Internet Trading ,
 ---------------------- Forwarded by Scott Sefton/LON/ECT on 27/07/99 13:13 
---------------------------
   
	Enron Capital & Trade Resources Corp.
	
	From:  Timothy.Hughes@cliffordchance.com                           27/07/99 
11:50
	

To: jboyd@enron.co.uk
cc: ssefton@enron.co.uk, ecooper@enron.co.uk, ekapralova@enron.co.uk, 
Andrew.Wilkinson@cliffordchance.com, Patrick.Huggard@cliffordchance.com, 
Christopher.Millard@cliffordchance.com, lkitchen@enron.co.uk (bcc: Scott 
Sefton/LON/ECT)
Subject: Internet Trading



Dear Justin
We refer to our meeting with you and the rest of the project team of 23 July
1999 and our subsequent phone call of 27 July 1999.
We thought it may be useful for us to set out in writing our advice in
relation to a number of the issues that we discussed at the above meeting
and conference call.  On that basis, please find below the following advice
on the following issues:
1. Legal and Privacy Statement.
We believe that the Legal and Privacy statement should be available on the
first entry page for the Enron website and on each of the main trading pages
in the same form and style as the other navigational links.
The Legal and Privacy statement contains important legal protections for
Enron that we think should be displayed at the earliest opportunity and in a
prominent fashion.  The more prominent the display, the easier it will be
for Enron to argue that a user of the website was aware of this statement
and therefore that it is binding on them.
2. Bid Box
When a trader clicks on a bid or offer price in the trading section of the
website a bid box appears.  It is important that this box contains wording
that indicates that at the underlying legal level the trader is making an
offer that Enron is free to accept or reject.  On that basis, we recommend
that the main wording in the bid box be "I want to buy [quantity]" or "I
want to sell [quantity]".
3. Availability of PA and ETA
There is little case law to guide us as to the best approach for ensuring
that agreements formed online are sufficiently executed to be enforced by
courts in England.  To improve Enron's argument that the ETA has been
sufficiently executed and agreed to by the counterparty, we advise that the
ETA be available for viewing and printing at all times through a hotlink in
the trading section of the website. This will assist our argument that the
ETA is incorporated by reference when a counterparty signs the PA.  If, for
some reason, (for example, the ETA is not available at the time of signing
the PA), the direct incorporation of the ETA argument fails, the hotlink to
the ETA may help to establish a course of dealing argument.  That is an
argument that over time the counterparty has been trading on the same terms
and conditions for each trade and has, therefore, affirmed its initial
acceptance of those terms and conditions.
4. Registration Forms
We look forward to an opportunity to review the online registration form for
new customers.  We also look forward to reviewing the online registration
form for view only users of the website.  Prior to our review of the view
only registration form, can you please confirm whether or not Enron will be
vetting view only applications.  If view only users are issued passwords
automatically, without a confirmation of identity or other verification or
clearance by Enron, then we should discuss the possible risks and legal
issues that may arise.
5. Master Agreements
We understand that Enron is internally discussing the relationship between
Master Agreement, NBP terms and NBP side letters.  The conclusion of these
discussion may require an amendment to the ETA, in particular clause 3(a).
6. Changes to the GTCs and ETA
It is clear from an English law perspective and the bulk of overseas
jurisdictions consulted by us that an change to the GTCs or ETA will require
the counterparty to accept the change by executing a new version of the
agreement.  Three issues have arisen in implementing this process:
(a) Marking up Changes:  From a legal as well as a public relations
perspective it is preferable that amended agreements contain a process for
indicating what changes have been made.  This process could take the form of
a list of changes or double underline or other mark-up procedure.  Changes
should be indicated against the previous version. All versions should be
dated.  Similarly, the ticker tape screen should indicate that there is a
new version until that new version is accepted.
That said, this position is advisable only if Enron can be certain that all
changes to amended agreements are identified.  If amended agreements are
presented for execution that are improperly marked-up or do not mark-up
certain changes, then Enron would have a lesser chance of enforcing these
unmarked changes than if no marking-up was shown.  Therefore, this process
is advisable only if Enron can ensure that all changes are identified.
(b) Notice of changes: We have previously discussed with you what procedure
should be adopted by Enron to notify counterparties of the change in the ETA
or GTCs.  To improve any argument that a counterparty has freely consented
to an amended agreement, we would advise that Enron adopt a procedure for
notifying counterparties of the altered agreements in advance of them taking
effect.  This notice should not be a contractual obligation, rather an
internal Enron procedure.  That said, we understand from our meeting that
there may be emergency situations requiring an immediate change to an
agreement, with the result that trading is suspended under the old
agreement.  If those circumstances are likely to be the bulk of cases when
amendments are to be made, then the notice process may not necessarily be
appropriate.  If notice is not given, then Enron would be relying on the
following elements as asserting that a counterparty freely accepted the
amended agreement:
(i) that the counterparty was prompted that the agreement had been amended
(and if mark-ups are provided, that the changes were indicated); and
(ii) that the counterparty is a professional organisation with experience in
the speed and pace of the commodities trading industry.
These elements are not conclusive but would give Enron an argument that the
counterparty is bound to any accepted amended agreement.
(c) Overseas Counsel: Advice from overseas counsel on amendment of the ETA
and GTCs did not specify that Enron would not be giving the counterparty a
period of notice of changes to the agreements, during which the counterparty
could continue to trade.  Therefore, if it is ultimately decided that no
notice period will be used, then we may need to seek further advice from
overseas counsel.
7. ETA Termination
Under your recent instructions we have amended the ETA so that it can only
be terminated for convenience by Enron.  That is, there is no express
termination for convenience right for a counterparty.  We have previously
noted that this means that an ETA may continue to be in force with a
counterparty that has ceased to trade or wishes to cease trading with Enron.
Advice from overseas counsel on the drafting of the ETA and GTCs was sought
based on a reciprocal right to terminate with notice. We will seek further
advice from overseas counsel on this issue.
8. Website Text Review
We look forward to an opportunity to review the text and layout of the
website to assess the final impact of the layout and text on the contractual
obligations formed using the website.
9. Data Protection
Since our meetings and conference call, we have discussed further our recent
advice to you on data protection.  We are currently seeking the further
advice of overseas counsel of this issue and will provide further advice to
you shortly.
10. German digital signatures
Further advice is being sought from German counsel.  We will provide you
with a response on this issue shortly.

We hope the above provides a useful summary of our advice on a number of
issues.  Please do not hesitate to contact us to discuss any aspect of this
matter.
Regards
Timothy Hughes/Andrew Wilkinson





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