electronic contracts

Electronic ContractingElectronic Contracting

Electronic Commerce Law

2006

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OutlineOutline

1. Online contracts

2. Legal requirements

3. Terms

4. Formation

5. Governing law

Online contractsOnline contracts

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What can I contract to buy online?What can I contract to buy online?

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How do I make an online contract?How do I make an online contract?

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Who can I make an online contract with?Who can I make an online contract with?

ANYONE, ANYWHERE!

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How do I enforce an online contract?How do I enforce an online contract?

Does the contract satisfy all legal requirements?

What are the terms of the contract?

When was the contract formed?

What is the governing law of the contract?

Legal requirementsLegal requirements

Online contracts

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Legal requirementsLegal requirements

Common law elements

Electronic Transactions Acts

Form and signature

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Common law elementsCommon law elements

The elements of a contract at common lawOffer and acceptance

An intention to create legal relations

Consideration, i.e. a price paid for a promise

Capacity to contract, e.g. age, mental capacity

Consent, i.e. lack of misrepresentation, duress, undue influence, mistake, etc

Legality

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Common law elementsCommon law elements

Generally, contracts do not need to be in writing, or even verbal

Property Law Act 1974 (Qld)10 (1) No assurance of land shall be valid to pass an interest at law unless made by deed or in writing signed by the person making such assurance.

Insurance contracts

IP assignments

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Electronic Transactions ActsElectronic Transactions Acts

The Acts seek to remove legal impediments to the use of electronic documents and digital signatures

They are based on the UNCITRAL Model Law on Electronic Commerce

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ETAs - CommencementETAs - Commencement

Thai – April 2002

Aust, 1st stage - 24 March 2000 – 2nd stage 1 July 2001

Vic - 1 September 2000

Tas - 1 June 2001

NT - 13 June 2001

ACT - 1 July 2001

NSW - 7 December 2001

Qld - 1 November 2002

SA - 7 December 2002

WA - 2 May 2003

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Two key principles:

FUNCTIONAL EQUIVALENCE

As far as possible, paper based commerce and electronic commerce should be treated equally by the law..

TECHNOLOGY NEUTRALITY

The law should not discriminate between different forms of technology..

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UNCITRALUNCITRAL

United Nations Commission on International Trade Law (UNCITRAL)

Model Law for consumer protection in an electronic environment

Purpose to remove legal obstacles to e-commerce and to create a more secure legal environment

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Model Law on Electronic CommerceModel Law on Electronic Commerce

http://www.uncitral.org/pdf/english/texts/electcom/05-http://www.uncitral.org/pdf/english/texts/electcom/05-89450_Ebook.pdf89450_Ebook.pdf

Aim - to provide national legislatures with a templateAim - to provide national legislatures with a template

Facilitates - use of electronic communication and Facilitates - use of electronic communication and storage of information (electronic data interchange storage of information (electronic data interchange and electronic mail)and electronic mail)

Gaining international acceptanceGaining international acceptance

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Model Law on Electronic CommerceModel Law on Electronic Commerce

Singapore, Illinois, Columbia, Australia, Canada, Singapore, Illinois, Columbia, Australia, Canada, United States, New Zealand, ThailandUnited States, New Zealand, Thailand

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www.uncitral.org/english/texts/electcom/m-ec.htmwww.uncitral.org/english/texts/electcom/m-ec.htm

6 Requirement of Writing

7 Signature

8 Original Copy

9 Admissibility and evidential weight of data messages

10 Retention of data messages

11Formation and validity of contracts

12 Recognition by parties of data messages

13 Attribution of data messages

14 Acknowledgement of receipt

15 Time and place of dispatch and receipt of data messages

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UNUN

General Assembly recommended:

all States give favourable consideration to the Model Law

all efforts be made to ensure that the Model Law, together with the Guide, become generally known and available

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PurposePurpose

Set of internationally acceptable rules as to how a number of such legal obstacles may be removed

For individual users for contractual solutions

UNCITRAL’s response to countries existing legislation which was inadequate or outdated In certain cases, existing legislation imposes restrictions on modern means of communication - prescribing "written", "signed" or "original" documents.

