E-Commerce

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E-Commerce

• Commerce and Contracts
• 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
• Jurisdiction
• 8. When is an e-contract formed?

• Electronic Aspects
• 10. Electronic Transactions Act 1999 (Cth)
• 11. Electronic payment systems
• Secure Contracting Online
• 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
• International
• 18. UNICITRAL Model

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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

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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.

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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.

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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
• a clear identification of the Parties to the
  transaction
• the subject matter of the transaction, including
  a description of any goods or services to be
  supplied
• the price, delivery and payment terms
• warranties, liability, insurance, intellectual
  property and dispute resolution
• how orders are to be placed and accepted
  including use of electronic agents
• record keeping, audit trails and evidence
• security, format and authentication of messages
• when and where messages are sent and received
• responsibility for lost, incomplete or garbled
  messages and
• the law governing the transaction.

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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 contract should
  specify a jurisdiction whose laws of evidence
  accept electronic evidence.

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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.

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7. Contract issues in a 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.

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Jurisdiction

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

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8. Where formed? ETA

• The Electronic Transaction Act 1999 (Cth) (ETA)
  (on AustLII or ComLaw), 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)).

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Electronic aspects of contracts

• 9. When is an electronic contract formed?
• 10. Electronic Transactions Act 1999 (Cth)
• 11. Electronic payment systems
• Types of Electronic Payment Systems
• Regulation of EPS
• Consumer friendly EPS

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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?
• Timing of acceptance
• Offer can be revoked prior to acceptance

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When is an e-contract formed?

• 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".
  
• Invitation to treat If latter, buyer makes the
  offer - example
• 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 sellers intention shows a willingness to
  be contractually bound without any further
  negotiations, the display may be regarded as an
  offer.
• If the traders 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 traders 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
• The timing of acceptance is critical, because
  generally an offer may be revoked at any time
  before it is accepted.

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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
• payment reaches the vendor, and
• the customers credit card information, or the
  customers identifier for some other form of
  electronic payment, is not intercepted and used
  without the customers knowledge.
• The following are some of the common electronic
  payment systems (EPS)

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Types of payment system (cont.)

• 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 merchants
  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 SET mechanism, it is a
  third party not the merchant who verifies 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 banks identity,
  the banks Internet address and a serial number.
  The digital cash is securely transferred using
  data encryption methods.
• Stored value cards (SVCs) (including smart cards)
  
• SVC is a plastic card that can contain a
  microprocessor chip (more commonly known as a
  smart card) or a magnetic strip. The chip stores
  more information than magnetic strip cards and
  can perform simple computing operations. SVC is
  inserted into a terminal with a read/write
  mechanism alowing info to pass between card and
  terminal.

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Secure contracting

• 12. Secure contract formation in a digital
  environment
• Legal risks in electronic transactions
• Digital signatures
• Legal risk with digital signatures
• 13. Identity and capacity to contract

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Secure storage of e-records

• 14. Secure storage of electronic records
• Electronic records and the record keeping
  requirements of Commonwealth or State law
• When electronic records must be kept
• Corporations Act 2001 (Cth) and later laws
• Limitations legislation
• Retaining electronic contract records

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Good and bad practice

• 15. E-commerce best practice
• 16. EFT Code of ConductBanks bears the
  liability for hacked accounts! How come?
• 17. Scams and Swindles
• Bank Scams NetBank

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International

• 18. UNICITRAL Model Laws
• Electronic Commerce
• Electronic Signatures
• Partial implementation

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Next week Consumer Protection law unilaterally
re-writes contracts to give consumers (but not
small business) protections against the terms
they are invited to accept