Establishment of Contractual Terms for Transactions Completed Online in Australian Law - Essay Example

Contract Law Research Outline and Research Essay Name Institution Date Contract Law Research Outline and Research Essay Research outline Part 1 In Australia, the Electronic Transactions Acts of the Commonwealth and States have been instituted for several years. The aim of the law is to permit contractual transactions within transactions carried out within Australia. The Electronic Transactions Acts of the Commonwealth and States endows electronic signatures with the force of law although Australian law has not yet stipulated any standards regarding legal liability concerning digital signatures. This indicates the intricacies involved in establishing an enforceable online contract within Australia. Accordingly, the Australian law might not guarantee that there are no areas of uncertainty within online contract formation. This paper argues that there is no sufficient clarity and certainty in the establishment of contractual terms for transactions completed online. Part 2 Hill Jennifer, The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods, Northwestern Journal of Technology and Intellectual Property (Volume 2, Issue 1, 2003). The absence of an online transaction within the definition of contract writing leaves a major gap within the commercial certainty and predictability of online transactions. Online contracts have complicated and facilitated sales transactions with speedy and simpler methods on conducting business. E-commerce presents numerous challenges to traditional paper-based law and this includes jurisdiction, formation, authentication, message integrity in addition to non-repudiation. The basic requirements of a contract; offer, acceptance as well as consideration come under attack within formation of online contracts in the initial agreement, modification and also completion. Sales transactions are about agreement, in particular within a global context where diverse cultural, social and legal institutions often make them hard to keep. As a result, legislations such as Electronic Transactions Acts of the Commonwealth and States have been established to allow online contractual transactions. Additionally, electronic signatures have been included in online contracts for establishing the identity of the contractual parties, the integrity of the terms and conditions overseeing the contract, the timeframe of the contractual terms and conditions in addition to acceptance of the contractual terms and conditions by the parties to be bound by the contract. However, there is always some level of uncertainty during the formation and completion of online contracts and hence more measures to those in Electronic Transactions Acts are required to diminish uncertainty in online contracts. Alstine Michael, Cyberspace Law materials - Electronic Commerce, Virginia Journal of International Law (Volume I, issue 2, 2006). Under the traditional perspectives on the nature of a valid contract, binding contractual obligations arise through demonstrations of a consequent common intention of the contractual parties to a proposed transaction. Consequently, the law endorses and provides value to such a contract after certain prerequisites respecting form and the content of the contract have been satisfied through offering the power of the state in aid of the enforcement of those obligations. The rise of internet as a business tool has emerged with a level of uncertainty surrounding the law of offer and acceptance in contracts. The Electronic Transactions Acts provides electronic signatures with the force of law. This has been perceived to reduce the level of uncertainty in online contracts and hence create a relatively enforceable online contract within Australia. Yet, this law alone cannot ensure that there is absolutely no uncertainty within online contracts. With online transactions, the main issue for the seller is if the contractual terms and conditions on the seller’s website are enforceable. The contractual terms and conditions are only enforceable when the user accepts the terms and conditions. Therefore, in online transactions, the seller is supposed to give reasonable notice of terms and conditions before the user is considered to have accepted them. Part 3 Bibliography Articles Alstine Michael, Cyberspace Law materials - Electronic Commerce, Virginia Journal of International Law, Volume I, issue 2, (2006). Carl Pacini, To Agree or Not to Agree: Legal Issues in Online Contracting, Bus. Horizons, Volume 1, Issue 43, (2006). Christopher Poggi, Electronic Commerce Legislation: An Analysis of European and American Approaches to Contract Formation, Va. J. Int'l L. Volume 224, Issue 241 (2000). Damian Sturzaker, Australia: Dispute Resolution in the New Millennium: International Arbitration, Mondaq Bus. Briefing, (Jul. 27, 2001). Hill Jennifer, The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods, Northwestern Journal of Technology and Intellectual Property, Volume 2, Issue 1, (2003). Joachim Bonell, Do We Need a Global Commercial Code? 106 Dick. L. Rev. 87, Volume, 94, Issue 30, (2001). Priestley, L.J, Unconscionability as a Restriction on the Exercise of Contractual Rights' in Carter, Rights and Remedies for Breach of Contract, Volume 25, Issue 4, (2006). Williams Victor, The Duty to Give Notice of Unusual Contract Terms, Journal of Business Law, Volume 375, (2002). Cases Daulia Ltd v Four Millbank Nominees Ltd [1978] 2 All ER 557. Dow Jones & Company Inc v Gutnick [2002] HCA 56 Partridge v Crittenden [1968] 1 WLR 1204 Manchester Diocesan Council for Education v Commercial & General Investments [1970] 1WLR 241. Texts Ewan McKendrick, Contract Law - Text, Cases and Materials (Oxford University Press, 3rd Ed, 2005). Scott Fruehwald, Reciprocal Altruism as the Basis for Contract, (University of Louisville Law Review, 2nd Ed, 2009). Terry