Elements of Electronic Contracts

Describe about the Electronic Data Interchange for Service Providers.

Electronic form of making contract has been in vogue for last many years. Earlier they were made with respect to Electronic Data Interchange or EDI. They were privately dealt with and were subject to charges entailed to them. The service providers catered to specific organisations that had their prerogatives for very specific purposes. They were usually done for communication purposes between the manufacturer, wholesaler and the retailer. It simplified the efforts taken by these individuals to make arrangements for trade. In absence of such services, there would be unnecessary burden of paperwork. However this service is limited to people who have long lasting relationship. Then only EDI subsists without impediments.

These are established in traditional conceptualisation of contract but may not be apt in the virtual world of trade. The traders, who intend to enter into business through internet, must understand the nuances which are required and the process by which electronic forms of contract are formed. The following things are to be present in the elements of electronic contracts-

An offer which is basically desire for making an agreement on the basis of certain conditions being fulfilled. It can be made through almost all possible modes of communication. It can be through telephone discussions or through electronic mails. In the case of Reese Bros Plastics Ltd v Hamon- Sobelco Australia Pty Ltd (1988) 5 BPR 97325 (NSW CA), the postal rule is applicable to only for fax, telex and telephone. A prerequisite with respect to any electronic offers is how the offer looks or specifically its appearance. The intent or purpose comes as a secondary condition. The stress is upon how a man of reason would make out of the ‘offer’. The content of the homepage of a website or the language of the email can make contents of an offer. The intention becomes immaterial whether the web page creator actually wanted to make an offer or not or whether the email sender actually had the intent to make an offer or not. An acceptance to any such offer can result in a binding contract. This is very different from a traditional contract where the intention is of primordial importance. Here the appearance of the web content of email is enough to constitute offer and does not require further explanation from the maker of the content. However it has been noticed that distinction can be drawn between an offer and inviting someone to the offer. Contents in the webpage showing products and services with a price tag associated with them are more like inviting for buying. It is completely the choice of the buyer whether he or she chooses to be lured by the advertisement. If they are not, an offer does not exist at all. If they proceed to comply by the invitation the offer exists. Hence it is always advisable to retailers who display their wares online to show a disclaimer that the products are mere advertisement and an invitation and not direct offers. The terms and conditions to such invitations should also be mentioned along with such advertisements.

Legal Validity of Electronic Contracts

In the case of Tallerman &Co Pty Ltd v Nathan’s Merchandise (Victoria) Ltd Pty Ltd (1957) it was observed that acceptance is not proper when the manner of conveying is not thought of by the offeror. The offer is made by the consumer. The contract becomes binding when the retailer shows acceptance to that offer by agreeing to sell the product or service at the agreed terms and conditions. There is a rule in postal services that contract gets formed when a letter is sent accepting the offer. This concept is discussed in the case of Adam v Lindsell (1818) 106 ER 250. It is a classic old English case where it is discussed that acceptance actually happens when the acceptor of the offer sends his/her letter of acceptance through post. It is of primordial importance to ensure the time when the contract actually started. It is also essential to determine what law governs the formation of such contract. It has always been noticed that there is always an uncertain area regarding legal implications when one determines acceptance in case of internet contracts. In such cases it is necessary to determine how law has taken its stand in other types of communication. The most well known forms of other types of communications can be telegram, postal service, facsimile (fax) and telex. It is essential to determine the instances of acceptance in respect to all these types of communication-

Telex- In the case of Entores Ltd v Miles Far East Corp (1955)2 QBD 1327 the judge found out that the rules which apply to postal services were not much relevant in cases of telex services. The traditional rules of contract were more relevant in such cases which say that the contract comes into effect when the acceptance is received. The judge was also of the view that telex services were not similarly comparable to telegram and post. The difference that was drawn was that telex mode of communication was more spontaneous way of communicating. The earlier decision drew support in the case of Brinkibon v Stahag v Stahal (1983) 2 AC 34. Here the postal method was compared in respect to present day dynamism in technology. It was suggested that a flexible approach should have been taken. In telex, the messages were not bound to reach the chosen recipient at once since a plethora of issues result hindrances while transmission. Hence it was difficult to justify all case by using a single rule.

Alternative Dispute Resolution in E-commerce

Emails- Email is considered as the most spontaneous form of communication. They are not very accurate since they get delayed in transit and the time taken for an email to reach is also uncertain. Emails do not get delivered for various reasons. Often the email reaches the recipient but stays the in the in- box unseen and unread for many time. The traditional rules of contract are similarly applicable for emails and acceptance is taken into cognizance when the email gets read rather than when it gets sent. This principle is discussed in details in the case of Nunin Holdings v Tullarmarine Estates (1994) 1VR 47at 83.

In commercial contracts consideration is referred to goods delivered and money paid for the goods delivered. The preconditions of consideration are no impediment to invalidate internet contracts where products and money is in transit. However doubt is raised over ‘click wrap’ agreements of having considerations. These refer to services where by clicking on a link of the webpage online services like shareware get delivered. Courts usually refuse to consider such products or free software as genuine services and hence they negate the concept of consideration.

There is always a legal relation created in any online commercial transaction though the notion is subject to review. The online retailer need not make much effort to prove that in case of refusal to pay by the customer, the presence of a contract. The customer must be made to go through procedures disallowing counter charge.

