This document discusses consumer protection issues in online commerce. It begins with an introduction on consumers and technology, and the importance of trust and confidence for online transactions. It uses online financial services as a case study, examining problems regarding product complexity, online calculators, independence, disclosure, identification, complaints, privacy, access and cost, and jurisdiction. It then outlines the key elements of Australia's policy framework for online consumer protection: contracts, payments, and conduct. The document goes on to discuss relevant Australian legislation and industry codes of conduct. It concludes by looking at international regimes like the EU Directive and OECD Guidelines.

1. E-COMMERCE ADMINISTRATION &
MANAGEMENT
1. What is e-Commerce?
2. What is a contract?
3. Elements of an enforceable contract
4. Standard terms of a contract
5. Form and execution of contract
6. Benefits of a written contract
7. Contract issues in the digital
environment
8. Jurisdiction
9. When is an e-contract formed?
10. Electronic Transactions Act 1999 (Cth)
11. Electronic payment systems
12. Secure contract formation in a digital
environment
13. Identity and capacity to contract
14. Secure storage of electronic records
15. E-commerce best practice
16. EFT Code of Conduct
17. Scams and Swindles
18. UNICITRAL Model
JOHN BABATUNDE LEE
“AUSTRALIAN PERSPECTIVE”

2. Commerce and contracts
 1. What is Electronic Commerce?
 2. What is a contract?
 3. Elements of an enforceable contract
 4. Standard terms of a contract
 5. Form and execution of contract
 6. Benefits of a written contract
 7. Contract issues in the digital environment

3. 1. Electronic Commerce
2. What is Electronic Commerce?
 Commercial transactions that occur on the Internet. In e-commerce
transactions the parties rarely meet each other face to face:
 Creates obvious trust issues between the parties
 Makes it difficult to ensure the parties act lawfully, and transaction itself is
legal
 Particular concern: Unequal bargaining power between the parties.
 Online contracts play an important role in e-commerce as they stipulate the
terms and conditions governing a transaction between two or more parties. A
body of law has developed to ensure the legality of all aspects of e-commerce
and the online contracting process.
2. What is a contract?
 Legally binding agreement, between two or more people or organisations.
 The Terms of a contract may be expressed in writing or orally, implied by
conduct, industry custom, and law, or by a combination of these things.

4. 3. Elements of an enforceable contract
A binding contract is usually formed when the elements below are satisfied:
 One party makes an Offer, setting out the terms of the proposed contract to another party
or parties. The terms must be sufficiently certain.
 An unequivocal Acceptance of the offer is communicated to the party who made the offer.
 In ‘common law’ countries (Australia, US, Canada, UK and other countries whose law
originated from UK), contract must be supported by Consideration.
 Consideration is a ‘promise for a promise’. Consideration presumed to exist if certain formal
requirements are followed (for example where contract is executed as a deed).
 The parties to the transaction must have an Intention to create legal relations. Courts
will not force people into a contract if they did not intend to be legally bound. The following
rebuttable presumptions exist:
 if the parties are in a commercial (but not domestic) environment, the parties are presumed to have
an intention to create legal relations;
 if the parties are in a domestic environment (e.g family members or neighbours), the presumption
is that the parties did not intend to create legal relations.
 All parties to the transaction must have the Legal capacity to effect the transaction.
If any one of these elements do not exist or are ‘vitiated’ (e.g due to fraud)
there will be no contract between the parties.

5. 4. Standard terms of a
contract
Subject to exceptions (for example, consumer transactions),
the parties are free to choose the terms of their contract.
An online contract should at least contain the following terms:
1. a clear identification of the Parties to the transaction;
2. the subject matter of the transaction, including a description of any
goods or services to be supplied;
3. the price, delivery and payment terms;
4. warranties, liability, insurance, intellectual property and dispute
resolution;
5. how orders are to be placed and accepted including use of
electronic agents;
6. record keeping, audit trails and evidence;
7. security, format and authentication of messages;
8. when and where messages are sent and received;
9. responsibility for lost, incomplete or garbled messages; and
10. the law governing the transaction.

