Discuss about the Contracts Created by Electronic Means.
A contract is a voluntary understanding in between two or more parties which is enforceable by law. A contract arises due to formation of agreement, consideration, legal capacity, intention, and certainty which are the five essential elements. Both the parties should be capable to enter into an agreement under the existing law. Minors, intoxicated person, mentally insufficient person can’t enter into a contract. Mutual consent is essential for forming a contractual relationship in between parties[1].
The world is witnessing a changed manner of doing business due to increase use of technology. The internet has become an important medium to conduct business within or outside the country. This has created urgency and given rise to complex jurisdictional problems and formed variety of consumer protection issues. A clear purpose for the enactment of the Electronic Transaction Act 1999 by the Commonwealth Parliament is due to increase use of internet in conducting business[2].
The act is a part of the commonwealth government’s strategic structure for protecting the economy in the age of technology. It ensures that the people enjoy the social and economic rights under any circumstance[3].
The act was enforced on 15 March 2000 and is made on the United Nation Commission on International Trade Law’s Model Law on Electronic Commerce (UNCITRAL). It was adopted under the guidelines of the experts referring issues related to e-commerce[4].
The law safeguards the interest of people by removing the legal obstacles to use electronic communication for business[5]. Each state and territory has effectively enacted the complimentary legislation as a part of national uniform system. The legislation is based on two practical theories which are: ‘functional equivalence ’and ‘technology neutrality’.
Functional equivalence treats both the paper and electronic transactions on same parameter. Technology neutrality doesn’t differentiate in between different type of technology. The extensive range of electronic communication includes communication through fax, email, messages or any other electronic medium.
A contract is a basic necessity for any transaction in a business. It is a union connecting two or more people to discharge a legal obligation under a valuable consideration. A contract can be created with a variety of methodologies like exchange of communication by post, verbally, or by completion of formal documents. An oral contract is valid as per the law provided there is no specific requirement of a written contract. The beginning of the information age has changed the form of communication of business. There are various ways to create an electronic contract either through e-mail or by using the website[6]. The electronic contracts are divided in three major categories. Sale of physical goods is where the goods are ordered online and payment is made via internet. The customer gets the normal delivery at their doorstep. Sale of digitized goods takes place in sale of the software, where the buyer receives the goods online. Supply of services takes place in online banking, financial consultancy, and consumer advice. The services are made available online by the service provider.The indication of lowest price[7] doesn’t constitute to an offer to sell.
In the case of Fisher vs. Bell it was constituted by the court that display of goods with the price label in a shop is not an offer. It will be treated as invitation to treat. The offer is made when the customer present the item to the cashier. Acceptance altogether happens when the payment is made.
In the case of Harvey vs. Facey[8] difference between the offer and supply of information was stated. The Privy Council mentioned that mentioning the lowest price to the party doesn’t constitute an offer, however it will be considered as mere negotiation.
There are five essential of a valid contract which binds the parties under an obligation. It is necessary to make a valid offer to the other party. The other party must accept the offer to create a contractual relationship. The parties should have mutual concern regarding creating contractual relationship which involves consideration. The terms of the contract must be certain. All the essential of the electronic contract are similar to the contract law but under the electronic law, offer and acceptance are considered separately. It is significant to understand when and where the contracts are formed as it influences the privileges of the parties to the contract and helps in deciding the authority in case of disputes. New section 13(1) (a)[9]summarizes the detail information about e-contracts which means dispatch occurs when the information is transmitted. The postal acceptance rule is exclusion to normal contractual principles which are accepted due to delay in time. The contract is formed when it is accepted by the other party. In case of contract through electronic form (email) a contract shall be created when an offeree presses send rather than an offeror giving his acceptance. Time and place is important while accepting the contract.
In the case law of Tallerman & Co Pty Ltd v Nathan’s Merchandise it was stated by the court that the actual obligation to a contract starts when the acceptance is communicated; it creates a legal relationship in between the parties. In the offer is not completed until and unless an acceptance is received to the offeror[10].
When the contracts are formed through electronic medium, it is difficult to establish the moment of creation of the contract. While creating an electronic contract, determining the time of acceptance and formation directly affects the contractual rights of the parties. For example in sale of good through online sale, sending the acceptance is a critical transaction. Under the common law it is necessary to have a deemed receipt whereas in case of electronic communication, when the information is received by the addressee.
In the case of Entores Ltd v Miles Far East Corporation the court stated that posting rule doesn’t apply to the acceptance made by telex as it is an instantaneous form of communicating information.
