Electronic contracts : principles from common law [Second edition.] 9780409340754, 0409340758

Citation preview

Electronic Contracts Second Edition Simon Blount BA (Hons), LLB, PhD (UNSW)

Barrister at Law Adjunct Lecturer in Law University of New South Wales

LexisNexis Butterworths Australia 2015

In memory of Samar Ataya

AUSTRALIA

ARGENTINA AUSTRIA BRAZIL CANADA CHILE CHINA CZECH REPUBLIC FRANCE GERMANY HONG KONG HUNGARY INDIA ITALY JAPAN KOREA MALAYSIA NEW ZEALAND POLAND SINGAPORE SOUTH AFRICA SWITZERLAND TAIWAN UNITED KINGDOM USA

LexisNexis LexisNexis Butterworths 475–495 Victoria Avenue, Chatswood NSW 2067 On the internet at: www.lexisnexis.com.au LexisNexis Argentina, BUENOS AIRES LexisNexis Verlag ARD Orac GmbH & Co KG, VIENNA LexisNexis Latin America, SAO PAULO LexisNexis Canada, Markham, ONTARIO LexisNexis Chile, SANTIAG LexisNexis China, BEIJING, SHANGHAI Nakladatelství Orac sro, PRAGUE LexisNexis SA, PARIS LexisNexis Germany, FRANKFURT LexisNexis Hong Kong, HONG KONG HVG-Orac, BUDAPEST LexisNexis, NEW DELHI Dott A Giuffrè Editore SpA, MILAN LexisNexis Japan KK, TOKYO LexisNexis, SEOUL LexisNexis Malaysia Sdn Bhd, PETALING JAYA, SELANGOR LexisNexis, WELLINGTON Wydawnictwo Prawnicze LexisNexis, WARSAW LexisNexis, SINGAPORE LexisNexis Butterworths, DURBAN Staempfli Verlag AG, BERNE LexisNexis, TAIWAN LexisNexis UK, LONDON, EDINBURGH LexisNexis Group, New York, NEW YORK LexisNexis, Miamisburg, OHIO

National Library of Australia Cataloguing-in-Publication entry

Author: Title: ISBN: Notes: Subjects: Dewey Number:

Blount, Simon. Electronic Contracts. 9780409340747 (pbk). 9780409340754 (ebk). Includes index. Electronic Contracts. 346.022.

© 2015 Reed International Books Australia Pty Limited trading as LexisNexis. This book is copyright. Except as permitted under the Copyright Act 1968 (Cth), no part of this publication may be reproduced by any process, electronic or otherwise, without the specific written permission of the copyright owner. Neither may information be stored electronically in any form whatsoever without such permission. Inquiries should be addressed to the publishers. Typeset in Myriad Pro and Minion Pro. Printed in Australia Visit LexisNexis Butterworths at www.lexisnexis.com.au

Foreword to First Edition This book is like an acorn. It is well-structured, compact and bound, in years to come, to grow in further editions. Dr Simon Blount has investigated the emerging body of case law which electronic or internet commercial transactions have spawned over the last decade or so. His idea of collecting and systematising the common law cases on contracts in the new context of electronic dealing is timely. In the last 15 years, the internet and computer communication have transformed not only our commercial, but also our social, relationships. I can enter a contract over the internet with the hotel I want to stay at when I travel interstate or overseas. And, as we have recently learned, I can also defame someone in every jurisdiction where what I have written about him or her can be viewed online: Dow Jones & Company Inc v Gutnick (2002) 210 CLR 575. By clicking on an ‘I agree’ box or icon, a person can enter into a legally binding contract on the internet. But what if you are clumsy and accidentally hit the button? Worse, what if you are not particularly computer savvy and do not know how to send a recall message? Some of these issues are considered by the author in Chapter 4; others will be left to the courts to work out a solution. Forty years ago, potential litigants did battle with automatic ticket issuing machines when entering carparks. Could you make a contract with those machines? In Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163, the contract was made by the customer taking the ticket before he or she could know of an exemption clause on the back. Lord Denning MR described the machine as ‘a booking clerk in disguise’. He said, graphically, that if the clause were to be part of the contract it needed to be drawn to the customer’s attention by being ‘… printed in red ink with a red hand pointing to it — or something equally startling’. Ordinary users of the internet today when asked to click on an ‘I agree’ box

or icon are often presented with a long and complex set of terms and conditions, either directly or by being offered a link to them. Generally, when you click or are about to click, no red hands or red ink pop up on the screen telling you about any onerous or unfortunate terms. Few people would ever read those terms. Will they nonetheless be bound because their click is a signature?: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165. Time will tell. Dr Blount’s scholarly analysis explains the new (at least to me) concepts of ‘clickwrap’, ‘browsewrap’ and ‘shrinkwrap’ contracts. He discusses these new mysteries and their nuances in Chapter 6. Perhaps these will become as commonplace in the common law categories of contract as the offer to the world at large which Mrs Carlill brought to life when she tried the overrated carbolic smoke ball and found that it did not, as promised, prevent her from catching influenza: Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256; see, too, the more prosaic Australian Woollen Mills Pty Ltd v The Commonwealth (1954) 92 CLR 424. Dr Blount’s initiative will make a valuable contribution to a fertile field which is now starting to be tilled. Steven Rares Chambers 30 September 2008

Foreword to Second Edition This second edition has updated Dr Simon Blount’s pithy and useful work on the major common law jurisdictions’ treatment of electronic contracts. Most contracts are made electronically in the commercial world today. Contracts of significant value, such as charterparties that were once made by telex, an earlier and now obsolete form of electronic technology, are now routinely made through email exchanges. Consumers buy a vast range of goods and services online, ranging from books and clothing to accommodation, airline and theatre tickets. It is now a commonplace to join, or renew subscriptions to, organisations or publications by the click of one’s inanimate mouse while looking at a computer screen. We even learn in Chapter 2 that you can enter into contracts to buy land using email. The author has collected an impressive range of authorities from around the common law world that have grappled with the integration of the workings of cyberspace into the law of contract. Just as with paper based contracting, we ordinarily do not read the fine print online when clicking the ‘I agree’ box to signify a perhaps false, but probably exasperated, assent to the screen’s request to acknowledge that we have read the offeror’s usually interminable and incomprehensible standard terms and conditions. This casualness or resignation can have somewhat significant consequences as the British online retailer, GameStation, showed in 2010 in an April Fools’ Day prank it played on purchasers. The retailer inserted two additional terms in the plethora of its other online terms and conditions. The first new term was: By placing an order via this Web site on the first day of the fourth month of the year 2010 Anno Domini, you agree to grant Us a non transferable option to claim, for now and for ever more, your immortal soul. Should We wish to exercise this option, you agree to surrender your immortal soul,

and any claim you may have on it, within 5 (five) working days of receiving written notification from gamestation.co.uk or one of its duly authorised minions.

GameStation also added the following additional term: We reserve the right to serve such notice in 6 (six) foot high letters of fire, however we can accept no liability for any loss or damage caused by such an act. If you a) do not believe you have an immortal soul, b) have already given it to another party, or c) do not wish to grant Us such a license, please click the link below to nullify this sub-clause and proceed with your transaction.

The shoppers were given a simple tick box option allowing them to opt out. Few of them did that even though, if they had, they would have received a £5 voucher. News reports suggested that GameStation had estimated that about 88% of people who contracted with it on that fateful day may have paid more than they realised that they bargained for. Luckily, GameStation cancelled those conditions and announced that it did not intend to enforce them after April Fools’ Day 2010. The author has also added a new Chapter 10 discussing the efforts made and difficulties encountered by those seeking international harmony for electronic dealings in an ever-changing technological landscape. In this new edition, Dr Blount continues his scholarly and very valuable contribution to this emerging area of the law. The significance of a text like this, that synthesises the law and categorises issues that arise in an area vital to our daily lives, cannot be understated. Moreover, as I noted in the foreword to the first edition, Dr Blount has collected cases from many common law jurisdictions and contextualised them through his analysis in this informative and skilled text. Our law is the richer for it. Steven Rares Chambers 30 June 2015

Preface to First Edition … the world’s contracted thus …1 Four hundred years after John Donne, poet and lawyer, wrote these words, the world has now truly contracted. Electronic communications enable contracts to be made over vast distances at the click of a virtual button. This book is about how the common law world has contracted by electronic means. My primary source materials are the decisions of the courts in electronic contract cases in the United States, Canada, the United Kingdom and Australia. I am grateful for the research assistance I received from Nina Bliesner, Johanna Mayr, Tim Schaper and Samar Ataya in the early stages of writing. I also thank Jennifer Nott of the New South Wales Bar Library for her help in locating hard-to-find decisions and articles. I record my thanks also to the Faculty of Law of the University of New South Wales for financial assistance to defray the costs of research. In the later stages of writing, I became particularly indebted to Franco Corsaro SC, and to Robert Lovas and Jeanette Richards, barristers, who generously gave of their time to read drafts of this book. Their comments and suggestions have been invaluable. Any errors that remain are entirely my own. I thank Joanne Beckett of LexisNexis Australia for believing in this project and assisting me to see it through to publication, Marley Zelinka for her efficient coordination of the manuscript, and Nicola Tomlin for her meticulous preparation of the final draft. My thanks also to the Honourable Justice Steven Rares for finding time in his busy schedule as a Judge of the Federal Court to contribute a foreword to this book.

Most of all, I would like to thank Hannah and Daniel, who didn’t get much of a summer holiday this year while I was researching, and my wife Judy who has supported my writing with patience and grace. This book is for them. Simon Blount State Chambers 10 October 2008

1.

John Donne, The Sun Rising.