Since there is little chance of one to one dealing, it is difficult to ensure legal capacity of the parties. Hence the parties to the contract have to fill online forms where every single detail of the parties are entered including identity proof validated by legal authorities[1].

A concept must be pondered that whether a mistaken offer can be rescinded by the person offering. It is said that between the act of sending the offer and the recipient gaining knowledge of the offer, the offer can be cancelled. Even before the recipient provides acceptance, the offer can be rescinded. However once acceptance is given by the recipient, it is impossible to rescind the offer since the offer gets its acceptance and a contract is created. The present contract nuance can be found in the case of Mobil Oil Australia v Wellcome International Mobil Oil v Lyndel Nominees [1998] FCA 205; (1998) 81 FCR 475.

Challenges in Contract Creation via Electronic Medium

Section 7 of the Electronic Transactions (Victoria) Act 2000 {Act No.20/2000} speaks of legality of electronic retail system and validates them[2].

There is always chance of clashes and disputes when contractual relation is created through electronic medium. They include money which is significant in nature. Often the disputes become litigation bound. In these cases the costs of filing the case and defending the case cross the actual value of the product or service. In these situations, the concept of alternative dispute resolution is always effective. The parties to the contract have the choice to avoiding litigation and may refer their dispute to arbitration, conciliation or mediation. The parties can appoint a middle person known as the ‘referee’ who is equipped with the ability to solve difficult issues regarding legal related and technology related matters. They will also help to resolve the matter by curbing excessive expenditure and saving time. The most significant use of ADR was during disputes of Y2K which had large amount of money involved with it. The question is whether the concept of alternate dispute resolution will turn out to be a stable alternative for the e-commerce industry. It is predicted that ADR will play a significant role in the future of digitalisation. It play a pivotal role in tackling challenging new problems that will emerge from the use of internet for carrying transactions of commercial nature. There are existences of forums on the internet that provide ADR services who are a saviour to parties suffering from online frauds. They are suitable alternatives to lengthy court procedures where expenses exceed the value of the claim. It is seen that people who are well versed in e-commerce can act as mediators in alternative dispute resolution system. This system can be followed in ICANN Uniform domain Name Dispute Resolution Policy.

However certain issues rise when contracts are created through electronic medium. In maximum of the commercial electronic trade, there is only a single evidence of the contract which are the machine generated reports describing the trade details. However the problem that arises is that it is easy to tamper data stored in computer. The risk which the parties to the online trade face is that any other person can access to the trade data, change them or even delete them from the database without being caught. This becomes a grave concern when the documents are required in case any dispute pertaining to the trade.  The evidence to the dispute will be destroyed and justice will be difficult to access. Hence it is the responsibility of the parties to the electronic transaction to ensure that information regarding the trade should be well secured. This could be done by electronically locking the computer with complex codes and passwords. Help can be secured from software experts to achieve the same. So the biggest problem in a court is the evidentiary value of the computer created reports. It is very difficult to prove that the records are genuine because the content is insecure and can be easily accessed by third party hence making it vulnerable to tampering. There is way to avoid this serious issue[3]. Digital Signature Technology is a helpful solution. It will cater to save the evidentiary worth of the documents and save the authenticity of them in courts. By the use of digital signature, a message or document is converted by the method of cryptography. This technology helps to clarify the authenticity of the information and validates the trueness of the signatory. It also helps the party to ensure that the particular document was sent by a particular person. If any nuance of the document digitally secured gets tampered, by verifying one will be able to understand that the document has been changed as it is digitally signed. It will also be ensured that the digital signature is not made by the original signatory[4]. If any case of tampered records is discussed in courts, the court will reconsider the evidentiary value and excuse the glitch.  Since the growth of technology is elevating tenfold, over a period of time digital signatures are losing the essence of security[5].

The concept of contract formation by internet and other electronic medium is still in rising and is gaining popularity in all straights in life. However since the electronic space is insecure in nature, third party with technical skills can misappropriate the information available, it is essential to ensure appropriate safeguards to secure the authenticity of the documents so that they do not lose the evidentiary value in the courts of law.

The Effective Formation Of Contracts By Electronic Means (2016) .austlii.edu.au https://www.austlii.edu.au/au/journals/ANZCompuLawJl/2001/33.pdf

Davidson, Alan, The Law Of Electronic Commerce (Cambridge University Press, 2009)

Australian Government Review Of Australian Contract Law (2012) lawsociety.com.au https://www.lawsociety.com.au/cs/groups/public/documents/internetyounglawyers/644777.pdf

THE PAPERLESS CONTRACT (2015) www.nortongledhill.com.au https://www.nortongledhill.com.au/wp-content/uploads/2015/07/The-Paperless-Contract.pdf

E-Commerce | Attorney-General’s Department (2016) Ag.gov.au <https://www.ag.gov.au/RightsAndProtections/ECommerce/Pages/default.aspx>

Formation Of Contracts By Email – Is It Just The Same As The Post? (2016) User/Downloads/58-116-1-SM <https://file:///D:/User/Downloads/58-116-1-SM%20(1).pdf>

Electronic Transactions (Victoria) Act 2000 Act No. 20/2000 (2016) https://www.legislation.vic.gov.au/ <https://www.legislation.vic.gov.au/domino/web_notes/ldms/pubstatbook.nsf/f932b66241ecf1b7ca256e92000e23be/f3176112f522da6bca256e5b00213e26/$FILE/00-020a.pdf>