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Online Contracting


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Cyber law is ever changing and this quick guide to online contracting and e contracts is for customers and vendors alike. If you shop on the internet this guide will assist you grasp key concepts. It is not legal advice.

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Online Contracting

  1. 1. Online Contracting Cyber Law Bradley W. Deacon Twitter: @bradleywdeacon
  2. 2. Contracting Online
  3. 3. What Is An E-Contract A legally binding contract (electronic contract) made by buying goods or services through the internet between an electronic agent and the parties who have no personal contact or pre-existing business relationship. Some examples of E contracts are: online grocery shopping online shopping (eBay), and online auctions.
  4. 4. Does the general law of contract apply to E contracts? Yes, the standard legal principles of contract law apply to internet transactions such as online shopping and banking.
  5. 5. What should I think about before making an E contract? Resolving disputes when purchasing goods over the internet can be complex depending on where the trader is located. Australian traders are subject to specific laws that give the consumer rights of protection. However, if the trader is located overseas, different laws may apply to the transaction and you may not have the same level of consumer protection. It is important that you always carefully examine the internet provider's company policy on returns, refunds and dispute resolution. When buying goods online ensure that the trader has a physical address so you can contact them later if a dispute arises.
  6. 6. How do I sign an E contract? You usually sign an E contract by clicking on the "I agree" or "I accept" button. You should always read any terms of the contract carefully, including the fine print before clicking on the "I agree" or "I accept" button. Always ensure that you print out a copy of your agreement (contract).
  7. 7. What can go wrong with my E-contract? ordering the wrong product receiving the wrong item difficulty in returning the product security issues privacy issues the goods are not delivered the goods delivered do not match the online description the goods are not delivered on time the seller failed to disclose all relevant information about the product or terms of sale the goods are damaged in transit, or scamming. Although online shopping has many advantages, there are common problems, which can occur. These include:
  8. 8. What is a scam? Scammers pretend to sell a product (often very cheaply) so they can steal your credit card or bank account details. Similarly, they may take your money but send you a faulty or worthless product instead or even nothing at all. For a list of identified scams in Australia and tips for protecting yourself from scams refer to the ACCC website.
  9. 9. Goods bought online or overseas? Yes, you have the same basic rights online as you do offline when you deal with traders operating in Australia. However Australian Consumer Law operating from 1 January 2011 may not apply to a seller based in another country. Even if the law does apply, the distance might make resolving any problems difficult.
  10. 10. Goods bought at on online auction? There are many different kinds of online auctions and generally a consumer's rights are limited. Consumers who buy goods at a private auction where an auction house sells for a vendor are not likely to have the usual consumer rights. This includes for online auctions. As the auction house is not part of the contract between the buyer or seller they are not obliged to provide a solution (remedy) if goods are not fit for their intended purpose.
  11. 11. What are the steps I take to resolve my E contract problem? Always try to resolve your E contract problem directly with the person or company who you either sold to or purchased the goods from. For example, Joe bought an item from Mary via eBay. Joe wants a refund, as the item does not match the description given in the eBay advertisement posted by Mary. In this case Joe should firstly try to negotiate directly with Mary. Sometimes a problem can be solved with a simple conversation between the seller/buyer. You should keep a diary and any records of any conversations you have with the person you either bought from or sold to.
  12. 12. If you can't resolve the problem by dealing directly with the seller/purchaser contact the online shopping site (eg eBay) you used for the transaction and check what (if any) after sales service they offer to assist you with your problem.
  13. 13. What if I don’t know the name or contact details of the person I bought/sold with?? You may not know the name or contact details of the person/people you bought or sold from. Most internet service providers have a process to assist online consumers with contractual disputes. You should go to the internet service provider's home page to see whether they have a "help centre" or "online help" service, for example, eBay Australia provides an online process through which the buyer and seller can communicate with each other to resolve disputes.
  14. 14. Does it make a difference what online payment system I use? Yes, some eligibility for buyer protection services is determined by the payment method you use and also the country site where the item was purchased. If you paid by credit card and a problem arises you may be able to contact your bank and ask them to reverse the transaction. The safest way to avoid problems with online buying is to use a secure online payment system.
  15. 15. What court do I enforce my contract in? Often the buyer and seller live in different states or even different countries. It can be difficult with internet contracts to work out where the contract was made. As the law that applies to the agreement and the place to start legal action depends on where the contract was made, it is sometimes the case that buyers or sellers cannot force the other person to meet their obligations under the contract made on the internet. You should get legal advice.