The court held that this type of acceptance doesn’t led to contractual relationship[11].However new section 13(1) (b)[12] states that the time of dispatch is determined when it is acknowledged by the addressee.
In the case law of Henthorn vs. Fraser it was stated by the court that claimant is entitled for specific performance. According to the ordinary usage of postal services, the acceptance is completed when the letter is posted.
In the case of Adam vs. Lindsell it was stated by the court that the origin of postal acceptance rule regards to the acceptance, [13][14]and any form of acceptance should be communicated expressly to an offeror, however if the letter of acceptance is posted , it is regarded as accepted.
In the case law of Leach Nominees Pty Ltd v Walter Wright the telex machine was used to send the acceptance was used by the third party. The acceptance was considered to be dispatched when the sender gave the message to the telex operator, not when it was sent.
In a recent case law it was stated by the Supreme Court that the negotiation made through email are enforceable agreements. The email negotiation between a vendor and an authorized representative is a subject to a contract. It further stated that it binds the party into a contract satisfying the requirements of the Property Law Act 1974(Qld) (PLA). Further the court stated that subject to the parties have agreed on the purchase price, the deposit etc. binds the party into a contract.
In the famous case of Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd it was stated by the court that the Expression email exchange suggests that the party are agreed on the terms and conditions attached with the contract. The email exchange suggests that the parties are willing to fulfill the requisite terms and conditions[15].
Offer and acceptance are essential elements to form a contract. They both are necessary ingredients to bind the party in a contractual relationship. The offer will become a contract when the acceptance is received from the other party.
In Carlill v Carbolic Smoke Ball Co the court stated that the offer[16] which is made through various forms like newspaper advertisement, letter, fax, email etc. are explicit offer which held that advertisement containing certain terms and conditions regarding reward binds offeror in a contractual relationship.
Section 14B of the act states the provisions concerning Invitation to treat electronic contracts. The internet and technology has changed the way of conducting business. Various websites are indulged in carrying online business which creates a contractual relationship in between the seller and buyer. By putting any product for display on internet is an offer as per the definition mentioned in the act. The act states that any good which is displayed for sale online binds the seller in a contractual relationship. Display of goods on internet is a general offer to the public where any party can ask for purchase. This creates a legal obligation on the party to perform the contract by delivering the goods.Section5 (1)[17] of the Principal Act states the provisions related to generalized offers. An unaddressed proposal made randomly is regarded as an offer.
The law defines three kinds of mistakes in a contract: the unilateral mistake, the bilateral mistake, and the common mistake. The mistaken offer makes the contract either voidable or void-ab-initio. Under this act section 15D[18] applies in relation to the statement, declaration, as well as an offer and acceptance of an offer. In case of an error committed by a natural person or through a self-created message system, the party has the right to leave the part of the mistake. It is the duty to inform the other party about the error occurred at an initial stage. An offeree hasn’t withdrawn any benefit from the mistaken offer. The right to withdraw the part of electronic communication doesn’t provide the other party to rescind the contract. The consequence of the withdrawal of the portion of the electronic communication is determined by the law.
In case of unfair contract terms the plaintiff has the rights to terminate the contract, to vary the contract terms, and to allow the other party to avoid the obligation. The acts provide legal assistance in case of dispute due to unfair means of contract. In case of financial services one can make complaint to the Australian Securities and Investment Commission. They provide legal assistance in case of financial misconduct. In case of other type of contracts the plaintiff can make a complaint to the Australian Competition and Consumer Commission (ACCC) or Office of Fair Trading. Both the organization helps in safeguarding the rights in case of online misconduct.
In the case law of Hartog v Colin & Shields it was stated by the court that unilateral mistakes in the terms of an offer does not simply means the offers and to be able to enforce it. Moreover where the other person is aware about the unilateral mistake made by the offeror he should not take an advantage of such mistake.
Electronic Transactions (Victoria) Act 2000 safeguards the interest of the plaintiff under inappropriate conditions. Disputes arise in between the parties due to involvement of a considerable sum. In case of dispute the parties have right to address it through arbitration or mediation. This will help both the parties to appoint a mediator to resolve the complex issues. ADR has a major role to play in future due to up gradation in technology and software. It was stated by E C Lide in his paper in the year 1996 that ADR will play a major role in resolving disputes arising out of technology. The internet ADR system will help in online solution of the dispute in the presence of experts. This model works well in ICANN Uniform Domain name[19].