Preface to Second Edition In the six years between editions, electronic contracting has become commonplace. As consumers and businesses have become more familiar with the electronic transactions they enter into, so too have the judges who must decide the inevitable disputes. Contracts entered into wholly by email no longer rate even a comment from courts called on to consider not the form, but the substance, of the transactions. Courts routinely uphold clickwrap contracts as signed electronic agreements. Courts also increasingly uphold browsewrap contracts on the basis that users of the internet are sophisticated enough to be on notice of terms given by functional and clearly visible hyperlinks. Nevertheless, as courts are becoming more accepting of electronic contracts, they are asking more sophisticated questions. How is a click assenting to a hyperlink to be construed? Is a text message capable of accepting an offer by email? What effect does the appearance of an online contract have on its content? What are the limits of legislation validating electronic signatures? These questions have led to significant developments in the law of electronic contracts since the first edition. In the United States, an emerging new category of ‘modified clickwrap contracts’ has been recognised. An important decision in South Africa validated an acceptance by text message of an offer by email. A court in Ireland upheld a browsewrap contract, a court in New Zealand held that a fax header was not a signature under the Statute of Frauds, and the High Court of Australia affirmed that internet service providers are not liable for misleading and deceptive content posted by third parties. This second edition is more ambitious than the first. The first edition sought to give an account of the common law of electronic contract in Australia, referring to common law decisions from outside the jurisdiction,

particularly in the United States. However, new and important decisions in Canada, New Zealand, South Africa, Singapore, Ireland and elsewhere, provide the basis for an account of the common law of electronic contracts applying to all common law jurisdictions. I thank Hadeel Al-Alosi for undertaking the burden of research. Her legal and technical skills have contributed to this second edition being better than it might otherwise have been. Jennifer Burrows of LexisNexis has been an encouraging, thoughtful and efficient commissioning editor and Philippa Findlay has helped me to be a better writer. I again record my thanks to the Honourable Justice Steven Rares for his continuing support in writing another foreword. I assure Hannah and Daniel that the book is now finished. Most importantly, I thank my wife, Judy. Without her, I would not be able to lead the life in the law that I currently enjoy. This second edition is for Judy. Simon Blount State Chambers 1 July 2015

Table of Cases References are to paragraphs 731 Airport Associates v H & M Realty Associates LLC (2002) …. 2.8 2001 Trinity Fund LLC v Carrizo Oil & Gas Inc (2012) …. 2.14, 3.19

A Abrahams v Biggs [2011] …. 9.3 Abramson v America Online Inc (2005) …. 7.5 Advent Systems Limited v Unisys Corporation (1991) …. 7.24 AET Inc Ltd v C5 Communications LLC 2007 …. 9.4 Affinity Internet Inc, d/b/a SkyNetWeb v Consolidated Credit Counselling Services Inc (2006) …. 7.20 Alliance Laundry Systems LLC v Thyssenkrupp Materials NA 2008 …. 2.26 America Online Inc v Booker (2001) …. 8.12 — v Pasieka (2004) …. 8.12, 8.14 — v The Superior Court of Alameda County and Mendoza (2001) …. 8.12 American Eyewear Inc v Peepers Sunglasses and Accessories Inc (2000) …. 3.8, 4.22 American Library Association v Pataki (1997) …. 1.1 Animax Films Pty Limited v Sim Logic Pty Limited [2011] …. 2.2 Anson (Lady Elizabeth) (t/a Party Planners) v Trump [1998] …. 4.10 Anterra Sunridge Power Centre Ltd v Calgary (City) [2014] …. 4.11, 10.8 Anthony v Yahoo! Inc (2006) …. 9.9 Apple Corps Limited v Apple Computer, Inc [2004] …. 4.2 Aral v Earthlink Inc (2005) …. 7.12, 8.13, 8.18

Arizona Retail Systems Inc v The Software Link (1993) …. 6.3, 6.4, 6.5 Austar Finance v Campbell (2007) …. 4.11 Australian Competition and Consumer Commission v Abel Rent-a-Car Pty Ltd [1999] …. 9.6 — v Chen (2003) …. 9.12, 9.14 — v Hughes (2002) …. 9.12 — v Jetplace Pty Limited [2010] …. 9.6 — v Sensaslim Australia Pty Limited (In Liquidation) (No 1) [2011] …. 9.12 — v Taxsmart Group Pty Limited [2014] …. 9.12 — v Worldplay Services Pty Ltd (2004) …. 9.12 AvePoint Inc v Power Tools Inc (2013) …. 9.1 AV v iParadigms LLC (2008) …. 7.16, 8.3

B Bagg v HighBeam Research Inc (2012) …. 9.3 Bancroft Commercial Inc v Goroff 2014 …. 9.10 Bank of New York v Silverberg (2011) …. 2.3 Barnett v Network Solutions Inc (2001) …. 1.11, 6.11, 7.2, 8.7 Barwick v Government Employee Co 2011 …. 2.21, 10.9 Bassano v Toft [2014] …. 2.16, 2.21, 10.8 Bazak International Corporation v Tarrant Apparel Group (2005) …. 2.13 Bellsouth Communications System, LLC v Thomas N West (2004) …. 8.18 Bell v Hollywood 2006 …. 7.2 Bergcraft and Hidden Valley Inc v eBay Inc and Dave & Jamie 2003 …. 5.5 Bernuth Lines Ltd v. High Seas Shipping Ltd [2006] …. 4.12 Beta Computers (Europe) Ltd v Adobe Systems (Europe) (1996) …. 6.8 Bhagwandas Goverdhanda Kedia v M/S Girdharilal Parsthottamdas (1966) …. 4.2

Block v eBay Inc 2012 …. 5.2, 5.3 BMMSoft Inc v White Oaks Technology Inc 2010 …. 7.5 Bols Distilleries BV (t/a Bols Royal Distilleries) v Superior Yacht Services Ltd [2006] …. 2.2 Bonck v White (2013) …. 2.21 Bonython v Commonwealth of Australia [1951] …. 4.16 Boon v Boon (2000) …. 2.12 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) …. 7.22, 7.25 Bragg v Linden Research Inc (2007) …. 4.21, 8.6, 9.14 Bray v F Hoffman-La Roche Ltd (2002) …. 9.11, 9.12 Briceno v Sprint Spectrum LP d/b/a Sprint PCS (2005) …. 8.15 Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] …. 4.4, 4.5, 4.7 Brower v Gateway 2000 Inc (1998) …. 6.6, 8.8, 8.16 Building Register Ltd v Weston [2014] …. 6.16 Bullock v HRB Tax Group Inc 2014 …. 7.2 Burcham v Expedia Inc 2009 …. 7.14 Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] …. 6.2, 6.4

C Cafeteria Operators LP, Re (2003) …. 2.3 Cairo Inc v Crossmedia Services Inc 2005 …. 7.19 Campbell v General Dynamics Government Systems Corporation (2005) …. 7.15 Canadian Real Estate Association v Sutton (Quebec) Real Estate Services Inc [2003] …. 6.20 Capitol Federal Savings Bank v Eastern Bank Corporation (2007) …. 4.22

Carnie v Esanda Finance Corporation Ltd (1995) …. 8.18 Carnival Cruise Lines v Shute (1991) …. 8.10, 8.13 Caspi v The Microsoft Network, LLC (1999) …. 6.11, 7.9, 7.14, 8.10 Central Illinois Light Company v Consolidation Coal Company (2002) …. 2.14 Centrebet Pty Ltd v Baasland (2012) …. 3.10 — v — [2013] …. 4.16 Century 21 Canada Limited Partnership v Rogers Communications Inc (2012) …. 3.3, 3.5, 6.20 Chambre Nationale Des Commissaires Priseurs v NART SAS [2001] …. 5.3 Chapman v Skype (2013) …. 9.5 Chatlos Systems v National Cash Register Corp (1979) …. 7.24 Chwee Kim Keong v Digiland Mall.com Pte [2005] …. 1.12, 8.2 Clipper Maritime Ltd v Shirlstar Container Transport Ltd [1987] …. 2.5 Cloud Corporation v Hasbro Inc (2002) …. 2.13, 2.20 Clyburn v Allstate Insurance Company (1993) …. 2.2 CNH Capital Canada Limited v Diamond 4 Holdings Ltd (2012) …. 5.2 Comb v PayPal Inc (2002) …. 1.12, 3.20, 8.6, 8.8, 8.15, 8.17, 8.18 Commercial Bank of Australia Ltd v Amadio (1983) …. 8.4 CompuServe Inc v Patterson (1996) …. 4.20 Cowan v O’Connor (1888) …. 4.3 Cox v Coughlan [2014] …. 2.9 Crabb v GoDaddy.com Inc 2011 …. 7.20 Crestwood Shops, LLC v Hilkene (2006) …. 2.10 CSX Transportation Inc v Recovery Express Inc and d/b/a Interstate Demolition and Environmental Corp (2006) …. 7.6 Cutrone v Mortgage Electronic Registration Sys (2013) …. 2.3 CX Digital Media v Smoking Everywhere Inc 2011 …. 3.18

D Datec Electronic Holdings Ltd v United Parcels Service Ltd [2007] …. 7.4 David & Associates Inc v Internet Gateway (2004) …. 6.10, 6.21, 8.8 Davis v Dell Inc 2007 …. 8.18 Deepstar Marine Inc v Xylem Dewatering Solutions 2014 …. 9.3 Defontes v Dell Computers Corporation 2004 …. 3.20, 6.7, 7.11 DeJohn v The .TV Corporation International, Register.com Inc and Verisign Inc (2003) …. 6.13, 8.7 Dell Computer Corp v Union des Consommateurs and Olivier Dumoulin (2007) …. 1.4, 1.11, 7.12, 8.7, 8.21 DeVita v Maceys Inc (2007) …. 2.12 Diamond v Bank of London and Montreal [1979] …. 9.10 DiLorenzo v America Online Inc 1999 …. 8.11 Director General of Fair Trading v First National Bank plc [2000] …. 8.19 Dittman v Cerone 2013 …. 2.11 Dix v ICT Group Inc (2005) …. 8.12 Douez v Facebook Inc [2014] …. 7.10 Douglas v United States District Court for the Central District of California (2007) …. 3.10, 8.8 Dow Chemical Company v General Electric Company (2005) …. 2.14 Druyan v Jagger (2007) …. 6.17 Dunmore v Alexander (1830) …. 4.9 Durick v eBay Inc 2006 …. 6.13 Durrett v ACT Inc 2011 …. 6.13, 7.2 DWC Pain Free Medical PC v Progressive Northeastern Ins Co (2006) …. 2.21, 10.9 Dwyer v Canon Australia Pty Ltd (2007) …. 4.10, 4.11