6. 5. Form and execution of
contract
 Some contracts – inc. conveyance of land, or consumer credit transactions
– must be in a particular form, or signed a certain way.
 Otherwise there is no general requirement under Australian law that a
contract be in a particular form, or be executed in a particular manner. (Side
of a cow case)
 Apart from contracts which must be completed with certain formal
requirements, there is no reason in principle that contracts cannot be formed
by email exchange, or "click through" agreement, or executed by digital
signatures.
 In each case, the question will be: whether anything in the formation of the
contract might leave either party at risk that the other party will later
challenge the enforceability of the contract, for example on the basis that
 terms were not brought to their attention, or
 that they did not in fact participate in the formation of any contract
(perhaps because another person impersonated them).
 The legal status of computer-generated evidence is not the same in all
jurisdictions. To reduce the risk that a court will reject the evidence on which
a party relies to establish a contract, a jurisdiction clause in an online

7. 6. Benefits of a written
contract
Benefits of a written contract include:
 Risk terms will be implied into the contract by a court is reduced;
 when signed, the parties are 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, except in the case of
fraud, mistake, unconscionable conduct or other exceptions
recognised by the law;
 when properly drafted, the parties should know with certainty their
respective obligations;
 identifies the parties to the transaction and the commencement of
the commercial arrangement; and
 a conventional or electronic signature on an original contract
provides protection against tampering or repudiation by the
signatory.

8. 7. Contract issues in the
digital environment
The parties to an electronic contract should:
 satisfy themselves about the identity and capacity of the other
parties to the contract;
 determine when a binding contract is formed;
 determine the governing law of the contract;
 agree on the electronic payment system used;
 ensure information exchanges leading up to and including the
formation of a contract are secure to prevent later repudiation;
 determine by appropriate terms in the contract the consequences
of breach, frustration and other factors which may affect the
performance of the contract; and
 store electronic data relating to or evidencing the contract in a
manner that prevents alteration by any agent without detection.

9. Jurisdiction
 8.1. Where is an electronic contract formed?
 8.2. Jurisdiction and online contracts

10. 8. Where formed? ETA
 The Electronic Transaction Act 1999 (Cth) (ETA), establishes presumptions about
when and where a contract is formed over the internet. The presumptions can be
displaced by agreement between the communicating parties. In the absence of
agreement, default presumptions apply. Default presumptions:
 Time of Dispatch: the time of dispatch of an electronic communication is as soon as
it enters the first information system outside the control of the originator (sender) (ss
14(1) and 14(2)).
An Information System is defined as ‘a system for generating, sending, receiving,
storing or otherwise processing electronic communications’ (section 5). Note that this
definition is so broad as to include anything a standalone internet connection at home,
to a large network of computers running its own server.
 Time of Receipt: the time of receipt of an electronic communication is when it enters
into the information system designated for receipt of electronic communications by
the addressee (section 14 (3)).
Where there is no such delegated information system, then it is the time that it comes
to the attention of the addressee (section 14 (4)).
 Location: Under the ETA, the parties are deemed to be located at their respective
place of business, or if they have not place of business, at their residential address
(section 14(5)).

11. Electronic aspects
 9. When is an electronic contract formed?
 10. Electronic Transactions Act 1999 (Cth)
 11. Electronic payment systems
 11.1. Types of payment systems
 11.2. Regulation of EPSs
 11.3. Consumer friendly EPS

12. When is an e-contract
formed?
 The general law rules are that
 acceptance must be communicated before a contract will come into existence, and
 a contract is formed in the jurisdiction where acceptance is received.
 Offer or mere invitation to treat?
 Displaying information about a product or service for sale on a website may be construed either as
a binding offer, or a mere "invitation to treat". The courts will look at the intention of the alleged
offerer, gathered from all the circumstances to determine how the display of information is
characterised.
 If the seller’s intention shows a willingness to be contractually bound without any further
negotiations, the display may be regarded as an offer.
 If the trader’s intention falls short of this, the display is likely to be interpreted as a mere
"invitation to treat". An "invitation to treat" is invitation to the website visitor to make an offer
that the seller may accept or reject.
 It may be in a trader’s interests to ensure that information displayed on a website is not
characterised as a binding offer, as this will provide an opportunity to review their capacity to
supply goods (or other issues, for example, any legal restrictions on entering into contracts with
users from particular jurisdictions) before a binding contract is formed.
 Assuming a website is an invitation to treat, and the website visitor makes an offer in relation to
the goods or services displayed and the seller communicates acceptance of that offer to the
purchaser through the website, it is likely that the law may regard the contract as forming in the
jurisdiction of the website visitor (that is the place where the offeror received communication of the
acceptance).
 Timing of acceptance - can be revoked prior

