to enforce EULAs, the doctrine of privity presents an unnecessary and outdated barrier to the enforcement. Accordingly, the Australian legislature should abolish the doctrine of privity. In addition, Australian courts must clarify what type of notice is required for onerous contractual terms. Australian law also must develop standards for enforcing especially controversial clauses found within EULAs. Although exclusive jurisdiction and binding arbitration clauses have become increasingly important in international e-commerce, their enforceability against consumers in mass-market contracts presents troubling public policy questions. U.S. and E.U. law offer potential models for development of Australian law governing business-to-business and business-to-consumer adhesion contracts. Implementation of a stronger enforcement policy with respect to jurisdiction clauses in the business-to-business context, while maintaining a consumer protection approach for jurisdiction clauses in the consumer context, would be the optimal course of action for Australia. For binding arbitration clauses, Australia law should promote fair arbitration procedures for consumers by empowering judges to amend unfair aspects of consumer arbitration clauses

The Legal Architecture of Virtual Stories: World Wide Web Sites and the Uniform Commercial Code

“Virtual Stores” on the Web raise a myriad of traditional legal controversies in a new forum: the “battle of the forms” among purchasers and sellers; jurisdictional concerns and conflict-of-law problems; and the enforceability of contracts. This wide-ranging article analyzes law regarding these issues, with particular emphasis on the U.C.C

Digital Handshakes in Cyberspace Under E-Sign: There\u27s a New Sheriff in Town!

Without doubt, electronic commerce has increased the efficiency of businesses and consumers seeking to purchase goods, services, or intangibles by placing these objects just a keystroke away. If you already enjoy buying lingerie and foie gras over the Internet, you will love the new Electronic Signatures in Global and National Commerce Act ( E-SIGN ) Want to borrow $10,000 at four in the morning over the Internet to buy a car? E-SIGN allows it. Or how about entering a cybersigning chat room, extending a digital handshake, and then buying that cherished wedding gown? E-SIGN allows this to happen. In this era of ever-prevalent e-commerce, juxtaposed with increasingly effective computer hacker schemes, lawyers will now be asked to represent those transacting business under the new E-SIGN. Are you ready for it

Digital Handshakes in Cyberspace Under E-Sign: There\u27s A New Sheriff In Town!

Without doubt, electronic commerce has increased the efficiency of businesses and consumers seeking to purchase goods, services, or intangibles by placing these objects just a keystroke away. If you already enjoy buying lingerie and foie gras over the Internet, you will love the new Electronic Signatures in Global and National Commerce Act ( E-SIGN ) Want to borrow $10,000 at four in the morning over the Internet to buy a car? E-SIGN allows it. Or how about entering a cybersigning chat room, extending a digital handshake, and then buying that cherished wedding gown? E-SIGN allows this to happen. In this era of ever-prevalent e-commerce, juxtaposed with increasingly effective computer hacker schemes, lawyers will now be asked to represent those transacting business under the new E-SIGN. Are you ready for it

U.C.C. Survey: General Provisions, Bulk Transfers, and Documents of Title

This year several cases discussed the preemptive effect of the Federal Cigarette Labeling and Advertising Act upon state law tort and contract claims arising from the sale of cigarettes to smokers who contracted cancer. This is aptly illustrated by Forster v. R. Reynolds Tobacco Co., which was decided by the Minnesota Supreme Court. In that case, the smoker (Forster) sued a cigarette manufacturer (R.J. Reynolds) in strict products liability, misrepresentation, breach of warranty, and negligence. The cigarette manufacturer moved for summary judgment on the ground that the Federal Cigarette Labeling and Advertising Act preempted all state tort claims. The trial court agreed and granted summary judgment. On appeal, the Minnesota Court of Appeals reversed, finding no preemption of state tort claims. The Minnesota Supreme Court granted the cigarette manufacturer\u27s petition for review and, in an en bane decision, affirmed in part and reversed in part. The supreme court ruled that the Federal Cigarette Labeling and Advertising Act preempted only those state claims based on failure to warn theories. It ruled that the strict products liability, breach of warranty, and negligence counts were not preempted to the extent that they were not based on such theories. In effect this left the smoker free to pursue claims based on defects in cigarettes; but, the court did not resolve the question of whether cigarettes can be defective because they are addictive and harmful to health. The court also held that a claim of misrepresentation arising from alleged false statements made in cigarette advertising was not preempted