E-COMMERCE
Cyber Law &
Islamic
Ethics
CICT3523
DEFINITION

E-Commerce is the conduct
of trade and commerce
within the electronic
environment of the global
information economy.
According to Julian Ding the practice of ecommerce should consist of following elements:

a)
b)
c)
d)
e)
f)
There must be a commercial transaction.
The transaction must be executed in an
electronic and digital medium.
The physical presence of the parties to the
transaction is not a prerequisite.
The system by which the transaction is made
exists in a public network.
A system is considered to be an open system
The transaction is made regardless of
national boundaries.
BENEFITS OF E-COMMERCE




Cost saving - money, time and
paper.
Increase of productivity.
Increase of profitability.
Access to customers anywhere
and anytime.
THE PROBLEMS


National existing legislation is
either ‘outdated’ or ‘inadequate’
on the basis that it does not
contemplate e-commerce or
It restricts the use of e-commerce
by including requirements that do
not easily translate into an
electronic environment.
LEGAL OBSTACLES TO
ELECTRONIC COMMERCE
1.
2.
3.
4.
5.
Contract law
Evidence Law
Intellectual Property Law
Privacy
Financial Issues
FINANCIAL ISSUES

Being an electronic network, electronic
commerce requires that payment must be
made without using paper money.



At present, the most common means of
effecting payment on the Internet is
through the credit card systems.
There are disadvantages of using credit
card whereby the customer has to
disclose the number and it is a credit
transaction so have to pay extra cost.
The practice is, the bank utilise what is
called electronic fund transfer (EFT).
ELECTRONIC FUND TRANSFER (EFT)

EFT requires authentication to be done by
the bank’s computer system that the
request is in fact being made by an
authorised party and would enable any
purchaser to make payments for the
purchase by instructing its banker to
effect electronic fund transfer.
THE PROSESS
1.
2.
3.
4.
5.
6.
The seller must specify his bank account to the
buyer and other banking information.
If the buyer agreed to buy, he must then instruct
his bank to make the payment.
The buyer’s bank upon receiving the instruction
will have to authenticate that the instruction is
genuine and not a fraud.
Once the authentication is done, the money be
transferred.
The seller’s bank then confirms to the seller that it
has received the money.
Once confirmation is received, the goods are
allowed to be shipped.
THE PROBLEMS : JURISDICTION


Identification of the location where an ecommerce conducts its trade, to establish
where the liability to tax is incurred.
This is because of the nature of an ecommerce;
a) international
in nature.
b) provides service without any physical
presence.

The laws on taxes are differ from country
to country.
OECD (Organization for economic cooperation & development)


They endorsed the proposal guidelines on
taxation.
One of the requirement is what is called
‘permanent establishment’.


The vendor must have a fixed place of
business through which the business of an
enterprise is wholly or partly carried on.
The problem is that whether a website or
web-server can be considered to be a
permanent establishment.

UK approach.


US approach.


In 1999, the UK government set out
policy on the taxation of e-commerce
(adopted OECD guidelines).
Internet freedom tax.
Malaysia.


No legislation which governs e-taxation.
Relevant statutes (Income Tax Act 1967
and Service tax Act 1975).
Legal issues
in cyber
space
contracting
Cyber Law &
Islamic
Ethics
CICT3523
INTRODUCTION



The legal position of
advertisement on the Internet.
Whether the transaction on-line
is a valid contract or not?
How contract should be formed
in an electronic environment?
Advertisement on the web-site



Advertisement is invitation to
treat and not an offer.
It is just an invitation for further
negotiation.
Exception;

If a reasonable take it seriously?
Whether the transaction is a
valid contract or not?

Normally, cyberspace contracting
takes place through Electronic
Data Interchange (EDI), a
technology and method that
enables the transfer of information
and legally relevant documents
electronically to another for direct
processing in other part’s
information system.
Uniform Commercial Code (US)



Based on three principles; liberal
construction, freedom of contract,
good faith.
Parties may form a contract by any
means sufficient to show agreement.
Writing includes printing, typewriting
or any reduction to tangible form.
Therefore EDI message stored on the
hard disc should be sufficient
‘tangible form’ to qualify as writing.



