Last Updated 09 Apr 2020

Legal Environment of Business DB

Category business, Environment
Essay type Research
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Jurisdiction is defined as “the inherent authority of a court to hear and declare a judgment” (West's Encyclopedia of American Law, 1998). An aggrieved party must first determine where to file his case or complaint. In the determination thereof, he must ascertain which court has jurisdiction to take cognizance of his case. An erroneous determination can result in an opportunity for the defendant to challenge this and have the complaint dismissed (West's Encyclopedia of American Law, 1998).

There are different kinds and classifications of ‘jurisdiction.’ For purposes of this discussion, the pertinent jurisdiction that will be discussed shall be personal jurisdiction. Personal jurisdiction is the authority of the court over the person of the defendant (in personam) or in the property (in rem) subject of litigation (West's Encyclopedia of American Law, 1998). Traditionally, personal jurisdiction is limited to the geographical or territorial area where the defendant or the person sued is present. Through the years, territoriality of personal jurisdiction has enlarged and expanded (West's Encyclopedia of American Law, 1998).

Limiting personal jurisdiction merely on the basis of territory resulted in problems more pronounced in business transactions and dealings across territories. Judicial interpretation and legislative enactments enlarged personal jurisdiction through “long-arm statutes” which most states have (West's Encyclopedia of American Law, 1998). These statutes allowed a state court to acquire jurisdiction over a defendant even if he is in another state in certain cases such as when the issue involves business transactions; when it involves tort; or when issue involves real property located within such state (West's Encyclopedia of American Law, 1998).

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With the development of internet, it has slowly become an interstate and international medium for business transactions without being physically present in other states. This discussion will seek to illustrate internet jurisdiction.

I have chosen the web site Red Envelope (Red Envelope web site, n.d.). Using the “interactive use” test for jurisdiction, the web site creator of Red Envelope may be held subject to the jurisdiction of any state that engages in business with the web site. Clearly, an analysis of the content specified in the pertinent web site reveals that there is a “two-way online communication” between the customers and the company, Red Envelope. A customer can easily order an item as specified in the web site for an amount stated therein and subject to other terms such as the terms of shipment. Clearly the information and description therein is “for the purpose of soliciting business” (Wolf, 1999).

Personal jurisdiction is an issue for those who post web sites because it determines which state courts shall have authority over the issue of a case and the internet actor without infringing the due process clause of the U.S. Constitution. The courts, in the exercise of judicial power can deprive a person of liberty through imprisonment or of property by imposition of pecuniary liability in favor of a party who seeks relief. Thus, it is crucial for a web site owner to know if the court of a specific state or country can have such authority to hear and decide the claim that may arise from the use of the web site.

Ordinarily, courts acquire personal jurisdiction over the defendant if he is present within the geographical or territorial area where the court sits. An exception to this rule is in the case of long arm statutes where the court may apply its provisions under the instances discussed above. Invoking the application of the long arm statute to a particular case is tantamount to having the court possess such authority over the defendant to render a binding decision notwithstanding the fact that the defendant may not be present with in the territory where the court sits. Clearly, creators of web site who may not be present in a territory where the court sits may be held liable and accountable in a binding decision.

Based on an article of Christopher Wolf, there exists an ‘interactive-passive’ test of jurisdiction. The distinction lies in that, interactive test connotes that interactive uses have taken place within a state (Wolf, 1999). This means that there is more than a two-way line of internet communication to attract customers into engaging business with them as against mere information offered regarding matters (Wolf, 1999). Moreover, it signifies a high level of activity of business transactions.

For instance, in the case of Red Envelope, terms and conditions for the sale of described items are clearly specified such that customers need only to order and enter their credit card numbers for payment of the item ordered. On the other hand, a passive test connotes mere information posted in the web site for the viewer’s information and satisfaction of interest in so far as the specifics of certain item or items. Finally, advertising alone does not vest a court personal jurisdiction. It takes a higher degree of activity or sales made and contacts to forum residents (Wolf, 1999).


Red Envelope web site. Retrieved on February 18, 2008, from

West's Encyclopedia of American Law. The Gale Group, Inc. 1998.

Wolf, C. Standards for internet jurisdiction. 1999. Retrieved on February 18, 2008, from


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