Hutchinson, Researching and Writing in Law (Thomson Reuters, 3rd ed, 2010). Contract Law Research Outline and Research Essay Introduction Technological developments such as internet have led to new standards within global and local commercial activity. The changes have diminished the certainty of contractual negotiations making it appear like law of offer and acceptance is not readily applicable to online transactions. Activities and transactions that devise or instigate contractual negotiations are not limited to the written word. The law of offer is and acceptance is also applicable to online transactions. This paper analyses if there is sufficient clarity and certainty in the establishment of contractual terms for transactions completed online. To do this, it is essential to explore the contractual law and to investigate cases that are applicable and devise the required conditions to establish contractual certainty within online transactions1. One concern focuses on the association of parties. Numerous online transaction engines operate as third parties during the course of offer and acceptance. Such an interaction may set hurdles in contract formation. Due to this, is essential to establish the legal status of the third party (Debenhams Retail Plc v Customs and Exercise Commissioners [2004])2. The third party can be a contract party, an negotiator or even one of the contracting parties, or might be only a mediator through which contractual bargaining takes place. If there is no law giving the legal position of online contracts, the process of offer, acceptance as well as terms of contract established through the internet will establish itself through the general contract law. This will take place for the most part within the same way, just like in physical world during the negotiation terms of contracts. Therefore, instituting offer, acceptance as well as the contract terms is the same regardless of the contract is in written form, oral contract or implied through the conduct of the parties within the same way3. In evaluating if the Electronic Transactions Acts of the Commonwealth and States has reduced uncertainty within the formation of an online contract, it is appropriate to assess what an online contract means and to take into consideration other supporting legislation. Alone, the Electronic Transactions Acts cannot guarantee that there are no areas of uncertainty within the formation of an online contract. This paper will analyze the effects of the Electronic Transactions Acts on contract formation in Australia looking particularly at its impact on contract formation and certainty as well. In arguing that the Electronic Transactions Acts has not alleviated all uncertainty from electronic contract formation, it is necessary to investigate two arguments. First, consequent legislations like the Electronic Signatures Regulation have been introduced to alleviate uncertainty within online contracts, for example digital signatures. Through this argument, it is logical to argue that more legislation was necessary to enhance Electronic Transactions Acts that the law could buy itself but not alleviate all uncertainty within the formation of online contracts4. Furthermore, there is another argument that formation of contract is intrinsically uncertain within and of itself. The fact that online contracts form a rational subset of the contractual formation generally; it should logically follow that there are areas of uncertainty, which will remain within the formation of online contracts, following to the introduction of the Electronic Transactions Acts. Even though the Electronic Transactions Acts has reduced several difficulties facing the formation of online contracts, cannot solely do away within contractual uncertainty within online transactions5. Basically, there are several issues with online contracts. Generally, internet is an essential communication means. Issues with the law that have come up due to internet are hence due to the differences between communication within the physical world and communication through the internet. Negotiations in online contracts result from a chain of communications that establish a legally binding agreement. Therefore, there is no big difference between online contracts and contracts established through face-to-face communication. The details surrounding the form of the communication are the prime obscurity6. Generally, a contract should have an offer and acceptance as well. The set laws should be able to establish if a contract created online has a legal offer and an acceptance or whether a contract has an invitation to treat. It is crucial to note that communication through the internet involves a collection of separate procedures utilized in communicating through the same physical connection7. Due to the collection of protocols, different legal issues are applied to the individual communication procedures. Communication protocols such as e-mail correspond to the process of sending letters through post. Therefore, World Wide Web can be perceived as being equivalent to mail order catalogue based purchasing structure. Similar principals direct the process of creating a contract regardless of whether or not the procedure is quicker. In reference to the case Manchester Diocesan Council for Education v Commercial and General Investments [1970]8 since an offeror can specify the procedure of acceptance, it is advisable for parties to consent to the form of acceptance before concluding contractual negotiations. Another fundamental issue surrounding online contracts is the universal rule of law that, for an acceptance of an offer, it should be “communicated” to the offeror. Under usual situation, the offer should essentially receive the acceptance prior to the contract coming into existence9. In regard to invitation to treat, offers and acceptance, displaying goods is a rule of an invitation to treat. Additionally, there