ISSUES IN CONTRACT LAW

 Changes in society, in work arrangements and in technology have created issues for contract law and the law-makers and courts.  The growth of technology and mobile phones and iPods may have affected contract law for minors.  Are there any other issues relating to minors that should be considered?

 At one time a handshake was enough to make a formal agreement. As society and business developed, it became necessary to write these agreements into formal documents — contracts.  Now as the twenty-first century progresses, the internet has become a major factor in people's commercial life. This section examines how these changes may affect the development of contracts and contract law.

Challenges for contract law  The world of commerce has changed dramatically over the past 15 years.  The use of the internet to allow consumers to purchase goods and services, apply for finance and enter into contracts has grown.  This section identifies issues in contract law created by technology and the internet. It raises legal issues that must be (and in some cases have been) dealt with by our legal system. 

e-commerce  It has become a common practice to enter into contracts over the internet instead of the traditional pen-and-paper method of doing business. The elements required to form a valid e-contract (electronic contract) are the same as those required in a traditional contract.  First, the fact that a person uses a computer to access a supplier of goods or a service (for example, a supplier of DVDs or aeroplane tickets) indicates an intention to create a legal relationship. Second, an offer is made by clicking an icon or button such as ‘I accept’ and the offer is communicated by clicking on a ‘send’ button.  Acceptance of the offer should then be communicated back to the buyer. Third, consideration is present as both parties have made promises — one party has promised to supply the goods or a service and the other party has promised to pay for the goods or service.

ELECTRONIC SIGNATURES AND THE LAW  Signing on the dotted line is not so easy these days, particularly when many parties must sign a document. Invariably, much time is wasted chasing clients to sign contracts, particularly in businesses that require signatures such as real estate agencies. Most businesses do not, however, require a signature these days and a substantial number of contracts are formed via s where no handwritten signature is used.  If a signature is required, a business may consider electronic signatures. Examples of electronic signatures include a name typed at the end of an , an electronic image of the sender's signature, or clicking on an ‘I agree’ button. It is important to note that businesses are now using encrypted digital signatures that use mathematics for demonstrating the authenticity of the digital message or document. Digital signatures provide certainty for the recipient that the signature is from the sender and that it has not been altered in transit.

 In Australia, the Electronic Transactions Act 1999 (ETA) was passed with the intention of supporting and encouraging electronic commerce in Australia. Transactions under Commonwealth law cannot be invalid simply because they were conducted via electronic communication. The Act states that a requirement or permission under Commonwealth law such as providing a handwritten signature  can be fulfilled in electronic form. There are, however, exemptions to the law where a signature cannot be in an electronic form. In general, the exemptions cover situations where there is a high risk of document fraud; for example, passport documents and statutory declarations. Those engaging in business transactions must check the Electronic Transactions Regulations first.

 Some experts in the legal field have questioned the validity of e-signatures. If the contract is a digital contract it requires those who are signing it to close each page before reviewing the next and this may give a party grounds to claim that they had not really been given a chance to see the entire contract.

Advantages and disadvantages of electronic signatures AdvantagesDisadvantages Transactions can be undertaken over the internet with speed and efficiency. The process of using digital signatures may be difficult for all parties to understand. A digital signature requires encryption and complex verification services. Reduces the need for storage facilities and can be more secure. Courts may be unwilling to enforce digital signatures in contract disputes because of technical error. A simple handwritten signature is recognised and understood by all parties. Reduces human error that can be associated with couriers handling confidential documents that need to be delivered within tight time frames. Digital signatures need to be verified and there is no legal means stipulating this verification process. Online signatures provide more certainty that the signer is who they say they are compared to just pressing an ‘I accept’ button that could be pressed by anyone. Hardware and software may become obsolete. This has necessitated special archive services to be set up that verify that e-signed documents were validly signed.

E-pens make it possible for contracts to be signed without the need for paper and ink.

Case: OOPS! WHEN IS A SALE A SALE?  In July 2009, 105 people accessed the JB Hi-Fi website and found that JB Hi-Fi were offering 40-inch Samsung televisions for $15 instead of the $3500 the sets normally sell for.  At the time JB Hi-Fi were about to start a sale offering 15 per cent off all products, but it appeared that a typing error sent consumers into a frenzy. Many customers had placed multiple orders and were obviously disappointed when tracked down by JB Hi-Fi and told of the error. To placate customers they were offered a $1000 reduction on the price if they wished to go ahead with the purchase of a television.

Capacity of our legal system to change  Technology has changed the way we do things and sometimes the law needs to respond.

Automated message systems  Consider the following actions:  You download a 30-second preview of some music from an online overseas store, then decide to purchase the music. The contract is confirmed by the seller's automated message system.  You download software to your home computer and wait until you receive an activation code sent by an automated system.  In both instances there is no human intervention from one of the parties to the contract. The use of automated systems is widely used in business transactions. To clarify any doubt as to whether such contracts are valid, the Electronic Transaction Act 1999 (ETA) was amended in The legislation now provides that a contract formed by an automated message system is not invalid, void or unenforceable on the sole ground that no natural person carried out the actions.

Electronic signatures  As stated previously, the ETA provides for the legal recognition of electronic signatures in the formation of contracts, regardless of the method used. However, there was a possibility that one party to a contract could try to escape their responsibilities under the contract by arguing that the method used to create the electronic signature was not reliable. To avoid this possibility, the ETA was amended. Courts are now required to consider a range of factors when determining whether the method used was sufficient to identify the signatory in ‘light of all the circumstances’.

10.7  1.) Explain how buying a product on the Internet still fulfils the three elements required for a contract to exist.  2.) Refer to the case study ‘Oops! When is a sale a sale?’  A.) Identify if the three elements of a contract are present.  B.) Would JB's offer of a discount to customers be considered a counteroffer or an invitation to treat? Justify your answer.  3.) Refer to the case study ‘Electronic signatures and the law’.  A.) Why might electronic signature be advantageous for some businesses?  B.) Why is a signature not required for many contracts?  C.) Give one reason why the law provides that some documents cannot be signed electronically.  4.) Comment on the legal system's capacity to respond to demands for change in relation to contracts formed online.