E LECTRONIC CONTRACTS Department of Commercial Law University of Cape Town Electronic Transactions Law 1

INTRODUCTION Electronic contracts are wholly or partially negotiated & concluded through data messages (e.g. , sms, websites) They may be negotiated and concluded by natural persons (as principals or agents) or by electronic agents (automated transactions) However the following transactions may not be concluded electronically: 1. Sale/long-lease of land 2. Wills 3. Bills of Exchange s4(3) & Schedule 1 ECTA Electronic Transactions Law 2

C ONTRACT IN SA L AW Essentalia for valid contract: 1. Offer & Acceptance = Meeting of minds/consensus between parties 2. The parties must have contractual capacity 3. The agreement must be both legally and physically possible 4. The agreement must comply with any formalities prescribed by law Validity may be affected by misrepresentation, mistake or duress Electronic Transactions Law 3

T IME AND P LACE OF CONCLUSION OF ELECTRONIC CONTRACTS NB re Jurisdiction, Applicable Law, Lapsing of Offers. Information/Expedition/Reception/Objective Theories s22 ECTA: reception theory applies to electronic transactions Electronic Transactions Law 4

ECTA- R ECEPTION T HEORY Sending : s23(a) : a data message, must be regarded as having been sent by the originator, when it enters an information system outside the control of the originator or, if the originator and addressee are in the same information system, when it is capable of being retrieved by the addressee. Reception: s23(b) : a data message must be regarded as having been received by the addressee when the complete data message enters an information system designated or used for that purpose by the addressee and is capable of being retrieved and processed by the addressee. Electronic Transactions Law 5 Case: Jafta v Ezemvelo KZN Wildlife [2008] JOL (LC)

ECTA- R ECEPTION T HEORY : PLACE OF RECEIPT s 23(c): a data message must be regarded as having been sent from the originators usual place of residence or business and as having been received by the addressee, at the addressees usual place of residence or business. s25: attribution of data message (originator himself/ authorised agent/automated system programmed by self or authorised agent) * Automated Transactions s 26(1): the agreement is valid upon receipt of the acceptance and it is not necessary for the addressee to acknowledge receipt. Electronic Transactions Law 6

O NLINE A GREEMENTS Categories: Contracts for sale of goods Contracts for the supply of digitised products Contracts for the supply of services/facilities Manner of Acceptance: o Terms and Conditions: Shrink Wrap, Click-wrap and Browse-wrap contracts which refer to the way in which the contracts are concluded more so than the content thereof. Electronic Transactions Law 7

S HRINK W RAP & B ROWSE - WRAP CONTRACTS SHRINK WRAP: e.g. software licenses printed on paper, placed within the shrink-wrap of the software package itself. 1. Purchaser bound upon opening of packaging 2. May be voidable if buyers attention not drawn to terms and conditions BROWSE WRAP: binds the user of a website to a contract created by the user's mere browsing of the website. Electronic Transactions Law 8

C LICK - WRAP CONTRACTS Electronic Transactions Law 9 agreements built into Internet web pages. The purpose of these agreements are wide ranging, but they are commonly used for: Accepting term of use, e.g. regulating access to websites with an adult content Containing exclusion clauses, in an effort to limit or deflect liability from the site owners or administrators License agreements

T ERMS AND C ONDITIONS Electronic Transactions Law 10 Binding if not read? What is the position in SA Law? Ticket cases – Durbans Water Wonderland (Pty) Ltd v Botha and Another SA 982 A reasonable measures to bring the content thereof to the attention of the client terms and conditions therein contained constitute binding contractual terms. opportunity must be given to accept or decline highlight unusual or unexpected terms

A UTOMATED TRANSACTIONS S 20 ECTA an electronic transaction conducted or performed, in whole or in part, by means of data messages in which the conduct or data messages of one or both parties are not reviewed by a natural person in the ordinary course of such natural persons business or employment A party (X) interacting with an electronic agent to form an agreement is not bound by the terms of the agreement unless those terms were capable of being reviewed by a natural person representing that party (X) prior to agreement formation. (S20(d)) Electronic Transactions Law 11

A UTOMATED TRANSACTIONS S 20 ECTA no agreement is formed where a natural person (X) interacts directly with the electronic agent of another person (Y) and has made a material error during the creation of a data message and (i) the electronic agent did not provide that person (X) with an opportunity to prevent or correct the error; (ii) that person (X) notifies the other person (Y) of the error as soon as practicable after that person (X) has learned of it; (iii) that person (X) takes reasonable steps, including steps that conform to the other persons (Y) instructions to return any performance received, or, if instructed to do so, to destroy that performance; and (iv) that person (X) has not used or received any material benefit or value from any performance received from the other person (Y). 12 Electronic Transactions Law

ENFORCEABILITY Interpretation of terms and conditions, including disclaimers, exclusions & limitations of liability (traditional contract law approach) Seeking damages for breach Actions / Applications – applications inappropriate for damages Problems with damage claims – legal costs, uncertainty of outcome, determining quantum, damage may be less than cost needed to recover it Uniform Rules of Court Rule 5 – service of summons outside South Africa: time consuming and frustrating process Electronic Transactions Law 13

E NFORCEABILITY ECTAs Influence on recovery of damages: Section 43 – Cancellation Section 44 – Cancellation during cooling off period Section 43(5) – Damages or loss incurred due to payment system of supplier Defendant not in SA – how to enforce? Complications iro Uniform Rules of Court Rules ECTA: Section 46 – statutory rights to specific performance to customers in some internet related transactions. DamagesSpecific Performance Electronic Transactions Law 14

Electronic Transactions Law 15 Electronic Transactions Law compiled by Caroline B Ncube is licensed under a Creative Commons Attribution- NonCommercial-ShareAlike 2.5 South Africa License. To view this a copy of this license visit