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McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
True/False Questions
1) Canada's Uniform Electronic Commerce Act creates rights, powers, obligations, and
immunities with respect to electronic commerce-related activities within Canada.
a. True
b. False
2) Defensive domain name registration is a precaution taken by companies to avoid
potentially costly disputes with cybersquatters.
a. True
b. False
3) The Uniform Electronic Commerce Act states that electronic communications are
deemed sent when they leave the senders control, whether they are received or not.
a. True
b. False
4) The principle of network neutrality states that Internet service providers should refrain
from providing online services.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
5) The Government of Canada enacted PIPEDA in part to ensure an overlap between
federal and provincial privacy laws.
a. True
b. False
6) Under the proposed Electronic Commerce Protection Act, if Jane is identified as a
known spammer, her Internet service provider can cancel her service without liability.
a. True
b. False
7) Companies should refrain from telling consumers about privacy breaches because it will
cause consumers to become distrustful.
a. True
b. False
8) According to the Canadian Code of Practice for Consumer Protection in Electronic
Commerce, it is illegal for a company to send unsolicited emails to customers.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
9) Matt Cone has registered the domain name icecreamcone.ca. While Matt plans on using
the domain name to promote his homemade ice cream, he is also considering selling the
name to the highest bidder and using the money to help offset his startup costs. Matt has
contacted several relevant businesses with his offer. Recently, Matt has received a
complaint from a kosher ice cream distributor that holds a registered Canadian trademark
for "Ice-Cream Cohen." It has characterized Matt's actions as cybersquatting and is
demanding that he assign his registration in the domain name to them at cost. Because
cybersquatting is an illegal practice, Matt must assign his rights to Cohen.
a. True
b. False
10) Citron Cleaning Supplies has begun marketing their new computer screen cleaner under
the name "Compuclean." Citron is a US-based company and holds a US federally registered
trademark for "Compuclean." Recently, it has discovered that a Canadian company is in the
business of vending a similar product through the website compuclean.ca. The Canadian
web site encourages foreign-based orders and maintains an international toll-free phone
number for customer inquiries. Instead of bringing a complaint under the domain name
arbitration system, Compuclean wishes to bring an action against the Canadian company in
a US court. In order to increase the chances that the US court will assert jurisdiction, Citron
should argue in favour of the application of a passive versus active test.
a. True
b. False
11) Isabella has commenced an action against a Caribbean-based company that offered a
"guaranteed 17 percent return on all 30-day foreign investments of $20 000 or more." Both
the initial investment and interest were to be repaid in the investor's national currency,
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
regardless of the mode of investment. Instead, the company provided Isabella with a
certificate of ownership in a sugarcane farm, presumably obtained for less than its stated
value. Because Isabella is a Canadian citizen ,she would like the action tried in a Canadian
court and, accordingly, must satisfy the real and substantial connection test. Under this
approach, Isabella must demonstrate that the effects of the Caribbean company (ie the
harms suffered) were experienced in Canada.
a. True
b. False
12) Hoben Electronic Publishing Co wishes to take proactive steps to insulate itself from
potential liability for any libelous content it might inadvertently publish. It has noticed that
Southern Ontario is particularly litigious. Accordingly, it has posted a notice on its website
stating that residents of Southern Ontario cannot purchase or download content from the
site. These are the only steps taken by the company. Although it had the opportunity to
purchase software that would allow it to block access to residents of that region, it has
chosen not to do so. Nor has Hoben engaged in further screening at the time of purchase
and/or download. Nevertheless, the steps taken by the company are sufficient to avoid
liability under the effects-based approach to determining jurisdiction.
a. True
b. False
13) While attending a recent conference on electronic publishing, Samina overheard a
colleague remark that online service providers can always and absolutely avoid all liability
from third parties by inserting an exclusion from liability provision into their terms of use,
provided that the exclusion clause is sufficiently brought to the attention of its users. The
remark that she overheard is correct.
a. True
b. False
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
14) Kerasic Online is an ISP. It has been sued by SOCAN for copyright violation. SOCAN
argues that Kerasic commits a wrong every time that it allows a customer to electronically
distribute music files to other individuals. Kerasic believes, however, that as a result of a
recent Supreme Court of Canada decision, an ISP can never be held liable for participating
in the distribution of electronic music files. Kerasic's conclusion is correct.
