Electronic Commerce

Electronic Commerce Defined as commercial transactions conducted electronically EDI- Electronic data interchange: electronic transfer of information using an agreed standard requiring network connection between trading parties E-banking through telephone ATM,EPS

Electronic Commerce Why is the Internet valuable? Provides low entry cost as compared to EDI Enables small business to achieve a global presence Provides connectivity and communication Information can be obtained with use of cookie Provides marketers with cheap form of advertising Global market place open 24 hours with easy access

Electronic Commerce Forms of e-commerce transactions: On line sales e.g online bookshops Provision of services online: sale of air tickets Where information (images, text and sound) may be provided online e.g software may be downloaded on payment by credit card

Electronic Commerce Is that person whom he says he is? Has the message be tampered with? How do you know who the message has not been read by a third party How can you ensure the contract made binding and not repudiated by the other party?

Electronic Commerce Essential elements of a valid contract: Offer Acceptance Consideration Invitation to create legal relations

Electronic Commerce Contract formed when one party makes an offer: Offer unconditionally accepted by another party; Both parties intend to create legal relations; The promise of each other are supported by consideration

Offer vs Invitation to Treat Offer: An expression of willingness to be bound by the terms of the offer if it is accepted by the offeree. Must be distinguished from an invitation to treat. An invitation to treat is an invitation to others to make an offer. No contract exists if an invitation to treat is accepted.

Offer vs Invitation to Treat Eg. I/T: Advertisement: Partridge v Crittenden [1968] 2 All ER 421– newspaper advertisement for the sale of certain birds. [Held]: was I/T (no details of delivery or details of quantity) Shop displays: Pharmaceutical Society of Great Britain v Boots Cash Chemist [1953] 1 QB 403– [Held]: shop display its goods is I/T and not Offer Argos mistakenly advertised sale of TV sets on its website for $2.99 instead of $299. Matter was settled but if continued, court would hold that statement was I/T

Offer vs Invitation to Treat Offer: An expression of willingness to be bound by the terms of the offer if it is accepted by the offeree. Must be distinguished from an invitation to treat. An invitation to treat is an invitation to others to make an offer. No contract exists if an invitation to treat is accepted.

Distinction: Offer & I/T • Carlill v Carbolic Smokeball Co [1893] 1 QB 256: D published ad- it pay £100 to anyone who contracted influenza after using as directed the Smokeball-and deposited £-MrsCarlill used smokeball and contracted influenza-D argued: not possible to make offer to the world at large and purported offer not capable of acceptance. Court rejected, [Held]: D promise = offer and capable of Acceptance and could form basis of contract. D also argued that ad not to be taken seriously but because they put a deposit it showed intention to be legally bound.

Electronic Commerce Offer NOT = statements made to bring about sale I/T : mere declaration of a willingness to enter into negotiations to enter into negotiations/ invitation to another party to make offer Vital distinction: whether party intends to be legally bound by the terms of its statements if another party unconditionally assents to those terms  Requisite intention? (Objective test) Objective test: If it appears that a person by words or conduct, intended to make an offer, that person will be bound by that offer regardless whether he actually intended to make that offer BUT (there is a subjective qualification) Subjective qualification: If the offeree knew that the alleged offeror in fact had no intention to make an offer (though an intention was apparent), then the offeror will not be bound by he offeree’s acceptance.

Electronic Commerce Even though there is assistance of the objective principle, the distinction is hard to draw UNLESS the party expressly states that it will not be bound by another party’s assent to its statement– wording of statement not conclusive evidence of whether an offer is being made or whether it is merely an I/T. A statement may be I/T even though the word ‘Offer’ is used: Spencer v Harding (1870) LR 5 CP 561.

For the avoidance of doubt: • A website’s Terms & Conditions should clearly, comprehensively and unambiguously set out with whom the on-line seller is willing to contract, how offers and acceptances are to be communicated and received and when a contract is considered to be concluded; • Website should be set up to resemble a window and provide cyberspace shopping trolley; and • The language of the website should make clear that it is acting as an advertisement only(i.e I/T and not Offer) Electronic Commerce

Acceptance Acceptance is the unconditional assent (acceptance) to the exact terms of the offer. Exact terms: It cannot be varied; It cannot be subject to conditions; Nor be subjected to a counter offer (Hyde v Wrench) or Be a request for further information (Stevenson v McClean)

Acceptance Test: Objective. As to whether there is acceptance-court look at all the circumstances surrounding the purported acceptance and behaviour of parties and exchanges (electronic or otherwise) Whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party and that the other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he intended to agree to the other party’s terms: Smith v Huges (1871)LR6

Method of Acceptance An agreement can be in writing, made orally or implied from conduct Silence cannot amount to acceptance: Felthouse v Bindley [1862] 11 CB 869 An acknowledgement of offer ≠ acceptance Kodak advertised for sale of camera on its website for $100 instead of $329. Customers argued that the retailer had sent an email confirming the offer. The matter was settled out of court. It is questionable if the court would have treated the confirmation order as an acceptance or an acknowledgement of the offer. No contract if acknowledgement.