E Eastern Power Ltd v Azienda Communale Energia and Ambiente (1999) …. 4.18, 4.19 eBay Inc v Bidder’s Edge Inc (2000) …. 5.3 eBay International AG v Creative Festival Entertainment Pty Limited (2006) …. 1.9, 3.21, 5.2, 6.21, 7.2, 7.20, 7.26 Egis Consulting Australia Pty Ltd v First Dynasty Mines Ltd [2001] …. 4.5 E K D bhnf Dawes v Facebook Inc (2012) …. 6.19 Entores Ltd v Miles Far East Corporation [1955] …. 4.4 Evans v Matlock 2002 …. 5.3 Ewart v eBay Inc 2012 …. 5.2 Express Airways v Port Augusta Air Services 1980 …. 4.3

F Fadal Machine Centres LLC v Compumachine Inc (2011) …. 7.20 Fair Housing Council of San Fernando Valley v Roommates.com LLC (2008) …. 9.9 Faulks v Cameron (2004) …. 2.21 Feldman v Google Inc (2007) …. 6.13, 7.9, 8.8 Firstpost Homes v Johnson [1995] …. 2.5 Forcelli v Gelco Corp (2013) …. 2.12 Forrest v Verizon Communications Inc (2002) …. 7.13, 7.14, 8.12 Fteja v Facebook (2012) …. 1.10, 6.15

G Gachot v Sanson [2009] …. 2.23 Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd (2010) …. 1.11, 7.25 Gator.Com Corp v L L Bean (2003) …. 3.8, 4.19, 4.21

Gatton v T-Mobile USA Inc (2007) …. 8.7 Gentry v eBay Inc (2002) …. 9.3, 9.9 George T Collings (Aust) Pty Ltd v HF Stevenson (Aust) Pty Ltd (1991) …. 8.4 Get Up Ltd v Electoral Commissioner (2010) …. 10.12 Ghaed v Telus Communications [2013] …. 7.5 Gibson v Manchester City Council [1978] …. 3.1, 6.2 Ginsburg v Dinicola 2007 …. 5.2 Girouard v Drouet [2012] …. 2.9 Godwin v Francis (1870) …. 2.5 Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd [2012] …. 2.24 Google Inc v Australian Competition and Consumer Commission (2013) …. 1.12, 9.8 Grace v eBay (2004) …. 5.3, 9.9 Groff v America Online 1998 …. 4.12, 6.11, 7.2 Grosvenor v Quest Communications Intern Inc (2012) …. 3.20, 6.14

H H & R Block IRS Form 8863 Litigation; in Re 2014 …. 3.20, 7.2, 8.7 Hancock v American Telephone and Telegraph Company (2012) …. 6.13, 7.10 Harold H Huggins Realty Inc v FNC Inc (2008) …. 1.4, 3.19, 7.10 Harris v Blockbuster (2009) …. 3.20 Hendrickson v eBay Inc (2001) …. 5.3 Hessenthaler v Farzin (1989) …. 2.6, 2.16 Hickory Developments Pty Limited v Schiavello (Vic) Pty Ltd (2009) …. 4.11 Hill v Gateway 2000 Inc (1997) …. 6.6

Hines v Overstock (2009) …. 6.19 Hoffman v Supplements Togo Management (2011) …. 7.14 Hotmail Corp v Van Money Pie Inc 1998 …. 9.4 Howley v Whipple (1869) …. 2.5 Hubbert v Dell Corporation (2005) …. 1.4, 7.12, 7.16, 9.6 Hugger Mugger LLC v Netsuite Inc 2005 …. 7.5, 7.20 Hughes v McMenamon (2002) …. 8.10

I i.LAN Systems Inc v Netscout Service Level Corp (2002) …. 6.10 Intercity Group (NZ) Limited v Nakedbus Limited [2014] …. 9.6 International Casings Group Inc v Premium Standard Farms Inc (2005) …. 2.22 Islamic Council of South Australia Inc v Australian Federation of Islamic Councils Inc [2009] …. 2.2, 2.28 IVI Pty Ltd v Baycrown Pty Ltd [2005] …. 3.11

J Jafta v Ezemvelo KZN Wildlife [2008] …. 1.9, 3.12, 3.15, 3.21, 10.6 Jagex Limited v Impulse Software (2010) …. 4.21 Jallali v National Board of Oesteopathic Medical Examiners, Inc (2009) …. 6.13 Jerez v JD Closeouts LLC (2012) …. 7.14 Jetstar Airways Pty Ltd v Free [2008] …. 1.12, 8.18, 8.19 J Pereira Fernandes SA v Mehta [2006] …. 2.23, 2.25 Joan Balcom Sales Inc v Poirier [1991] …. 4.5 John Doe v Sexsearch.com (2007) …. 9.4

K

Kanitz v Rogers Cable Inc (2002) …. 3.10, 7.10, 7.12, 8.18, 8.21 Kavia Holdings Pty Limited v Suntrack Holdings Pty Ltd [2011] …. 2.20 Keenan v Aguiler (2012) …. 9.10 Klebanoff v Haberle (2008) …. 2.12 Klocek v Gateway Inc (2000) …. 6.7, 6.10, 6.21 Koch v America Online Inc (2000) …. 8.10, 8.14 Koresko v RealNetworks Inc (2003) …. 6.13 Kraft Real Estate Investments LLC v Homeway.com Inc 2012 …. 6.13, 8.8 Krause v Chippas 2007 …. 8.10

L La Forrest v Ford [2001] …. 3.15 Lachs v Fidelity & Casualty Company of New York (1954) …. 3.6, 3.7, 7.7, 10.16 Lamle v Mattel Inc (2005) …. 2.20 Larson v Rick Dees Ltd [2007] …. 7.21 Leach Nominees Pty Ltd v Walter Wright Pty Ltd (1985) …. 4.4, 4.7, 4.23 Legal Services Board v Forster (2010) …. 10.9 Leoppky v Meston (2008) …. 2.9 Liberty Syndicates at Lloyds v Walnut Advisory Corporation 2011 …. 7.14 Licitra v Gateway Inc (2001) …. 8.17 LICRA and UEJF v Yahoo! Inc 2000 …. 4.15 LJ Korbetis v Transgrain Shipping BV [2005] …. 4.5 Lim v dotTV Corp (2002) …. 3.18, 5.6 L’Oréal SA v eBay International AG [2009] …. 5.3 LTVN Holdings LLC v Odeh 2009 …. 6.22

M M A Mortenson Company Inc v Timberline Software Corporation (2000) ….

6.8, 6.10, 6.21, 7.18 McGuren v Simpson [2004] …. 2.20 Machulski v Hall (2002) …. 4.22 McNear v Petroleum Export Corporation (1929) …. 2.5 MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) …. 3.5, 3.10, 6.22 Magill v Expedia [2014] …. 9.2 Major v McAllister (2009) …. 7.14 Malone v Berry (2007) …. 4.22 Manasher v NECC Telecom 2007 …. 7.20 Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) …. 9.7 Mathew v Chiranjeev [2009] …. 2.11, 2.16, 2.23, 2.27 Mendelson-Zeller Co Inc v T & C Providores Pty Ltd [1981] …. 4.4, 4.16 Meridian Project Systems Inc v Hardin Construction Company LLC (2006) …. 6.1 Mink v AAAA Development LLC (1999) …. 3.8, 4.21 Molodysky v Vema Australia Pty Ltd (1989) …. 2.19 Moore v Microsoft Corporation (2002) …. 6.13 Moretti v Herz Corp 2014 …. 6.15 Mortgage Plus Inc v Docmagic Inc d/b/a Document Systems Inc 2004 …. 1.6, 6.15 Motise v America Online (2004) …. 7.14

N Naldi v Grunberg (2010) …. 2.11 National Auto Lenders Inc v SysLocate Inc (2010) …. 7.5 Net2Phone Inc v The Superior Court of Los Angeles County and Consumer Cause (2003) …. 7.11, 8.13

New Zealand Post v Leng (1998) …. 9.7 New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] …. 3.1, 6.2 Northland Airlines Ltd v Dennis Ferranti Meters Ltd (1970) …. 3.18 Novak d/b/a Pets Warehouse v Overture Services Inc (2004) …. 1.11, 7.10 Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] …. 4.9

O Oceanic Sun Line Special Shipping Co Inc v Fay (1988) …. 4.17 Oestreicher v Alienware Corporation (2007) …. 8.18 Olivaylle v Flottweg AG (No 4) (2009) …. 1.9, 4.6, 10.5 One Beacon Insurance Company v Crowley Maritime Services Inc (2011) …. 7.20 On Line Power Tech Inc v Squared D Company 2004 …. 2.21 Ontario College of Pharmacists v 1724665 Ontario Inc (Global Pharmacy Canada) [2013] …. 1.9, 3.10 O’Quin v Verizon Wireless (2003) …. 8.18 Original Blouse Co Ltd v Bruck Mills Ltd (1964) …. 9.10 Osseiran v International Finance Corp (2007) …. 3.19

