Law of Contracting Electronically

Question: Discuss about the Law of Contracting Electronically. Answer: Introduction In the world of e-commerce, contracts created electronically have gained immense importance. Communication between people across the globe has become very easy and fast and is no more at the mercy of geographical distances. E contracts have become popular over the past decade due to technological advancement. Therefore contracts created by electronic means have been recognised in the legal parlance as well. A contract which is formed, offered, accepted and finally executed using a software program is termed as an electronic contract. It is very evident that an e contract also has all the essential elements that are there in traditional paper based contract. Any contract entered into should be signed by the contracting parties, thus in the electronic mode of contracting, digital signatures are used for signing the contract which is similar to the traditional paper based method. In a contract created by electronic means there is no existence of paper or other such hard copies. What is offer? Before entering into a valid enforceable contract there has to be an offer made by one party to the other for a consideration and the same should be duly accepted by the offeree within a considerable period of time and communicated in a valid manner. Due to e contracts becoming prevalent more and more in this world of e commerce it is very important to understand what construes an offer. E contracts are either entered via emails or through websites of various business houses. Email communications are clear and very much similar to the other means of contracting but in the context of website communications it is very important to understand the difference between an offer and an invitation to treat An invitation to treat is not termed as a binding contract if the terms mentioned in the websites are accepted. A display on the internet is basically an invitation which is made by the businesses to the visitors who would then make an offer on their own basis the invitation. Once the same is accepted a contract is said to have formed. For example when a person advertises his products to sell on his website, it is construed that he is inviting people to make an offer to him for purchase of goods. When the buyers make an offer to the seller for the purchase of goods displayed on the websites after accepting the terms and conditions mentioned and the price at which the goods are displayed to be sold and the same is accepted by the seller, only then a valid contract is said to have been entered into. Therefore it is well said that displays on the internet websites do not construe a valid contract until and unless the buyers make an offer to buy the products and the services displayed. H owever there have been arguments in this regards wherein display of goods and services on a website may be called as a ready offer by the seller to a host of buyers and it all depends whether a website is an interactive one or a non-interactive one. For any contract to be enforceable by law it has to be accepted by the offeree with regards the terms and conditions and the consideration. Once the same is done it is construed that an acceptance has been done of the offer made by the offeror. An offer and acceptance in a contract entered by electronic means takes place in a manner which is similar to the other means of contract with slight deviations. What is acceptance? An e contract is entered into by two methods one is through internet websites of various business houses and secondly is via communication of an offer by one party to the other through an email. Thus when any business organization displays goods and services on their websites for sale with a price marked then it is said to be construed as a mere invitation. However once the buyer shows interest in buying a product or service after accepting the terms and the payment, the said invitation gets converted into an offer. Once the offer is accepted by the seller it is said that a legally enforceable contract has been entered into. However in case of an offer made by an email, the question arises as to at which point of the transaction can it be said that an offer has been accepted and duly communicated as well. For the same a new section 13A has been inserted in the Electronic Transaction Act 2002 which specifies that an acceptance of an offer made by electronic means is said to have been communicated to the offeror at a time as mentioned in Section 11. Thus as per Section 11, an electronic communication is said to have been received when the receiver has designated a specific information system for the receipt of messages. Hence the time when the message enters the system specified and if any such specification is not made then the time when the communication is attended by the receiver. Therefore an offer is said to have been accepted by the offeree in an e contract once the acceptance communication i.e. email from the offeree enters the designated information system of the offeror. Comparison Between E Contract and Traditional Contract Even though entering into a contract by electronic means is increasing with the advancement in technology yet there are some differences with the traditional method of contracting. The later clearly defines the time and place of entering into a contract and thus enables ease in application of jurisdiction in case of disputes. But the same is difficult in case of an e contract where the contracting parties do not come face to face and thus makes it difficult for the contracting parties to abide by any particular law. The second important difference between the two modes of contracting is enforceability. Enforceability of a click-wrap agreement is easy to establish as compared to the browse-wrap agreement. The same was proved in the case of Hotmail Corporation v Van$ Money Pie Inc. where the court found that a click-wrap agreement is an enforceable one. However in the traditional method of contracting, all contracts are legally enforceable in the court of law. Thirdly the time duration for acceptance of an offer in an electronic mode of contracting is very short until otherwise mentioned. The time for acceptance of an offer in case of a traditional method of contracting is more simply because of the speed at which the communication takes place in the former method. Therefore it is construed that even though online contracts are increasing day in and day