Acceptance Test: Objective. As to whether there is acceptance-court look at all the circumstances surrounding the purported acceptance and behaviour of parties and exchanges (electronic or otherwise) Whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party and that the other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he intended to agree to the other party’s terms: Smith v Huges (1871)LR6

Rules of Communication Two types of Rules of Communication: Postal Rule Receipt Rule

Postal Rule (1) POSTAL RULE: Developed as an exception to the Receipt Rule and applies to acceptance sent by telegram/post where it is reasonable to use that as a means of acceptance. Acceptance takes effect when letter posted Adams v Lindsell(1818)1 B&Ald 681 Letter posted when it is placed in the control of the Post Office and out of the control of the sender

Postal Rule Adam v Lindsell [1818] 106 ER 250 2 Sept – letter sent from A to B offering to sell goods to B 5 Sept- letter received by B and he sent letter accepting on 5 Sept 8 Sept – A sold to third party 9 Sept – A received B’s letter When was the contract made?

Postal Rule Byrne v Van Tienhoven (1880) 5 CPD 344 1 Oct - A sent letter of offer to B 8 Oct – A sent (letter) revocation of offer to B 11 Oct- B received letter and sent telegram (acceptance) on same day 20 Oct- B received revocation Is there a contract?

Receipt Rule (2) Receipt Rule General Rule is that a contract is concluded when the offeree’s acceptance is communicated to the Offeror. Acceptance is brought to the notice of the Offeror. Exceptional cases: effective though not brought to notice: Acceptance given to agent of Offeror Express or implied waiver requiring that Acceptance must be communicated

Receipt Rule Therefore the rule prevents the offeror being contractually bound without knowing that the offeree accepted his offer. Where the prescribed method of communicating acceptance is by instantaneous method, a contract exists when acceptance is received by the offeror and the contract is made at the place where acceptance is received: Entores Ltd v Miles Far East Corp [1955] 2 All ER 493 Brinkibon Ltd v Stahag Stahl Gmbh (1983)- contract concluded when buyer in London transmitted its acceptance by telex to seller in Vienna [Held] contract formed in Vienna where acceptance received by offeror. Also what was NOT acceptance by instantaneous means: (i) message received after office hours; (ii) message not effectively received e.g line went dead (iii)message was received by 3rd party who was not authorised to receive it Decision in Brinkbon endorsed in It will generally not cause hardship to the offeree because he will know whether his attempt to communicate the acceptance has been unsuccessful.

Consideration An agreement (promise) must be supported by consideration “Something of value in the eyes of the law”: seen as a burden to one party and a benefit to the other Consideration: -detriment to promisee -benefit to promisor It must be provided by each party to the promise and it need not be adequate: Chappell v Nestle [1960] AC 87 (chocolate wrappers)

Intention to create legal relations Objective Test: Agreement + consideration ≠ valid contract UNLESS parties intend to create legal relations in the sense that they intend their promises to be legally enforceable. If dispute-- > onus (heavy burden) proving no such intention is on the party who asserts that no legal effect is intended: Edwards v Skyways Ltd (1964) 1 WLR 349 In a commercial setting, presumption that there is intention to create legal relations Not necessary in a family or social arrangement: Balfour v Balfour [1919] 2 KB 571 (husband agreed to pay wife some money if she agreed to go on holiday with him; can the wife sue?)

Electronic Contracts Contract can be concluded electronically by Exchange of e-mail or Through the web site The Electronic Transactions Ordinance is based on the UNCITRAL Model Law on Electronic Commerce.

UNCITRAL United Nations Commission on International Trade Law drafted 1996 Purpose- to facilitate electronic contracting It does not govern every aspect of e commerce but provides essential procedures and principles for e-commerce. UNCITRAL has been used as a useful framework for national e-commerce legislation.

Electronic Commerce