Electronic Transactions (Victoria)
Amendment Bill 2011
Introduction Print
EXPLANATORY MEMORANDUM
General
Background
The Electronic Transactions (Victoria) Act 2000
The Electronic Transactions (Victoria) Act 2000 (the Principal Act)
implements the United Nations Commission on International Trade Law
(UNCITRAL) Model Law of Electronic Commerce 1996 (the Model Law).
The Model Law provides a set of internationally accepted rules to remove
legal obstacles to provide a more secure environment for electronic
commerce. To achieve national uniformity, the Commonwealth and the other
States and Territories of the Commonwealth have also passed electronic
transactions legislation that is consistent with the Principal Act.
The Principal Act implements three key outcomes of the Model Law: legal
validity of electronic transactions, non-discriminatory treatment of different
methods, and party autonomy to agree to alternative terms and conditions.
The Principal Act essentially provides that transactions taking place under a
law of the jurisdiction will not be invalid simply because they are completed
electronically. The Principal Act allows business and government to fulfil, in
electronic form, any of the following requirements: giving information in
writing, providing a handwritten signature, producing a document in material
form, and recording or retaining information. However, certain transactions,
and requirements and permissions relating to transactions, may be excluded
from the application of the Principal Act if prescribed in the Electronic
Transactions (Victoria) Regulations 2000 (the Regulations).
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The Principal Act is broadly directed at removing impediments to the use of
electronic communications in general (whether in transactions with
government, business or consumers). Although the Principal Act recognises
electronic transactions principally for the purpose of an individual's dealings
with Government, it also applies to private dealings. This includes cases
where statutes regulate the form of a contract (e.g. sale of goods legislation)
and where a contract is governed by the common law.
The Electronic Transactions (Victoria) Amendment Bill 2011
The Electronic Transactions Amendment Bill 2011 (the Bill) was
developed following consideration by the Standing Committee of AttorneysGeneral of the proposal to accede to the United Nations Convention on the
Use of Electronic Communications in International Contracts 2005
(the Convention).
The Convention was adopted by the UN General Assembly on 23 November
2005. The Convention builds on the Model Law with the purpose of
facilitating international trade by offering practical solutions for issues
arising out of the use of electronic communications in the formation or
performance of contracts between parties located in different countries.
The objective of the Convention is to enhance legal certainty and commercial
predictability. It does not otherwise purport to vary or create contract law.
The Convention updates the Model Law in light of further knowledge and
developments in electronic commerce, and provides for contracts to give
legal certainty in international trade. The explanatory notes to the
Convention discuss the Model Law in detail, specifically referring to the
provisions to be updated following the consideration of common, accepted
practices. The Convention addresses gaps arising since the Model Law was
developed in 1996 and introduces some refinements in approach to the Model
Law provisions.
Implementation of the Convention does not require significant changes to the
electronic transactions laws. The Bill is the Victorian version of the model
amendment provisions developed by the Parliamentary Counsel's Committee.
The Bill amends the Principal Act to update the electronic transactions
regime to align with the Convention, with a view to acceding to the
Convention when the amendments are enacted in each jurisdiction.
Implementation of the Convention is intended to—

modernise Australia's law on e-commerce so that it reflects
internationally recognised legal standards; and

enhance cross-border online commerce; and
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
increase certainty for international trade by electronic means and
thereby encourage further growth of electronic contracting; and

confirm Australia's commitment to facilitating electronic
communications in international trade transactions as reflected in Free
Trade Agreements.
The Bill applies the changes proposed by the Convention in the context of
international contracts to the general electronic transactions regime, as
these changes serve to update the regime for all electronic transactions.
For example, the Convention provides default rules for determining the time
of dispatch and receipt of an electronic communication in connection with the
formation and performance of a contract (Article 10). The Bill applies these
same default rules in determining the time of dispatch and receipt in relation
to all electronic transactions.
Similarly, the Convention provides default rules for determining the location
of the parties (Article 6). The Bill applies theses same default rules in
determining the location of the parties in relation to all electronic
transactions.
Parties to a contract may, however, agree to contractual terms that vary the
default rules, consistent with the preservation of party autonomy in respect of
these matters under Article 3 of the Convention.
