GEC C.S.H.B. 306 75(R)    BILL ANALYSIS


BUSINESS & INDUSTRY
C.S.H.B. 306
By: Elkins
4-21-97
Committee Report (Substituted)



BACKGROUND 

There is no current statue that defines applicable laws regarding
interstate contractual transactions made over the Internet. 

PURPOSE

As proposed, CSHB 306 would ensure the legality of a contract made over
the Internet. The context of the bill would clarify that a contract made
over the Internet is valid as long as it complies with the laws of the
state in which the website is located. 

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any
additional rulemaking authority to a state officer, department, agency or
institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 35, Business & Commerce Code, by adding
Subchapter I. 

  Section 35.961. DEFINITION. Defines "Internet" as the largest
nonproprietary   nonprofit cooperative public computer network. 

  Section 35.962.  LAW APPLICABLE TO CONTRACT MADE OVER
INTERNET. 

  (a)  Subject to Subsection (d), this section applies only to  a contract
made solely   over the Internet between a person located in this state and
a person located   outside this state who does not maintain an office or
agent in this state for doing   business in this state. 

  (b)  A contract to which this section applies is governed by the law of
this state  
  unless each party to the contract who is located in this state:
  
   (1)  is given notice that the law of the state in which another party
to the    contract is located applies to the contract; and 

   (2)  agrees to the application of that state's law.

  (c)  A person asserting that the law of another state applies to a
contract has the   burden of proving that notice was given and agreement
was obtained as provided   by Subsection (b). 

  (d)  Sections 1.105 and 35.53 do not apply to a contract to which this
section   applies.  This section does not apply to a contract to which
Section 35.51 applies. 

  Section 35.963.  RECIPROCAL SUSPENSION OF STATE LAWS.  Except as
provided by Section 35.962, if a person in another state transmits
information into    this state over the Internet or conducts an activity
over the Internet in this state and   the transmission or activity would
violate a law of this state, the activity does not   violate the law of
this state if: 

  (1)  the activity is legal in the state in which the person is located;
and 

  (2)  that other state provides for a reciprocal recognition of the laws
of this state   in relation to information transmitted or activities
conducted over the Internet by a   person located in this state. 


SECTION 2.  Subchapter I, Chapter 35, Business & Commerce Code, as added
by this Act,   applies only to a contract made on the Internet effective
on or after the effective   date. 

SECTION 3.  Effective date September 1, 1997.

SECTION 4.  Emergency Clause.


COMPARISON OF ORIGINAL TO SUBSTITUTE

SECTION 1. of CSHB 306
The substitute deletes in its entirety Section 35.351, which was a new
section of Subchapter D. 
The substitute replaces the deleted language by adding a new Subchapter I,
entitled "Internet Activities." The new Subchapter I adds three new
sections: 
-Section 35.961 defines Internet.
-Section 35.962 details the types of contracts made over the Internet to
which this section applies. 
-Section 35.963 defines reciprocity recognition and suspension of the
conflicting laws of the states conducting these activities. 

SECTION 2. of CSHB 306
Strikes the language "Section 35.531, of the Business & Commerce Code" and
is amended by adding "Subchapter I, Chapter 35, Business & Commerce Code,
as added by this Act."