P Pacific International Securities Inc v Drake Capital Securities (2000) …. 4.18, 4.21 PanAmerican Operating Inc v Maud Smith Estate (2013) …. 7.6 Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (No 2) (1993) …. 9.11 Parma Tile Mosaic and Marble Co v Short (1996) …. 1.9, 2.23, 2.24 Patchett v Swimming Pool and Allied Trades Association Limited [2010] …. 9.3 PDC Laboratories Inc v Hach 2009 …. 1.4, 7.16

Peekay Intermark Ltd v Australia and New Zealand Banking Group Limited [2006] …. 9.3 Person v Google Inc (2006) …. 8.7 Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] …. 3.9, 3.10 Pirie v Saunders (1961) …. 2.20 Pollstar v Gigmania Ltd (2000) …. 1.4, 6.17, 6.22, 7.11 Polyad Company v Indopco Inc 2007 …. 2.15 Powell v City of Newton (2010) …. 2.12 ProCD v Zeidenberg (1996) …. 1.10, 6.6, 6.7, 6.9, 6.17, 6.21 Progressive Casualty Insurance Company v Estate of Jose Juan Palomera-Ruiz and Giant Electric Corporation (2010) …. 2.3, 2.7 P R Transport Agency v Union of India 2006 …. 5.2 Prudential Insurance Company of America v Paul M Prusky and Steven G Prusky as Trustees of the MFI Associates, Ltd Profit Sharing Plan 2005 …. 2.10

R Ramsey v Vogler [2000] …. 9.11 REA Group Ltd v Real Estate 1 Ltd (2013) …. 9.7 RealNetworks Inc Privacy Litigation, Re 2000 …. 2.2, 8.18 Recursion Software Inc v Interactive Intelligence Inc (2006) …. 6.11 Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) …. 4.5, 4.16, 4.17 Regions Bank v Cabinet Works LLC (2012) …. 2.24 Register.com Inc v Verio Inc (2004) …. 1.14, 6.18, 7.19 Reliance Nat Indem Co v Pinnacle Cas Assur Corp (2001) …. 4.22 Rinaldi v Iomega Corp 1999 …. 6.6 RMC Publications Inc v Doulos PM Training 2007 …. 4.22

R (on application of Software Solutions Partners Limited) v Her Majesty’s Commissioners for Customs and Excise (QBD (Admin Ct)) [2007] …. 1.9, 3.7 Robet v Versus Brokerage Services Inc [2001] …. 7.17 Rosenfeld v Zerneck (2004) …. 2.8, 2.22 Rudder v Microsoft Corp (1999) …. 7.10 Rugby Football Union v Viagogo Ltd [2011] …. 5.2 Russells v McCardel [2014] …. 10.9 Ryanair Ltd v Billigfluege.de GMBH [2010] …. 6.20 Ryanair v Bravofly Ltd [2009] …. 6.21

S Salco Distributors LLC v Icode Inc 2006 …. 6.6 Sawyer v Mills (2009) …. 2.7 Sayeedi v Walser (2007) …. 4.22 Scarcella v America Online (2004), (2005) …. 7.3, 7.4, 9.4 Schelde Delta Shipping B V v Astarte Shipping Ltd (The ‘Pamela’) [1995] …. 4.10, 4.11 Scherrillo v Dunn & Bradstreet Inc (2010) …. 1.4, 7.9 Schnabel v Trilegiant Corporation (2012) …. 7.15 Scott v Bell Atlantic Corp (2001) …. 9.2 SEC v SG Ltd (2001) …. 9.14 SEKO Worldwide LLC v Four Soft Limited (2007) …. 3.3 Shattuck v Klotzbach (2001) …. 2.8, 2.22 Showtime Touring Group Pty Ltd v Mosely Touring Inc (2013) …. 9.12 Shroyer v New Cingular Wireless Services Inc (2007) …. 1.12, 8.5, 8.6, 8.7, 8.8 Siedle v National Association of Securities Dealers Inc (2002) …. 6.13 Singer v Adamson 2003, (2005) …. 1.8, 2.8, 2.28

Skilling v Zenith Insurance PLC [2013] …. 1.6, 9.3 S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] …. 1.9, 2.11, 2.23, 2.25, 2.26, 2.28, 2.29 SmartText Corporation v Interland and KFKI Systems Inc (2003) …. 3.16 Smythe v Thomas (2007) …. 1.9, 5.4, 5.5, 5.7, 6.21 SN4, LLC v Anchor Bank (2014) …. 2.24 Sotelo v DirectRevenue (2005) …. 6.7 Southwest Airlines Co v Boardfirst LLC 2007 …. 6.18, 6.19 Specht v Netscape Communications (2002) …. 1.11, 3.10, 6.12, 6.13, 6.17, 6.18, 7.3, 7.7, 7.8, 7.14 St Albans City and District Council v International Computers Ltd [1996] …. 1.11, 7.25 State of West Virginia (Ex rel U-Hauls Co) v Zakaib (2013) …. 7.20 Stenzel v Dell (2005) …. 3.20, 8.18 Step-Saver Data Systems Inc v Wyse Technology and the Software Link Inc (1991) …. 6.5, 6.8, 6.10 Steven v Fidelity and Casualty Company of New York (1962) …. 3.6, 3.7, 7.7, 10.16 Stevens v Publicis SA (2008) …. 2.22 Stomp Inc v NeatO LLC (1999) …. 1.10 Stuart v Hishon [2013] …. 2.20 Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Limited (No 2) [2012], [2013] …. 9.12 Swift v Zynga Game Network (2011) …. 1.6, 6.15 Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) …. 4.2, 4.17, 9.11

T Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) …. 4.4

Thornton v Shoe Lane Parking Ltd [1971] …. 3.7, 3.9, 3.10, 3.21, 6.21, 7.7 Ticketmaster Corp v Tickets.Com Inc 2003 …. 6.17 Tiffany (NJ) Inc v eBay Inc (2010) …. 9.5 Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] …. 7.24, 7.25 Toghiyani t/a First Class Refurbishing v Amerigas Propane Inc t/a Amerigas Partners (2002) …. 2.14 Treiber & Straub Inc v United Parcel Service Inc and UPS Capital Insurance Agency (2007) …. 7.2 Trimex International Fze Limited v Vedanta Aluminium Ltd (2010) …. 3.14 Trumpet Software Pty Ltd v Ozemail Pty Ltd (1996) …. 7.23 Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) …. 2.6

U United States v Miller (1995) …. 2.16 Universal Grading v eBay 2009 …. 8.8

V Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) …. 8.4 Vendor Advocacy Australia Pty Limited v Seitanidis [2013] …. 9.7 Vergara Hermosilla v Coca Cola 2011 …. 2.2, 3.18 Victor Chandler International v Customs and Excise Commissioners [2000] …. 2.2 Vista Developers Corp v VFP Realty LLC (2007) …. 2.8 V J Lively v Ijam Inc and Monarch Computer Systems Inc (2005) …. 3.8, 4.22, 6.7

W Waddle v Elrod (2012) …. 2.12 Waltons Stores Interstate Ltd v Maher (1988) …. 3.19

Ward v Brodie & Shore (2005) …. 9.11 Welsh v Gatchell [2009] …. 2.23, 2.24, 2.27 West Waters v Earthlink Inc and Onemain Inc (2003) …. 7.11 Westerndorf v Gateway 2000 …. 6.6 Wilkens v Iowa Insurance Commissioner (1990) …. 2.18 Williams v America Online Inc 2001 …. 3.13, 3.21, 8.14 Williamson v Bank of New York Mellon (2013) …. 2.12 Woodruff v Anastasia International Inc 2007 …. 8.10

Y Yahoo! Inc v LICRA (2001) …. 4.15 —v— (2004) …. 4.15 —v— (2005) …. 4.15 —v— (2006) …. 4.15

Z Zappos.com, Inc, in Re; Customer Data Security Breach Litigation (2012) …. 3.20, 6.19 Zhu v Merrill Lynch HSBC [2002] …. 7.17 Zippo Manufacturing Co v Zippo Dot Com Inc (1997) …. 3.8, 4.20, 4.21, 4.22, 4.23 Zurakov v Register.com Inc (2003) …. 9.6

Table of Statutes References are to paragraphs

Commonwealth Arbitration Act 1974 …. 8.15 Commonwealth Constitution s 51(v) …. 9.12 Competition and Consumer Act 2010 …. 9.12 Corporations Act 2001 …. 4.10, 4.11 Electronic Transactions Act 1999 s 4 …. 3.15 s 8 …. 3.15 s 10(1)(b) …. 10.12 s 14A(1) …. 4.13 s 14B(1) …. 4.3 s 14B(2)(c) …. 4.3 s 14B(2)(d) …. 4.3 s 14B(2)(e) …. 4.3 Federal Court of Australia Act 1976 …. 8.18 Trade Practices Act 1974 …. 4.24, 9.11, 9.12 s 5 …. 9.12 s 6 …. 9.12 s 45 …. 9.11 s 52 …. 9.6 s 65AAC(1) …. 9.12

Australian Capital Territory Imperial Acts (Substituted Provisions) Act 1986 Sch 2 Pt 11 4(1) …. 2.4 Sale of Goods (Vienna Convention) Act 1987 …. 6.4

New South Wales Conveyancing Act 1919 s 54A …. 2.4 Electronic Transactions Act 2000 …. 2.20, 10.8 s 30 …. 10.8 Fair Trading Act 1987 …. 9.11 Limitation Act 1969 …. 2.20 s 54 …. 2.20 Sale of Goods Act 1923 …. 7.24 Sale of Goods (Vienna Convention) Act 1986 …. 6.4

