Contracts in the electronic age
It would be difficult to miss the fact that technology has changed the way we do business. But while purchasing goods and service online might have become commonplace, there have been some grey areas in the law surrounding electronic transactions, particularly in relation to whether a contract is binding, and proof of identity.
With the aim of making the rules a little clearer, the Electronic Transactions Act has been amended. The changes commenced in NSW in October 2010, with other states and territories to follow.
Many purchases nowadays are automated; handled by a computer program built into a website, not by an actual person. This has brought about the need for a new definition in the Act. Contracts may now be made via “automated message systems”, meaning electronic transactions that don’t have a person at one or both ends. Despite the absence of a person in the exchange, it’s still a valid contract.
The notion of “offer” and “acceptance” for a contract to be binding had become a little muddied in the online arena. For example, if a company advertised goods on a website, was this an offer that they could not retract without getting into legal trouble? The Act now says that offers of goods and services made on the internet or other networks are not considered to be binding offers, but instead, invitations for customers to make an offer. If they do, and the vendor accepts, then it becomes a binding contract.
Another change relates to the time and place of transactions. The place of dispatch of an electronic communication is generally taken to mean the sender’s place of business, and the place of receipt is the addressee’s place of business, regardless of where the information system is located. The time of dispatch is when an electronic communication leaves an information system, and the time of receipt is when the addressee can retrieve it. This may clear up any confusion about the precise time an offer has been accepted, given the potential for emails to be lost, or communications blocked by firewalls.
Because people entering into electronic transactions may occasionally make errors, such as typing in the wrong item, the Act now gives them better protection. In certain circumstances, they can withdraw the part of the transaction with the error, as long as they notify the other party ASAP.
And the rules in relation to electronic signatures have changed. Until now, many contracts have needed a signature on paper. Now, when there is a signature requirement, this may be met with an electronic signature, as long as a reliable method is used to identify a party and show their intention regarding the information in the electronic communication.
No doubt the law will have to keep playing catch-up with ever-changing technology.
For more information please see our 2023 article Electronic signature needs to be seen when signing.