E – CONTRACTS – PRINCIPLES AND PRACTICE CHAPTER 6 E – CONTRACTS – PRINCIPLES AND PRACTICE

INTRODUCTION E-commerce transactions take place every day between business and business, business and consumers and even business and government agencies. E-commerce refers to business transactions that utilize electronic networks, including the Internet. The term also includes the use of electronic devices to carry out business activity such as: telephones faxes, email, EFTPOS (Electronic Funds Transfer at Point of Sale), automatic devices such as teller machines.

INTRODUCTION EXAMPLE OF ELECTRONIC TRANSACTIONS: - The purchase of consumer goods (from buying shoes, computers or having a pizza home delivered). The payment of bills (for example ‘Bpay’). Banking. Arranging travel (from booking an airline ticket and hiring a car, to purchasing hotel accommodation, tours and travel insurance). Enrolling and paying for tertiary education. Statutory business requirements (for example, obtaining a registered business name or business licence from the appropriate authority).

Electronic Transactions Act 1999 (Clth) The Electronic Transactions Act 1999 (Clth) – ETA provides a legal framework to support and encourage businesses and consumers using electronic commerce. FUNDAMENTAL PRINCIPLE: - electronic and paper based commerce should be viewed and treated in exactly the same way. Copy of legislation - http://www.comlaw.gov.au/Details/C2011C00445

Electronic Transactions Act 1999 (Clth) S. 8 of the ETA provides a transaction will NOT be invalid because it took place wholly or partly electronically and that certain requirements imposed by commonwealth law may be met in electronic form. S. 9-12 of the ETA provide that if legislation requires a document to be ‘in writing’ or ‘signed’ then an electronic record and signature will be sufficient to fulfil those requirements. ‘Readily accessible and usable condition’ means that the information contained in the electronic communication should be readable and capable of being interpreted. S. 10 of the ETA recognises an electronic signature. Such a signature authenticates an electronic transmission by identifying the signer and attributing the document to them.

USEFUL TERMS Australian Business Number Digital Signature Certificate (ABN – DSC)   A digital certificate linked to a business entity’s Australian Business Number (ABN) and developed by the Commonwealth government to encourage the use of digital certificates in Australia for identification in online transactions. Clickwrap Agreement A legal agreement for which acceptance is confirmed by clicking a screen icon such as an ‘I accept’ box. Cybercrime Electronic criminal offences, usually involving unauthorised access to a computer or alteration to computer records. Cybersquatting Registering, selling or using a domain name with the intent of profiting from the goodwill of someone else’s trademark. Cyberstuffing The practice of embedding ‘meta tags’ in websites. Domain Name An internet address. Digital Signature A subset of an electronic signature. It is attached to specific data and permits authentication of the data. E- commerce The undertaking of business transactions using electronic networks, including the internet but also includes the use of electronic devices to carry out business activity; telephones, faxes, email, EFTPOS (Electronic Funds Transfer at Point of Sale) and automatic devices such as teller machines.

USEFUL TERMS

Forming Contracts Electronically An electronic contract to be valid and enforceable – must have the 6 essential elements present: - Intention to create legal relations Offer and acceptance Consideration Capacity to contract Genuine consent Legality of object

Forming Contracts Electronically Intention If a person enters into a business transaction electronically, a reasonable person would most likely conclude that there was an intention to create legal relations. In a social or domestic agreement is entered into electronically, a reasonable person is less likely to conclude there was intention to create legal relations.

Forming Contracts Electronically Offer and Acceptance It is very important to distinguish between an actual offer and an invitation to treat, particularly in relation to transactions carried out via websites. If the display of information on a website is regarded as an invitation to treat, then before a contract can be made, an offer and an acceptance must occur. If the offer is contained in either an email or on a website, all the terms and conditions of that offer should be clearly stated.

Forming Contracts Electronically Offer and acceptance Electronic display of an offer over the Internet is actually made to the ‘world at large’, given that the web is a universal phenomenon and accessible worldwide. Unless the offeror wishes to deal with the world at large, the offer must clearly include any restrictions on that offer, such as time, geographical limits or number of items available. Acceptance of an offer is achieved within a web environment via a ‘clickwrap’ acceptance. This means there will be either a set of terms and conditions described directly within an email or on a website – access to terms and conditions can be made available via a link or dialogue box – user presses on an “I accept’ button.

Forming Contracts Electronically 2. Offer and acceptance Another method of acceptance is by the use of a digital signature or registered certification authority (a ‘public key’). This method requires the user to attach their unique digital signature or registration authority to signify their acceptance, otherwise they cannot proceed with the transaction. A revocation of an offer is only effective when the offer that was made, or potentially made, has be.en effectively communicated to the offeree.