Northern Territory De Facto Relationships Act 1991 …. 2.21 s 45 …. 2.21 Electronic Transactions Act 2000 s 9 …. 2.21 Law of Property Act 2000 s 58 …. 2.4 s 62 …. 2.4 Sale of Goods (Vienna Convention) Act 1987 …. 6.4

Queensland Property Law Act 1974 s 56 …. 2.4

s 59 …. 2.4 Sale of Goods (Vienna Convention) Act 1986 …. 6.4

South Australia Law of Property Act 1936 s 26(1) …. 2.4 Sale of Goods (Vienna Convention) Act 1986 …. 6.4

Tasmania Conveyancing and Law of Property Act 1884 s 36 …. 2.4 Mercantile Law Act 1935 s 6 …. 2.4 Sale of Goods Act 1896 s 9 …. 2.4 Sale of Goods (Vienna Convention) Act 1987 …. 6.4

Victoria Building and Construction Industry Security of Payment Act 2002 …. 4.11 Electronic Transactions Act 2000 …. 10.16 s 9 …. 10.9 s 9(1) …. 10.9 s 9(1)(b) …. 10.9 s 9(1)(c) …. 10.10 Fair Trading Act 1999 Part 2B …. 8.19 Instruments Act 1958 s 126 …. 2.4 Legal Profession Act 2004 …. 20.9

Supreme Court Act 1987 …. 8.18 Sale of Goods (Vienna Convention) Act 1987 …. 6.4

Western Australia Electronic Transactions Act 2003 …. 2.9, 2.16 Sale of Goods Act 1895 s 4 …. 2.4 Statute of Frauds 1677 …. 2.9, 2.10 s 4 …. 2.4 s 17 …. 2.4 Sale of Goods (Vienna Convention) Act 1986 …. 6.4

Canada Civil Code of Quebec ss 1435–1437 …. 7.12, 8.7, 8.21 Personal Property Security Act RSBC 1996 …. 5.2 Privacy Act …. 7.10

International Commission on International Trade Law (UNICITRAL) …. 10.1, 10.3, 10.5, 10.6, 10.11 Convention on Contracts for the International Sale of Goods (Vienna Convention) …. 10.2, 10.3, 10.4 art 1 …. 10.3 art 2 …. 10.3 art 6 …. 10.3 art 11 …. 10.4 art 13 …. 10.2, 10.3, 10.4 art 19 …. 6.4

art 20 …. 10.4 Convention on the Use of Electronic Communications in International Contracts (CUECIC) …. 10.2, 10.13 art 8 …. 10.14, 10.15 art 9 …. 10.14, 10.15 art 10 …. 10.13 art 11 …. 10.13 art 12 …. 10.14 art 14 …. 10.14 Model Law on Electronic Commerce (MLEC) …. 10.2, 10.6, 10.8, 10.10, 10.15 art 1 …. 10.7 art 5 …. 10.7, 10.9 art 6 …. 10.7, 10.9 art 7 …. 10.7, 10.9, 10.10 art 10 …. 10.15 art 11 …. 10.7, 10.15 art 12 …. 10.15 art 14 …. 10.16 Model Law on Electronic Signatures (MLES) …. 10.2, 10.10 art 2 …. 10.11 art 6 …. 10.11 art 8 …. 10.11

New Zealand Electronic Transactions Act 2002 …. 2.9, 2.22 Property Law Act 2007 s 24 …. 2.9

Singapore Civil Law Act 1994 (CLA) s 6 …. 2.26 s 6(d) …. 2.11, 2.26 Electronic Transactions Act 1999 …. 2.26 s 4 …. 2.26 s 4(1)(d) …. 2.26 Interpretation Act 2002 …. 2.26 s 2 …. 2.26

South Africa Electronic Communications Transactions Act 2002 s 24 …. 3.12

United Kingdom Betting and Gaming Duties Act 1981 s 9(1)(b) …. 2.2 Consumer Credit Act 1974 …. 2.21 Electronic Communications Act 2000 s 7 …. 2.21 Law of Property (Miscellaneous Provisions) Act 1989 …. 2.4 Misrepresentation Act 1967 …. 9.1 Rules of Court O 65 r 5(2B) …. 4.10 Sale of Goods Act 1979 …. 7.25 Statute of Frauds 1677 …. 2.4 s 4 …. 2.4 s 17 …. 2.4

United States Federal 15 USC §7001(a)(1) …. 2.7 17 USC §204 …. 2.2 Communications Decency Act 1996 …. 9.4, 9.9 s 230 …. 9.9 Constitution …. 4.15 First Amendment …. 4.15 Electronic Signatures in Global and National Commerce Act …. 10.9 Electronic Signatures and Records Act …. 2.11 Federal Arbitration Act 1923 …. 2.2, 8.15 Global and National Commerce Act …. 2.20 Perishable Agricultural Commodities Act …. 2.3 Restatement (Second) of Contracts s 22(2) …. 3.1, 6.2 s 69(1)(a) …. 3.16 s 90(1) …. 3.19 s 211(3) …. 7.1 Uniform Commercial Code …. 1.10, 2.13, 2.14, 2.20, 2.22, 2.26, 5.1, 6.1, 6.2, 6.3, 6.4, 6.8, 6.10, 6.16, 6.20, 6.21, 7.24, 9.1 s 2–201 …. 2.4 s 2–202 …. 6.21 s 2–204 …. 3.1, 6.2, 6.5, 6.8, 6.10, 6.21, 1.10 s 2–204(2) …. 6.2 s 2–206 …. 6.3, 6.5, 6.6, 6.7, 6.8, 6.21, 1.10 s 2–206(1) …. 6.3 s 2–206(2) …. 6.3 s 2–206(3) …. 6.3

s 2–207 …. 3.18, 6.4, 6.5, 6.6, 6.7, 6.8, 6.10, 6.21, 1.10 s 2–207(2) …. 6.4 s 2–207(2)(b) …. 6.8, 6.21 s 2–207(3) …. 6.4 s 2–209 …. 6.4 s 2–302 …. 8.4 UCC see Uniform Commercial Code UETA see Uniform Electronic Transactions Act Uniform Electronic Commerce Act (UECA) …. 10.8 Pt 2, s 23 …. 10.8 Uniform Electronic Transactions Act …. 2.10, 2.26, 10.8 s 2 …. 2.22 California Uniform Commercial Code s 2-328 …. 5.6 Iowa Iowa Code s 515.52 …. 2.18 Massachusetts Massachusetts General Laws Ch 259 s 1 …. 2.4 New York Electronic Signatures and Records Act (ESRA) …. 10.9 South Carolina Civil Code 1976 …. 2.2

Washington Consumer Protection Act …. 8.12

Table of Contents Foreword to First Edition Foreword to Second Edition Detailed Table of Contents Preface to First Edition Preface to Second Edition Table of Cases Table of Statutes Chapter 1

Introduction

Chapter 2

The Requirement of Writing and the Statute of Frauds

Chapter 3

Offer and Acceptance

Chapter 4

The Postal Acceptance Rule, Time and Place of Receipt and Jurisdiction

Chapter 5

E-Auctions

Chapter 6

Shrinkwrap, Clickwrap and Browsewrap Agreements

Chapter 7

Incorporation of Terms

Chapter 8

Vitiating Factors

Chapter 9

Misrepresentation, Misleading and Deceptive Conduct and Jurisdiction

Chapter 10 International Conventions and Model Laws Index

Detailed Table of Contents Foreword to First Edition Foreword to Second Edition Table of Contents Preface to First Edition Preface to Second Edition Table of Cases Table of Statutes Chapter 1 Introduction Preliminary Overview Method Outline Formalities Formation Formation under the Uniform Commercial Code (US) Incorporation and implication Vitiating factors International Conventions and Model Laws Conclusion Chapter 2 The Requirement of Writing and the Statute of Frauds Introduction General Requirements The Statute of Frauds

Telegrams, mailgrams, telexes and faxes Email — sale of land Email — lease of land Email — option to purchase land Email — settlement agreements relating to land Email — contracts for sale of goods Signature Validity Validity under general requirements Validity under the Statute of Frauds Electronic Transactions Legislation and the Statute of Frauds Conclusion Chapter 3 Offer and Acceptance Introduction Offer Offer of standard form terms Offer by machine Offer by interactive webpage Revocation Acceptance An offer must be accepted by the offeree An acceptance must be communicated to the offeror Acceptance must be unequivocal Silence does not amount to acceptance An acceptance must be given within a reasonable time A counter-offer is not an acceptance Promissory Estoppel

Illusory Contracts Conclusion Chapter 4

The Postal Acceptance Rule, Time and Place of Receipt and Jurisdiction

Introduction The Receipt Rule The Postal Acceptance Rule Acceptance by telex Acceptance by fax Acceptance by email Recalling an Electronic Acceptance Time and Place of Receipt Time Place Electronic transactions legislation Jurisdiction Australia Canada United States Conclusion Chapter 5 E-Auctions Introduction Online Auction and Agency Online Auction With Reserve Online Auction Without Reserve Conclusion Chapter 6

Shrinkwrap, Clickwrap and Browsewrap Agreements

Introduction The Uniform Commercial Code Shrinkwrap Contracts The Seventh Circuit and ‘layered contracting’ ProCD v Zeidenberg distinguished Clickwrap Contracts CD-ROM clickwrap Online clickwrap contracts Modified clickwrap contracts Browsewrap Contracts Conclusion Chapter 7 Incorporation of Terms Introduction Signature Agency Notice Reasonably conspicuous notice by scrollbox Reasonably conspicuous notice by hyperlink Reasonably conspicuous notice of onerous terms Course of Dealings Incorporation by Reference Express and Implied Terms Implied Terms Terms implied for business efficacy Terms implied by law Conclusion Signature and notice

Express and implied terms Chapter 8 Vitiating Factors Introduction Mistake Duress Unconscionability Procedural Unconscionability Market alternatives Substantive Unconscionability Forum selection causes Arbitration clauses Waivers of class actions Legislating for Substantive Unconscionability Conclusion Chapter 9

