The Legal Problems in the Electronic Fund Transfer

5.3 The Legal Problems in the Electronic Fund Transfer

The Negotiable Instrument Law of our country does not admit the payment and settlement by paperless e-instrument even authenticated by digital signature. Hence, how to amend the Negotiable Instrument Law or enact an individual Electronic Fund Transfer Law to meet the development of the e-commerce becomes the fundamental guarantee for the smooth payment and settlement in the e-commerce. The electronic fund transfer involves the following problems:

The definition of the subjects in the electronic fund transfer

In the whole process of the electronic fund transfer there are three parties: (1) The instructor. (2) The instructed. (3) The payee. In the electronic fund transfer there are also intermediate banks

and clearing organizations besides payer banks and payee banks. As the intermediate links in the electronic fund transfer, they may not exist or more than one of them may exist. They just act as the instructed of the payer banks and payee banks. The process of the electronic fund transfer is that the instructor signs and issues the payment instructions and the instructed accepts and fulfills the payment instructions. As to the computer manufacturers, communication line providers and power firms mentioned above, they are involved and related to the electronic fund transfer, but do not belong to the parties of the electronic fund transfer itself.

The rights of the instructor are to require the instructed to transfer the designated sum of fund to the designated payee within the prescribed time. In case the instructed fails to perform or only partially perform the duty, the instructor has the right to require the compensation of the losses thus incurred by the instructed, who has the obligation to do so. Meanwhile, the instructor’s obligation is to pay the fund transferred and the relevant transferring fees to the instructed, who has the right to require the instructor to do so. The obligation of the instructor to the instructed arises when the instructed accepts the instructor’s payment instructions, at which time both shall be bound by the payment instructions and bear relevant obligations and enjoy relevant rights.

The legal relationship between the instructor and the instructed is always contractual, and each party has the contractual relationship only with his direct instructor or instructed. In other words, if the instructions fail to be performed or are performed late or improperly due to the fault of the indirect instructed, the instructor, instead of claiming rights to the person directly responsible, has to claim compensation from his direct instructed, and so on. For the payer and payee, they have no contractual relationship in terms of transfer, but fundamental relationship based on the electronic fund transfer. Their relationship of rights and obligations are not embodied in the electronic fund transfer.

Introduction to E-commerce

The electronic fund transfer has very special legal characteristics. It is abstract like the negotiable instruments, i.e., whether the fundamental legal relationship of the electronic fund transfer is lawful, the fund transfer will be valid once it is made and the payee enjoy complete right over the fund received. The payment in the electronic fund transfer is irrevocable. The payer or any third party, instead of requiring canceling the transferred fund, has to claim to the payee based on the fundamental legal relationship between them. Even if the criminal to commit laundry of money transfer the e-fund, the electronic fund transfer itself cannot be denied its validity. This is the consideration of safeguarding the transaction safety and simplifying the legal relationship. As there are a large number of people involved in the transfer, if the transfer is invalidated due to the invalidity of the fundamental legal relationship, all the involvers of the transfer will be affected and the relationship between each party will have to be re-ascertained. This will definitely add to the complexity of the legal relationship and cost of resolving the disputes, which is against the legal principles underlying the e-transactions.