Departure from the Convention
The Convention does not apply to electronic communications relating to
personal, family or household contracts. The rationale for this exclusion was
that the Convention does not address matters providing protection for
consumers in contracts (for example, by specifying conditions under which a
consumer will be presumed to have agreed to terms and conditions).
However, in Australia there is legislative protection for consumers.
This includes trade practices legislation (applicable to contracts for sale of
goods and services to a "consumer" and concerned with unfair conduct),
consumer credit legislation (providing relief from certain unjust contracts,
mortgages or guarantees in respect of the provision of consumer credit) and
financial services legislation. Other laws such as insurance contracts
legislation include provisions which may have a protective effect for
consumers, but also provide for enforcement of terms and conditions against
consumers.
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The Principal Act currently applies to all transactions, including private and
consumer transactions, entered into for the purposes of a law of Victoria.
It does not override the protection provided by other consumer protection
laws. Therefore it is considered appropriate to depart from the Convention
on this issue and encompass personal, family and household contracts within
the scope of the Principal Act.
The matter of applying the amendments to consumer contracts despite the
Convention's exclusion was discussed in a public consultation paper and
comments were requested on this issue. However, no comments were made
on this issue and Ministers agreed that these contracts would not be excluded
from the scope of the amendments.
Therefore, the scope of the Principal Act will now extend the Convention
rules to personal, family and household contracts.
The Principal Act is not intended to apply to international transactions and
specifically refers to transactions "for the purposes of a law of this
jurisdiction". However, the Bill contains a new Part 2A which is applicable
to international contracts. Other than Part 2A, the Principal Act will continue
to apply to domestic transactions only.
Clause Notes
Clause 1
sets out the purposes of the Bill which are to amend the Principal
Act—

to clarify the circumstances in which a requirement for
a signature will be taken to have been met in relation to
an electronic communication; and

to substitute the provisions relating to the determination
of time and place of dispatch and receipt of electronic
communications; and

to provide for contracts that involve electronic
communications; and

to make other miscellaneous amendments.
Clause 2
provides that the Bill is to commence operation on a day or days
to be proclaimed or, if a provision does not come into operation
before 11 October 2012, it comes into operation on that day.
Clause 3
provides that the Electronic Transactions (Victoria) Act 2000
is called the Principal Act.
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Clause 4
amends section 3 of the Principal Act by inserting a number of
new definitions. The newly defined terms are—
addressee—The definitions of originator and addressee clarify
that the Principal Act deals with the relationship between
originator and addressee, but not the relationship concerning any
intermediary such as servers or web hosts.
The definition of addressee provides that an addressee is the
person with whom the originator intends to communicate by
transmitting electronic communication, as opposed to any person
that may receive, forward or copy the communication during the
course of transmission. It is to be interpreted to cover natural
persons, corporate bodies and other legal entities.
The definition is consistent with the definition of the term in the
Convention.
automated message system—The use of automated message
systems forms part of present day business practices.
New section 14C (inserted by clause 12 of the Bill) confirms that
the absence of human intervention does not preclude contract
formation, and whilst a number of reasons may otherwise render
a contract invalid, the sole fact that an automated message system
formed the contract will not deprive the contract of legal
effectiveness, validity or enforceability. New section 14D
(inserted by clause 12 of the Bill) also contains a safeguard where
there has been an "input error".
The definition of automated message system clarifies that an
automated message system differs from an information system in
that its primary use is to facilitate exchanges leading to contract
formation. The intention of the definition is to cover transactions
that lack human intervention on either one, or both, sides of the
transaction. For example, if a party orders goods via a website,
the order may be taken and confirmed by the vendor's automated
message service.
The definition differs slightly from the Convention.
The Convention provides that automated message systems
"initiate an action or respond to data messages or performances".
There was doubt raised during consultation as to the meaning of
"or performances" and in the absence of any practical examples,
the Commonwealth, States and Territories agreed that the
definition should slightly depart from the Convention and omit
the words "or performances".
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originator—The definitions of originator and addressee are
introduced to clarify that the Principal Act deals with the
relationship between originator and addressee, but not the
relationship concerning an intermediary such as servers or web
hosts.
