Online Contracts:
Concluding contracts online is dependant on the clarity of the offer and
acceptance process, the nature of the contractual terms and how they are
incorporated, and whether contracts agreed by email contain sufficient
formality.
The global nature of World Wide Web (WWW) means that parties need
to consider international law issues.
General Principle:
Under the most jurisdictions, the formation of a contract requires the
following elements:
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An offer;
Unequivocal acceptance of the offer which is communicated to the
person making the offer;
Consideration;
An intention to create legal relations; and
Capacity in each party to be legally bound.
It is recommended that the parties have written contracts, signed and
retain copies of all relevant correspondence and documents relating to
that contract.
Offer:
Offer is an expression of willingness to enter intro a contract on the
stated terms. It is implies an intention that the acceptance of the terms
will become a binding contract.
English law distinguishes between an offer and an "invitation to treat",
such as advertisement promotes the sale however it is not an offer. For
more please see, Spencer V Harding (1870) L.R 5C.P 561
Under English traditional contract law, displaying a goods in a shop is
not an offer but it is an invitation to treat , however, it is depend on the
judge decision about the circumstances of offers and invitation to treat.
See Argus case!
In September 1999, due to software error, Argos displayed Sony
Television set for sale on price of £3 rather than the correct retail price
of 299.99.
In 2002 Kodak faced a similar problem when it incorrectly advertised
digital cameras for sale on its website for £100 instead of correct value
of £329.
Acceptance:
A contract is formed when the offer is unconditionally accepted and the
acceptance of the terms of one party's offer by the other party, and
communication of that acceptance, concludes the contract.
Two Rules for acceptance:
The receipt rule: this states that a contract is formed at the time and
place when the acceptance is received by the offeror. (Fax, phone)
The Postal rule: this applies to communications by post, according to
which acceptance is effective at the time of posting of the
communication. (UK Case: Entores Limited v Miles Far East Corp
[1955] 2 Q.B. 327.)
If the correspondents are both online their message can be received in a
matter of seconds. In this circumstance it is argued the postal rule should
not apply as communication is instantaneous.
Accordingly, the time of communication is largely crucial as it
determines when the contract is made and the time at which the offer
may no longer be revoked. However, communication over the internet is
not always instantaneous, Email message and order from a website can
take from a seconds to several days to arrive at destination. Due to this
uncertainly, a good argument that the postal rule apply to
communication of acceptance via email.
Capacity:
For a contract to be valid, the parties must intend to enter into the
contract and have the capacity to do so.
Due to anonymous nature of the internet the e-trader has limited means
of checking the identity of other buyer.
Legal capacity: Under English law, contract made with minors are
generally voidable at the minor's option under the Minor's Contract Act
1987. Under Iran Civil law article 212, it is stated that contract with
minors are voidable.
Mistake: a mistake does not invalidate a contract unless it is
fundamental.
Some jurisdiction requires that certain contracts muse be in writing.
Pretty pictures v quixote films ltd[2003] EWHC 311 (QBD)
Accordingly, parties to a contract are advised to have a written copy of
the contract for evidential purpose.