Discuss about the General Law of Contract.
Contract law is an important field for any and every business, irrespective of its scale and the industry in which the business operates. In order for the businesses to conduct their business efficiently, it becomes crucial that the contract law is properly adhered, as nearly every aspect of business requires a contract to be formed[1]. Electronic Transaction Act, 1999[2], short for ETA is a crucial piece of legislation where the different aspects of contract law merge and through which, different regulations for the digital marketing are presented. In the following parts, a discussion has been carried in which the general law of contract has been discussed. Apart from this, the different aspects of ETA, which can be applicable on the business of Thelonious have been discussed and have been applied, so as to conclusively provide an advice for the client.
A contract denotes that a promise has been made between two or more parties, in which one side pays the consideration and the other side undertakes the condition for which the promise has been made.[3] A contract can be created by putting down the terms on a paper and getting them signed from both the contracting parties, which would result in a written contract; or simply by exchanging the terms in an oral manner, making a verbal contract. For the formation of contract, there is a need to have the elements of offer, acceptance, clarity, consideration, intention and capacity. In case even one of these elements is not present, a contract cannot be formed[4].
The first step towards creating a contract is the offer. One party has to offer some terms on the basis of which the promise is made, to the other party[5]. It is important to differentiate between an invitation to treat and an offer. The former denotes the aim of the parties to start with the negotiations for the contract and the latter shows the aim of the parties to be bound by the contract[6]. When the goods are displayed on the shop window, they are an invitation to treat as was stated in Pharmaceutical Society of Great Britain v Boots[7] and the offer is only made when the individual picks the goods and takes it to the cashier for billing. And so, on the basis of display, the shopkeeper is not obligated to sell the product. The adverts in the newspaper are also taken to be invitation to treat, as was famously held in Partridge v Crittenden[8]. However, when it comes to a unilateral offer made in the newspaper, as was held in Carlill v Carbolic Smoke Ball Company[9], which can be accepted through performance, it is deemed that an offer has been made instead of an invitation to treat.
The next step which has to be taken for the creation of any contract is the acceptance. The acceptance has to be taken on the offer which was made and by the individual to whom the offer was made[10]. The acceptance has to be properly communication and a silence is not an acceptance and the famous example of this is Felthouse v Bindley[11]. It is important that while communicating the acceptance, the offer is accepted in the exact manner in which it was made, without modifying or altering it. When the communication has changed or altered term, it is considered as counter offer as was famously established in Hyde v. Wrench[12]. And this would mean that the original offer is expired.
The date of acceptance, as per the general acceptance rules provides that the acceptance date is such date on which the offering party attains the communication of acceptance sent by the accepting party. However, a key exception to this rule is the postal rules of acceptance. As per postal rules, the acceptance date is the date of posting the acceptance letter and the receiving date of this letter is irrelevant. The rationale behind this is considering the postal office as the agent of the offering party[13]. A leading case in which the validity of the postal rules of acceptance was upheld was the case of Adams v. Lindsell[14], whereby the court stated that the contract was enforceable. Though, when a third party responds to such communication and send the acceptance, the date of receipt is the date of acceptance instead of the sending date, as per the case of Leach Nominees Pty Ltd v Walter Wright Pty Ltd[15].
Consideration is one more key element in contract formation, without which, the contract is declared as invalid. A consideration is not required to be adequate and just has to be sufficient. And it is also important that consideration moves from the promisee[16]. The amount of consideration is mutually decided between the parties. And if the consideration does not have economic value, it makes the consideration invalid, as was held in White v Bluett[17]. Another requirement for forming the contract is for the parties to have an intention of entering into lawful relation[18]. The parties also need to have the contractual capacity, in terms of being of legal age and sound mind. Lastly, the terms on which the contract is based has to be very clear for a valid contract to be formed[19].
A key piece of legislation which is applicable on the digital contracts is the ETA. The electronic contracts are contracts formed through electronic means. Under these, the offer and acceptance are made through emails. Each jurisdiction in the nation has its own version of ETA, which is identical to the ETA of commonwealth[20]. Section 14 relates to the date of sending the offer and acceptance, which is aligned with the postal rules of acceptance. The date on which the communication is sent from the device of the sender is accordingly deemed as the date of offer or acceptance[21]. Section 15 of ETA provides that the communication becomes binding on the creator of the electronic communication in such situation where the authority is obtained from the creator or was sent by the creator of such communication[22].