a. True
b. False
15) All websites must contain terms of use.
a. True
b. False
Multiple Choice Questions
1) Which of the following statements is TRUE?
a. Electronic commerce discourages international business transactions.
b. Technology allows contracts to be performed less efficiently.
c. Technology increases marketing costs.
d. The law governing electronic commerce is uncertain.
e. Electronic commerce is governed by a set of international treaties.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
2) According to the Office of the Privacy Commissioner of Canada, which of the following
is an example of Serena's personal information?
a. her favourite colour
b. her body weight
c. the name of her pet
d. the name of her best friend
e. her Facebook page
3) Rolf Dog Food has created a new website to sell its dog food over the Internet. Which of
the following strategies will help ensure that Rolf's terms of use are binding on visitors to
the website?
a. Rolf can post the terms anywhere on his website. As long as interested customers can
locate and read them, the specific location is never important.
b. Rolf's terms of use are automatically binding on anyone using the site, so the company
does not need to worry about where or how the terms are posted.
c. Rolf could deny visitors access to the website unless they have confirmed that they have
read and agreed to the terms of use by clicking an "I accept" box.
d. Rolf should mail a hardcopy of the terms of use to each potential visitor to the website,
to ensure that they receive adequate notice of the conditions.
e. It is impossible to ensure that terms of use will be binding on visitors to the website.
4) Eta sends Morley a contractual offer via email from her Calgary office. The email
contains a provision indicating that the offer expires at 5:00 pm, Calgary time. Morley
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
replies to Eta's offer from his Vancouver office, indicating that he accepts her offer.
Morley's email leaves his control at 4:52 pm (Vancouver time) and reaches an information
system within Eta's control instantaneously. Eta waited in her office till 5:10 pm (Calgary
time), but received nothing (because of the one-hour time difference between Vancouver
and Calgary). The next day, when Eta found Morley's email in her inbox (time stamped at
5:52 pm Calgary time), she phoned Morley to refuse the deal. According to the Uniform
Electronic Commerce Act, which of the following is TRUE?
a. Eta and Morley have definitely concluded a binding agreement, which was formed at
5:52 pm Calgary time.
b. Eta and Morley have definitely concluded a binding agreement, which was formed at
4:52 pm Calgary time.
c. Eta's offer expired.
d. Morley accepted Eta's offer, but the contract did not come into effect until the next
morning when Eta opened her email.
e. Once she opened her email it was too late for Eta to refuse the deal.
5) After becoming tired of the Muzak piped into your office, you decide to subscribe to an
online, listener-supported radio station dedicated to jazz and blues music. You had thought
that there was no upfront fee, but that listeners may make a donation using their electronic
wallets. Clicking through the site, you are asked to provide certain information on a
contractual form. One day, after several visits to the website, you notice a hyperlink
labelled “Terms of Service” while viewing the previous hour's play list. You click the link
and a document opens, indicating that, by streaming music from the website, you have
agreed to pay a flat fee on a monthly basis with a minimum subscription of one year. On
your previous visits, you never noticed the hyperlink, which is barely visible in fine print,
at the bottom corner of the homepage right next to a flashy and distracting animation.
Which of the following BEST characterizes this situation?
a. You have entered into a contract and owe a year of monthly fees.
b. You can rely on Rudder v Microsoft to get out of this contract.
c. You have not entered into a contract.
d. You may have entered into a contract, but its terms likely do not include a year of
monthly fees.
e. You have entered into a contract that is governed by the Sale of Goods Act.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
6) Which of the following propositions is supported by the decision in Zhu v. Merill Lynch?
a. The fact that a party clicked "I Agree" without actually reading the terms of the
agreement will render the contract unenforceable.
b. The fact that a party receives an automated response confirming a transaction is
cancelled is not binding on the party sending the notice if that party has made a mistake.
c. Computer-generated transactions are not generally binding.
d. A party must verify significant transactions made on the Internet by telephone or other
communication with the counterparty for those transactions to be binding.
e. All computer transactions are binding based on the messages sent between the parties.
