E-commerce is the term used to refer to business transactions done via electronic networks. The world has seen the shift from physical transacting of business to a more online approach over the last few years. This has led to an increase in the volume of business transactions worldwide and convenience in doing so. E-commerce has helped to reduce the paperwork employees have to deal with, improved efficiency and also streamlined the overall business operations. However, this has also led to an increase in the level of fraud that happens to unsuspecting customers especially those who transact their business online. So then, how much certainty and clarity do terms for online contracts have? To answer this it is important to go through the contractual terms in an online contract and its performance. A contract is existent to legally enforce the agreement, duties and rights that parties agree to when entering into a transaction1. For a normal contract to be enforceable, according to Australian Law, it must have the following elements offer, invitation to treat and acceptance2; these are the same requirements for a contract transacted online. Issues arising out of online contracts in Australia usually emanate from the following reasons; the offer was not valid, was not duly accepted and failure by the acceptor to communicate their acceptance to the party which made the offer3. Other causes of problems in online contract performance are usually involving the jurisdiction of the contract, if the party in the contract provides substandard services or goods compared to what was stated in the contract, if one of the parties to the contract does not perform or fails to execute the contract as stated, payment terms, and other details such as how the contract is to be performed by the parties4.
For a contract to be enforceable, one must prove the existence of a valid offer, the English common law describes a valid offer as one which states clearly that the party making the offer desires and is ready to engage in business relations with another party, and to this effect the offeror is ready to enter into a legally enforceable contract which is to be founded on specific conditions and terms5. This in essence means that the information that is mainly present in a website is a clear and valid offer that if accepted is enforceable by law; this is different from an invitation to treat. A good example of an offer from the description above is one of those questions found in website that require a buyer to follow a certain link to buy a product or service; this is a clear invitation to do business. Another example of an offer may be from those marketing emails people usually receive especially when they subscribe to something. Most online businesses out of a desire to get customers and make money make money, do not want to get into the explanation of the legal terms involved in the contract6. A valid offer has however to contain all the terms to that are relevant to its performance. This means that an offer however casually put must contain all information pertinent to the contract. All offers and their contents should be easily accessible, accurate and clear; the offer should be made available to the other party in a way that allows the latter an opportunity to go through it before agreeing to the transaction. It is also important that the consumer is given a copy of the contents of the offer for future referral. Relevance to the case can be explained by quoting (1871) Smith versus Hughes. In this case, the judge ruled that the offeror intentions were not of importance7. If the offer was given in which a person reasonable in nature would recognize that as an offer was the main focus. For an offer to exist, there are certain prerequisites. The item must be described in detail, place of delivery, payment terms and the offer price. The payments terms should give the date when payment is to be made. The service given should also be described in matter of condition and type. The offer is illegal if any of the minimum requirements are not met8. It is merely an advertisement and not a legal contract. The web page has to clearly give instructions as pertaining to the information available in the website. It should distinguish between and offer and an invitation to treat9. In the event the offer is made via the internet, how is its validity determined legally? Presently, it is not given legally when acceptance should happen. In comparison to (1908) Powell versus Lee10, the judge ruled that there must be communication of acceptance. Therefore one has to ask which criteria are to be followed in relaying internet acceptance. The website can be used or one can send information through E-mail. Information of acceptance sent through E-mail is similar to signatures signed in normal transactions. In the case, (1818) Adam versus Lindsell11 the ruling postulated that acceptance was to be immediate in instances where E-mail is used. In the event one posts their acceptance, the date of posting is considered as effective. When using E-mail, terms stated in offer are included in the acceptance letter sent.
Acceptance through the website is quite different. Olley vs. Malborough Hotel (194912), L Estrange vs. Graucob ltd (1934)13 and Parker vs. SER Co. (1877)14 clearly show that for terms to be accepted in a court of law, the terms below must be seen to have been done: first, the client should be notified of the terms prior to or in the course of the agreement before a contract is entered into; second, these terms should be located in a contractual document; third, the party that establishes the terms should take reasonable measures to inform the other party of their existence. The red hand rule supports this by stating in the 1956 case of Bradshaw and J Spurling Co. that those clauses which are unreasonable or unexpected by the buyer, are the obligation of the seller to ensure the other party notices them15. In this case the judge ruled that some clauses in fact required to be typed in red and have a red hand directing the reader to them to ensure they were noticed. In the context of contracts done online, the UN has accepted models on electronic commerce (e-commerce) and electronic signatures in the years 1996 and 2001 respectively16. These models have been very useful in offering guidelines to e-commerce in many countries of the world17. The Electronic Transactions Act established in 1999 in Australia calls for a signature in such contracts and that the signature is only deemed valid if the system is able to establish what the person’s intention are when giving the signature and their identity; this is found in Section 1018. There are two ways of contracting online namely; browse wrap and click wrap agreement19.
