Electronic and Mobile Commerce Law

An Analysis of Trade, Finance, Media and Cybercrime in the Digital Age

Charles Wild, Stuart Weinstein, Neil MacEwan, Neal Geach

• Publisher: University Of Hertfordshire Press
• Year: 2011
• ISBN:
  9781907396205
• Edition: 1
• Topic: Law
• Subtopic: Law Theory & Practice
• Index: Law

The rapid, commercially-driven evolution of the Internet has raised concomitant legal concerns that have required responses from both national and international law. This unique text offers a complete analysis of electronic and mobile commerce, exploring the law relating to online contracts and payment systems, electronic marketing, and various forms of cybercrime as well as the regulation of electronic communications networks and services. Written by specialists, this account also provides insights into emerging areas such as internet libel, online gambling, virtual property, cloud computing, smart cards, electronic cash, and the growing use of mobile phones to perform tasks previously carried out by computers.

Section 1:
Electronic Commerce

Chapter 1: Contractual Aspects of Electronic Commerce

If someone wishes to enter into a contract over the Internet, the immediate question they will ask is whether such an agreement reached ‘online’ is enforceable. To look to the answer to this question, we must examine the well-established legal principles which apply to traditional written contracts. Under such traditional principles, a contract entered into online will be enforceable if the two (or more) parties entering into the contract mutually assent to its terms and the contract itself must be supported by some consideration. We will also examine how European law and its implementation within the UK have over the past decade and a half changed the nature of selling online to consumers. We shall briefly touch on jurisdiction aspects of the Internet to the extent they relate to selling to consumers online. Finally, we will examine the current status of taxation of Internet sales in the US and UK.

Contractual aspects of Electronic Commerce

E-commerce is generally about the making of contracts using the Internet. It does not form any special branch of English law and is to be dealt with by normal rules of the law of contract.¹ Some academics and practitioners have questioned whether English law as it stands is capable of coping with this new phenomenon because of the special attributes of online contracting. Online contracts are no different to paper contracts, what is unique is the contracting process.

Contracts are formed in the world of the Internet as easily as they are off-line. Under English law for a contract to be valid several conditions must be satisfied:

• offer

• acceptance

• consideration

• intention to create legal relations.

These conditions apply whether the contract is an ‘e-contract’² or a straightforward online contract.

In the e-contract scenario, often it is the case that the parties do not meet and use distance-selling methods to enter into an agreement. This may not be so unique. After all, this happens frequently in the world of non-e-commerce contracts as well. Similarly, in the case of a contract enabling Electronic Commerce, for instance, a contract for the creation of a website, the contract may be formed by the parties meeting one another or not. The e-contract will relate to the object of the contract rather than its form. For example, a hosting contract enabling a website to be hosted by a professional and made available for customers to access over the Internet.

Offer

An offer is the clear indication of the party to be bound by the terms of the offer. This can be communicated in a number of ways, including by electronic communications. An invitation to treat offers is not intended to be legally binding but unfortunately might be construed by the customer as such. Hence, the cyber-trader will need to ensure that his or her online communications are set out and framed in such a way so as not to cause uncertainty. He or she must also ensure that the communications are not construed as unilateral offers: Carlill v. Carbolic Smoke Ball Co [1893] 1 QB 256.

It is necessary to distinguish an offer from what the law classifies as an invitation to treat. The intention of the parties is important. The law has laid down various general rules covering standard commercial situations such as display of goods in a shop - Fisher v. Bell [1961] 1 QB 394, Pharmaceutical Society of G.B. v. Boots [1953] 1 QB 401 and advertisements of goods and services for sale - Partridge v. Crittenden [1968] 2 All ER 421. It is not yet settled how these general rules, which can be excluded by the contrary intention of the parties, will apply to common e-contract situations.

Consider for instance, the Argos case:

A telly for under a fiver? You’d have to be either insane or just back from the updated Argos website, where a Sony TV was on sale for a mere £3.00. The price has now been changed, but the company says it has received a number of multiple orders from online customers. Argos has just updated its site for the autumn season. Over 500 new products - including the bargain TV - were added to the site yesterday. The official line is that there was a ‘transcription error’ somewhere between Argos and the company that maintains its website. However, the exact source of the error has yet to be tracked down. Those who spotted the mistake and ordered the Sony television will be disappointed, as Argos has no plans to actually sell the TVs for £3.00. Until money has changed hands, Argos has no contract with its customers, and is under no obligation to fulfil the orders. Which is just as well, since the people who spotted the bargain, put in orders for ten or fifteen TVs. The television is now advertised at the correct price of £299.99. A spokeswoman for Argos commented: ‘We cannot fulfil the orders we have received -even as a gesture of goodwill. It would simply be too expensive.’ She was not sure how many orders had been received, but assured The Register that it was a significant number. Expect some disgruntled would-be buyers to sue. The courts maybe take a different view on consumer contracts than Argos.³

Withdrawing an offer

Generally, an offer can be withdrawn before a valid acceptance is made. However, a revocation must be received before it is effective. An offer can also be terminated by a counteroffer (see Hyde v. Wrench [1840] 3 Beav. 334). In Hyde, the defendant’s offer to sell his farm for £1,000 was in-effect rescinded by the claimant’s counter-offer at a lower price. Consider also the problem with battle of the forms (see Butler Machine Tool v. Ex-Cell-O Co [1979] 1 All ER 965). In Butler, the buyer accepted the offer of the seller but substituted its own terms and conditions for those furnished by the seller. Where the seller had accepted the differing terms, it was bound by such terms and not the original offer.

