LAW101 Role of Contract in E-Commerce and Key Elements of Online Contract: Business Law Assignment Answer

Legal cases and law

Issue

• What is the role of the contract in E-commerce and identify the key elements of online contract?
• Is there any differences to traditional contract and it how unfair contract terms?
• What are the challenges or dispute resolution in e-commence?

Rule

Before entering into the contract, the legal system must be known which provides for the formation and treatment in case of any dispute arises. Australian Contract law is based on the English common law and the basic element of Australian contract law is the freedom of contract. Electronic Contract is the faceless computerized facilitation of contract in the cross organisation business. It is new mechanism to deal within the global market. As per the Air Great Lakes Pty Ltd v KS Easter (Holdings) Pty Ltd [1989] 2 NSWLR 309, it is held that the electronic contract is similar to the traditional contract. For example, the vendors shows their products and the customer makes the offer to buy the products and then the prices of the products is paid to the vendors and the contract is formed between the parties.  Under the contract, the both parties may negotiate for the prices. There are no special fundamental principles for making the contracts electronically. There are same provisions as the provisions for physical contracts. E commerce is regulated by the federal, state and territorial Electronic transactions Act. These acts are based upon UNCITRAL model law on electronic commerce. E commerce is the virtual market place where two or more parties come together on the computer or virtual platform to trade in the goods or services. As per the case of Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349, it is held that the contracts are governed by the basic principles of Australian Contract law. The E commerce vender shows their products at the virtual platform to the customers and customer places the order for purchase of products. This would be considered as offer. The offer may be accepted or rejected by the vendors according to availability of the products. The online contract is made by electronic platform where there is no physical contact between offeror and offeree. But the key elements of the normal contracts remain the same in the online contract. The contract is the reciprocal promises made by parties to each other for making the consideration for each other. There are joint promises or consideration that one would deliver the goods on the certain terms and the other parties would pay the amount of such goods or services.  Offer is the intention or willingness of the one party to enter into the contract for binding the other party on certain terms. When the other person accepts or gives his ascent on such terms, then the agreement would be formed. According to Prof. Wilson, “the Acceptance to an offer is like the match stick towards the train of gun powder”. Gun powder is Offer and Match stick is acceptance. As the match stick comes in the contact of gun powder, there is the explosion of the gun powder. In this way, when the offer is accepted by the other party, it becomes the promise or agreement. Once the offer is accepted, it cannot be withdrawn. Offer is different from invitation to treat and mere puffery. Invitation to treat is the statement made by the shop owners to attract the customers to purchase the products of their shop. In invitation to treat, the customer makes the offer in respect of the purchase of the products, and then the shopkeepers give their ascent on the offer of the customers.  As held in the case of Bressan v Squires [1974] 2 NSWLR 460, the offer becomes the promise and agreement. The online contract is made like the physical contract. In these contract, the vendors offer to sell the products to the  general public on some e commerce platform and the customer makes the orders for purchase of the product, then the vendors gives their ascent on the offer of the customers and shipped the product. If the vendors reject the offer, the offer is rejected and the refund of the amount is made into the account of customer. The key elements of an online contract are:-

1. The offer and acceptance is communicated on the electronic platform.
2. The communication is made by accepting and shipping the product upon the address of the customers.
3. Firstly, there is mere invitation to treat and then after the customer selects the goods in the cart and makes the payment.
4. The acceptance is made by the vendors according to the availability of the product and dispatch policies on such locations of the customers.
5. When the products are dispatched by the vendors and the agreement doesn’t come into force until the product is received by the customers. 
6. The customers can revoke the contract till the receiving the products.
7. The agreement is complete when the goods or services are dispatched and received by the customer.

Electronic Contracts is the boarder term and it includes the online contracts. These contracts are formed by transmitting the messages electronically in form of electronic record. These contracts are made by using the computer networks and real time transactions. The electronic transmission of the messages helps to prevent the delays in the contracts. That’s why these contracts are used frequently (Giancaspro, 2017).

