Loren Thompson 16719558
Assignment Cover Sheet
LAW
School of ......................................
Student name:
Loren Thompson
Student number:
16719558
Unit name and number:
200011 Contracts
Tutorial group:
Simon Kozlina
Tutorial day and time:
Thursday 10am – 1pm
Lecturer/Tutor:
Simon Kozlina
Title of assignment:
Research Essay
Length:
2,500 Words
Date due:
Monday 6 May, 2013
Date submitted:
Monday 6 May, 2013
Campus enrolment:
Parramatta
Declaration:
x I hold a copy of this assignment if the original is lost or damaged
x I hereby certify that no part of this assignment or product has been copied from any
other student’s work or from any other source except where due acknowledgement
is made in the assignment
x No part of the assignment/product has been written/produced for me by any other
person except where collaboration has been authorised by the subject lecturer/tutor
concerned
x I am aware that this work will be reproduced and submitted to plagiarism detection
software programs for the purpose of detecting possible plagiarism (which may
retain a copy on its database for future plagiarism checking)
Signature:______________Loren Thompson x________________________
Note: An examiner or lecturer/tutor has the right to not mark this assignment if the
above declaration has not been signed.
1
Loren Thompson 16719558
200011 CONTRACTS ESSAY
I Introduction:
Mik1 presents a compelling argument for the absorption of technological change into
current contract principles without the need for special rules. However, it can be
equally argued that the presence of an electronic communications system 2 that is
global, so far reaching, still so novel in risks presented, are so complex and deviate so
far from traditional and more simple communication systems, that a separate set of
special rules for electronic transactions seems warranted in order to more closely
protect both parties to a contract, particularly as it pertains to the rules of offer,
acceptance and intention.3
II Offer:
The concept of ‘offer’ denotes the first crucial component of the formation of a
contract, which includes offer, acceptance, certainty, consideration and intention.4 An
offer constitutes ‘a proposal by one party to enter into a legally binding contract with
another’.5
An offer will be made if a reasonable person in the situation of the offeree would
believe that an offer had been made.6 The offer must also be communicated to the
Eliza Mik, ‘Updating the Electronic Transactions Act? – Australia’s Accession to the UN Convention
on the Use of Electronic Communications in International Contracts 2005’ (2010) 26 Journal of
Contract Law 184, 207.
2
Raymond T Nimmer, ‘The Legal Landscape of E-commerce: Redefining Contract Law in an
Information Era’ (2007) 23 Journal of Contract Law, 10.
3
Clive Turner and John Trone, Australian Commercial Law (Thomson Reuters, 29th ed, 2013) 54.
4
Ibid 46.
5
Ibid 52.
6
J W Carter, Cases and Materials on Contract Law in Australia (LexisNexis, 6th ed, 2011) 48.
1
2
Loren Thompson 16719558
person to whom the offer is being made.7 An offer may be withdrawn any time before
it is accepted by the offeree provided the offeror communicates the revocation to the
offeree,8 at the time of acceptance, the two parties were not ‘of one mind’ or ad idem.9
An offer can be rejected which can be express or implied through the actions of the
offeree, for example, a counter-offer 10 . If time of acceptance expiry is not issued
expressly, it can be presumed to end after a passing of a reasonable period of time,
determined by circumstances of the offer.11
The new legislation12 was implemented to decrease burden on the judiciary to apply
traditional common law to new emerging technologies, arising out of a growth in the
use of the Internet and other electronic devices. 13 The Act clarifies application of
those current principles with regard to electronic transactions, relieving the burden of
ambiguity and uncertainty.14
An example of this is s 14B15 which suggests that where a website provides goods for
sale, not addressed to an explicit party16 and is accessible to the ‘world at large’,17 it
will be considered an invitation to treat. This provision in the legislation has a basis in
current common law18 but has been expanded and adapted to take the ‘guess-work’
out of the application to modern technology such as a website, giving rise to the
7
Carlill v Carbolic Smoke Ball Co. [1893] 1 QB 256.
Dickinson v Dodds (1876) 2 Ch D 463.
9
Ibid [474].
10
Stevenson Jaques & Co v McLean (1880) 5 QBD 346 [350-1].
11
Clive Turner and John Trone, Australian Commercial Law (Thomson Reuters, 29th ed, 2013) 54.
12
Electronic Transactions Act 2000 (NSW) ss 5 -14E.
13
Jeannie Marie Paterson, ‘Consumer Contracting in the Age of the Digital Natives’ (2011) 27 Journal
of Contract Law 152.