The definition provides that an originator is the person that sent
or generated the communication, even if the communication was
transmitted by another person. The intention of the definition is
to eliminate the possibility that a recipient who merely stores a
data message might be regarded as an originator. This definition
contrasts with the definition of addressee, as it focuses on the
intent of the action. It is to be interpreted to cover both natural
persons, corporate bodies and other legal entities.
performance—The new definition of performance provides that
the performance of a contract also includes non-performance of
the contract. The Principal Act is intended to apply to
communications that are made at the time when no contract, and
possibly not even the negotiation of a contract, has come into
being.
Clause 4 also substitutes the following existing definitions—
place of business—The new definition of place of business
provides that a place of business includes business entities,
government, government authorities and non-profit bodies.
The revised definition clarifies that the Principal Act is intended
to apply to transactions of a commercial and trade-related nature,
rather than only being directed at facilitating dealings with
government.
This amendment aligns the domestic electronic transactions
regime with the Convention.
transaction—The new definition of transaction clarifies that the
scope of the Principal Act encapsulates a wider range of
exchanges of information including dealings in connection with
the formation and performance of a contract. The Principal Act
is applicable to both requirements and permissions under a law
to give information in writing. Whilst the broad and inclusive
definition of transaction is intended to include laws requiring a
contract to be in writing, the new definition confirms the
intention by reference to various exchanges of information
relating to contract formation, whether the exchanges occur at
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the stage of negotiations, during the performance, or after a
contract has been performed.
This amendment aligns the domestic electronic transactions
regime with the Convention.
Clause 5
amends the outline in section 5 of the Principal Act to include a
description of the provisions applying to the use of electronic
communications in contracts in new Part 2A.
Subclause (2) makes a minor consequential amendment.
Clause 6
inserts new section 6A into the Principal Act.
The power to provide for exemptions to the operation of the
Principal Act has existed since the Principal Act was established.
These exemptions are contained in the Regulations.
In general, appropriate exemptions are made where the purpose
or intention of a requirement, permission or Victorian law cannot
be satisfied by the use of electronic communications.
New section 6A provides that Regulations may exempt specified
transactions, requirements, permissions, communications or other
matters, or specified Victorian laws, from any or all of the
provisions of the Principal Act.
New section 6A replaces the numerous, separate provisions in
Division 2 of Part 2 of the Principal Act that provided individual
powers to make regulations to exempt certain dealings from each
specific section.
This new section creates a simplified structure by providing one
regulation-making power in respect of exemptions from any, or
all, of the provisions contained in the Principal Act.
Clause 7
provides for the repeal of section 7(3) and 7(4) of the Principal
Act. New section 6A (inserted by clause 6 of the Bill) provides
that the Regulations may exempt specified transactions,
requirements, permissions, communications or other matters, or
specified Victorian laws, from any or all of the provisions of the
Principal Act.
New section 6A replaces the numerous, separate provisions
in Division 2 of Part 2 of the Principal Act, such as existing
section 7(3) and (4), that provided individual powers to make
regulations to exempt certain dealings from each specific section.
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The note at the foot of section 8(5) of the Principal Act referring
the reader to section 12 has been removed administratively.
This administrative amendment is made as a consequence of
clause 6 of the Bill, which inserts a new regulation making power
(new section 6A of the Principal Act), and clauses 7, 9 and 11 of
the Bill, which repeal sections 7(3) and (4), 12 and 14(3) and (4)
of the Principal Act. The notes do not form part of the Principal
Act because of the application of section 3(2) of the Principal Act
and further, because they were inserted before the
commencement of section 36(3A) of the Interpretation of
Legislation Act 2000.
Clause 8
amends section 9 of the Principal Act.
The Principal Act provides for the legal recognition of electronic
signatures (irrespective of the method used) by establishing
general conditions under which an electronic signature is
regarded as authenticated with sufficient credibility and
enforceability.
Signatures are used to perform a number of functions, such as
identifying a person's personal involvement in the act of signing a
document, associating a person with the content of a document,
associating a person with the content of a document written by
someone else, or endorsing authorship of a text. These basic
functions of a signature are achieved in electronic form by using
a method that identifies the originator of an electronic
communication, and indicates the originator's intention in respect
of the information contained therein.
Clause 8 amends section 9(1)(a) of the Principal Act to provide
that an electronic signature must be capable of indicating the
signatory's "intention" in respect of the information contained in
the electronic communication, rather than the signatory's
"approval" of the information contained in the electronic
communication.