is a supporting rationale behind treating the display of goods as invitation to treat instead of as offer. Nonetheless, in cases where a machine makes the display, for example in online transactions where the display is through a computer or other electronic machine, the display is likely to construe an offer. This presents the complex issue regarding how a website should be treated. Essentially, advertisements are an invitation to treat and numerous Websites do little more than acting as electronic billboards. What’s more, there are companies that use online completely for all processes of their transactions. Such companies might not have any facilities of accepting orders apart from the Website and utilize electronic agents in conducting negotiations10. As a result, it is worthy noting that the facts of the individual case will have a big role to play in solving contractual issues concerning the websites. Partridge v Crittenden [1968]11 indicates that all advisements do not necessarily suit the prerequisites to be an offer but instead may simply be an invitation to treat. The argument in this case was that an advertisement is a unilateral offer where specific provisions are applied. It therefore can be argued that the form of contract leads to different outcomes. It is not all times clear if the “buyer” is also the party making the offer, or the acceptance (Daulia v Four Millbank Nominees Ltd [1978])12. From the above cases, it is clear that where much of the supposed inconsistency is. The complexity is establishing the legal status of a web is hence not the issue with the law, but an issue with establishing where the facts best contest preceding case law. All websites cannot be grouped in the same category. The actual status of the website in legal terms should be established before other things. In an attempt to tackle the difficulties involved in online transactions, the ECC e-commerce law obligates the supplier to provide a receipt for the order (Article 52 of the e-commerce law). Normally, the receipt is issued through the e-mail. In the case Argos Neuman 2002, Argos Ltd, which is an online dealer, received orders valued at GBP one million. When Argos Ltd quoted the wrong price on Sony Nicam televisions in its online catalogue appearing to offer them for GBP 3 instead of the usual retail price GBP 299, the dealer defended the claims that it had breached the contract basing on the terms and conditions provided on its website. Argos Ltd argued that the e-mail was neither an order confirmation nor order acceptance. In this manner, the company had to recognize the offer but Argos affirmed that this wan an invitation to treat. Therefore, the client makes the offer to their website13. Generally, there are several offer and acceptance issues in online transactions that remain unsolved. Still, there are is no secure contract formation in online transactions. This is because Australian firms including Internet Service providers are not obligated by any law to warranty the security of online transactions. In view of that, parties are free to determine their own suitable measures in achieving confidentiality, integrity and validity of information transmissions during contract formation. As a result, there several legal risks involved in online transactions and they include, confidentiality; individuals communicating information like trade secrets or bank account details might be obligated by law or agreement to maintain confidentiality of such information. This obligation is applicable to online communications. Authentication is another legal risk involved in online transactions; the identification and verification of contract parties as well as transmission of information is fundamental to the establishment of a binding contract and allocation for deception between the contractual parties. Message integrity is also a legal issue since for a binding contract to be formed; there should be a “meeting of minds” on the same contractual terms. A contract might not be enforceable in case one party can ascertain that information allied to the contract formation have been corrupted or tampered with. The last legal risk with online transactions is repudiation of a contract where the contractual parties have to agree on the authentication as well as the security procedures to be utilized in forming the contract. Normally, a contractual party will be prevented from denying the existence, precision or legality of a communication which conforms to the agreed procedures14. A leading Australia online jurisdiction case is Dow Jones & Company Inc v Gutnick [2002] HCA 5615. In this case, the ruling of the High Court was that a Victorian court would have jurisdiction over defamation act that involved an article written within New York and uploaded onto a web server within New Jersey since Victoria was the location where the damage was suffered. It was argued that for the material on the Websites, the material is not available in an understandable form until when it is downloaded on the computer of an individual who has utilized a web browser to get the material from the web server. What matters is where the individual downloaded material. Even though this ruling was specific to online defamation jurisdiction, the ruling was consistent with the available common law rule16. Electronic signatures include all forms of electronic signatures. A digital signature makes use of cryptography to give a methods to enable electronic signings in online contracts and digital signatures ascertains the identity of the contractual parties, the integrity of the terms and conditions overseeing the contract, the timeframe of the contractual terms and conditions in addition to acceptance of the contractual terms and conditions by the parties to be bound by the contract. In general, a digital signature is not a computerized image of a hand written signature but it is special for