7) Which of the following would best explain why certain terms in an online agreement
might be found to be of NO LEGAL EFFECT?
a. The terms are boilerplate provisions.
b. The terms are displayed in red font, rather than black.
c. The terms cannot be stored electronically.
d. The terms are not accessible to the customer until after the customer has clicked an "I
Agree" box to accept the agreement.
e. The terms can only be found by searching through complicated hyper-links.
8) The common carriage principle is relevant to Internet service providers (ISPs) because it
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
a. allows ISPs to privilege the content that they think customers most want to see.
b. allows ISPs to police the Internet by monitoring the content transmitted through their
Internet infrastructure.
c. prevents ISPs from denying competitors access to their Internet infrastructure.
d. means the exact same thing as network neutrality.
e. allows ISPs to maintain monopolies.
9) Ginger's Pet Shop has decided to retail its products over the Internet. To generate interest
in its new website, Ginger wants to allow customers to post content about pets or pet
supplies on the site. Which of the following examples might pose a liability risk to Ginger?
a. Ginger's site carries a picture of a customer's dog with the customer's permission.
b. A customer posts a video demonstrating the superiority of Ginger's pet supplies over the
supplies sold by a competitor by allowing a pet goat to eat the competitors products.
c. The display of customers' pets on Ginger's website contributes to Ginger's image as a
customer-oriented pet shop.
d. Ginger requires customers to agree to terms of use that restrict the types of pictures they
can post, leading to complaints that her terms limit free speech.
e. Ginger requires customers in their terms of use to not use their products for an illegal
purpose.
10) The International Widget Co has approached you seeking advice. It is currently
embroiled in a dispute with one of its regular trading partners. As a result of spilling
Orange Crush on his keyboard, the trading partner's purchasing officer accidentally ordered
700 widgets, instead of the usual monthly 70. Figuring that the extraordinary order would
not be processed, he did not bother informing International Widget about the mistake.
Relying on the accuracy of the order, International Widget bought supplies necessary to
make 700 widgets. The trading partner refuses to carry out the transaction. Assuming the
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
relevant jurisdiction follows the approach adopted by Canadian statutes that deal with
electronic commerce, which of the following is most likely TRUE?
a. International Widget's trading partner will not be bound by the order.
b. International Widget's trading partner will be bound by the order.
c. International Widget can recover from its trading partner the cost of no more than 350
widgets.
d. International Widget can recover from its trading partner the cost of no more than 500
widgets.
e. International Widget’s trading partner is only obliged to pay for 70 widgets and keep the
remaining 630 widgets for free.
11) Which of the following is an example of traffic shaping?
a. An Internet service provider (ISP) completely blocks access to particular websites.
b. An ISP slows a user's Internet service whenever they try to send files through a peer-to-
peer system.
c. An ISP gives subscriber information to the police upon request.
d. An online service provider offers prizes to the first 1000 visitors to its website.
e. An online service provider redirects Internet traffic from its old website to its new and
improved website.
12) Andres has created an online service that allows users to instantaneously distribute
documents to hundreds of other people. Which of the following strategies can help him
reduce his risk of being held liable for the content distributed by the users of his service?
a. He should review all documents and edit anything that might be considered offensive.
b. He should include a provision in his terms of use warning users that he will monitor
every message they distribute through the service.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
c. He should include a provision in his terms of use allowing him to claim indemnification
from a user if he is held liable for something they distributed through the service.
d. He should avoid telling users what they can or cannot distribute through the service for
fear of infringing their free speech.
e. He should not worry about this risk and do nothing as it is not a likely legal hazard of his
business.
13) Javed has created a website for his company. The website is strictly informational. It
does not allow customers to buy products online or post their own content. Which of the
following statements is TRUE?
a. Javed does not need to worry about liability issues.
b. Javed's website could put him at risk for claims of copyright infringement, depending on
the information posted on the site.
c. Unless Javed specifies that his website forms a part of his contract with customers, the
content on the website can never be considered in a claim for innocent misrepresentation.
d. Javed should not include terms of use on his website because such terms are only
appropriate for websites that allow customers to make online purchases or post content.
e. Javed’s website could put him at the risk of breach of contract if he does not allow his
customers to post comments about his business on his website.
