Law of Electronic Contracts

There has been in the recent years a trend that the court has shown towards the judicial trend of recognition of contract that are formed through the medium of emails. In the cases of Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd and Stellard Pty Ltd v North Queensland Fuel Pty Ltd in which there was a situation that was demonstrated this has led to the courts recognizing the fact that an immediate and binding agreement is constituted through exchange of emails. In contract law there is a distinction that is drawn between what can be considered as communication that is immediate and communication which is inherently delayed. This separation has ramifications on the determination of when and where the acceptance of the offer of the contract is to be finalized.  The Postal Acceptance Rule would apply on to those forms of communications that are non-instantaneous in nature. For instantaneous communication the contract would be formed immediately as the acceptance is conveyed.

An issue which may essentially arise in contract through email is when the contract will be said to have been formed. The requirements of contract that are required are that of offer and acceptance for an email to constitute an agreement that is immediate and binding. There should not be any doubt through the emails exchanges, the surrounding circumstances and the external conversations, that there existed an intention to be bound by the contract from both the parties to form a contract. It was opined in the case of Vantage Systems by the courts that a contract would arise as a result of emails being exchanged where an intention is there from the parties for concluding the same and have a binding agreement. In the case of Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd, a sale contract for a land held to be binding and the same had been concluded between the parties through email. Though the email stated that the acceptance would be subject to the contract, however it was still opined that the contract had been formed and the rest was only a formality.

These days it is quite common that there is exchange of emails which are in nature commercial and which do form binding and concluding agreement between the parties which are exchanging the emails. These latest case are cautionary to those who dealing through negotiation by way of email correspondence. Another important aspect which is highlighted in these care are that of using clear and decisive language so that it can be clearly evidenced where the person aims to be bound by the contract and where the aim is not to be bound by the contract.

Further, other than contract through emails there has also be a huge emergence of business through online activities.  Internet’s impact has been so huge that for any business’s successes there cannot be avoidance of this tool that has become extremely important for the various transactions that are conducted which are in respect to the business. The main reason why there has been an increase in electronic contracts is because electronic commerce has increased.  It is essential to understand because it is transaction that is online there will not be any change under the law of contract, all the elements which are required for forming a contract that is valid would also apply such as that of offer, acceptance, consideration, legal capacity and legal intention. Online transactions primarily fall under three kinds of electronic contract which are (a) shrink-wrap, (b) browse wrap and (c) click through agreements. Formation of contract required that different steps which are to be followed, which the customer is required to undergo. In the click through agreements for example, which is one of the most popular electronic contract, it requires that the customer should scroll through the various terms and conditions which are there. Then by clicking on a button they are required to validate the contract to make it enforceable.

Electronic contracts do have certain advantages which have been attached to them, however the reliability and certainty which is there in the contracts that are physical in nature and which have be signed in ink personally by the parties and which are found usually in the contracts that are paper based in nature are not found in the electronic contract. It is thus necessary for the electronic message’s recipient to ensure that the person who is sending the message can be trusted, so that any action that is requisite can be taken by placing on the message sent complete reliance, without there being any requirement of verifying anything further regarding the same. The addressing of concerns with respect to security is essential to be addressed since the amount of data that is being generate is great and any information which may have been left behind may hold importance and can be vita and may even be used in a manner that is improper. The principles, generally which are applicable are for the relationship to be formed that is in nature contractual regarding the purchase which are being done online is only after the actions have commenced between purchaser and seller. When there is a display of goods on e-commerce website, these actions generally are invitation to treat, it would not be considered to be an offer but would only be an invitation to treat, this is quite similar to the manner in which goods are kept on display on any other virtual store. It is only upon the action by the customer that there would be commencement of an offer after such customer has visited the website, the offer is not made by the seller. The goods and services which are displayed on the website do not form an offer, hence it is important that the customer who wants to purchase the goods has to communicate the same to the seller. It would be upon the customer to make an offer for purchasing the product and this offer would be communicated to the seller by the customer through electronic means, once the same has been communicated electronically within the website itself which it is required to be done. It will only then be an offer for the purchase of the product which the seller has advertised on the website. The vendor shall the once and offer has been made by the customer decided either to accept this offer unequivocally and without any conditions or he may even reject the same, this however it required to be communicated to the customer as to whether there has been an acceptance of the offer. A contractual relationship is formed once there is acceptance of the offer of the customer by the vendor.

On June 12^th, 1996 the UNCITRAL after its 650^th meeting adopted the Model Law of Electronic, the General Assembly then in turn adopted this vide its resolution 51/162 at the 8^th Plenary Meeting which was held on December 16^th 1996. Under Article 11 the electronic contract have been recognized by Modern Law, this article states that unless that parties have agreed otherwise, the offer and acceptance may be conveyed by the way of data messages. Where contract has been formed by way of data messages it cannot be said that the same will be denied validity or enforceability on this ground stating that there had been use of data messages for conveying the offer and acceptance.

The offer in a contract indicates the person’s willingness to form a contract without within the purview of certain terms and conditions. There is no restriction which has been placed generally on the type or number of people to whom the offeror can make such an offer to.  It for the offeror to decide as to whether, he wants to make such an offer to a particular group of person, an individual or to the whole world. The online transaction environment this type of offer can be made through different methods it can be either through email (which has been already discussed) or it can be through the medium of a website. In all the agreements which would form a contract eventually there is an offer and acceptance which can be identified easily. However, there might be such cases where the differentiation between offer and acceptance would not be one that is obvious. In such situation where the possibility of identification is not there with a certainty that is complete as to who has made the offer and to whom the offer has been made for acceptance. However, if there has been an agreement which has been reached finally between the parties it would be result into a contract which is a valid contract. It is thus important that the intention of the parties should be made clear where there is no ready or separate identification of offer and acceptance which can be made. It is also required that the terms should be defined properly.  

