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."