Section 10 imposes an obligation of signature[23]. This section provides that in such cases where signature is a requirement, the condition would be deemed as been met when the reliable method has been selected for such communication[24]. For instance, the automatic insertion of email headers, in Mehta V J Pereira Fernandes S.A [25] was taken to be an unreliable method for the signing of a document[26]. The validity to the electronic contracts is provided through section 19 of this act[27].
There are a number of nuances that Thelonious would have to keep in mind for forming the contracts online, owing to his shift towards a digital platform. Particularly when he has to take up the online sales and set the website up, certain key elements of the contract law have to be kept in mind, along with the applicability of the ETA. As is the case with advertisements in the newspapers, the adverts on the internet are deemed as invitation to treat. This can be inferred from the examples of Kodak and Amazon UK, where the prices were wrongly advertised and the court in both the cases upheld the adverts as invitation to treat. The intention is also considered for creating the contracts through online mode.
The Supreme Court in the case of Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd[28] held that the term had been subjected to the contract; however the offer and acceptance consisted of different rounds of telephonic conversation and emails. And this conduct depicted the intention of the parties to form a contract; thus leading to a valid contract being formed in this case.
In order to form an electronic contract, there is a need for a clear notice to be given to the customer and to provide that the contract law is applicable. Further, there is a need for a clear statement to show what would be deemed as an acceptance of the agreement. And lastly, the consumer has to be given a chance for reviewing the terms and condition of the agreement, before the contract becomes enforceable on them.
There are two key forms of electronic contracts. And these include the click through and the browse wrap. The browse wrap agreements have the terms and conditions at different page, which are accessed through a hyperlink[29]. The click through agreements is the most common type of electronic contracts and in these an individual has to scroll down through the entire terms and conditions of a particular agreement and the acceptance to this agreement is provided by clicking on a tick box or a button which is placed at the bottom of the agreement in order for the same to be transformed into an enforceable contract. In a click through agreement, the agreement’s terms and conditions are accepted by simply clicking on the “I Accept” or a similar icon. This is an end user agreement which usually comes with the software covered in the plastic wrapping. The court held that by clicking on “Accept” icon, which was given in the end of the contractual terms, in of DeJohn v The TV Corporation International, et al.[30], the plaintiff had entered into the contract. Thus, it is crucial for Thelonious to keep extra care when drawing up the website and opting for one of these two methods.
The common law of contract and the ETA summarized above, along with the different aspects of the electronic contracts and the manner in which these two can be formed draw out a clear advice for Thelonious. Thelonious is required to pay a key attention to all these laws and make informed choices, and present the same to his customers, particularly when they have to form the electronic contract by merely clicking on a button. The customers have to be clearly informed that by clicking on such button, an electronic contract would be formed, which would bind them in a legal manner. The key thought here that the offer and acceptance has to be obtained and the minds have to be met of the consumer and of Thelonious, so that an intention to form an electronic contract is clearly presented. Thelonious would provide the products and the consumer would purchase at the agreed price and at the agreed conditions. Amongst the two methods available for creating online contracts, it is advised to Thelonious to opt for click wrap agreements as the consumer would not have to go to a different page to access the terms and can easily read these on the same page.
Conclusion
In the preceding parts, the different aspects of contract law, particularly related to the formation of contract were highlighted. The discussion was initially focused in the manner a basic contract is formed, and for which the different elements of contract are required. The discussion then moved on to the different sections of the ETA, which are commonly used in the electronic contract and which even provide the validity to such contracts. This was followed by elucidating the manner in which the electronic contracts are formed, i.e., the click wrap and the shrink wrap, and the need for the consumer to be aware of entering into the contract, by clicking on these. Lastly, an advice for Thelonious was drawn whereby he was advised to adopt the laws stated earlier and take special care while coming up with the manner in which the contracts with the customers are to be made, i.e., the adoption of click wrap method.
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Adams v. Lindsell (1818) 106 ER 250
Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256
DeJohn v. The .TV Corporation International, et al. 245 F.Supp. 2d 913 (C.D. Ill. 2003)
Felthouse v Bindley (1862) EWHC CP J35
Hyde v. Wrench (1840) 3 Beav 334
Leach Nominees Pty Ltd v Walter Wright Pty Ltd [1968] WAR 244
Mehta V J Pereira Fernandes S.A [2006] EWHC 813 (Ch) (07 April 2006)
Partridge v Crittenden [1968] 2 All ER 421
Pharmaceutical Society of Great Britain v Boots [1953] 1 QB 401
Stellard Pty Ltd & Anor v North Queensland Fuel Pty Ltd [2015] QSC 119
White v Bluett (1853) 23 LJ Ex 36
Contract Law
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