There are instances where the law requires a signature that does
not have the function of indicating the signatory's "approval"
of the information contained in the electronic communication.
For example, the execution of particular document may need to
be witnessed. In these circumstances, the witness' signature does
not (and is not intended to) indicate the signatory's approval of
the contents of the document. It merely identifies the signatory
as a witness to the execution of the document.
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This item aligns the Principal Act with the Convention by
confirming that the notion of "signature" does not necessarily
imply a party's approval of the entire content of the
communication to which the signature is attached.
Section 9(1)(b) of the Principal Act currently provides a flexible
approach to the requirements of a valid electronic signature by
providing that the method used should be "as reliable as was
appropriate for the purpose for which the information was
communicated". This enables a range of legal, technical and
commercial factors to be considered when determining whether
the method used is appropriate, including the nature of the
activity taking place, the frequency of activity between the
parties, the value and importance of the information contained
in the communication, and the availability and cost of using
alternative methods of identification.
Clause 8 substitutes section 9(1)(b) of the Principal Act with a
new paragraph to this "reliability test" for determining whether
the method used was as "reliable as was appropriate" by adding
reference to "in the light of all of the circumstances, including
any relevant agreement". This new paragraph also validates a
signature method regardless of its reliability principle, in
circumstances where the method used is proven in fact to have
identified the signatory, and indicated the signatory's intention
in respect of the information contained in the electronic
communication, by itself or together with further evidence.
This new paragraph is intended to ensure that a court considers a
number of factors in ascertaining whether the electronic signature
used was sufficient to identify the signatory. In accordance with
the principle of "party autonomy", it is open to the parties to
agree to use simpler signature methods.
This new paragraph prevents a party from invoking the
"reliability test" to repudiate a signature in circumstances where
the identity of the party and their intentions can be proved.
Such a result would be particularly unfortunate as it would allow
a party to escape the party's obligations by asserting that the
party's signature, or the other party's signature, was unreliable
even if there is no dispute about the identity of the person
signing, or the fact of the signing.
This amendment aligns the domestic electronic transactions
regime with the Convention.
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The amendment to section 9(2)(c) of the Principal Act
complements the amendment to section 9(1)(a) to provide that
the Principal Act does not affect the operation of any other
Victorian law that specifies the particular method of electronic
signature to be used to identify the original of a communication,
and to indicate the originator's "intention" rather than "approval"
if the information communicated.
Furthermore clause 8 inserts a new section 9(3) into the Principal
Act to align the domestic electronic transactions regime with
Article 9 of the Convention to clarify that where the Principal
Act applies to a law requiring a signature, it includes a law that
provides a consequence for the absence of a signature.
The note at the foot of sections 9(2), 10(4) and 11(5) of the
Principal Act referring the reader to section 12 has been removed
administratively. This administrative amendment is made as a
consequence of clause 6 of the Bill, which inserts a new
regulation making power (new section 6A of the Principal Act),
and clauses 7, 9 and 11 of the Bill, which repeal sections 7(3)
and (4), 12 and 14(3) and (4) of the Principal Act. The notes do
not form part of the Principal Act because of the application of
section 3(2) of the Principal Act and further, because they were
inserted before the commencement of section 36(3A) of the
Interpretation of Legislation Act 2000.
Clause 9
repeals section 12 of the Principal Act which is one of the
regulation-making powers contained in the Principal Act.
Clause 6 replaces the current regulation-making provisions to
provide a simplified structure for making exemptions to the
application of the Principal Act. This clause does not alter the
policy or operation of the Principal Act.
Clause 10 substitutes section 13 of the Principal Act and inserts new
sections 13A and 13B into the Principal Act.
Section 13 of the Principal Act contains default rules to
determine the time and place of dispatch and receipt of an
electronic communication that apply in the absence of any
alternative agreement on these matters.
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Clause 10 repeals existing section 13 of the Principal Act and
substitutes new sections providing the default rules with minor
changes to accord with the Convention. These minor changes
update the Model Law based on a greater knowledge of the
internet and the use of electronic communications obtained since
the Model Law was finalised in 1996. All amendments retain the
proviso that in all cases, parties can agree to alternative terms to
determine the time and place of dispatch and receipt of electronic
communications.