Acceptance

Acceptance is to be distinguished from a counter-offer, Hyde v. Wrench [1840] 3 Beav. 334. Commercial parties usually prefer to deal on their own ‘standard terms’. Where two business are negotiating with each other, each insisting that the contract be on its own set of terms this can result in the so-called ‘battle of the forms’, Butler Machine Tool Co v. Ex-Cell-O Co [1979] 1 All ER 965. If each side responds to the other by issuing its own standard terms this has the legal effect of making a counter-offer.

Communicating acceptance

Acceptance has to be communicated in order to be effective. Acceptance in online transactions has the potential to be extremely controversial. Usually the acceptance is communicated to a machine (the computer) or is made by a machine. This raises the question as to whether English law recognises a computer as a proper contracting party. In general, the law will attribute acts and omissions of a machine to the person who executes it. In Thornton v. Shoe Lane Parking [1971] 2 QB 163, the court had to consider the contractual implications in the use of an automated car park. Denning LJ (as he then was) held that the customer was committed at the very moment when he put his money into the machine:

The contract was thus concluded at that time. It can be translated into offer and acceptance in this way: the offer is made when the proprietor of the machine holds it out as being ready to receive the money. The acceptance takes place when the customer puts his money into the slot.⁴ The owner or person in control of the computer is bound by the legal communications made by the computer if such communications had been programmed into the computer by the owner or person in control. It would therefore appear that English law would treat a web server as a mere agent of the cyber-trader or cyber-consumer and can make contracts on their behalf provided the relevant communications were pre-programmed by the natural or legal persons concerned.

Query: Does the ‘browse-wrap’ licence work the same way as the parking lot machine in Thornton? With a browse-wrap agreement, there is no direct way of signalling assent. Any acceptance of the agreement, if it comes, must be read into the mere act of browsing the site.

Unless specifically stipulated, the method of acceptance can be made by any communication method that is reasonable. According to the Electronic Commerce Directive⁵ (as implemented by the Electronic Commerce (EC Directive) Regulations 2002)⁶ in the case of consumer contracts concluded over the Internet the service provider will need to specify clearly, comprehensibly and unambiguously and prior to the order being placed by the recipient of the service:

• the different technical steps to follow to conclude the contract;

• whether or not the concluded contract will be filed by the service provider and whether it will be accessible;

• the technical means for identifying and correcting input errors prior to the placing of the order; and

• the languages offered for the conclusion of the contract.⁷

Member States must ensure that the service provider indicates any relevant codes of conduct to which he or she subscribes and the information on how those codes can be consulted electronically.⁸ It is also incumbent on the trader to ensure that the terms displayed online can be downloaded and saved for reproduction by the customer.⁹ It should be noted that these provisions do not apply where the contract is made exclusively by the exchange of emails or equivalent individual communications.¹⁰ They only apply to contracts made over the Internet (usually by a ‘click-wrap’ method). A click-wrap agreement is one whereby a customer enters into a binding contract by agreeing online via the click of a mouse to be bound by the terms of the contract.¹¹ The term comes from the ‘shrink-wrap’ licences found in boxes containing software - in essence, once you have removed the shrink-wrap, you are considered to have accepted the terms of the licence contained in the box unless you manifest refusal to be bound by such terms by returning the software to the seller.

For guidance on how to interpret ‘click-wrap’ licenses in England and Wales, we must look to the United States (‘US’) for guidance because like so many other things this concept originated there. First, we have the controversial Uniform Computer Information Transactions Act (‘UCITA’), a draft law prepared and recommended for enactment by the National Conference of Commissioners on Uniform State Law at its 1999 Annual Conference.¹² Of course the US has 50 states and each state has to adopt its own law in areas that are not controlled by federal law. Generally, contract law is one of those areas that is reserved for the state legislatures. UCITA attempts to bring a level of certainty to information technology transactions that the Uniform Commercial Code¹³ did for the sale of goods. UCITA has had a ‘rocky’ reception to say the least. In fact, it has only been passed in Virginia and Maryland. Efforts to pass the law in other states have been defeated or met with anti-UCITA legislation, e.g., Iowa and Vermont. Given that UCITA is not the success its drafters had hoped, it is largely seen today as a tool for ac...