Forming Contracts Electronically When is an Electronic Communication Regarded as Sent or Received? S. 14A - electronic communication is dispatched when it leaves the information system under the control of the originator (the person who sends the communication). S.14 - the communication is considered received once it becomes capable of being retrieved by the addressee, at the electronic address designated by the originator Electronic communication is received when it comes to the attention of the addressee – does NOT mean they must have read it – if the addressee is aware, or should be aware, that an electronic communication is in their electronic mailbox – electronic communication is deemed to have been received.

Forming Contracts Electronically Place of Dispatch and Receipt The ETA states that an electronic communication is dispatched at the place where the originator has its place of business and that it is generally received at the place where the addressee or recipient has its place of business. Difficulty with contracts made using the internet is that parties may come from different states or different countries. ANSWER – Must determine where the contract was actually made and which state or country’s law will apply when it comes to interpreting and enforcing the agreement. The general rule is that a contract is formed in the jurisdiction where acceptance is received.

Forming Contracts Electronically Consideration Consideration is reasonably straight forward in an e-contract. All that is required is that there are mutual promises and these may be made electronically.

Forming Contracts Electronically 4. Capacity to Contract Minors are a group that require special consideration when it comes to online contracts. In an electronic environment, one party may not know the other party to the contract is a minor. In some cases it may be necessary for proof of age to be provided, for example, in the online purchase of alcohol, medications or restricted DVDs and publications

Forming Contracts Electronically Genuine Consent It is important to ensure parties to an electronic contract give their consent in a genuine manner. There may be a lack of genuine consent as a result of mistake, misrepresentation, duress, undue influence or unconscionable conduct.

Terms of an E-Contract The terms of a contract consist of the promises that each party makes to the other. It is important that the terms of a contract are brought to the attention of the other party before the contract is made, especially disclaimers of liability and exclusion clauses. If a party has not had a reasonable opportunity to read these terms before the contract is entered in to, they may not be bound by them. EXAMPLES – Badly designed website where terms and conditions are easy to skip over ‘Accept’ button appears at the top of a long page of terms resulting in the user being able to accept without actually reading the terms. Terms are so long or difficult to read that a reasonable person would be unlikely to be aware of and understand them. REFER TO CASE - E-Bay International AG v Creative Festival Entertainment Pty Ltd (2006) FCA 1768

Electronic Signatures A person is not bound by an electronic communication unless the communication was sent by or with the authority of that person. An electronic signature is a method of authenticating an electronic communication. The ETA does require that the signature method be: - Sufficient to identify the person; - Sufficient to indicate the person’s intention regarding the information communicated; - As reliable as is considered appropriate for the proposal in question.

Electronic Signatures

Domain Names and the Law A domain name (DNS) is the method used to identity a particular business internet address. A DNS helps users to find their way around the Internet. The DNS comprises a directory that is organised hierarchically, made up of all domain names and their corresponding computers, registered to each particular person and company using the Internet. A website can be created from that computer and it will be accessible to Internet users around the world.

Domain Names and the Law Internet Corporation for Assigned Names and Numbers (ICANN) The assignment of domain names using the endings ‘.com, .net and .org’ is controlled by an American company, Network Solutions Inc. A new international, non-profit organisation, Internet Corporation for Assigned Names and Numbers (ICANN) was established to control the use of domain names. ICANN ensures that every address is unique and that all users of the Internet can find valid addresses. It also ensures that each domain name maps to the correct IP address. Online tip – further information about the role and functions of ICANN can be found at: http://www.icann.org/en/about/welcome

Domain Names and the Law Rules for Allocation of Domain Names in Australia ICANN’s role is also to authorise other organisations to allocate domain names, subject to ICANN’s standards. In Australia, the authorised organisation is ‘.AU Domain Administration’. The rules under which domain names are allocated can be found at ‘Domain Name Eligibility and Allocation Policy Rules for the Open 2LD’s (2008-05) at: http://www.auda.org.au/policies/auda-2008-05/ they include: - The domain name license period is fixed at two years A registrant may not register a domain name for the sole purpose of resale or transfer to another entity.

Domain Names and the Law Domain Name Dispute Resolution Under the Policy a complainant must prove that: • The domain name complained of is identical or confusingly similar to a trade mark or service mark in which the complainant holds the rights; • The holder of the domain name has no rights or legitimate interest in the domain name; • The domain name has been registered and is being used in bad faith.