For the purposes of contract law, the time of the dispatch and the
receipt of an electronic communication are significant to the issue
of contractual acceptance. It is important to note that the
proposed new sections do not intend to provide a rule on the time
of contract formation when using electronic communications, but
refine the default rules for determining the time of dispatch and
receipt only. This then enables the application of wellestablished common law rules to determine the issues concerning
contract formation.
New section 13—Time of dispatch
New section 13 replaces provisions concerning the default rules
establishing the time of dispatch of an electronic communication
to align the Principal Act with Article 10 of the Convention.
Both the Model Law and the Convention contain a formula to
determine the time of dispatch of an electronic communication
which involves the notion of a communication leaving the control
of the originator's information system. The Model Law is
directed at the time an electronic communication enters the
information system of an addressee, whereas the Convention is
directed at the time it leaves the information system of the
originator. There is likely to be little difference in practice, but
for example, an e-mail communication whilst often virtually
instantaneous, can be lost or delayed by security measures such
as firewalls and filters.
New section 13(1)(a) adopts the Convention rule to be clear that
dispatch occurs at the time an electronic communication leaves
the information system of the originator.
New section 13(1)(b) provides that where an electronic
communication does not leave the information system of the
originator, the time of dispatch is deemed to be when the
communication is received by the addressee. This provision
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anticipates the exchange of electronic communications within the
same information system.
The provision does not make a distinction between an
information system that is, or is not, under the control of the
user such as where the parties are using web-based e-mail or
Softward as a Service (SAAS) models.
In relation to contracts, the general rule under the common law is
that, unless an offer stipulates a particular mode of acceptance, a
contract is formed when acceptance in communicated to the
offeror. An exception to this general rule is the "postal
acceptance" rule, where acceptance is effective immediately after
a properly pre-paid and addressed letter is posted. However, the
application of the postal acceptance rule to electronic
communications may be confined to situations where it can be
inferred an offeror intended acceptance to be communicated
upon dispatch of an electronic communication.
New section 13(2) confirms that the default rules for determining
the time of dispatch are not affected if the information system
supporting an electronic address is in a different location from
where the electronic communication is sent, which could be in a
different location or jurisdiction.
New section 13A—Time of receipt
New section 13A replaces the provisions concerning the default
rules establishing the time of receipt of an electronic
communication to align the Principal Act with Article 10 of the
Convention.
New subsection 13A(1) provides that the time of receipt of an
electronic communication is the time when it becomes "capable
of being retrieved" by the addressee at a designated electronic
address, or when sent to another electronic address, the time of
receipt is the time when the electronic communication is both
"capable of being retrieved", and the addressee has become aware
that the electronic communication has been sent to that electronic
address.
Whether or not an electronic communication has been sent to a
non-designated address is a factual matter that could be proven
by objective evidence, such as a record of notice, or an automatic
delivery message.
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The Convention introduces the concept of an electronic
communication being "capable of being retrieved". New section
13A(2) clarifies that an electronic communication is presumed to
be capable of being retrieved by the addressee when it reaches
the addressee's electronic address. However, it is important to
note that this is a presumption only. It does not go so far as to
say that the presumption equates to knowledge. The question of
whether an electronic communication has been "communicated"
would remain to be determined under the common law,
depending on the particular facts.
The rule determining receipt of an electronic communication is
stated as an example as to why personal, family or household
contracts are excluded from the scope of the Convention.
The explanatory notes to the Convention provide that the
presumption of receipt occurring upon an electronic
communication reaching an addressee's electronic address is not
appropriate in the context of consumers. Receipt of an electronic
communication often communicates acceptance for the purpose
of contract formation, and the rationale for the exclusion in this
context is that it requires private individuals to conform to the
same standards of diligence as entities or persons engaged in
commercial activities. Consumers may not regularly check their
e-mail, or could be unable to distinguish readily between
legitimate commercial messages and unsolicited mail or spam
and as such, the Convention states that the rule is not appropriate
for personal, family or household contracts.
However, the rules of dispatch and receipt were not previously
excluded from application to personal, family or household
dealings, including contracts. In the absence of these rules, the
question of how the time of dispatch and receipt are to be
determined in relation to consumer contracts would be left open.
