MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Electronic Contracts

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE International contracts  Jurisdiction  Different laws  Conflict of Laws  International conventions  Vienna Sales Convention  UNCITRAL Model Law on Electronic Commerce  International Chamber of Commerce E-Terms repository  This lecture deals only with Australian law

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Formation of Contract  Legal capacity  Intention to contract  Offer  Acceptance  Consideration  Certainty

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Vitiating Factors  Misrepresentation  Duress  Undue Influence  Unconscionable conduct  Mistake  Illegal or against public policy

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE eCommerce Issues  Form of contract  Time and place of offer and acceptance  Incorporation of terms  Capacity of software agents

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Form  Many statues require:  Writing  Signature  Sealed and delivered (Deed)  Witnesses etc  Section 8 Electronic Transactions Act  A transaction is not invalid because it took place wholly or partly by means of one or more electronic communications

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  An offer is a clear statement of the terms on which a party promises to be bound if the other party accepts  A party can indicate acceptance in many ways  A mere mental assent with nothing more will not be acceptance  Unless waived by the offeror, acceptance must be communicated

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  Invitations to treat:  Advertisements  Shop displays  Catalogues  Objective test:  Would a reasonable person think it was an offer

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  Clicking “I accept” button  Is this the offer or acceptance?  Depends whether seller can accept or reject  Electronic Auctions  The bid is the offer  Auctioneer can accept or reject  But, there may be a collateral contract with auctioneer that he will accept the bid

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  Offeror can specify method of acceptance  Instantaneous communications  Contract is formed at place and time receipt of acceptance  Postal rule ( non-instantaneous communications)  Contract is formed at time & place that letter is posted  Available where offeror indicates to offeree that the offeree can use non-instantaneous communications

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  “instantaneous”  does not refer to speed of communication  Can recipient immediately notify sender if he does not receive whole or part of message  Vienna Sales Convention  Applies to contracts involving signatory countries  Doesn’t apply to consumer goods or auctions  Contract is formed when acceptance is delivered to the offeror’s mailing address

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  Use of  Is it instantaneous?  Vienna Sales Convention  The acceptance is sent when it is put in the offeror’s mailbox

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  Online Shopping  Is online shopping instantaneous?  Vienna Sales Convention  Offer is made when it is delivered to the seller’s URL

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  Section 14 Electronic Transactions Act  Dispatch occurs when it enters the first information system outside the control of the sender  Receipt occurs when it enters the information system designated by the recipient  If no information system designated then receipt occurs when it comes to the recipient’s attention

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  Section 14 Electronic Transactions Act  Dispatch occurs at the sender’s place of business  Receipt occurs at the recipient’s place of business  If more than one place of business then  Place of business most closely related to the transaction  Otherwise, principal place of business

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Time & Place of Offer & Acceptance  Section 14 Electronic Transactions Act  If no place of business  Place of residence  Does not modify the postal rule

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Best Practice Model Standard terms should include:  Reference to fair business practices  Identity of the business  Contractual information (method of offer\acceptance)  Jurisdiction & applicable law  Dispute resolution  Protection of privacy  Methods of payment  Security and authentication

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Shrinkwrap Agreements  Terms and conditions are not shown to purchaser until after he has bought the box and opened it  Terms cannot be imposed after contract formed  Purchaser must be given reasonable notice of terms before contract formed

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Shrinkwrap Agreements (cont.)  Are there 2 contracts?  One to buy the box  One to licence the software  Recent cases have recognised practical importance of allowing terms to be made known after sale  McRobertson Miller Airlines v Commissioner for State Taxation (1975) 133 CLR 125  Hill v Gateway 2000 Inc.  Try and return clauses

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Clickwrap Agreements  Best Practice  Provide notice regarding terms  Place user accept option at end of all terms  Require an affirmative act  Record date & time of user acceptance  Allow user to exit at any time  Online user registration

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Electronic Agents  Can a party’s intention be expressed by a computer  Can a computer act as an electronic agent  Ostensible (apparent) authority of agents  Principal is bound where he puts agent in a position where he appears to have authority  Principal is not bound where it is clear to others that agent is acting outside ostensible authority  Applies, by analogy, to electronic agents

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Electronic Agents (cont.) Section 15 Electronic Transactions Act (1)For the purposes of a law of the Commonwealth, unless otherwise agreed between the purported originator and the addressee of an electronic communication, the purported originator of the electronic communication is bound by that communication only if the communication was sent by the purported originator or with the authority of the purported originator. (2)Subsection (1) is not intended to affect the operation of a law (whether written or unwritten) that makes provision for: a)conduct engaged in by a person within the scope of the person's actual or apparent authority to be attributed to another person; or b)a person to be bound by conduct engaged in by another person within the scope of the other person's actual or apparent authority.

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Signatures  Functions  Identification  Attribution  Assent  Authentication = identification + attribution

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Signatures (cont.)  Subsidiary functions  Legal requirements  Goods worth more than a certain amount  Guarantees  Sale of land  Bill of exchange  Wills  Certificates by Company directors  Focusing attention

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Signatures (cont.)  Supplementary considerations  Message integrity  Confidentiality  eCommerce Requirements  Authentication  Non-repudiation = authentication + message integrity  confidentiality

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Electronic Signatures 3 possible legal scenarios 1.Minimalist  Only recognise that electronic signatures can be the same as written signatures 2.Prescriptive  Specify details of technology to be used 3.Set broad criteria for electronic signature to be effective

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Electronic Signatures (cont.) Section 10 Electronic Transactions Act  adopts minimalist approach  Requires identification, attribution and assent  Does not require signature to verify message integrity  Technology used must be “as reliable as [is] appropriate”

MANAGEMENT & LEGAL IMPLICATIONS OF eCOMMERCE Electronic Signatures (cont.) Section 10 Electronic Transactions Act  Recognises the need for different levels of authentication  Caters for technological advances  Does not favour one technology  Is consistent with international developments (e.g. UNCITRAL)  Only applies to Commonwealth law  States are enacting parallel legislation