In the landmark case of Smith v. Hughes, it was explained by Blackburn J. whatever be the real intentions of an individual if the conduct of the person has been such that it would lead to any reasonable man in believing that the terms that had been proposed by him had been asserted to by the other party and it is based on this belief that the other party enter into a contract, then it would held that such as person who has led the other party believe such a promise would be bound by the same in the manner which is same as if he had the intention of being bound by the contract.

A difference exists between an offer which may be converted into a contract and there being an invitation to treat. In invitation to treat there is an invitation which is given to the offeror to make an offer, once such an offer has been made then the negotiations are opened. There is an invitation from the parties of responses for bargaining and the negotiations are covered under it which does not form offers. There is very thin line of difference which is there between an offer and an invitation to treat. An invitation to treat is just an advertisement for something however; an offer is made to enter into a legally valid contract. Often, an invitation to treat is made by the seller for which there is request made to the buyer to make an offer against it.  The case of Spencer v. Harding stated that it is only an invitation to treat which is formed by a circular which stated instruction as to who offer to the trade for sale was to be made, and hence the same cannot be accepted. Where it is for the sale of goods that the advertisement has been made even then the same rule shall be made applicable. Somervell LJ in the landmark case of Pharmaceutical Society (GB) v Boots Cash Chemists (Southern) Ltd opined that a self serving arrangement is nothing but a methods which enables the customer to be able to see that products that they want to purchase in a convenient manner and substitute possible and put those products back which they are not willing to purchase and then these selected products would be moved to the cashier so that an offer can be made for the purchase of the same. Further in the case of Partridge v. Crittenden it was stated by Lord Parker that the advertisements are only an invitation to treat and nothing else. In the era of electronic contracts when there is a display of products are made on the website it is not an offer but an invitation to treat. The presence of a seller online is considered to be an invitation to treat only and it is not an offer in the manner similar to that as observed in virtual stores where the goods are displayed physically.

Thus, since the online presence of a seller is considered to be an invitation to treat only, any mistake which has been made can be withdrawn easily. There can be no suit which may be filed against it as it is not an offer but only an invitation to treat. In the Argos Distributors case there was a television that had been put on display and price at $299. There were various customer in Europe and UK who ordered the television however, there was refusal on the part of the retailer stating that the price of the television had been mentioned incorrectly. Since it was the Argos Distributors who had put the advertisement it was considered that it was only an invitation to treat and not an offer, therefore a right of refusal was there with Argos for fulfillment of such orders. However, a case may arise where the display of goods and services online on the website by the merchant leads to there being an offer which has been formed in a way that there a facilitation of a contract. For example in the Kodak where the case was a little different from what happened in Argon, since the website of Argos was interactive in nature there was no confirmation of the offer, however the website of Kodak had accepted the offer hence they could not back out of it.

Unlike the traditional stores most of the sales which are made online are automatically commenced. The chances hence, of there being a mistake is quite high. It is usually through an online vendor that such mistakes are detected usually at the time when an order has been shipped which is after the formation of the contract. In transactions that are made offline directly with the vendor it is at the check out that such mistake may be detected and hence are easier to be rectified.

Various literatures, decisions of the courts and legislations indicate that there are still various problems in forming, construing and building of electronic contracts. There are may be uncertainties legally that arise as to the precise at which there is a formation of the electronic contract. Legal uncertainties also exist with respect to the place at which it would be considered that the contract has been formed. Further even with respect to electronic contract guarantee, there are various uncertainties as to whether there would be applicability of such guarantees if it is required for them to be written or signed specifically by a person through requirements that are statutory in nature.  The case of Parker v Clark however, stated that an email was a note and the same would be considered as being sufficient for the satisfaction of requirement of the document being written.

Though is a clear indication of the importance with respect to every day transaction that internet has with the Commonwealth Parliament enacting the Electronic Transactions Act 1999 (Cth.).The legislations main aim is for ensuring that a foundation is there which has been laid for creating a nation-wide legislative framework that aids e-commerce. However law of contract would still be applicable for issues related to contracts formed online or electronically.

References

Argy, P, N Martin and M.S. Jaques, "The Effective Formation Of Contracts By Electronic Means" [2001] New South Wales Society for Computers and the Law Journal

Carter, J. W, Contract Law I (LexisNexis Butterworths, 2015)

Carter, J. W, Contract Law II (LexisNexis Butterworths, 2015)

Cheshire, G. C et al, Cheshire, Fifoot, And Furmston's Law Of Contract (Butterworths/LexisNexis, 2001)

E-Commerce (Continuing Professional Education Dept. of the College of Law, 2000)

E-Commerce (CLE Dept of College of Law, 2000)

Hultmark, Christina, Internet Marketplaces (Oxford University Press, 2002)

Syed, Mahbubur Rahman and Mahesh S Raisinghani, Electronic Commerce (Idea Group Pub., 2000)

UNCITRAL Model Law On Electronic Commerce, With Guide To Enactment, 1996 (United Nations, 1997)

Wang, Faye Fangfei, Law Of Electronic Commercial Transactions (Routledge, 2010)

Parker v Clark [1960] 1 WLR 286

Partridge v Crittenden [1968] 1 WLR 1204

Pharmaceutical Society (GB) v Boots Cash Chemists (Southern) Ltd [1953] EWCA Civ 6

Smith v Hughes [1871] LR 6 QB 597

Spencer v Harding [1870] LR 5 CP 561

Stellard Pty Ltd v North Queensland Fuel Pty Ltd [2015] QSC 119

Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21

Electronic Signatures (2016) Austlii.edu.au .

 

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