This would be a significant omission as consumers are
increasingly undertaking transactions online over the Internet.
Therefore, this new section is also intended to apply to personal,
family or household dealings, including contracts, and would not
override, but merely supplement, other existing laws offering
protection to consumers.
New section 13A(3) confirms that the default rules for
determining the time of receipt are not affected if the information
system supporting an electronic address is in a different location
from where the electronic communication is received, which
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could be in a different location or jurisdiction. This is consistent
with new section 13B(3) concerning the determination of the
place of dispatch or receipt of an electronic communication.
New section 13B—Place of dispatch and place of receipt
New section 13B replaces the provisions concerning the default
rules establishing the place of dispatch and receipt of an
electronic communication to align the Principal Act with
Articles 6 and 10 of the Convention.
New section 13B(1) replicates the existing provision to provide
that the place of dispatch and receipt of electronic
communications is the place where the originator or addressee
has its place of business.
As a result of business adopting technological advances, business
practices may involve various parts of a transaction taking place
in different locations and possibly different jurisdictions.
Consequently, it can be difficult to define the "place of business".
For example, the global reach of electronic commerce means that
an order could be placed from a person's home or work, and
receive by a salesperson at an office location. The vendor may
maintain several warehouses at different locations and different
goods might be shipped to fulfil the single purchase order.
The transaction may also involve direct debit from a credit card,
and the payment is likely to be effected in yet another location.
New section 13B aligns the domestic electronic transactions
regime with the Convention to provide default rules to enable
parties to ascertain the place of business of their counterpart.
This facilitates a determination as to the international or domestic
character of a transaction, including the jurisdiction of contract
formation.
It is important to note that section 13B does not impose a duty on
parties to disclose their place of business, but establishes a set of
rebuttable presumptions in favour of a party's indication of its
place of business.
New section 13B(2)(a) provides that a party's place of business is
assumed to be the location indicated by the party, unless another
party demonstrates that they do not in fact have a place of
business at that location. Where a party has not indicated a place
of business, section 13B(2)(b) provides that if there is one place
of business, that will be assumed to be the place of business.
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In circumstances where a party has made no indication and there
are multiple places of business, new subsection 13B(2)(c) and (d)
provide that the place of business will be either the place that has
the closest relationship to the transaction, or the principle place of
business. In determining the place of business with the closest
relationship to the transaction, this provision provides that
consideration is to be given to the circumstances known, or
contemplated, by the parties at any time before or after the
transaction.
New section 13B(2)(e) provides that if a party does not have a
place of business, for the purposes of determining the place of
dispatch and receipt of an electronic communication, the place of
business is assumed to be their habitual residence. This provision
does not apply to legal entities since it is generally understood
that only natural persons are capable of having a "habitual
residence".
New section 13B(3) and (4) clarify that the location of an
information system can be one, not necessarily the most
significant, factor to consider in determining the place of
business. Further, peripheral information related to electronic
messages such as Internet Protocol addresses and domain names
provide little conclusive value for determining the physical
location of the parties and as such, the intention of section 13B(3)
and (4) is to require cautious consideration of these elements.
The provisions recognise that there should be a reasonable
connection between a party and what is deemed to be their place
of business.
Clause 11 repeals section 14(3) and (4) of the Principal Act.
New section 6A of the Principal Act (inserted by clause 6)
provides that the Regulations may exempt specified transactions,
requirements, permissions, communications or other matters, or
specified Victorian laws, from any or all of the provisions of the
Principal Act. The new section replaces numerous, separate
provisions in Division 2 of Part 2, such as the existing section
14(3) and (4), that provided individual powers to make
regulations to exempt certain dealings from each specific section.
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Clause 12 inserts a new Part 2A into the Principal Act which provides
additional provisions applying to contracts involving electronic
communications.
New Part 2A operates in general terms, whereas the provisions
contained in Part 2 of the Principal Act apply by reference to the
expression "for the purposes of a law of Victoria". The intention
is that the new Part 2A is applicable to both domestic contracts
and contracts with an international aspect. However, Part 2 of
the Principal Act will remain applicable to transactions
undertaken pursuant to a law of Victoria.
These amendments align the electronic transactions regime with
the Convention, preserving the rights of parties to agree to their
own alternative arrangements. The Convention acknowledges
that in practice, solutions to the legal difficulties raised by the use
of electronic communications are often the subject of contractual
terms.