  16. 16. What if I bought my good from an overseas trader? If you bought your goods from an overseas trader it may be harder for you to enforce your rights. It may even be difficult to work out where and in which country you should make your claim. If this applies to you get legal advice. For more information about resolving problems with online purchases from a trader operating overseas refer to the ACCC webpage on shopping online.
  17. 17. Enforceability of online contracts in Australia
  18. 18. Click Wrap & Browse Wrap? Two common methods of accepting terms and conditions of an agreement online are the click-wrap agreement and the browse-wrap agreement. A click-wrap agreement is an electronic agreement where the terms and conditions of the agreement are located on the same page as the “I agree” button. Consumers are usually required to scroll through all the terms and conditions and then take positive action by clicking “I Agree” before being able to proceed. This form of agreement is highly likely to be enforceable as a contract.
  19. 19. Click Wrap? However even in a click-wrap agreement, careful thought needs to be given to a number of issues such as: – when is the contract formed? Is the merchant making an offer online that the customer accepts (that sees the formation of the contract at that point) or is the customer making an offer which may then be accepted or rejected by the merchant. The Terms & Conditions will be need to be tailored accordingly.
  20. 20. What if I bought my good from an overseas trader? if the contract is formed at the time of clicking “I Agree” other Terms & Conditions cannot be added later. – do the Terms & Conditions contain clear rights of the merchant not to supply in certain circumstances? – do the Terms & Conditions contain clear return and refund terms that are compliant with the law in Australia?
  21. 21. Click Wrap continued if the contract is formed at the time of clicking “I Agree” other Terms & Conditions cannot be added later. – do the Terms & Conditions contain clear rights of the merchant not to supply in certain circumstances? – do the Terms & Conditions contain clear return and refund terms that are compliant with the law in Australia?
  22. 22. Browse Wrap A browse-wrap agreement is where the terms and conditions are not on the same page as the “I agree button,” and can be accessed by a hyperlink on the same page. The consumer is normally not required to access the hyperlink and view the terms and conditions before being allowed to proceed with the contract. This form of agreement is less likely to be enforceable as a contract.
  23. 23. Browse Wrap continued As outlined earlier the same rules of paper contracts also apply to electronic contracts. It is therefore important to consider two landmark cases in the law of contracts.
  24. 24. Landmark cases In L’Estrange v Graucob [1934] KB 394 the court decided that, in the absence of vitiating factors such as fraud and misrepresentation, a signature is taken to fully bind the consumer to all terms and conditions of the contract. It is still unclear in Australia as to whether modern technological advances, such as digital signatures, count as a signature for the purposes of the rule in L’Estrange as stated by Elizabeth Macdonald, “Incorporation of Standard Terms in Website Contracting – ‘Clicking I Agree’” (2011) Journal of Contract Law, 198, 199-210. Therefore, business owners should construct their website in a way that provides reasonable notice prior to the formation of the contract, satisfying the rule in Thornton v Shoe Lane Parking [1971] 2 QB 163
  25. 25. Business Owners Business owners should therefore ensure that all steps are taken to ensure the arrangement of the terms and conditions and the “I agree” button express an intention for the terms and conditions to be wholly incorporated into the Contract formed with the customer.
  26. 26. Business Owner Best Practice The customer is required to scroll to the end of the terms and conditions (in a scroll box for example) before being allowed to proceed, establishing reasonable notice of the contract’s terms and conditions. The terms and conditions are displayed on the same page as the “I agree” button, but the “I agree” is located at the base of the terms and conditions, once more establishing reasonable notice of the contract’s terms and conditions.
  27. 27. Business Owner Best Practice Continued • Any unreasonable terms and conditions should be bolded or highlighted to draw added attention. J Spuring v Bradshaw [1956] 1 WLR 461; The “red- hand rule”. • An “I have read the terms and conditions” tick box should be assented to (and left blank by default, requiring an additional positive step by the customer) before being allowed to click the “I agree” button. This is to provide a visible mark to the contract see In re Cunningham (1860) 164 ER 1491 and • emphasize the user’s agreeability to the contract see Peekay v Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] 2 Lloyd’s Rep 511; Contractual Estoppel
  28. 28. Browse wrap caution A browse-wrap agreement will place the vendor in a weaker legal position because it does not provide the same degree of reasonable notice to the user, and are not recommended for business owners. Business owners will also need to take into consideration the application of the Australian Consumer Law (ACL) on their online standard form contracts. Particular attention should be given as to whether any of the contract’s terms may be unfair contract terms.
  29. 29. Disclaimer Please Note: This is not legal advice but it may help you understand the law.
  30. 30. References Lind, A., Tan, J. (2015) ‘Enforceability of Online Contracts In Australia, accessed at online-contracts-in-australia/ on 1 November 2015. WA Legal Aid (2015), ‘E contracts and online buying’ accessed at services/Pages/EContractsOnlineBuying.aspx on 1 November 2015.