Domain Names and the Law Misuse of Domain Names ‘Cybersquatting’ is the registering, selling or use of a domain name with the intent of profiting from the goodwill of someone else’s trademark. ‘Typosquatting’ is the purchasing of a domain name that is a variation on a popular domain name with the expectation that the site will receive traffic from the original site due to users misspelling the name. REFER TO CASES – CSR Ltd v Resource Capital Australia Pty Ltd (2003) 128 FCR 408 ACCC v Chen (2003) 132 FCR 309 Architects (Australia) Pty Ltd v Witty consultants Pty Ltd (2002) QSC 139 READ DISCUSSION ARTICLE – The 10 Most Expensive Domain Names READ COMMERCIAL TIP

E-Commerce and Consumer Protection E-Commerce is subject to the Competition and Consumer Act 2010 and therefore the ACL, unless the conduct or contract occurs in an overseas jurisdiction. Businesses must ensure they do not breach – S. 18 of the ACL which prohibits misleading and deceptive conduct in the course of trade and commerce S. 29 of the ACL prohibits the making of false or misleading representations regarding goods and services. S. 48 of the ACL which provides that a single price for goods or services must be disclosed S. 29 (i) of the ACL, which prohibits false and misleading representations about price. REFER TO CASE - ACCC V Dell Computer Pty Ltd (2002) FCAFC 434 READ EXAMPLE - Rebecca

E-Commerce and Consumer Protection The Australian Guidelines for Electronic Commerce 2006 Guidelines that online businesses are encouraged to follow. Topics covered include: • Fair business practices. • Accessibility. • Disability access. • Advertising and marketing. • Engaging with minors. • Providing information. • Privacy. • Payment. • Concluding the contract. • Security and authentication. • Complaint handling. • Dispute resolution. READ CHECKLIST

Spam Spam is an unsolicited electronic ‘junk mail’ message, frequently sent out to many people at the same time by email, or text messages to mobile devices. Sometimes the messages form the basis of ‘scams’, or are simply irritating and wasteful. The Spam Act The Spam Act 2003 (Cth) and Spam (Consequential Amendments) Act 2003 (Cth) make it illegal to send most types of commercial electronic messages to or from Australia without the recipient’s consent. The legislation does not apply to non-commercial messages. Note that whilst the legislation is aimed primarily at emails, it also covers mobile text messages and faxes.

Spam Applies Only to Commercial Messages Sent to an Electronic Address Electronic Messages That Do Not Require the Consent of the Recipient eg messages from government, political, religious, charitable or educational organisations Businesses May Send Electronic Messages if they Meet the Spam Act Criteria Express Consent means that the recipient has actively consented to receiving messages from the sending organisation

E-Commerce and Consumer Protection Implied Consent- If a person has an ongoing relationship with a business, the business may send information about their products and services. It is Illegal to ‘Harvest’ Electronic Addresses.

E-Commerce and Consumer Protection Responsible Authorities Australian Government Information Management Office (AGIMO) responsible for functions relating to the promotion and co-ordination of the use of information and communications technology in the delivery of Australian Government programs and services. VISIT - www.noie.gov.au The Australian Communications and Media Authority (ACMA) is the government agency responsible of broadcasting, the Internet, radio communications and telecommunications. Promotes the principle of self-regulation and competition within communication industry, whilst protecting consumers and other users. VISIT - www.acma.gov.au.

E-Commerce and Consumer Protection Penalties for Breach A business that is in breach of the Spam Act is liable for a fine up to $220,000 for a single day’s contravention. If a business offends again they can be liable for a penalty of up to $1.1 million. Enforcement options also include:- formal warnings injunctions infringement notices and court proceedings. For further information about the Spam Act and Codes of Practice visit www.acma.gov.au. READ CASE - Australian Communications and Media Authority v Clarity 1 Pty Ltd (2006) FCA 410 READ DISCUSSION ARTICLE - Australian Communication and Media Authority Media Release

Electronic Banking Electronic banking has become one of the most challenging areas when it comes to electronic methods of communication Electronic Funds Transfer Systems allows funds to be transferred electronically, without the use of paper or face-to-face contracts. Electronic funds transfers involve the use of electronic devices including: • Automatic teller machine transfers; • Direct credit and debit arrangements; • Internet banking; • Paper-free banking; • Point-of-sale transfers; • Smart-cards/stored value cards; • Transfers initiated by telephone;

Electronic Banking Such financial activity is regulated by common law and the provisions of the Competition and Consumer Act 2010, Electronic Transactions Act 1999 and the Privacy Act 1988, together with the Electronic Funds Transfer Code of EFT Code of Conduct, which deals with the rights and obligations of the parties to electronic transfers. The code is administered by ASIC which ensures that businesses comply with the code. VISIT - http://www.asic.gov.au/asic/asic.nsf/byheadline/EFT-Code