Allocating the Risk of Software Failures in Automated Message Systems (Autonomous Electronic Agents)
Jurisdiction | South Africa |
Date | 20 August 2019 |
Published date | 20 August 2019 |
Citation | (2016) 28 SA Merc JL 201 |
Author | Wian Erlank |
Pages | 201-237 |
ALLOCATING THE RISK OF SOFTWARE
FAILURES IN AUTOMATED MESSAGE
SYSTEMS (AUTONOMOUS ELECTRONIC
AGENTS)
WIAN ERLANK*
Associate Professor in Law, North-West University
LEHLOHONOLO RAMOKANATE**
LLD Candidate, North-West University
I INTRODUCTION
A marvel of electronic commerce is an increase in the active participa-
tion of unattended computer systems in the negotiation and formation
of agreements. Computers today can, and already are, helping their
human users to make better decisions and negotiate more profitable
deals.
1
Drawing from their role online, which role closely resembles that
of human agents in the real world,
2
these devices have earned the name
electronic agents.
3
The 1990s saw much talk about the so-called
information superhighway,
4
which is defined as the state of affairs in
which ‘information and communication networks give access to almost
any kind of information at any time virtually anywhere in the world’.
5
The realisation of the information superhighway transformed the
*LLB (Stell) LLM LLD (Stell).
**LLB (NUL) LLM (NWU).
1
Beam & Segev, ‘Automated negotiations: A survey of the state of the art’, available at
http://www.cs.uu.nl/docs/vakken/vm/agents-negotiation.pdf, accessed on 10 August 2015;
Bainbridge, Introduction to Computer Law 4 ed (Longman 2000) 225.
2
On the comparison of electronic and human agents, see generally Wettig & Zehendner, ‘A
legal analysis of human and electronic agents’ (2004) 12(2) Artificial Intelligence and Law
111–135; Winn, ‘Emerging issues of electronic contracting, technical standards and law
reform’ (2002–2003) 7(1) Uniform Law Review 701, making the point that the main aim
behind automated tools of communication is not only to replace low level clerical employees,
but middle managers and sales representatives also; Wong, ‘The emerging law of electronic
agents: E-commerce and beyond . . .’(1999–2000) 33(1) Suffolk University Law Review 83 at
87.
3
For other names used, see Middlebrook & Muller, ‘Thoughts on bots: The emerging law
of electronic agents’ (2000) 56(1) The Business Lawyer 341 at 342. In this work, the phrases
‘electronic agents’ and ‘automated message systems’, unless otherwise indicated, shall be used
synonymously.
4
Perritt, Law and the Information Superhighway (John Wiley & Sons, Inc 1996); Smith,
Internet Law and Regulation 4 ed (Sweet and Maxwell 2007) 4.
5
Eiselen, ‘The Electronic Data Interchange Agreement’ (1995) 7(1) SA Merc LJ 1.
201
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internet from a simple medium of communication into a virtual
marketplace. This virtual market, also known as an information
economy,
6
is filled to the brink with information about sellers, buyers,
goods, services and their prices. No human can personally search,
collect, analyse and use all this information without a waste of time,
transactional costs and profits.
7
As Nimmer eloquently explains
‘[h]uman choices are a potentially inaccurate, always slower element of a
transaction’.
8
For this reason, as electronic commerce increasingly
becomes attractive for business, human involvement will not only
become undesirable, it will be actively discouraged. To conquer the
obstacles of the information economy, businesses are increasingly
resorting to automated message systems. With automated message
systems, complex transactions, being transactions that involve extensive
negotiations and comparisons, can be performed faster and at much
lower costs than by human agents.
9
Despite the magnitude of its importance, and its relevance to modern
contract law, the issue of the allocation of risk for system failures in
automated transactions has arrested very little attention in academic
commentary.
10
Automated message systems are composed of computer
hardware and software. It is the software which, with the necessary
support of hardware, is able to interact and negotiate with other
electronic agents and humans. Like all other software, the software
which runs automated message systems can malfunction. As a result of
that malfunction, automated message systems can ‘transmit an offer or
acceptance that was unintended, unforeseen or unauthorized by the
person on whose behalf the electronic agent was operating’.
11
When the
malfunction of an automated message system leads to a contract, one
6
Kephart et al, ‘Dynamic pricing by software agents’ (2000) 32(1) Computer Networks 731.