Misrepresentation, Misleading and Deceptive Conduct and Jurisdiction

Introduction Representations Pre-contractual representations Misrepresentation inducing a contract Fraudulent misrepresentation Misleading and Deceptive Conduct Liability of Internet Service Providers Jurisdiction Misrepresentations Misleading and deceptive conduct Jurisdiction under legislation

Conclusion Chapter 10 International Conventions and Model Laws Introduction The Vienna Convention Model Law on Electronic Commerce Model Law on Electronic Signatures Convention on the Use of Electronic Communications in International Contracts Conclusion Index

[page 1]

Chapter 1 Introduction While new commerce on the Internet has exposed courts to many new situations it has not fundamentally changed the principles of contract: Register.com Inc v Verio Inc (2004) 356 F 3d 393

Preliminary 1.1 Electronic contracts are contracts made by telegram, telephone, telex, fax, email, text message and webpage. The categories of technology are not closed and may include contracts made by voice mail, twitter and the automated interaction of electronic agents. The characteristics that all these contracts have in common are that they are made remotely by electronic means. The means of electronic contracting that has most caught the popular imagination is the internet. In American Library Association v Pataki,1 Preska J suggested that the law deals with problems of the internet by analogy: The internet may well be the premier technological innovation of the present age. Judges and legislators faced with adapting existing legal standards to the novel environment of cyberspace struggle with terms and concepts that the average American five-year-old tosses about with breezy familiarity. Not surprisingly, much of the legal analysis of Internet-related issues has focused on seeking a familiar analogy for the unfamiliar.2

The common law deals with problems of electronic contracting by applying familiar principles to familiar problems, by applying familiar principles to unfamiliar problems, and, occasionally, by adapting familiar principles to unfamiliar problems. This book analyses the common law response to problems of contracting by electronic means in the last two

categories. It investigates the application of familiar principles to unfamiliar problems, such as whether an email is signed writing sufficient to satisfy the Statute of Frauds and whether sufficient notice of electronic terms is given by hyperlink, and the adaptation of familiar principles to unfamiliar problems, such as whether an e-auction can result in a binding contract for sale between bidder and vendor without the [page 2] agency of an auctioneer, and whether an implied term of fit for purpose can be read into a contract for the download of software at common law.

Overview 1.2 This book is the only text dealing comprehensively with the common law principles of electronic contracting. In particular, it is the only text that focuses primarily on an analysis of the decided case law, rather than legislation.3 In the analysis below, only principles of electronic contracting that have been judicially decided are discussed. The discussion focuses on issues of electronic contracting that are unique to electronic contracts, provides an account of the development of the common law of electronic contracts and provides a comprehensive body of recent case law suggesting the likely response of common law courts to problems in recognised categories of electronic contracting. 1.3 Other recent publications dealing with electronic contracts are standard contract texts (which include electronic contracts cases illustrating general principles of contract law),4 e-commerce texts (which include one or more chapters giving an overview of electronic contracts),5 and texts dealing with domestic,6 or international,7 electronic transactions legislation. The standard contract texts deal with a few of the most important electronic

contract cases in some detail.8 But many important cases are not examined, and the discussion of electronic contracts is, of necessity, not exhaustive.9 The texts specialising [page 3] in electronic transactions generally deal with the technical, policy and legislative aspects of the regulation of electronic transactions well. However, they do not consider, in detail, the body of case law that has developed in the United States, and to a lesser extent in Canada, Australia, the United Kingdom and New Zealand, dealing with problems of electronic contracts.10 Three recent exceptions to these generalisations are books by Gillies,11 Davidson,12 and Mason.13 Gillies’ detailed examination of the intricacies of European private international law is outside the scope of this book. But her analysis of United States case law on personal jurisdiction is both keen and accurate.14 Davidson has written an e-commerce text, but included an excellent chapter introducing shrinkwrap, clickwrap and browsewrap contracts and the foundation authorities on which they are based.15 Mason, already in his third edition, provides an exhaustive study of the law of electronic signatures, not restricted to just contractual signatures, from around the world. His account of the common law of signatures, from making a sign of the cross to imprinting names on telegrams and faxes is interesting and valuable.16 1.4 Four propositions are true for all electronic contracts. First, there is a significant difference between non-webpage electronic contracts made by telephone, fax, email and text message, and webpage electronic contracts. Second, following on from the first proposition, telephone, fax, email and text message contracts conform to established principles of contract because the common law has always accepted that simple contracts not requiring formality can be made orally and many electronic media do no more than

extend the distance over which oral communications are made. Webpage contracts do not conform so easily because the structure of the internet itself has affected how courts think about webpage contracts, and how courts adapt established principles of contract to them.17 Third, following on from the second proposition, the presentation of webpage contracts cannot be divorced from their legal construction. Webpages are instantaneously interactive. A click cannot be recalled and system redundancy may cause an inadvertent keystroke to perform the same function as the deliberate click of a mouse.18 Pop ups containing terms may be ignored by [page 4] users, or clicked on to be deleted because they are an annoyance19 in webpages already overloaded with links, movies and sounds distracting the user from terms.20 Variations in hardware, such as the difference in the display of a smart phone compared to a computer or the difference in computer screen sizes, may result in terms being cut off from view,21 and deep linking makes it possible for users, intentionally or unintentionally, to bypass terms.22 Even colour can be important. Decisions in the United States have turned on terms insufficiently notified in difficult-to-see grey text, or by inconspicuous blue hyperlinks.23 Fourth, electronic transactions legislation remains largely inert in the presence of electronic contracts. Although legislation in all the jurisdictions examined in this book validates contracts in electronic form, common law courts do not need the assistance of the legislation to give effect to electronic signatures and contracts. Further, the courts will not give effect to electronic signatures and contracts that fail to comply with other formal requirements simply because they are in electronic form validated by electronic transactions legislation.24

Method 1.5 The case law is drawn from the United States; Canada; Australia; New Zealand; the United Kingdom; Ireland; Singapore; India; and South Africa, because problems of common law electronic contracting are common to all common law jurisdictions. The discussion below is ordered according to the contractual principle in issue, rather than the jurisdictions in which the decisions were made. I have dealt with the challenge of relying on decisions from different jurisdictions by briefly stating, in the introduction to each chapter, the general principle under discussion and pointing out any significant difference of principle between jurisdictions. Generally, the differences are minor. American exceptionalism asserts itself in the fact that there are effectively 50 common law contract jurisdictions in the United States, with inevitable disagreements between them. However, the Restatement (Second) of Contracts is an authoritative, though not binding, consensus on the principles of common law contract that is accepted by courts throughout the United [page 5] States.25 The Restatement, as far as it applies to the principles under discussion in this book, is broadly consistent with principles familiar to common lawyers outside of the United States. 1.6 There are three limitations to the approach I have taken. First, although the benefits of including United States decisions in the discussion far outweigh the disadvantages, many of the decisions, even on appeal, are interlocutory in character. This means that even though an appellate court may appear to state a proposition in an authoritative fashion, on closer analysis it may be saying no more than that there is an arguable case for the proposition. Second, despite the common law focus, many of the United

States decisions rely on the Uniform Commercial Code (US) (‘UCC’), which modifies the common law. Third, because electronic contracting is an emerging area of the law, there are still relatively few appellate decisions binding their respective jurisdictions. I have attempted to deal with these limitations by, as far as possible, explaining the procedural and legislative circumstances of each case, and extrapolating the likely state of the law from the reasoning of superior courts of record26 deciding similar electronic contracting issues in similar ways.27 Ultimately, the reader must draw their own conclusions about the weight of the decisions.

Outline 1.7 The order of the chapters below is similar to the order in standard texts on contract law. However, because electronic contracts are usually made remotely, discussions of jurisdiction follow immediately on from discussions of the postal acceptance rule, and misrepresentation and misleading and deceptive conduct.

Formalities 1.8 There is no common law requirement for a simple contract to be in writing. However, the Statute of Frauds requires certain contracts to be in writing, or to be evidenced in writing. An electronic contract will not be unenforceable under the Statute of Frauds simply because of its electronic form. But, even if it is validated by electronic transactions legislation and contains essential elements of an agreement, it will be unenforceable if the nature of the communication indicates that the parties have not met across a virtual table to draw up an agreement, but have merely been speaking to one [page 6]

another with the assistance of the internet.28 Similarly, even if an electronic signature is validated by electronic transactions legislation, it will only satisfy the Statute of Frauds if it is made with an intention to authenticate content. An answerback automatically imprinted at the head of a fax communication, or an email address automatically inserted at the head of an email,29 is probably not sufficient to indicate intention to authenticate an electronic communication.