14
Sharon Christensen, ‘Formation of Contracts by Email – Is it Just the Same as the Post?’, (2001) 1(1)
Queensland University of Technology Law and Justice Journal 22.
15
Electronic Transactions Act 2000 (NSW) s 14B.
16
Ibid s 14B(1)(a).
17
Ibid s14B(1)(b).
18
Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401.
8
3
Loren Thompson 16719558
argument that the legislation indeed provides more clarification and certainty to
electronic contracts.19
III Acceptance:
The agreement to receive or ‘accept’ the offer must not include any objections or
counter-offers, there must be complete agreement to the offer as a whole. 20 The
offeree must accept the offer prior to the offer ending, and can be accepted expressly
or through conduct (other than silence).21 The offeror may express terms under which
the offer may be accepted and if those terms are not complied with the offer has not
been accepted.22
The Postal Acceptance Rule 23 dictates the method of accepting an offer from a
distance, via a postal service, stating the acceptance will be given upon the post of the
acceptance.24
One of the issues debated by many legal scholars 25 is whether or not the Postal
Acceptance Rule should incorporate new instantaneous communication such as faxes
and emails. In the pioneering cases of Brinkibon Ltd v Stahag Stahl Stahl und
Stahlwarenhandelsgesellschaft mbH26 and Entores Ltd v Miles Far East Corp27 it was
established that the rule could expand to incorporate telexes and telegrams.
Sharon Christensen, ‘Formation of Contracts by Email – Is it Just the Same as the Post?’, (2001) 1(1)
Queensland University of Technology Law and Justice Journal 22.
20
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256.
21
Dickinson v Dodds (1876) 2 Ch D 463.
22
Ibid.
23
J W Carter, Cases and Materials on Contract Law in Australia (LexisNexis, 6th ed, 2011) 76.
24
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34.
25
Alan Davidson, ‘Accepting by Email and the ‘Postal Acceptance Rule’, (2006) 26(8) Proctor 37.
26
[1983] 2 AC 34.
27
[1955] 2 QB 327.
19
4
Loren Thompson 16719558
The concept of fax machines has provided a particular hurdle for the judiciary.28 The
confusion surrounding the Postal Acceptance Rule demonstrates that the legislation29
provides a practical application and clarification around which to base decisions
regarding electronic transactions30.
VI Intention:
‘Intention’ is the purpose of the parties to create legal relations.31 Current common
law principles provide presumptions that parties entering into commercial contracts
are presumed to have been entered into with the intention to create a legally binding
agreement, whilst parties entering into a social agreements are presumed to have not
intended to create a legally binding agreement.32
The new legislation does not address these presumptions, and the rules dictated by
common law are not much changed. However, it can be suggested that intention is far
more difficult to gage through electronic communications, and so should be addressed
by new legislation33.
28
Jalun Pool Supplies Pty Ltd v Onga Pty Ltd [1999] SASC 20.
Electronic Transactions Act 2000 (NSW) ss 5-14E.
30
R T Nimmer, ‘The Legal Landscape of E-commerce: Redefining Contract Law in an Information
Era’ (2007) 23 Journal of Contract Law 10.
31
Clive Turner and John Trone, Australian Commercial Law (Thomson Reuters, 29th ed, 2013) 62.
32
J W Carter, Cases and Materials on Contract Law in Australia (LexisNexis, 6th ed, 2011) 76.
33
Eliza Mik, ‘Updating the Electronic Transactions Act? – Australia’s Accession to the UN
Convention on the Use of Electronic Communications in International Contracts 2005’ (2010) 26
Journal of Contract Law 184, 207.
29
5
Loren Thompson 16719558
V Arguments for and against Legislation:
In her article34 Eliza Mik presents a compelling argument against the amendments to
the Electronic Transactions Act 2000 (The Act) as she believes current contract
principles are capable of absorbing technological change, and new legislation is a
superfluous separate paradigm for electronic contracting.35
Mik places particular emphasis on opposition of two recommendations made by the
Attorney General’s Department.36 Mik argues that traditional contract law principles
could provide for the use of automated message mechanisms without the legislation
needing to clarify validity. 37 At present, s14C of The Act 38 instructs that contracts
formed via automated message systems will not be considered invalid merely because
a natural person has not intervened. Mik makes a persuasive argument suggesting that
a natural person generates the automated message system, hence there is technically
still offer and acceptance from a natural person, negating the need to clarify this
through legislation39.