New section 14A—Application and operation of this part
The Convention is directed at clarifying uncertainties in the use
of electronic communications in connection to the formation and
performance of contracts involving parties in different
jurisdictions. As such, the Convention rules are only concerned
with, and applicable to, international contracts. However, the
proposed new provisions contained in new Part 2A also apply the
Convention rules to the use of electronic communications related
to the formation and performance of domestic contracts to avoid
having different regimes under the domestic law.
Subsection 14A(1) provides that the new Part 2A applies to
contracts where either some, or all, parties are located within
Australia or elsewhere, and whether the contract is for business
purposes, for personal or household purposes, or for other
purposes.
The explicit intention to extend the provisions to international
contracts is embodied in section 14A(1)(a) which applies the new
Part 2A in circumstances where the location of the parties may be
outside Australia. It is not the intention to extend the provisions
so far as to purport to cover contracts involving all parties being
outside Australia and having no connection to Australia.
However, in such circumstances there is nothing to prevent
parties agreeing that the law of another jurisdiction should govern
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the contract given the preservation of the principle of "party
autonomy".
New section 14A(b) clarifies the intent to depart from the
Convention by including personal and household contracts within
the scope of new Part 2A. The Principal Act does not override
the protection provided by other consumer protection laws and
therefore, it is not necessary to exclude such contracts from the
scope of the Principal Act.
New section 14B—Invitation to treat regarding contracts
New section 14B provides that a proposal to form a contract,
other than a proposal addressed to specific persons, is considered
to be merely an invitation to make offers, unless the contrary
intention is clearly indicated by the person making the proposal.
This provision reflects the common law distinction between an
offer, where the offeror has indicated a willingness to be bound,
and an invitation to treat, where a statement invites the making of
offers or further negotiations. The distinction turns on the intent
of the invitor. In the absence of a clear intention to be bound by
an offer, the invitor is not bound until the price offered by a
customer is accepted.
The intention of this provision is to transpose the common law
notion of an invitation to treat into an electronic environment to
confirm that a trader who advertises goods or services on the
Internet, or through other generally accessible communication
systems or open networks, is considered to be inviting those who
access the site to make offers, unless there is a clear indication by
the trader of an intention to be bound.
The Internet enables information to be sent or viewed by
virtually an unlimited number of people. Section 14B(2)
provides that proposals using interactive applications for the
placement of orders may also be considered an invitation to treat.
Although interactive applications appear to provide for contracts
to be concluded almost instantaneously, an advertisement or
proposal to the world at large does not indicate the invitor's
intention to be bound, given the unlikelihood of fulfilling
purchase orders received by an unlimited amount of people.
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New section 14C—Use of automated message system for contract
formation—non-intervention of natural person
The use of automated message systems forms part of present day
business practices. New section 14C confirms that the absence of
human intervention on behalf of one or all parties to a contract
does not itself preclude valid contract formation. This provision
does not enable an automated message system to interfere with
agreement to terms of a contract; it merely confirms that an
automated message system can agree to form a contract.
A definition of automated message system has been inserted.
The intention of this provision is to acknowledge that whilst a
number of reasons may otherwise render a contract invalid, the
sole fact that automated message systems were used in the
contract formation and no natural person reviewed or intervened,
does not deny the resulting contract legal effectiveness, validity
or enforceability. However, the person or entity using the
automated message system is ultimately responsible for the
actions of the automated message system.
New section 14D—Error in electronic communications regarding
contracts
Unlike transactions involving human intervention, transacting
with an automated message system reduces the opportunity to
detect or correct an error.
New section 14D contains a safeguard providing a right to
withdraw the portion of an electronic communication containing
an error in certain circumstances. The particular circumstances
that must apply in order to give rise to the right to withdraw the
error are intended to address the notion of "unjust enrichment"
and limit abuses by parties acting in bad faith.
Where an "input error" is made (e.g. where a person enters the
wrong quantity of goods on an order form) the safeguard enables
the withdrawal of the portion of the electronic communication
containing the error, only where the error is made by a natural
person in an exchange with an automated message system, and
an opportunity to correct the error is not provided. Further, the
right to withdraw the portion of the electronic communication
containing the error is only available if the person notifies the
other party of the error as soon as possible after having learned
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of the error and he or she has not used or received any material
benefit or value from the goods or services.