The click wrap type of agreement is enforceable under the Australian Law; this is because in this type of agreement, the conditions and terms of the contract and the button for ‘I agree’ are located in one page. This makes it possible for the party to scroll down and read the contents of the conditions and terms carefully before accepting the offer. The conditions and terms are usually tailored to meet the contract, however if acceptance is done when one clicks ‘I agree’ then no more conditions and terms can be added20. It is necessary that the parties to the contract confirm if the conditions and terms are in accordance to the Australian law or if the terms tend to exclude the offeror from performance in any way before clicking ‘I agree’. The ‘Browse wrap agreement’ is considered to have less chances of being enforced. In this form of agreement, the conditions and terms of the contract are not situated in the page where the ‘I agree’ button is located21. They are mostly connected to a hyperlink that is on the same page as the terms. This is because it is not necessary for a person to read through them before proceeding with the other contractual items. It is recommended that an enforceable online contract will be completed if the following terms are met: that the client is required to read and confirm all the conditions and terms of the transaction- these are normally contained in a scroll box at the end of the purchase page. Any unique or unreasonable conditions and terms should be highlighted or written in bold to ensure the client notices them. At the end of the conditions and terms, the client should be required to show they have read and confirmed the contents of the offer before proceeding with the transaction; this gives a visible indicator that the client has accepted the offer22. The case Hotmail Co. v Van Money Pie in the United States showed that click wrap contracts are enforceable by law23; however care has to be taken to ensure they do not sound vague. Most online contracts, offers require the filling of information concerning a person such as the name, ID, account number etc after the clicking ‘I agree’24. It is necessary to note that this is a clear indication of acceptance of the contract and this will make it acceptable by law. It also necessary for merchants to ensure that the best practices stated earlier are met so that they can have the required clarity in their contractual terms25.
In the case Peter Smythe vs. Vincent Thomas26 both subjects being aware of how eBay works were bound to the contract of sale and purchase of the aircraft. Thus the webpage is an invitation to treat but the invitation to bid was an offer which Smythe was bound to pay while Thomas was bound to sell. Such a sale was made with the implied condition as to the good state of the plane as there were no clauses stating that the plane was to be bought as is or anything to specify its quality. This means that Thomas would be liable for such an action however eBay would not be liable. However if the plane did not show up, according to the case Eva Gora vs. eBay27, eBay then would be liable. This is because eBay has clearly shown in its webpage that it is a safe place in which people should conduct trade. It also charges insurance for trade in its webpage meaning that it guarantees the transaction s enforced. This means that eBay would be liable in case the plane was not produced.
Much case law and specific law have been mentioned pertaining to the enforcement of online contracts. However it is necessary to note that the same requirements of a contract that is made on paper are the same requirements that apply to a contract that is made online. Thus it is enforceable by the Australian law as a normal contract would be. These terms of a contract are not only applicable to Australia but are recognised by international law; hence are enforceable by many countries of the world. It therefore would be of great help to consumers who may not take due care when entering into such contracts with the thought that they are not legally recognised. Once such a person enters into such a contract, he or she is bound by the terms of the contract and is required by law to perform as stipulated by the contract or face legal redress. Only vitiating factors such as fraud, undue influence etc can lead to the revocation of the contract as in the case L Estrange Vs Graucob Co. Merchants who do not take reasonable care as pertains the invitation to treat and the offer may come to a loss should an issue arise as this might lead to the contract not being enforceable. However it has been noted that most online merchants seek these online contracts as an opportunity to make money through misrepresentation and other forms of fraud. This is unacceptable in Australian law and if all contractual terms are met the merchant is bound by law to perform the contract. However, it is not exactly clear to what extent are online contracts enforceable by the Australian law thus it is necessary that every person engaging in electronic commerce takes caution when transacting to make sure that all the terms of a contract are met. From the discussion above it comes out that the extent of sufficient certainty and clarity in online contracts is above average in Australia though improvements should be done; this is because though the government has put in place the legal framework for these contracts, some of the merchants avoid the legal requirements for making online offers while some of the consumers are ignorant of the law pertaining to online contracts. The parties need to ensure there is clarity in the communication of their intent and then they will most definitely be certain of the enforceability of the contractual terms. E - Commerce is the new business hub and it is here to stay, it therefore necessary that participants in this sector adhere to the rules of business as stated in the law.