7
Turban et al, Decision Support and Business Intelligence Systems 9 ed (Prentice Hall 2011)
618–619, mentioning that the real crisis of information overload began with the advent of the
internet, and that the amount of information collected by enterprises doubles on a yearly
basis. As a result of this, it is not possible for users to personally go through all this information
without the assistance of intelligent agents.
8
Nimmer, ‘Electronic Contracting: Legal issues’ (1996) 14(2) John Marshall Journal of
Computer and Information Law 211 at 212.
9
Sorge, ‘Conclusion of contracts by electronic agents’ in International Conference on
Artificial Intelligence Law (05–11 June 2005, Bologna, Italy) 210.
10
For instance, some of the leading South African legal sources on electronic commerce
law do not in any way cover this issue in their discussion of automated transactions, see Buys
& Cronjé (eds), Cyberlaw@SA II: The Law of the Internet in South Africa 2 ed (Van Schaik
Publishers 2004) 94–96; Papadopoulos & Snail (eds), Cyberlaw@SA III: The Law of the
Internet in South Africa 3 ed (Van Schaik Publishers 2012) 55–56; Van der Merwe Computers
and the Law 2 ed (Juta & Co 2000) 241–274.
11
Kerr, ‘Ensuring the success of contract formation in agent-mediated electronic com-
merce’ (2001) 1 Electronic Commerce Research 183 at 195; Kerr, ‘Spirits in the material world:
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way of dealing with the matter would be to identify how risk is to be
allocated between the programmer, the user of the electronic agent and
the third party who, innocently or otherwise, concluded an agreement
with the electronic agent.
12
Software developers are, however, famously
known for including extensive exemption clauses in computer con-
tracts
13
in order to limit their liability for defective software.
14
The
general attitude of courts is also skewed in favour of not holding
software manufacturers in breach of contract where defective software
has been delivered.
15
Because the liability of the manufacturer for
defective software is an independent topic, mired with its own peculiar
difficulties, we shall limit the discussion of this paper to the attribution
of risk as between users of software and third parties.
The question of the allocation of risk for system failures is interesting
because, although the allocation of risk for faulty communications is a
topic well known in contract law,
16
the use of automated message
systems raises novel issues. With older technologies, especially telegrams
and faxes, messages were authored by humans. If a message was garbled
on transmission, so that it reaches the other party stating different terms
all together, a court had the luxury of choosing to enforce the contract
on the original telegram or the garbled version — that is of course if the
court was convinced that there was a valid contract despite the tele-
graphic error.
17
In automated transactions, messages are authored by
Intelligent agents as intermediaries in electronic commerce’ (1999) 22(2) Dalhousie Law
Journal 189 at 224.
12
Weitzenboeck, ‘Electronic agents and the formation of contracts’ (2001) 9(3) Interna-
tional Journal of Law and Information Technology 204 at 232.
13
End User Licence Agreements (EULAs).
14
Lloyd, Information Technology Law 3 ed (Butterworths 2000) 518. Exclusion clauses can,
of course, be overcome if they are unfair or unreasonable, see Watford Electronics Ltd v
Sanderson CFL Ltd [2001] 1 All ER (Comm) 696. For a discussion of this case, see Atkins,
‘Unfair terms in computer contracts’ in 20th British and Irish Law, Education and Technology
Association Conference (April, 2005, Queen’s University of Belfast) 8. These clauses can also be
nullified by courts construing them against software developers, see St Albans City and District
Council v International Computers Ltd [1995] FSR 686. For a discussion of this case, see
Bainbridge, (Longman 2000) 201–203.
15
Saphena Computing v Allied Collection Agencies Ltd [1995] FSR 616 at 652. For a
discussion of this and other relevant cases, see Atkins, ‘Software plus law equals bugs galore!’
(2013) 19(2) European Journal of Current Legal Issues, available at http://ojs.qub.ac.uk/
index.php/webjcli/article/view/250, accessed on 10 August 2015; Lloyd, (Butterworths 2000)
508–511.
16
For a thoughtful discussion of the law as it relates to older technologies, particularly the
telegram, see generally Ewing, ‘The effecton the formation of contract of a telegraphic mistake
in an offer’ (1933) 3(2) Idaho Law Journal 107–125; Kahn, ‘Some mysteries of offer and
acceptance’ (1955) 72(3) SALJ 263–266; Francis, ‘Two aspects of contracting by telegram’
(1967) 84 SALJ 278–294.
17
Christie, The Law of Contract 4 ed (Butterworths 2001) 85.
ALLOCATING THE RISK OF SOFTWARE FAILURES 203
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