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ObjectsObjects

Enabling or facilitating the use of electronic commerce

Provide equal treatment for fostering economy and efficiency in international trade

Provide media-neutral environment

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Validity of transactions:

For purpose of complying with a law, a transaction will not be invalid simply because it is made wholly or partly by an electronic communication (unless regulations provide otherwise)

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The following legal requirements can now be met in electronic form:

a requirement to give information in writing

a requirement to provide a signature

a requirement to produce a documents

a requirement to record information

a requirement to retain a document

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Provided that:it must be readily accessible for subsequent reference (i.e. recipient must be able to decipher it)

USA, Australia, NZ, Ireland - the recipient consents to the information or document being provided electronically

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Consent ProvisionConsent Provision

Explanatory Memorandum

“This provision is based on the Government's general policy that a person should not be compelled to use an electronic communication to conduct a transaction in order to satisfy requirements or permissions to give information in writing under Commonwealth law.”

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Time and place of dispatch and receipt of Time and place of dispatch and receipt of electronic communicationselectronic communications

Section 14

Postal Acceptance RuleAdams v Lindsell (1818) 1 B & Ald 681, 106 ER 250.

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AttributionAttribution

UNCITRAL and Thailand

Compare to Australia

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Writing and signatureWriting and signature

When is writing and signature legally obligatory?Real property transactions

Wills

Cheques

Insurance contracts

Consumer credit transactions

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Writing and SignatureWriting and Signature

What is writing?

The apocryphal cow.

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Why is some form of writing or signature often desirable?

To ensure the availability of reliable evidence that the party intended to proceed with the transaction

To encourage deliberation and reflection and to emphasise that the transaction may have significant legal consequences

To authenticate the identity of the other party

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How do you ‘sign’ an online contract?

What is electronic writing?

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Electronic Transactions Acts:

Writing see ss 9-13 (Qld)

Signature see ss 14-15 (Qld)

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Electronic agentsElectronic agents

It is possible for users of a computer to instruct the computer to carry out transactions automatically. Eg., electronic agents may be used by a person:

to initiate or respond on their behalf to electronic messages without review by the personas an online shopping agent programmed to surf the internet and make purchasesas an inventory control system programmed to place orders when stocks reach a particular level

Although the legal status of electronic agents is still uncertain, the better view is that a computer tool programmed by or with a person’s authority to implement their intention can make and accept contractual offers on their behalf

TermsTerms

Online contracts

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Terms of the contractTerms of the contract

The terms of a contract may be expressed in writing or orally, implied by conduct or by custom, or be a combination of these things

Subject to certain important exceptions (eg. consumer protection laws) parties are generally free to set whatever terms they like

The commercial reality is that the terms of the contract are usually set by the seller

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Terms of the contractTerms of the contract

Clearly expressed terms are important because:The risk that terms will be implied into the contract by a court is reduced

The parties will usually be deemed to have read the contract and accepted the written terms, making it difficult for either party to deny the existence of the written contract

When properly drafted, the parties should know with certainty their respective obligations

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Common terms – Online transactionsCommon terms – Online transactions

The names of the parties

The subject matter of the transaction, including a clear description of the goods or services to be supplied

Price, delivery and payment terms

Warranties, liability, insurance, intellectual property and dispute resolution

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Common terms – Online transactionsCommon terms – Online transactions

How orders are to be placed and accepted including use of electronic agents

Record keeping, audit trails and evidence

Security, format and authentication of messages

When and where messages are sent and received

Responsibility for lost, incomplete or garbled messages

The law governing the transaction

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Common terms - WebsitesCommon terms - Websites

Disclaimers

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Incorporation of termsIncorporation of terms

Terms are incorporated into a contract by:Signature

Reasonable notice

Course of dealing

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Shrinkwrap ContractsShrinkwrap Contracts

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Shrinkwrap ContractsShrinkwrap Contracts

Step-Saver Data Sys Inc v Wyse Tech 939 F 2d 91 (1991)

ProCD Inc v Zeidenberg 86 F 3d 1447 (7th Cir 1996)

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Is click-wrap reasonable notice?