However, the lack of ability to interact with a natural person at the time of acceptance
of the offer provided means that the parties are not ‘of the same mind’, a crucial
element of ‘acceptance’ 40 . Mik 41 anticipates and counters this argument with the
proposition that it is not necessary that both parties be perfectly in sync, however it is
Eliza Mik, ‘Updating the Electronic Transactions Act? – Australia’s Accession to the UN
Convention on the Use of Electronic Communications in International Contracts 2005’ (2010) 26
Journal of Contract Law 184, 207.
35
Ibid.
36
Ibid.
37
Ibid.
38
Electronic Transactions Act 2000 (NSW) s 14C.
39
Brian Coote, ‘The Instantaneous Transmission of Acceptances’ (1972) 4 New Zealand Universities
Law Review 331.
40
Dickinson v Dodds (1876) 2 Ch D 463.
41
Eliza Mik, ‘Updating the Electronic Transactions Act? – Australia’s Accession to the UN
Convention on the Use of Electronic Communications in International Contracts 2005’ (2010) 26
Journal of Contract Law 184, 207.
34
6
Loren Thompson 16719558
arguable whether the lack of ability to negotiate terms of the offer before acceptance
with an automated message system is proof of being ad idem at all. Because the
offeree is not dealing with a natural person, clarification is required by The Act42
to determine whether an offer by an automated message system can be
considered a valid offer to form a legally binding relationship.
Another area of concern for Mik, is the provision of remedies for electronic mistakes
and ‘input errors’.43 Mik is in agreement with the practicality of this recommendation
and praises recognition of the rise in ‘input error’s when utilising electronic devices.44
However, Mik disagrees with a theoretical approach to the issue of electronic
mistakes and is unsupportive of the recommendation, and by extension s 14D(2)(b) of
The Act,45 that parties who have made an inadvertent input error whilst accepting an
online offer to contract have the right of withdrawal, provided there was no
opportunity to correct the error.46 A consumer who has genuinely selected the wrong
colour shirt whilst utilising a drop down menu, according to Mik 47 should not be
allowed to withdraw from the contract upon the basis of mistake. New legislation
allows protection for both the consumer and the vendor by providing additional
information to compliment current contracting principles.48
42
Electronic Transactions Act 2000 (NSW) ss 5 -14E.
Eliza Mik, ‘Updating the Electronic Transactions Act? – Australia’s Accession to the UN
Convention on the Use of Electronic Communications in International Contracts 2005’ (2010) 26
Journal of Contract Law 184, 207.
44
Ibid.
45
Electronic Transactions Act 2000 (NSW) s 14D(2)(b).
46
Ibid s 14D(2)(b).
47
Eliza Mik, ‘Updating the Electronic Transactions Act? – Australia’s Accession to the UN
Convention on the Use of Electronic Communications in International Contracts 2005’ (2010) 26
Journal of Contract Law 184, 207.
48
R T Nimmer, ‘The Legal Landscape of E-commerce: Redefining Contract Law in an Information
Era’ (2007) 23 Journal of Contract Law 10.
43
7
Loren Thompson 16719558
VI Looking to the future of contract law
With this new sense of anonymity behind the Internet, there is a much higher risk of
being exploited and a higher vulnerability with less course of remedy. The provisions
of the Electronic Transactions Act 2000 (NSW) 49 are mechanisms being put into
place on a more global scale to meet the need for progression in a technological era.
The current Act, for all its merits, is not perfect, and will not necessarily easily and
readily encompass all future electronic contractual issues, however its presence
bridges the gap between traditional contract law rules and sets out how they can be
applied in the new digital era.50
VII Conclusion
It is impracticable that courts should be expected to make common law decisions to
absorb technological change to traditional common law principles 51. Technology and
the internet are so vast, globally reaching and still so uncertain that it is unrealistic to
expect it to fall neatly into common law principles that were established before the
invention of the first computer. 52 As such, the introduction of The Act and its
amendments are a wise pre-emptive strike that is much more capable of absorbing
future technological change than traditional principles, providing more certainty and
protection for both consumers and vendors alike.
49
Electronic Transactions Act 2000 (NSW) ss 5 -14E.
Adam Reynolds, ‘E-auctions: Who Will Protect the Consumer?’ (2002) 18 Journal of Contract Law
75.
51
Ibid.
52
Simone WB Hill, ‘Email Contracts – When is the Contract Formed?’ (2001) 12(1) Journal of Law
Information and Science 46.