each and every online document generated as it is obtained from the document. Any change or alteration within the document will produce a new signature and this allows the recipient to find out if a change has taken place after the initial digital signing17. Since Australian law has not yet stipulated any concerns regarding legal liability in regard to digital signatures, there are legal risks with digital signatures. And because Australian law has not yet stipulated any standards in legal liability, it solely the responsibility of the parties to rely on available contract and tort laws to protect themselves against involved legal risks. Therefore contractual parties utilizing digital signatures are supposed to distinctly and accurately assign liability for acts and non-acts that comprise a private key. Normally, the private key number is between 160 and 500 digits long and the parties are supposed to agree that secrecy of the private key should be maintained by its lawful holder18. However, even though the contractual parties may agree to different contract terms, characteristically the private key holder is responsible for any loss ensuing in case the security of the private key is compromised. In case the private key is compromised, the contractual parties might have negotiated liability on a sliding scale depending of the circumstances that led to the compromise of the security key. Generally, mostly the parties agree on a cap on liability. However, even though an electronic signature might satisfy the functional prerequisites of the law of contracts, the signature does not provide adequate evidence of the signatory’s identity. Additional proof is needed which connects the public key utilized to the party19. Essentially, a Commonwealth law might require that during a contract, information to be recorded in writing, a written document to be retained or an electronic communication to be retained. An electronic record will satisfy these prerequisites in regard to the Commonwealth, New South Wales, and Western Australia laws but as long as specific conditions are fulfilled. Online transactions have limitations legislation. Statutory limitation periods limit the duration in which an action can be brought against an individual or organization. A statutory limitation period is normally six years from the time when action took place but it may differ within certain cases. Mostly, the law requires a company to maintain electronic records for at least six years to defend or bring proceeding in regard to breach of an online contract (Limitation Act 1969 (NSW)20. Conclusion To establish the formation of an online contract, the general common law is legitimate. There is no major difference in the process of offer and acceptance as compared to physical contracts. However, online transactions carry some level of uncertainty in contracting. Nonetheless, an offer still indicates readiness to get into a legally biding contract under agreed terms while an acceptance remains being willing to accept the offer without additional negotiations. Therefore, as much online transactions have changed commerce, the foundations of offer and acceptance within the contract law remain solid, it is just the evidential preconditions of fact that have changed. The formation of online contracts exists as a division of all contractual formation. By their very nature and as evidenced by the many contractual disputes taking place each year without dispute regarding the contract content, the contracts are uncertain. Consequently, it must plausibly follow that there will always be some level of uncertainty during the formation and completion of online contracts. To satisfy the incorporation of document signed online into all the functional and formal prerequisites for signed document in Australian law, additional steps to those in Electronic Transactions Acts are required. Somehow, this has been accomplished through electronic signature but to entirely remove uncertainty and satisfy the implicit terms concerning online transactions, further reform might be required. Although Electronic Transactions Acts has reduced uncertainty in online contracts, it cannot be said that no uncertainty remains in electronic contracts. Bibliography Articles Alstine Michael, Cyberspace Law materials - Electronic Commerce, Virginia Journal of International Law, Volume I, issue 2, (2006). Carl Pacini, To Agree or Not to Agree: Legal Issues in Online Contracting, Bus. Horizons, Volume 1, Issue 43, (2006). Christopher Poggi, Electronic Commerce Legislation: An Analysis of European and American Approaches to Contract Formation, Va. J. Int'l L. Volume 224, Issue 241 (2000). Damian Sturzaker, Australia: Dispute Resolution in the New Millennium: International Arbitration, Mondaq Bus. Briefing, (Jul. 27, 2001). Hill Jennifer, The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods, Northwestern Journal of Technology and Intellectual Property, Volume 2, Issue 1, (2003). Joachim Bonell, Do We Need a Global Commercial Code? 106 Dick. L. Rev. 87, Volume, 94, Issue 30, (2001). Priestley, L.J, Unconscionability as a Restriction on the Exercise of Contractual Rights' in Carter, Rights and Remedies for Breach of Contract, Volume 25, Issue 4, (2006). Williams Victor, The Duty to Give Notice of Unusual Contract Terms, Journal of Business Law, Volume 375, (2002). Cases Daulia Ltd v Four Millbank Nominees Ltd [1978] 2 All ER 557. Dow Jones & Company Inc v Gutnick [2002] HCA 56 Partridge v Crittenden [1968] 1 WLR 1204 Manchester Diocesan Council for Education v Commercial & General Investments [1970] 1WLR 241. Texts Ewan McKendrick, Contract Law - Text, Cases and Materials (Oxford University Press, 3rd Ed, 2005). Scott Fruehwald, Reciprocal Altruism as the Basis for Contract, (University of Louisville Law Review, 2nd Ed, 2009). Terry Hutchinson, Researching and Writing in Law (Thomson Reuters, 3rd ed, 2010). Read More