14) Susanne has asked for your advice on how she can reduce the risk of having her
identity stolen. Which following strategies would you recommend that she adopt?
a. She should never download software from the Internet.
b. She should always carry her social insurance card so she can prove her identity whenever
necessary.
c. She should never pay for items with a credit card instead she should only use cash.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
d. She should never transmit personal information over voicemail.
e. She should always chose obvious passwords for her online accounts so that she does not
risk forgetting them.
15) Privacy laws limit the extent to which businesses can collect, use, or disclose personal
information about their customers. Which of the following strategies should be adopted by
a company to minimize the risks and costs associated with privacy compliance?
a. A company should appoint one person to be responsible for privacy issues so that it can
completely avoid the cost of training other employees about privacy compliance.
b. When a company only collects necessary personal information, it can use that
information however it wants.
c. A company should encrypt personal information whenever possible, even if there is a
small financial cost to do so.
d. If the company is located in the Yukon, it is not subject to privacy legislation so should
develop its privacy policy in a way that best suits its needs.
e. A company should include the maximum expected cost of privacy law claims into its
calculation price of goods or services and not bother to comply with the privacy laws.
16) After reading an article about domain name–related entrepreneurship, you decide to
register several domain names for resale. Subsequently, you receive a complaint alleging
that you have registered one of those names in bad faith. The complainant has filed for
arbitration. The name in question is breadandbutter.com. The complainant, a baker,
conducts business under the name. Based on these facts, which of the following statements
is most likely to be TRUE?
a. You have an intellectual property right in the name.
b. You are a cybersquatter.
c. The complainant can claim the “good faith” justification.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
d. Your domain name dispute cannot be litigated in court.
e. If you quickly set up a bakery under the same name you should be able to avoid any
liability.
17) “Phishing” occurs when
a. you download free software from the Internet.
b. you believe that your bank has requested your personal information, which you supply in
an email, only to later learn that the initial email was a scam.
c. without your knowledge, a program captures an image of your screen that can be used by
an identity thief to collect your personal information.
d. you accidently install a virus on your computer when you are downloading music from a
website.
e. a company sells your personal information without your permission.
18) Which of the following tests is irrelevant to a determination of the appropriate
jurisdiction for litigation arising from online interaction?
a. whether there is a real and substantial connection to the place where jurisdiction is being
sought
b. whether the website has an actual impact in the place where jurisdiction is being sought
c. whether the defendant is culpable
d. whether the website merely posts information, or requires customers to interact
e. whether the person clicked “I Agree” or not
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
19) The Government of Canada proposed to add new provisions to the Criminal Code that
focus on prohibiting identity theft. Which of the following statements about the proposed
amendment is FALSE?
a. Currently there are absolutely no provisions in the Criminal Code that can be used to
prohibit identity theft.
b. The proposed provisions focus on the preparatory stages of identity theft, making it
illegal to possess the identity documents of another person.
c. It is currently difficult to characterize personal information as property unless it has
commercial value.
d. Under the proposed amendment, the offender could be ordered to pay the victim for the
reasonable amount spent restoring their identity.
e. The new provisions include prison sentences sometimes up to a maximum of five years.
20) RAS Auto Parts, a Canadian company, recently received some decidedly unfavourable
publicity stemming from an incident that took place at a Caribbean conference attended by
its board of directors. The story was published in the Trinidad Daily Online. RAS would
like to bring a defamation suit against the Daily Online in Canada. In order to obtain
jurisdiction in Canada, under the effects-based approach, which of the following elements
must RAS prove?
a. how the harm was suffered
b. why the harm was suffered
c. where the harm was suffered
d. what harm was done
e. that RAS is incorporated in Canada
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
21) M!ke Internet Inc offers an Internet connection and an email account for $9 per month.
The company does not retail goods, nor does it provide a forum for subscriber auctions.
Which of the following is most likely FALSE?
a. M!ke is an Internet service provider.
b. M!ke is an online service provider.
c. M!ke is an online intermediary.
d. M!ke is unlikely to be seen as a participant in its customers' communications.
e. Mike has no risk of liability
22) Syntax Systems has launched a new electronic newsletter. Similar to the use of a
listserv, the newsletter is composed of subscriber submissions (rather than content
generated by the news service itself). Each day's accumulated subscriber submissions are
automatically packaged and automatically sent by mass email without editorial review. (In
fact, the whole point of the newsletter is that no one knows what anyone else will say until
it is disseminated.) Revenue for the newsletter is generated through automated advertising.