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CASE: Hotmail Corporation v Van$ Money Pie Inc (1998)

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Steven J Caspi v Microsoft (NJ App Div 1999)

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BrowswrapBrowswrap

Specht v. Netscape (SDNY 2001)

Ticketmaster Corp v Tickets.com Inc (Wash 1999)

Net2 Phone Inc v Los Angeles Superior Court (Cal CA 2002)

Thorton v Shoe Lane Parking Station Ltd [1971]

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CASE: Specht v. Netscape (2001)

Please review and agree to the terms of the Netscape SmartDownload software license agreement before

downloading and using the software.

Unless otherwise agreed in writing, all disputes relating to this Agreement … shall be subject to final

and binding arbitration in Santa Clara County, California, under the auspices of JAMS/EndDispute, with the losing party paying all costs of arbitration.

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‘Promises become binding when there is a meeting of the minds and consideration is exchanged. So it was at King’s Bench in common

law England; so it was under the common law in the American colonies; so it was through more than two centuries of jurisprudence

in this country; and so it is today. Assent may be registered by a signature, a handshake, or a click of a computer mouse transmitted

across the invisible ether of the Internet. Formality is not a requisite; any sign, symbol or action, or even wilful inaction, as long as it is

unequivocally referable to the promise, may create a contract.’

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‘Where click-wrap license agreements and the shrink-wrap agreement at issue in ProCD require users to perform an affirmative action

unambiguously expressing assent before they may use the software, that affirmative action is equivalent to an express declaration stating,

‘I assent to the terms and conditions of the license agreement’ or something similar. For example, Netscape’s Navigator will not function without a prior clicking of a box constituting assent.

Netscape’s SmartDownload, in contrast, allows a user to download and use the software without taking any action that plainly manifests

assent to the terms of the associated license or indicates an understanding that a contract is being formed.’

Governing lawGoverning law

Online contracts

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What is the governing law (proper law) of What is the governing law (proper law) of the contract?the contract?

In the absence of agreement to the contrary, the governing law is the law where the contract was formed

Webpage - invitation to treat or offer

If the buyer makes the offer online and the seller communicates acceptance of that offer to the buyer through the website, the contract is formed in the jurisdiction of the buyer

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Jurisdiction clausesJurisdiction clauses

If a jurisdiction clause is effectively incorporated into the terms and conditions of the contract of sale, this may alter the outcome

NB. In certain circumstances a court may override the effect of a jurisdiction clause

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Jurisdiction clausesJurisdiction clauses

Amazon: www.amazon.com

“By visiting Amazon.com, you agree that the laws of the state of Washington, without regard to principles of conflict of laws, will govern these Conditions of Use and any dispute of any sort that might arise between you and Amazon.com or its affiliates.”

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Telstra Big Pond: www.bigpond.com

16.1 This agreement is governed by the law in force in the State of New South Wales, Australia, and the parties irrevocably submit to the non-exclusive jurisdiction of the courts of New South Wales, Australia and courts of appeal from them for determining any dispute concerning this agreement.

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HotmailHotmail

If this Agreement is with Microsoft Corporation, claims for enforcement, breach or violation of duties or rights under this Agreement will be adjudicated under the laws of the State of Washington, without reference to conflict of laws principles. If this Agreement is with a Microsoft affiliate, claims for enforcement, breach or violation of duties or rights under this Agreement will be adjudicated under the laws of the place of incorporation for such Microsoft affiliate, without reference to conflict of laws principles. All other claims, including, without limitation, claims under or for violation of consumer protection laws, unfair competition laws, and in tort, will be adjudicated under the laws of your state of residence in the United States, or, if you reside outside the United States, under the laws of the country to which the subject MSN Web Sites are directed. If this Agreement is with Microsoft Corporation, you hereby irrevocably consent to the exclusive jurisdiction and venue of state or federal courts in King County, Washington, USA in all disputes arising out of or relating to the use of the MSN Web Sites. If this Agreement is with a Microsoft affiliate, you hereby consent to the exclusive jurisdiction and venue of the courts located in the place of incorporation for such Microsoft affiliate in all disputes arising out of or relating to the use of the MSN Web Sites.

Online contractsOnline contracts

Electronic Commerce Law

electronic contracts

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