50
8
Loren Thompson 16719558
VIII Bibliography
A Articles/Books/Reports
Adam Reynolds, ‘E-auctions: Who Will Protect the Consumer?’ (2002) 18 Journal of
Contract Law 75.
Alan Davidson, ‘Accepting by Email and the ‘Postal Acceptance Rule’, (2006) 26(8)
Proctor 37.
Andrew Phang, ‘Contract Formation and Mistake in Cyberspace’, (2005) 21 Journal
of Contract Law 197.
Andrew Stewart, ‘What’s Wrong with the Australian Law of Contract?’, (2012) 29
Journal of Contract Law 74.
Brian Clarke, ‘Email Acceptance Rule’, (1997) 17(5) Proctor 13.
Brian Coote, ‘The Instantaneous Transmission of Acceptances’ (1972) 4 New Zealand
Universities Law Review 331.
Clive Turner and John Trone, Australian Commercial Law, Thomson Reuters, 29th
ed, 2013, 52-121.
Eliza Mik, ‘ ‘Updating’ the Electronic Transactions Act? – Australia’s Accession to
the UN Convention on the Use of Electronic Communications in International
Contracts 2005’ (2010) 26 Journal of Contract Law 184.
Eliza Mik, ‘The Effectiveness of Acceptances Communicated by Electronic Means,
or – Does the Postal Acceptance Rule Apply to Email?’ (2009) 26 Journal of
Contract Law 68.
9
Loren Thompson 16719558
H G Fryberg, ‘The Impact of Electronic Commerce on Litigation’, (2003) 24 Aust Bar
Rev 199.
Jeannie Marie Paterson, ‘Consumer Contracting in the Age of the Digital Natives’
(2011) 27 Journal of Contract Law 152.
Justin Hogan-Doran, ‘Jurisdiction in Cyberspace: The When and Where of On-line
Contracts’, (2003) 77(6) Australian Law Journal 377.
*J W Carter, Cases and Materials on Contract Law in Australia (LexisNexis, 6th ed,
2011) 76.
Lisa Smith, ‘Global Online Shopping: How Well Protected is the Australian
Consumer?’, (2004) 12 CCLJ 163.
Nicholas Sheridan and Mark Rigotti, ‘Contract Formation and Electronic Signatures
Under Electronic Transactions Act’, (2001) 12(1) Journal of Banking and Finance
Law and Practice 47.
Peter Bolam and Rachel Choi, ‘Electronic Signatures: When are they effective?’
(2012) 15(7) INTLB 118.
R T Nimmer, ‘The Legal Landscape of E-commerce: Redefining Contract Law in an
Information Era’ (2007) 23 Journal of Contract Law 10.
Robert Bond, ‘Black Holes in Cyberspace’, [1997] New Zealand Law Journal 25.
Sharon Christensen, ‘Formation of Contracts by Email – Is it Just the Same as the
Post?’, (2001) 1(1) Queensland University of Technology Law and Justice Journal 22.
Simone WB Hill, ‘Email Contracts – When is the Contract Formed?’ (2001) 12(1)
Journal of Law Information and Science 46.
10
Loren Thompson 16719558
Simone WB Hill, ‘Flogging A Dead Horse – Postal Acceptance Rule and Email’,
(2001) 17 Journal of Contract Law 151.
B Cases
Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC
34.
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256.
* Dickinson v Dodds (1876) 2 Ch D 463.
Dolphin Quay Pty Ltd v Symbol Nominees Pty Ltd [2012] WASC 413.
Entores Ltd v Miles Far East Corp [1955] 2 QB 327.
Jalun Pool Supplies Pty Ltd v Onga Pty Ltd [1999] SASC 20.
Leach Nominees Pty Ltd v Walter Wright Pty Ltd (1986) 85 FLR 427 at 434.
Metlife Insurance Ltd v Visy Board Pty Ltd [2007] NSWSC 1415.
* Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd
[1953] 1 QB 401.
* R v Clarke (1927) 40 CLR 227.
Schib Packaging Srl v Emrich Industries Pty Ltd (2005) 12 VR 268.
* Stevenson Jaques & Co v McLean (1880) 5 QBD 346 [350-1].
11
Loren Thompson 16719558
C Legislative Materials
Electronic Transactions Act 2000 (NSW) ss 5 -14E.
Electronic Transactions Amendment Bill 2010 (NSW).
Explanatory Memorandum, Electronic Transactions Amendment Bill 2010 (NSW).
12