Which of the following is most likely to be TRUE?
a. Syntax is likely to be liable in the event that an illegal message was posted.
b. Syntax will never be liable in the event that an illegal message was posted.
c. Syntax is exempted from liability by virtue of being an Internet service provider.
d. Syntax can only avoid liability if it attempts to censor illegal messages.
e. A conduit model of website may attract liability, even where the activity of the provider
is content neutral, and the law has not been finally settled by the decision of the SCC in
SOCAM.
23) Which of the following kinds of online behaviour might not attract legal liability?
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
a. posting a defamatory remark
b. distributing materials subject to copyright
c. disclosing personal information
d. trademark infringement
e. providing a content-neutral conduit website for the posting of messages by others, with a
terms of use contract that clearly states that no responsibility for editing or other review of
the posted material is taken, and with disclaimers of liability and releases as terms of use to
be electronically agreed to for access to the site
24) Based on the decision in SOCAN v Canadian Association of Internet Providers, which
of the following statements is TRUE?
a. "Caching" is an unacceptable use of the Internet.
b. An Internet service provider (ISP) is content-neutral when it does not have knowledge of
infringing content and cannot practically monitor the content passing over its network.
c. If an ISP knows that customers could potentially infringe copyright through their use of
the Internet, the ISP will always be liable for any infringement that occurs.
d. ISPs cannot be held responsible for paying royalties.
e. Content-neutral ISPs are shielded from all legal liability.
25) Which of the following proposals is found within the Canadian Code of Practice for
Consumer Protection in Electronic Commerce?
a. Online vendors should make a complaints procedure available to customers, endeavour
to deal with complaints within one week, and resolve or address complaints within 45 days.
b. To reduce the risk of confusion and disagreement, online communications should be
available in one language only.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
c. Unsolicited emails can be sent to customers without their consent as long as the subject
line of the email clearly specifies what the message is about.
d. Online vendors should never communicate with people they know to be children.
e. Online vendors do not have to worry about any liability whatsoever as jurisdiction of the
courts cannot be taken over them.
26) You have recently gone into business as a consultant, specializing in the area of online
consumer protection. As part of your services, you offer a seminar to business owners on
how they can prevent identity theft. Which of the following practices will you suggest to
your clients?
a. transacting as a mere conduit
b. adopting authentication procedures that collect only necessary personal identifiers
c. utilizing an open-access network
d. implementing electronic contracting and instantaneous communication
e. Allowing only one completely unsupervised person in your organization to have access
to all personal information, and excluding all others in your organization from such access
27) You have recently gone into business as a consultant, specializing in the area of online
consumer protection. As part of your services, you offer a seminar on how to avoid online
consumer complaints. Which of the following practices should you suggest to your clients?
a. Be sure your terms of use include extensive use of specialized legal terminology.
b. Weave promotional materials into your terms and conditions of sale.
c. Be sure to accurately describe all online goods and services.
d. Dispense with confirmation procedures.
e. Promise not to collect any personal information.
McInnes/Kerr/VanDuzer: Managing the Law: The Legal Aspects of Doing Business, Fourth Edition
Chapter 19: Electronic Commerce
28) Which of the following is a good reason for incurring the costs associated with
implementing Industry Canada's consumer protection principles into your business?
a. Your business is legally required to do so.
b. You will avoid competition from multi-level marketers.
c. You will avoid the need for adopting a privacy-compliance policy.
d. You will strengthen consumer confidence in your products.
e. You will insulate your business from all legal liability.
29) According to consumer protection principles, when should your business not provide a
refund for a completed online transaction?
a. when the customer had no opportunity to correct or cancel their order before it was
accepted
b. when the transaction was the result of a keystroke error
c. when the customer has entered into the transaction without adequate information
d. when the customer mistakenly entered into the transaction because of inaccurate prompts
on your website
e. when the customer has received the ordered goods, kept the goods for several months
without complaint, paid the purchase price, and the online contract has been performed by
you, yet the customer suddenly demands a refund without any articulated reason