Key Elements of online contract:-

1. Offer:-  The offer is made by the customer on the online platform and gives the order for the desired goods or services. The order is not made face to face but the offer is made by the customers to vendors for available goods or services.
2. Acceptance: The offer is accepted by the vendors according to the available stock in response of the invitation to treat. The offer can be revoked by the customer before the offer is accepted by the vendors.
3. Lawful consideration (Skilbeck, 2017). There must be lawful consideration for both parties. The customers are obliged to pay the amount or consideration of the products to the vendors and the vendors are liable to deliver the goods according to the order placed and requirements given by the customer.
4. Intention to create legal relations:- There must be the intention to create the legal relations between the parties. If there is no such intention, there would be no contract. Agreement of domestic and social nature cannot be enforced. 
5. Capacity of parties: The parties must be competent according to the provisions of the Australian Contract Law. The parties must not be minor, unsound mind and disqualified by the law. 
6. Free Consent:- The consent must be free and genuine. The consent of party must be free from all the coercion and influences.
7. Lawful object: The Contract must be done with the lawful object and the object of the contract must be legal and within the purview of the legal provisions.
8. Possibility of the legal performance:-

The contract must be legally performed by the parties. The parties are able to perform the contract. The contract must not be vague and ambiguous. It must be possible to enforce the contract. The conditions of the contract must be possible to perform.

The Electronic contract are executed by selling of the physical goods and rendering the desired services to the customers or by selling or installing of the digitalized products such as software’s etc. The contract comes to end when the services are delivered to the customers and the customer has paid for the same (Aleid, 2017). 

Application

United Nations convention on the use of electronic communications in international contracts, 2005 have specified the provisions dealing with the issues relating to the place of party in the electronic environment. Article 12 of UNCUECIC says that the contract can be formed by transmission of the electronic records and by automated messages system. The object to adopt this convention is to adopt the uniform policies and rules to deal with problems arise under the electronic contract. This convention helps to create more legal certainty and commercial predictability (Tasneem, 2011).

as held in the contract case of Bendigo and Adelaide Bank Limited (ACN 068 049 178) & Ors v Kenneth Ross Pickard & Anor [2019] SASC 123, the contract are made physically or one to one in which one person gives the offer to another person, and the other person give the acceptance to the offeree on the agreement of the certain terms as given in the offer.  In electronic contract, the offer and acceptance is made by transmission of the electronic records. The transactions between the customers and vendors are made electronically and the customers are not aware about the creditability of the vendors. The customers choose the goods from the showed goods on the website (Palanissamy, 2013). The vendors first make the invitation to treat to the customers to show their product. Then the customer makes the offers in respect of the goods or services desired. These processes are made by electronic records and there is no physical contact between vendors and customers. The electronic contracts are similar to postal contracts.  The email acceptance is considered when it is sent to the customer and this would be considered as acceptance on the offer of the customers. In the case of Entores Ltd v Miles Far East Corp':' and Brinkibon v Stahag Stahl mbH, the case provides the support in the electronic contracts as it applies the rules for contract formation on other technologies. The acceptance must be communicated by the vendors and it must be absolute (Du, et al. 2014).

Challenges in enforcement of Electronic Contracts:

The electronic contracts may create various challenges on the enforcement of the contract. The parties can retain the documents for enforcement of the contract. If there is any dispute between the parties upon the terms of the contract, then it can be enforced by the United Nations Convention on use of computers in electronic contracts. The electronic documents relating to the electronic contracts can be taken for evidence and admissible in the court for proving the elements of the contract. The electronic contract may cause the problem relating to time and place of the contract which may arise the problem relating to the place of the agreement. The agreement is considered executed at the place where the acceptance on the offer is communicated to the offeror. The time would be the time at the time when the offer is accepted. The issues relating to performance of the contract can be settled according to the United Nations convention on use of computers in electronic contract.  

Conclusion

The disputes can be settled according to the alternative dispute resolution mechanism by way of arbitration or mediation. The disputes of the parties are governed by the general and fundamental principles of the contract legislation. Therefore, it could be inferred that in the given contract, the both parties may negotiate for the prices. There are no special fundamental principles for making the contracts electronically.  It is considered that when the other person accepts or gives his ascent on such terms, then the agreement would be formed. In contract, there is legal contract when both parties are complying with the legal terms and conditions and also met with the all the essential elements of the contract which are required to perform the contract. Only in the case of the legal compliance with the essential elements of the contract by both parties, the contract would be certainly be legal and failure to comply with the any of the terms set in the contract by party, other party may ask for the compensation for the same. Thus, the disputes are resolved by the agreement on the mutual terms and conditions of the contract. If any party breaches the terms of the electronic contract, then the customer can claim the damages and compensation under the provisions of Australian Contract law as well as the Australian Consumer Law.