13. 11 Types of payment system
There are a number of ways payment of goods can be effected through cyberspace. A paramount concern for electronic
payment systems is the security of the transaction, including ensuring that payment reaches the vendor, and the
customer’s credit card information or the customer’s identifier for some other form of electronic payment is not
intercepted and used without the customer’s knowledge. The following are some of the common electronic payment
systems (EPS):
 Internet banking
Current Internet banking only permits cash deposits and withdrawals to be made using existing ‘non-Internet’
methods such as cheques, cash or electronic funds transfer. Future PCs or telephones with smart card readers
will permit the transfer of value from an account onto a stored smart card, using the Internet or telephone lines.
 Credit cards
Credit card details are entered into a merchant’s web form on the Internet. The details may be manually sent by
e-mail and verified by the merchant as a mail-order/telephone-order (MOTO) transaction, or encrypted using
secure socket layering (SSL) techniques and then automatically processed by the relevant bank. Transactions
using SSL are more secure but are also more costly.
 Virtual credit card
Appearing as an icon on a computer screen, the card is used to purchase products using secure electronic
transaction (SET) protocol to authenticate the buyer and seller by use of digital signatures. Under the SET
mechanism, it is a third party not the merchant who verifies the credit card details, increasing confidentiality and
security.
 Digital cash
Digital cash is a payment or transfer of value initiated and processed electronically within current inter-bank
payment systems. Digital cash is effectively money stored as computer code. The digital cash is essentially a
message issued by a bank containing its value, the bank’s identity, the bank’s Internet address and a serial
number. The digital cash is securely transferred using data encryption methods.
 Stored value cards (SVCs) (including smart cards)

14. Secure contracting
 12. Secure contract formation in a digital
environment
 12.1. Legal risks in electronic transactions
 12.2. Digital signatures
 12.3. Legal risk with digital signatures
 13. Identity and capacity to contract

15. Secure storage of e-records
 14. Secure storage of electronic records
 14.1. Electronic records and the record keeping
requirements of Commonwealth or State law
 14.2. When electronic records must be kept
 14.3. Corporations Act 2001 (Cth)
 14.4. Limitations legislation
 14.5. Retaining electronic contract records

16. Good and bad practice
 15. E-commerce best practice
 16. EFT Code of Conduct
 17. Scams and Swindles
17.1. Bank Scams – NetBank

17. International
 18. UNICITRAL Model
 18.1. UNCITRAL Model Law on Electronic
Commerce
 18.2. UNCITRAL Model Law on Electronic
Signatures

18. (end)
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19. Consumer Protection Online
1. Consumers and Technology
2. Trust and Confidence
3. Case Study: Online Financial Services
4. Policy Framework
5. Legislation
6. Australian Codes of Conduct
7. International regimes
8. Conclusion

20. Introduction
 1. Consumers and Technology
 2. Trust and Confidence

21. 3. Case Study:
Online Financial Services
 3.1. Complexity of Products
 3.2. Online Calculators
 3.3. Independence
 3.4. Disclosure
 3.5. Identification
 3.6. Complaints
 3.7. Privacy
 3.8. Access and cost
 3.9. Jurisdiction
 3.10. Terms and Conditions

22. 4. Policy Framework
 4.1. Contract
 4.2. Payment
 4.3. Conduct

23. ‘Instruments’
 5. Legislation
 Trade Practices Act/Competition and Consumer Act
 6. Australian Codes of Conduct
 6.1. EFT Code of Conduct
 6.2. Smart Card Code
 6.3. Telecommunications Codes
 6.4. Internet Industry Association Code of Conduct
 6.5. Australian Direct Marketing Association (ADMA)
Industry Code of Practice
 6.6. The Model Code

24. Looking further
 7. International regimes
 7.1. EU Directive
 7.2. OECD Guidelines
 8. Conclusion