E-commerce success depends not only on government policies such as jurisdiction and taxation, but even more critically on an underlying issue: Will courts enforce electronic contracts consummated on-line, typically by consumers who click on an “I agree” icon on a Web page?

While e-commerce legislation answers the question of whether, in general, electronic contracts are enforceable, the validity of any specific contract is ultimately up to the courts. When faced with that question, the courts appear split.

Three recent cases illustrate the differing perspectives. The first case involved an attempted class action lawsuit brought by a disgruntled Verizon high-speed Internet subscriber in a District of Columbia court. The subscriber was a district resident who, after experiencing delays in service and slower speeds than advertised, decided to sue.

Verizon responded to the suit by asking the District of Columbia court to dismiss the case on the grounds that its service contract, which all subscribers entered into electronically, required that any disputes be resolved in Virginia. The selection of Virginia was no accident -- it is one of only two U.S. states that lack a class-action procedure similar to that found in the district.

The District of Columbia Court of Appeal sided with Verizon and dismissed the case. It ruled that all subscribers received adequate notice about the electronic agreement, and it was not unreasonable to enforce the clause.

The case is strikingly similar to an Ontario, Canada, case from earlier this year involving an attempted class action suit against Rogers Cable by a group of equally unhappy high-speed Internet subscribers. The Rogers Cable contract included a clause that mandated all disputes be decided by arbitration rather than in the courts. An Ontario court upheld that contract and dismissed the suit even though the clause was not included in the original subscriber agreement but later was added in an amendment posted on the company’s Web site. In doing so, the court ruled that posting amendments to a contract on-line could constitute sufficient notice.

In stark contrast to the District of Columbia and Ontario decisions, a federal court in California recently reached the opposite conclusion when it examined the validity of the electronic agreement used by PayPal, an on-line payment service. The case involved yet another attempted class action suit, this time by angry PayPal users who argued that the company engaged in a series of unfair consumer practices. Much like Rogers Cable, PayPal sought to dismiss the suit on the grounds that its agreement contained a clause that required that all disputes be resolved by arbitration in California.

Unlike the Verizon and Rogers Cable cases, however, the court in this case refused to enforce the arbitration clause. The court first expressed reservations about whether there was sufficient evidence that users had agreed to the PayPal electronic contract, and then it left little doubt that it viewed the arbitration clause as completely one-sided with all the power resting with the company. Moreover, the court was very troubled that the clause required that the arbitration occur in California, noting that the average PayPal transaction value was only $55, thereby effectively eliminating any dispute resolution for the vast majority of its customers who live outside the state and who would be unwilling to go to the expense of traveling to California.

The dramatically different outcomes in these cases illustrate two opposing visions of e-commerce law that must be resolved. The Verizon and Rogers Cable cases, along with an earlier Canadian case involving an attempted class action suit against Microsoft, emphasize the importance of contractual certainty. Indeed, some of those cases refer specifically to the need to enforce e-commerce contracts in order for the medium to succeed.

The PayPal case, along with two other earlier U.S. cases involving disputes with America Online, sided with consumers by not enforcing company-drafted clauses that mandated arbitration or court appearances in far-off jurisdictions. These cases stress the importance for consumer protection to extend on-line in the same manner as it does off-line, even at the expense of contractual certainty. Viewed from this perspective, e-commerce will not succeed unless consumers are assured that electronic contracting does not eliminate important consumer protections.

Bridging these perspectives ultimately may require staying out of the courtroom. While more easily said than done, this can be achieved through alternative dispute resolution mechanisms that consumers easily can access regardless of location, along with contractual clauses that simultaneously provide legal certainty while leaving adequate protections intact.