The intention of the safeguard is to encourage parties to build
in an opportunity to correct input errors when using automated
message systems, such as including a confirmation screen that
provides an opportunity to correct any information before the
electronic communication is sent. In addition, section 14D(3)
clarifies that the safeguard is not intended to give parties an
opportunity to repudiate disadvantageous contracts or to avoid
what would otherwise be valid legal commitments.
The safeguard is noted as an example as to why personal, family
or household contracts are excluded from the scope of the
Convention. The rationale for the exclusion is because the
Convention does not address matters providing protection for
consumers. However, in Australia there is adequate legislative
protection for consumers and given the protective policy
underlying the safeguard, section 14D is intended to apply to
personal, family or household dealings, including contracts, and
would not override, but merely supplement, other existing
consumer protection measures.
New section 14D(4) clarifies that while the safeguard intends to
preserve the effects of the contract as much as possible, it does
not intend to assert any undue influence with well-established
notions of contract law. The conditions of withdrawal or
avoidance of electronic communications affected by the errors
that occur in any other context than those provided for in
section 14D are to be determined by other applicable legislation
and the common law.
New section 14E—Application of Act in relation to contracts
New section 14E(1) clarifies that the provisions contained in
Part 2 of the Principal Act are also applicable to contracts
involving the use of electronic communications. Part 2 contains
provisions that are relevant to contracts, but are prefaced with the
words "for the purposes of a law of this jurisdiction". In order to
remove any doubt as to whether "a law of this jurisdiction" would
extend to the common law, subsection 14E(1) specifies that the
provisions of Part 2 also apply to contracts. This confirms that,
for example, the default rules concerning the time of dispatch and
receipt are applicable in determining the time of dispatch and
receipt of an electronic communication relating to a contract.
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This subsection complements the new definition of transaction
that clarifies that a transaction under Part 2 includes electronic
communications related to a contract.
New section 14E(2) is intended to clarify the applicable law in
circumstances where different provisions or jurisdictions
(or both) could potentially operate in the same field.
New section 14E(2)(a) provides that Part 2A of the Principal Act
does not apply to a contract if Part 2 is applicable. The intention
of this is to provide that an electronic communication related to a
contract that is communication "for the purposes of a law of
Victoria", that is, within the scope of Part 2, will not be governed
by the provisions in Part 2A. For example, the relevant
provisions of Part 2 will apply to an electronic communication
related to a contract governed by Victorian law. This is intended
to provide for a singular provision to be applicable.
New section 14E(2)(b) provides that Part 2A of the Principal Act
does not apply where the law of another State or Territory of the
Commonwealth, is the proper law of the relevant contract, and
that State or Territory has provisions in place that are
substantially the same as Part 2 of the Act.
The intention of this paragraph is to provide that an electronic
communication related to a contract that is established under the
law of another State or Territory, that is, any contract governed
by State or Territory legislation (including the common law), will
not be governed by provisions in Part 2A of the Principal Act.
For example, a contract for the sale of goods in a particular State
will be governed by the Part 2 equivalent of that State's electronic
transactions legislation even in the circumstances where that
State has not enacted provisions similar to Part 2A to provide for
contracts. The intention is to preserve the co-operative nature of
the electronic transactions scheme.
Clause 13 supports the transition to new provisions.
New section 16(1) preserves the Regulations made under the
Principal Act before the commencement of the amending Bill as
if the new regulation-making power (new section 6A) had been
in force at the time the Regulations were made, and as if the
Regulations had been made under that section. This does not
prevent the amendment or revocation of the Regulations in the
future.
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New section 16(2) to the Principal Act provides that new
sections 14B, 14C and 14D extend to proposals, actions,
statements, declarations, demands, notices or requests, including
offers and the acceptance of offers, that are made, carried out
or given before the commencement of the amending Bill.
However, subsection (3) provides that new section 16(2) and
Part 2A of the Principal Act do not have retrospective application
in respect of a contract formed prior to the commencement of the
provisions. The intention of new section 16(3) is to provide for
consistent rules and procedures to apply to an entire contract.
Clause 14 provides for the repeal of the amending Act on 11 October 2013.
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