Many countries have legislated laws on
e-commerce. In Asia, 5 countries have
legislated the laws on e-commerce
such as Singapore (1998), Brunei and
Filipina (2000), Thailand (2001),
Myanmar (2004).
The Malaysian Parliament passed the
Electronic Commerce Act 2006 (ECA),
The Electronic Commerce Act 2006
(“the Act”) was enacted and came
into force on 19th October 2006.
DOES ISLAM
APPROVES E-COMMERCE?

The problems arise when there is no
express ayah in the text as regard to
the new arising matter. Hence it is
important to refer to the existing
principles in usul al-fiqh and apply
these principles to the current
situation whenever it is possible.
DOES ISLAM
APPROVES E-COMMERCE?


The problems arise when there is no
express ayah in the text as regard to
the new arising matter. Hence it is
important to refer to the existing
principles in usul al-fiqh and apply
these principles to the current
situation whenever it is possible.
Hadith

“What Muslim deem to be good is
good in the sight of God.”


It is submitted that if the practice ecommerce has been actively
anticipated by members in a society
and it is proven that such practice
does not create any disharmony or
inconvenience, such the widespread
practice of e-commerce is
accepted.
E.g : Online shopping.


Maslahah also should be taken into
consideration for the derivation of new laws.
However, this does not mean that the Muslim
can freely make laws with whatever they desire
but the interest of man is based on the Lawgiver
Himself.
There is some flexibility in coming out with new
principles as regard to current issues. In laying
down the new principles, it is important that one
should not contradict any clear injunctions and
basic Islamic principles. In cases where Islamic
law is silent, reference to the man-made laws
are possible as long as the regulations are not
against Syari’ah.


Therefore, Islam approves
electronic commerce because
it gives lots of benefits to
mankind as long as the laws
regulating it is in line with Islamic
law.
Here, we want to discuss what is
the Islamic law governing law of
contract.
E-COMMERCE
AND THE ISLAMIC LAW OF CONTRACT


The basic rule is that trade is
permissible in Islam.
Essential elements of a valid contract
in Islam;
1.
2.
3.
Offer and acceptance (sighah alaqad).
The contracting parties.
The subject matter of a contract.
1. OFFER AND ACCEPTANCE



As regard to offer and acceptance,
the most important element behind
this requirement is consent (rida).
Voluntarily consent from the parties
and the consent of the object.
Surah 4:29

“O you who believe! Eat not your
property among yourselves in vanities:
But let there be amongst you traffic
and trade by mutual goodwill”


How to ascertain the consent of
parties who are contracting through
the Internet? What should be a
criteria to determine there is consent
between the parties.
In e-commerce, the consent is
obtained once the buyer click the
mouse and accept the offer by the
seller in the internet and the popular
method of payment is using the
credit card.
2. THE CONTRACTING PARTIES



The next requirement is that the consent must
be made by a competent person who has
the qualities of prudence (aqil) and majority
(baligh).
Hence to make e-commerce be accepted in
Islam, the parties reach the age of majority.
In the Internet, should have a control and
mechanism to ensure the parties involved are
competent to enter into an agreement. By
requesting the identity card numbers, one
may know whether a person is competent or
not.
3. THE SUBJECT MATTERS


The subject matters or the transaction itself
must be free from the following elements,
such as riba, maysir and gharar.
E-commerce has the potential to be exposed
to the practice of riba when the parties
involved use conventional credit card
method for payment. When the buyer is not
capable to pay what he has spent, the bank
will charge a high interest and this interest be
considered as riba. Although the subject
matter of the transaction but it becomes void
when they are other elements, which is
unlawful in the eyes of shariah.
CONCLUSION
The ethics of doing an e-commerce in
Islam can be summarized as follows;

a)
b)
c)
d)
e)
f)
The agreement is enforceable
The existence of mutual consent by both
parties.
The contract is free from the elements of
uncertainties (gharar).
The contract is free from the elements of riba.
The wealth acquisition or consideration in the
contract is not gained through unlawful sources
(batil) and
The contract does not involve any kind of
game of chance or gambling (maysir).