The only evidence in an electronic transaction is the computer generated documents. It creates problem as it is difficult to amend data in the system. In case of e-commerce there is a risk of alteration of the data. In other words if the veracity of the electronic data is not ensured, the overall value of the contract will not remain the same. The only solution to the problem is using digital signatures. We all know that the technology is growing at a rapid rate which has led to generation of electronic tools like digital signatures. An electronic signature is signature used in case of electronic data transmission. They are recognized both in Australia and in other countries. They have the same effect as the handwritten signatures. Digital signature[20] is unique electronic identities which make them more trusted and secured way of authorization of the electronic contracts. It transforms the document using cryptography. It helps in ensuring that if any party tries to change the information attached, the verification process will ensure that this situation doesn’t arise. The court protects the party in case of any such misconduct. Moreover, with the advancement in technology it is highly suggested that the digital signatures will lose their authenticity due to chances of data interference. It is highly recommended to update the technology when and where it is required. The companies should change their signing and encryption keys in number of occasion because of the chances of failure in technology due to advancement.
In the case law of Mehta v J Pereira Fernandez it was stated that the present various guidelines and security management system which ensures the safety of the data.The name written in the end of an email can be considered as the digital signature[21]. Its status is as similar as the hand-written signature
Computer and technology has changed the scenario of conducting business. Internet has become a popular place to exchange goods and services. The society understands the increasing trend of e-commerce where majority of sales are carried online. There is however some challenges attached while conducting electronic business. The electronic transaction act defines the scope and the legal rights of the parties to the contract. It discusses the remedies available to the parties in case of non-performance. In the age of global competition the electronic contract is a tool used to perform oversea business. It consists of all the general scope attached with the legislation and explains the duty of the parties to the contract.
References
Alan L Tyree, Electronic signatures. <https://austlii.edu.au/~alan/electronic-signatures.html>
Andy Gibson and Douglas Fraser, Business Law 2014(Pearson Higher Education AU, 2013)
Carlill v Carbolic Smoke Ball Co
Christensen, Sharon — “Formation of Contracts by Email – Is it Just the Same as the Post?” [2001] QUTLawJJl 3; (2001) 1(1) Queensland University of Technology Law and Justice Journal 22
Court of Appeal [1893] 1 QB 256; [1892] EWCA Civ 1<https://www.australiancontractlaw.com/cases/carlill.html>
E-Commerce. <https://www.ag.gov.au/RightsAndProtections/ECommerce/Pages/default.aspx>
Electronic Transactions (Victoria) Act 2000 – SECT 13 <https://www.austlii.edu.au/au/legis/vic/consol_act/eta2000345/s13.html
Electronic Transactions (Victoria) Act 2000 – SECT 13. <https://www.austlii.edu.au/au/legis/vic/consol_act/eta2000345/s13.html>
Electronic Transactions (Victoria) Act 2000 – SECT 5 <https://www.austlii.edu.au/au/legis/vic/consol_act/eta2000345/s5.html>
Electronic Transactions (Victoria) Act 1999 – SECT 15D. <https://www.austlii.edu.au/au/legis/cth/consol_act/eta1999256/s15d.html
Entores Ltd v Miles Far East Corporation [1955] 2 ALL ER 493; [1955] 2 QB 327; [1955] EWCA Civ 3<https://www.australiancontractlaw.com/cases/entores.html>
Harvey vs. facey (1893) Privy Council
Beatson and J. Cartwright, Anson’s Law of Contract (Oxford University Press, 2016)
Jeannie Marie Paterson, Andrew Robertson, Arlen Duke, Principles of Contract Law (Thomson Reuters Australia, 2012
Mehta v J Pereira Fernandes S.A [2006] EWHC 813 (Ch) (07 April 2006<https://austlii.edu.au/~alan/electronic-signatures.html>
Michael Gisler, et al. Legal Aspects of Electronic Contracts Infrastructures for Dynamic Business-to-Business Service Outsourcing (IDSO’00) Stockholm, 5 – 6 June 2000.
Philip Argy and Nicholas Martin, Mallesons Stephen Jaques, The effective formation of contracts by electronic means,
Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd [2015] QSC 119 (14/11998) Martin J 15 May 2015<https://www.hunthunt.com.au/news-and-publications/insurance/sale-of-land-email-exchange>
Tallerman and Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd [1957] HCA 10; (1957) 98 CLR 93 (18 February 1957)High Court of Australia<https://www.austlii.edu.au/cgi-bin/sinodisp/au/cases/cth/high_ct/98clr93.html?stem=0&synonyms=0&query=~contract%20near%20law>
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