out yet the complexity attached to it deters many from accepting the said mode. Withdrawal of Mistake In an E Offer When a mistake has been made while entering into a contract by any one or both the parties to the contract, there are some rules and principles applicable irrespective of the mode of contract- paper based or electronic. As per the Australian Law, the legal issues for such mistakes are similar for both the means of contract as stated by Electronic Transaction (Queenland) Act 2001 and Commonwealth Electronic transactions Act 1999. In an e contract an offer can be withdrawn only upon due receipt of the communication of such withdrawn by the receiving party. A mistaken offer can be withdrawn only by the offeror as it is he who has made a wrong offer basis which a contract is being executed. However the concept of Caveat Emptor applied to mistakes in an offer made in e contracts also wherein the offeree should be made aware of the same before such withdrawal is made as the wrong can be rectified after mutual deliberations and the offer can be revised. For example while selling products online if the e retailer quotes incorrect prices by mistake of a product which is duly accepted by the buyer and his order is also confirmed by the seller via an automated email and the seller realises later that the price quoted is incorrect then the question arises whether the party can withdraw a mistaken offer. As per the case decided by the Higher Regional Court of Frankfurt Main in the year 2002, a mistaken offer made by the vendor in an electronic contract could not be retrieved by the seller due to an automated mail generated of acceptance of the offer the court allowed the offeror to void the acceptance. However an opposite decision was spelt out in the year 2003 by the Regional Court of Cologne in a similar case wherein it stated that since the sales person accepted the offer by sending an automated mail without reviewing the offer, hence the seller would have the right to void the acceptance of a mistaken offer. However if it would have b een an invitation to treat then the same is possible to be withdrawn by the offeror. Therefore it is still a debatable topic whether a mistaken offer made by electronic mode is voidable or not. Resolution of Disputes In E Contracts To enable smooth functioning of contracts entered into by electronic means, the Australian Law has devised legal assistance for the parties to the contract for the resolution of disputes that may arise. The Australian Contract Law has been derived by the famous English Law wherein the contracting parties have the freedom to enter into a contract after due negotiations. The electronic contracts are regulated by the Federal, State and the Territory Electronic Transactions Acts and these are formed basis the UNCITRAL Model Law on Electronic Commerce. The Electronic Transactions Act 1999 has a code of conduct which specifies the procedures for resolution of disputes for contracts entered into via electronic means. Australia is a signatory to the Vienna Convention on Contracts for the International Sale of Goods. The said convention has set out certain rules applicable uniformly to the countries who are a part of this convention with regards sale of goods internationally. However adherence to the said conventions rules is not a necessity. The parties to the contract can chose the laws applicable to the country of one of the parties to the contract as well. Issues Concerning E Contracts The concept of contracting via electronic means is fast, paper-less and convenient yet there exist various issues and problems regarding the same. First and foremost is confidentiality of terms of contract. The hackers and the malwares have led to vulnerability of the confidentiality of businesses. Thus security is an issue especially with regards digital signatures. If a digital signature is hacked then it may lead to entering into unacceptable contracts by hackers thus leading to huge losses. Therefore the issue of ethics is yet to be addressed. Further to this another concern with regards digital signature is that the accuracy of the same cannot be verified to its hundred percent. Second issue is that the words used in an offer made through electronic means can be misleading. Due to the same, there is difficulty in understanding which law would be applicable for resolution of disputes. As the contracting parties generally communicate via exchange of mails, also the intent of the contracting parties is not understood as the persons are not face to face. Thirdly, it is very difficult to get assurance with regards the fact that the parties contracting are legally bound to enter into a contract and there may be situations where the person contracting may be a fraud or incapable to enter into a contract. Conclusion Thus on a concluding note it is clear that the increasing technological advancement has led to a shift in the method of entering into contracts from the paper based method to the electronic means yet the same is coupled with varying issues which needs to be addressed before the same can be applied by all the firms private as well as government institutions. The law also requires refinement and inclusion of sections dealing in various types of issues in the present Electronic transactions Act prevalent. Although the same is comprehensive in nature but is yet to be exhaustive. Security issues are still a big problem specially in case of contracts which needs to be accepted only after due signature by the offeree. The concept of digital signature is very good in the wake of globalization but the threats attached to it deters the business firms from using such a technology. Adequate ethical code of conduct and penal provisions should be spelt out so that globalization in business can inc rease. References: Are sellers Bound by Mistakes in Online Advertisements, Wilmerhale (Online), 30 June 2003 https://www.wilmerhale.com/pages/publicationsandnewsdetail.aspx?NewsPubId=91329 Argy, Philip and Martin, Nicholas, The effective formation of contracts by electronic means, Computer and Law (online), 30 July 2001, https://www.austlii.edu.au/au/journals/ANZCompuLawJl/2001/33.pdf Delaney, Hayden, and Francis, Briar, Electronic Signatures and their Legal validity in Australia Find Law Australia (online), https://www.findlaw.com.au/articles/5777/electronic-signatures-and-their-legal-validity-in-.aspx Donnie, L. Kidd Jr and William H. 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