Kirsty Newman 19:33, 2 Sep 2004 (EST)
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The material elements of a contract formed online are essentially the same as a traditionally formed contract. As a starting point, contracts are formed all the time in instances as simple as buying goods from a store. The principles of valid contract formation are agreement, which constitutes an offer and an acceptance, an intention to create legal relations, and consideration, which is the price paid for what is received. Using shopping as an example, the shop offers the goods on display for sale, the purchaser accepts them, usually at the same time as providing the consideration (payment for the goods), and this is done with the legal intention that if these goods don’t work for example, the store will be required to refund the purchaser’s money or replace the goods as a consequence. These three principles form the base of a contract in addition to authentication (Willmott, 2001).
New technologies are perhaps the best examples of why the law needs to keep developing. The Internet and cyberspace have created entirely new environments in which traditional principles and concepts do not apply, and are subsequently reshaped.
An offer must contain all the essential terms that will govern the transaction, or else it will not be enforceable. Therefore, on websites, the location of the terms of the transaction may be important. It is possible for the terms and conditions to be brought to the attention of a possible customer before the contract comes into effect. Website designers need to ensure that unless the customer scrolls through all the terms and conditions and accepts them (usually by clicking on the ‘I Accept’ icon), they will be unable to access the product or download the software. This is because, if a customer declines the terms and conditions and is still able to access the product or software, the providing company will not be able to rely on those terms and conditions. This is an example of a ‘click-wrap contract’ (CCH Australia Ltd, 2002: 553). Click wrap contracts have been accepted in the USA and in Canada but the Australian courts have yet to decide on the matter, although the general consensus is that they are enforceable (CCH Australia Ltd, 2002).
Under current technology it is also encouraged that a hard copy of the terms and conditions be made for the reason that if the site operator or owner changes the terms and conditions and a dispute arose, it is important for the customer to know which terms and conditions they are legally bound to (see http://www.oznetlaw.net ). Another issue that arises in relation to online offers is offers in the form of mass e-mails. As Spam is illegal, the recipient must have given prior consent and have the option of opting out of the mass e-mailing list (CCH Australia Ltd, 2002).
E-mail is a common method of acceptance in the electronic environment. This can be problematic since unlike traditional contracts, the person being contracted with is not physically present, and so their identity may be uncertain. Digital signature technology is one way to get around this problem.
Consideration has been authoritatively defined by Lord Dunedin in the English case of Dunlop Pnuematic Tyre Company Ltd v Selfridge & Company Ltd (1915) AC 847 at 855, as:
An act or forbearance of one party, or the promise thereof, is the price for which the promise of the other is brought, and the promise thus given for value is enforceable.
This can become an issue in the online environment, when software is offered at no charge (for example, Acrobat Reader). This then means that the software provider cannot bind the customer to the terms and conditions, since there has been no consideration given in exchange for the software (CCH Australia Ltd, 2002).
Since in the e-commerce environment the relationship of the transacting parties is usually commercial in nature, an intention to create legal relations will be implied (Rose and Frank Co v JR Crompton and Bros Ltd (1923) 2 KB 261).
As mentioned above, in the online environment it can be difficult to authenticate the person or company being contracted with. This not only applies to e-mails, but also websites. False websites are created which pose as copies of well-known websites, and so receiving money from unsuspecting customers who receive nothing material in return. It was suggested in the Australian eBusiness Guide by CCH Australia Ltd (2002) that this situation could be largely eliminated if websites could show authentication of their legitimacy. One example woulbe be digitally signed web-pages (see for example PGP Signed Web-Page)
Some contracts, unless they are in writing and signed by the ‘party to be charged’ (the person who is having the contract enforced against them), will be unenforceable. The two most significant are contracts concerning land and guarantees, imposed in Queensland by the Property Law Act 1974 (Qld), s 59 and s 56(1) respectively. These types of contracts are not usually formed online, but offer and acceptance can be made via e-mail. Therefore, in the case of these types of contracts, unless a hard copy is made, if a dispute arose or one party wanted to back out of the contract for instance, the other party will not be able to enforce the contract against them.
CCH Australia Ltd. (2002) 'Australia eBusiness Guide', 2nd edition, CCH Australia: Sydney p. 547 - 567.
Dunlop Pnuematic Tyre Company Ltd v Selfridge & Company Ltd (1915) AC 847 at 855.
‘Online Contracts’. [Online], (1999). Available: http://www.oznetlaw.net/facts.asp?action=content&categoryid=232 [Accessed 7 Aug. 2004].
Rose and Frank Co v JR Crompton and Bros Ltd (1923) 2 KB 261
Willmot, L., Christensen, S., Butler, D. (2001) ‘Contract Law’, Oxford University Press: Victoria – ISBN 0 1955 10062.
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Kirsty Newman 17:31, 25 Oct 2004 (EST)