Journal Articles
Barnes, David and Matthew Hinton, "Reconceptualising e-business performance measurement using an innovation adoption framework." (2012) 61(5) International Journal of Productivity and Performance Management.
Chau, Stephen, "The use of E-commerce amongst thirty-four Australian SMEs: An experiment or a strategic business tool?" (2003) 7(1/2) Journal of Systems and Information Technology, 49 – 66
Duan, Xiaoxia, Hepu Deng and Brian Corbitt, "Evaluating the critical determinants for adopting e-market in Australian small-and-medium sized enterprises." (2012) 35(3/2) Management Research Review, 289 – 308
Emiliani, M.L. and D.J. Stec, "Online reverse auction purchasing contracts." (2001) 6(3) Supply Chain Management: An International Journal, 101 – 105
Fletcher, Nigel, "Challenges for regulating financial fraud in cyberspace." (2007) 14(2) Journal of Financial Crime, 190 – 207
Ladson, Alicia and Bardo Fraunholz, "Facilitating online privacy on eCommerce websites: an Australian experience." (2005) 3(2) Journal of Information, Communication and Ethics in Society, 59 – 68
MacGregor, Robert and Lejla Vrazalic, "A basic model of electronic commerce adoption barriers: A study of regional small businesses in Sweden and Australia." (2005) 12(4) Journal of Small Business and Enterprise Development, 510 – 527
Missingham, Roxanne, "Electronic Resources Australia: a national approach to purchasing." (2009) 30(6/7) Library Management, 444 – 453
Missingham, Roxanne, "Networking a nation: ILL developments in Australia." (2007) 25(2) Library Hi Tech, 188 – 196
Parry, Frank, "Essential Law for Information Professionals (2nd ed.)." (2007) 25(1) Electronic Library, 116 – 117
Pikkarainen, Tero, Kari Pikkarainen, Heikki Karjaluoto and Seppo Pahnila, "Consumer acceptance of online banking: an extension of the technology acceptance model" (2004) 14(3) Internet Research, 224 – 235
Salo, Jari and Heikki Karjaluoto, "A conceptual model of trust in the online environment." (2007) 31(5) Online Information Review, 604 – 621
Scupola, Ada, "SMEs' e-commerce adoption: perspectives from Denmark and Australia." (2009) 22(1/2) Journal of Enterprise Information Management, 152 – 166
Shackleton, Peter, Julie Fisher and Linda Dawson, "E-government services in the local government context: an Australian case study." (2006) 12(1) Business Process Management Journal, 88 – 100
Wilson, Stephen, "Digital signatures and the future of documentation." (1999) 7(2) Information Management & Computer Security, 83 – 87
Books
Davidson, Alan, The Law of Electronic Commerce (Cambridge University Press, 2009)
Paul Budde Communication Pty, Australian E-Commerce, Marketing and Advertising (PBC Co., 2011)
Cases
Adams v Lindsell [1818] EWHC KB J59
Evagora v eBay Australia & New Zealand Pty Limited [2001] VCAT 49
Hotmail Corporation v. Van Money Pie Inc., et al. C98-20064, 1998 WL 388389
J Spurling Ltd v Bradshaw [1956] EWCA Civ 3
L'Estrange v F Graucob Ltd [1934] 2 KB 394
Olley v Marlborough Court Hotel [1949] 1 KB 532
Parker v South Eastern Railway [1877] 2 CPD 416
Powell v Lee (1908) 99 LT 284
Smith v Hughes (1871) LR 6 QB 597
Smyth v Thomas [2007] NSWSC 844