Formation 1.9 The display of a standard form agreement on an interactive website on a computer is an offer30 expressing a willingness to be bound to a clear statement of terms, capable of immediate acceptance without further negotiation. Acceptance of such an offer occurs on the last act, such as clicking on a virtual button, required to commit the offeree beyond recall.31 An offer by email is capable of acceptance by other electronic means, such as text message.32 In general, the postal acceptance rule is unlikely to apply to acceptances by email or text message as a matter of policy, although it may apply on a case-by-case basis where the circumstances warrant it.33 Electronic transactions legislation does not resolve whether or not the postal acceptance rule applies to acceptances by email or text message, but, once the question has been decided, solves what otherwise may be complex problems of jurisdiction. An electronic agreement may be made between a successful bidder and a vendor to an online auction without the agency of the online auctioneer.34

Formation under the Uniform Commercial Code (US) 1.10 ‘Wrap’ contracts are made under the UCC which allows courts in the United States to find assent to terms in circumstances where the common law might not. Shrinkwrap contracts are named for the clear plastic wrapping

enclosing late terms and conditions said to become effective on opening the wrapping. Section 2–207 of the UCC allows the addition of non-material terms, but where the offer and acceptance is not a ‘battle of the forms’ §2–207 may not apply, and §2–204, allowing for an agreement without identifying offer and acceptance, and §2–206, allowing for agreement in the absence of a timely rejection, may allow a court to find assent to the late terms. Most shrinkwrap [page 7] decisions turn on identifying whether a communication is an acceptance in different terms, or a true counter offer.35 Clickwrap contracts borrow their name from shrinkwrap contracts. They refer to the click of a mouse on a virtual button on an interactive webpage.36 Section 2–204 allows a court to construe the click of the mouse as conduct creating a contract in a manner sufficient to show agreement. Clickwrap contracts typically contain terms in a scroll box. However, more recently, modified clickwrap contracts have combined a click button with notice of terms by hyperlink.37 Clickwrap decisions turn on whether there are factors vitiating an electronically signed agreement. Browsewrap contracts are typically terms of website use notified by hyperlink. The user assents to the terms by using the site with actual or constructive knowledge that use is subject to terms. Section 2–206 allows a court to construe the user’s conduct as acceptance of the terms in a manner reasonable in the circumstances. Browsewrap decisions usually turn on the sufficiency of notice of terms by hyperlink.

Incorporation and implication 1.11 Terms are incorporated into an electronic contract where there is an unambiguous manifestation of assent, and reasonably conspicuous notice of

the terms.38 An electronic signature is capable of incorporating terms, whether the signatory has read them or not,39 if the terms are in reasonably sized text in a scroll box with a portion of the text immediately visible.40 Conduct using a website may incorporate terms of use if the user has actual notice of terms, or is put on constructive notice of terms by a hyperlink that is functional and clearly visible.41 A paper contract may incorporate by reference terms that are displayed online, and an online agreement may incorporate by reference further online terms. An agreement for the download of software from the internet may attract an implied term at common law that the software is reasonably fit for the intended purpose.42 [page 8]

Vitiating factors 1.12 An electronic contract may be set aside for unilateral mistake43 or for unconscionability. A standard form electronic contract may be procedurally unconscionable where its effect is that the party with superior bargaining power stands to cheat a large number of customers out of small sums of money,44 or if the weaker party had no reasonably available market alternative to entering into the contract.45 In the United States, individual terms such as forum selection, arbitration and class action waiver clauses may be substantively unconscionable where the likely damages for each of a large number of customers are likely to be small. Jurisdictions outside of the United States must rely on legislative intervention to set aside unfair terms.46 An electronic contract may be rescinded where the making of the contract was preceded by electronic misrepresentations, or for conduct such as burying important online terms in fine print, creating false online profiles, and creating misleading and deceptive sponsored links or domain names. However, the courts have been slow to find website operators liable for content provided by third parties as long as they play no role in its creation.47

International Conventions and Model Laws 1.13 The United Nations Commission on International Trade Law (UNCITRAL) has sought to provide certainty for international transactions by electronic means. Article 13 of the United Nations Convention on Contracts for the International Sale of Goods (Vienna Convention) expressly recognises that contracts by telegram or telex may be in writing for its purposes. It follows that contracts for the international sale of goods by modern means of electronic communication are also likely to be in writing under the Vienna Convention. Article 5 of the Model Law on Electronic Commerce (MLEC) provides the key proposition that an electronic communication is not invalid solely because it takes place wholly or partly by means of electronic communications,48 and the Model Law on Electronic Signatures (MLES) addresses the requirements for digital signatures using cryptography and other technologies. Finally, the Convention on the Use of Electronic Communications in International Contracts (CUECIC) expressly deals with problems of electronic contracting, although the problems may be more apparent than real. [page 9]

Conclusion 1.14 The United States Court of Appeals, Second Circuit, was undoubtedly correct when it said: ‘While new commerce on the Internet has exposed courts to many new situations it has not fundamentally changed the principles of contract.’49 But there are many examples of common law courts significantly adapting the principles of contract to accommodate virtual reality: an email or text message above a typed name or initial may be signed writing sufficient to satisfy the Statute of Frauds; an interactive display of goods on the internet

may be an offer, not an invitation to treat; a text message can reasonably accept an offer made by email; a bidder and a vendor to an electronic auction may enter into a binding contract, even though the auctioneer is not an agent; scrolling through electronic terms in a scroll box is equivalent to turning the pages of a multipage agreement; a hyperlink, depending on its visibility, is capable of putting a website user on constructive notice of the terms of use; and a contract for the download of software may carry an implied term at common law that the software is fit for purpose. In each example, a familiar solution has been adapted to meet an unfamiliar problem. It is the problems, rather than the solutions, that have continued to inspire this second edition.

1.

American Library Association v Pataki (1997) 969 F Supp 160.

2.

American Library Association v Pataki (1997) 969 F Supp 160 at 161.

3.

There have been a number of surveys of electronic contract cases decided in the United States. See, for instance, W L Reynolds and J M Moringiello, ‘Survey of the Law of Cyberspace: Electronic Contracting Cases 2007–2008’ (2008) Business Lawyer 64.

4.

L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008.

5.

C Brien and J Brien, Netlaw, LexisNexis Butterworths, Sydney, 2004; P Todd, E-commerce Law, Routledge Cavendish, London, 2005; Y F Lim, Cyberspace Law: Commentaries and Materials, 2nd ed, Oxford University Press, Melbourne, 2007; B Fitzgerald et al, Internet and E-commerce Law, Technology Law and Policy, Lawbook Co, Sydney, 2007; D I Bainbridge, Introduction to Information Technology Law, 6th ed, Pearson Longman, New York, 2007; J Forder and D Svantesson, Internet and E-commerce Law, Oxford University Press, Melbourne, 2008.

6.

D McBurnie and E Levinson, Contract: Sales of Goods Over the Internet, Lawbook Co, Sydney, 2001; B Dugan and B Dugan, Electronic Transactions: Electronic Transactions Act 2002, LexisNexis NZ Ltd, Wellington, 2004.

7.

C Reed, Internet Law: Text and Materials, Butterworths, London, 2000; L Brazell, Electronic Signatures Law and Regulation, Thomson/Sweet & Maxwell, London, 2004; C Coteanu, Cyber Consumer Law and Unfair Trading Practices, Ashgate, Burlington 2005; C Reed and J Angel (eds), Computer Law: The Law and Regulation of Information Technology, 6th ed, Oxford University Press, Oxford, 2007; G J H Smith (ed), Internet Law and Regulation, Sweet & Maxwell, London, 2007.

8.

See, for instance, the discussion of Chwee Kim Keong v Digiland Mall.com Pte [2005] 1 SLR 502 in N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis

Butterworths, Sydney, 2008 at [12.52]. 9.

See, for example, N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.5], [3.44]; L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005, at [3.555]–[3.579], [3.605].

10.

But see also B Fitzgerald et al, Internet and E-commerce Law, Technology Law and Policy, Lawbook Co, Sydney, 2007, which discusses shrinkwrap, clickwrap and browsewrap decisions; and G J H Smith (ed), Internet Law and Regulation, Sweet & Maxwell, London, 2007 which has a discussion of cases in the context of European Union laws and regulations.

11.

L E Gillies, Electronic Commerce and International Private Law, Ashgate, Hampshire, 2008.

12.

A Davidson, The Law of Electronic Commerce, Cambridge University Press, Melbourne 2009.

13.

S Mason, Electronic Signatures in Law, Cambridge University Press, 2012.

14.

L E Gillies, Electronic Commerce and International Private Law, Ashgate, Hampshire, 2008 at 161– 208.

15.

A Davidson, The Law of Electronic Commerce, Cambridge University Press, Melbourne, 2009 at 66–73.

16.

S Mason, Electronic Signatures in Law, Cambridge University Press, 2012 at 14–82.

17.

T Tasker and D Pakcyk, ‘Cyber-Surfing on the High Seas of Legalese: Law and Technology of Internet Agreements’ (2008) 18 Alb LJ Sci & Tech 79 at 81.

18.

Scherillo v Dunn & Bradstreet Inc (2010) 684 F Supp 2d 313.

19.

Harold H Huggins Realty Inc v FNC Inc (2008) 575 F Supp 2d 696 at 698.

20.

T Tasker and D Pakcyk, ‘Cyber-Surfing on the High Seas of Legalese: Law and Technology of Internet Agreements’ (2008) 18 Alb LJ Sci & Tech 79 at 106.

21.

T Tasker and D Pakcyk, ‘Cyber-Surfing on the High Seas of Legalese: Law and Technology of Internet Agreements’ (2008) 18 Alb LJ Sci & Tech 79 at 108.

22.

Dell Computer Corp v Union des Consommateurs and Olivier Dumoulin (2007) 284 DLR 4th 577.

23.

Pollstar v Gigmania Ltd (2000) 170 F Supp 2d 974; PDC Laboratories Inc v Hach 2009 US Dist LEXIS 75378 distinguishing Hubbert v Dell Corp (2005) 359 Ill App 3d 976.

24.

Davidson even questions the need for electronic transactions legislation for contracts: A Davidson, The Law of Electronic Commerce, Cambridge University Press, Melbourne, 2009 at 31.

25.

L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005, at [1.115], [1.120].

26.

The only three exceptions are a decision of a Federal Magistrate Judge in Mortgage Plus Inc v Docmagic Inc d/b/a Document Systems Inc 2004 US Dist LEXIS 20145 and Swift v Zynga Game Network (2011) 805 F Supp 2d 904 and a decision of a Sheriff in Skilling v Zenith Insurance PLC [2013] ScotSC 23.

27.

This approach is taken by T Tasker and D Pakcyk, ‘Cyber-Surfing on the High Seas of Legalese: Law and Technology of Internet Agreements’ (2008) 18 Alb LJ Sci & Tech 79 at 82, 84.

28.

Singer v Adamson 2003 WL 23641985; affirmed (2005) 837 NE 2d 313.

29.

Parma Tile Mosaic and Marble Co v Short (1996) 87 NY 2d 524; cf S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651.

30.

eBay International AG v Creative Festival Entertainment Pty Ltd (2006) 170 FCR 450; Ontario College of Pharmacists v 1724665 Ontario Inc (Global Pharmacy Canada) [2013] ONSC 4295.

31.

R (on application of Software Solutions Partners Limited) v Her Majesty’s Commissioners for Customs and Excise (QBD (Admin Ct)) [2007] EWHC 971.

32.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84.

33.

Olivaylle v Flottweg AG (No 4) (2009) 255 ALR 632.

34.

Smythe v Thomas (2007) 71 NSWLR 537.

35.

ProCD v Zeidenberg (1996) 86 F 3rd 1447 (7th Cir).

36.

Stomp Inc v NeatO LLC (1999) 61 F Supp 2d 1074 at 1080 n11. Typically, virtual buttons are worded ‘OK’, ‘I Agree’ or even ‘I Accept’.

37.

Fteja v Facebook (2012) 841 F Supp 2d 829.

38.

Specht v Netscape Communications (2002) 306 F 3d 17 (2nd Cir).

39.

Barnett v Network Solutions Inc (2001) 38 SW 3d 200.

40.

Novak d/b/a Pets Warehouse v Overture Services Inc (2004) 309 F Supp 2d 446.

41.

Dell Computer Corp v Union des Consommateurs and Olivier Dumoulin (2007) 284 DLR 4th 577.

42.

St Albans City & District Council v International Computers Limited [1996] 4 All ER 481; Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd (2010) 77 NSWLR 479.

43.

Chwee Kim Keong v Digiland Mall.com Pte [2005] 1 SLR 502.

44.

Shroyer v New Cingular Wireless Services Inc (2007) 498 F 3d 976 (9th Cir).

45.

Comb v Paypal Inc (2002) 218 F Supp 2d 1165.

46.

Jetstar Airways Pty Ltd v Free [2008] VSC 539.

47.

Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435.

48.

A Davidson, The Law of Electronic Commerce, Cambridge University Press, Melbourne, 2009 at 26.

49.

Register.com Inc v Verio Inc (2004) 356 F 3d 393 (2nd Cir) at 403.

[page 11]

Chapter 2 The Requirement of Writing and the Statute of Frauds This case offers challenges not typically encountered in jurisprudence. The first relates to the writing requirement set out in s 1(d) of the Statute of Frauds. We see no legal impediment to the proposition that emails so qualify: Girouard v Drouet [2012] NBJ No 136.

Introduction 2.1 There is no common law requirement for a simple contract to be in writing. Any requirement is a consequence of statutory modification. Until recently, courts have not had to consider whether electronic script is ‘writing’. In the case of individual statutory requirements, the courts will construe the statute to determine whether electronic writing is sufficient. In considering whether electronic writing is sufficient to satisfy the Statute of Frauds, courts are less concerned with the medium of the writing, be it by telex, fax or email, than with the content of the writing. This is despite the casualness and malleability of emails tending to undermine both the cautionary and evidentiary function of the requirement for writing.1 Lack of concern with the medium of the writing reflects the courts’ concern to prevent the statute from itself becoming an instrument of fraud by allowing parties to avoid their promises on the basis of a narrow interpretation of the statute that takes no account of the new communication technologies. However, if the content of the writing in a contract falling within the Statute of Frauds is insufficient, the contract will be unenforceable, despite electronic transactions legislation enabling a reliance on electronic writing.

The content of electronic communications may be insufficient if essential terms are omitted, or the casual nature of the communication suggests that parties are simply negotiating with the assistance of the internet. In the case of an exchange of [page 12] emails for the sale of land, it may be a point of fine distinction whether the emails are signed memoranda, or are simply electronic talking.

General Requirements 2.2 Courts have interpreted general statutory requirements for writing broadly enough to encompass electronic media. In Clyburn v Allstate Insurance Company,2 for instance, the plaintiff’s house was damaged by fire two years after he had ceased paying premiums to the defendant. The South Carolina Civil Code required that where a cancellation arose from nonpayment of premiums, the cancellation was not effective unless written notice of the cancellation was delivered to both the insured and the agent of record prior to the proposed effective date of cancellation. The defendant asserted it had delivered a computer disk to the insured’s agent. The court relied on previous procedural rulings in which courts had accepted tape recordings and videotapes as ‘writing’ to find that the computer disk could constitute written notice: In today’s paperless society of computer generated information, the court is not prepared, in the absence of some legislative provision or otherwise, to find that a computer floppy diskette would not constitute a ‘writing’ within the meaning of [the Code].3

Re RealNetworks Inc Privacy Litigation4 concerned not a floppy diskette, but a clickwrap agreement entered into over the internet. RealNetworks offered free basic versions of RealPlayer and RealJukebox, allowing users to

see and hear video and audio over the internet. Before a user could install either software package, they had to accept the terms of RealNetworks’ licence agreement, containing an arbitration clause, which appeared on the user’s screen. The users sued, alleging that the software allowed RealNetworks to access and intercept their electronic communications, and to store information without their knowledge or consent. On RealNetwork’s motion to stay the proceedings and enforce arbitration pursuant to the electronic agreement, the users, by way of an intervenor, argued that the Federal Arbitration Act (US) applied only to written contracts. The agreement was not written because it was in electronic form and could not be printed or saved. The District Court for the Northern District of Illinois found that the definition of ‘writing’ in the Act did not exclude representations of language on media other than paper. Because electronic communications could be letters or characters formed on the screen to record or communicate ideas, and could be visible signs or legible characters representing words and letters conveying meaning, the plain meaning of the word ‘written’ did not exclude electronic communications. [page 13] The Privy Council was also less concerned with the medium of the communication than with the content in Bols Distilleries BV (t/a Bols Royal Distilleries) v Superior Yacht Services Ltd.5 The appellant manufactured and distributed vodka. To promote the brand, it sponsored ocean-going yachts and had extensive negotiations about the structure of the sponsorship with the respondent which was the manager and operator of a yacht. The respondent proposed a choice of law and forum selection clause nominating Gibraltar. The appellant sent an email to the respondent, agreeing to some terms but rejecting others. The forum selection clause was never discussed and a formal agreement was never signed. The appellant purported to terminate the agreement and the respondent issued proceedings in Gibraltar.

The appellant argued that the Gibraltar courts had no jurisdiction pursuant to European Union legislation which required an agreed forum selection clause to be in writing, or evidenced in writing. On appeal, the Privy Council had relatively little difficulty in finding the statutory requirements for writing were fulfilled by electronic means, but found that the respondent had not demonstrated, to the requisite standard, that the email sent by the appellant constituted a contract. On the contrary, the email itself showed that relevant parts of the agreement had yet to be discussed between the parties.6 In Vergara Hermosilla v Coca Cola,7 an email in response to a phone call was found to be signed writing sufficient to satisfy the assignment of a copyright interest under 17 USC §204. And in Islamic Council of South Australia Inc v Australian Federation of Islamic Councils Inc,8 the constitution of the Australian Federation of Islamic Councils Inc provided for a Federal Council meeting on the written request of four or more State Councils. Brereton J held that an email from the Victorian State Council was a written request: … the concept of ‘writing’ is concerned with the form in which words are used, and not the surface on which they are written. The fundamental distinction is between the written word and the spoken word. While ‘writing’ often contemplates writing on paper, it is nonetheless writing and not speech, if written in invisible ink. It is nonetheless writing, if written in the sky by an aircraft engaging in skywriting. To my mind, it is nonetheless writing, if it appears on a computer screen, as a result of the entry of data into a computer.9

[page 14] In Animax Films Pty Limited v Sim Logic Pty Limited,10 in which the appellant alleged an agreement formed by exchange of emails, the Court of Appeal of New South Wales unanimously found no binding contract in writing, not on the basis that an exchange of emails was not capable of forming a written contract, but on the basis that there was no agreement. 2.3

However, there are limits to the flexibility of the courts in construing

the requirement for writing. An insurer sought to rely on a recorded telephone conference as written notice of an offer of insurance in Progressive Casualty Insurance Company v Estate of Jose Juan Palomera-Ruiz and Giant Electric Corporation.11 The insurer argued that the Court of Appeals of Arizona should interpret the statutory requirement for ‘written notice’ flexibly in the light of new technologies, and that the intent of the statute was satisfied by electronically recording the telephone conversation. The court rejected the argument, with the result that the coverage afforded to the respondent was expanded by operation of law. In New York, the courts have questioned whether a registry of electronically executed mortgage notes and securities instruments were capable of assignment as ‘consolidation, extension and modification agreements’ for the purposes of attracting tax relief. The courts reasoned that because the electronic registry did not amount to possession of physical documents, there was no legal instrument capable of assignment.12 And the United States Bankruptcy Court for the Northern District of Texas held in Re Cafeteria Operators LP13 that although an exchange of emails was writing under the E-Sign Act, the emails did not evidence an agreement extending payment terms under the Perishable Agricultural Commodities Act because there was no meeting of the minds.

The Statute of Frauds 2.4 Sections 4 and 17 of the Statute of Frauds 1677 required certain contracts, including contracts of guarantee, contracts for the sale of an interest in land, and contracts for the sale of goods over a certain amount, to be either in writing, or evidenced by a written memorandum or note of the agreement: Section 4 No action shall be brought whereby to charge any executor or administrator upon any special promise to answer damages out of his own estate; or whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriage of another person; or to charge any

person upon any agreement made upon consideration of marriage; or upon any contract of sale of lands, tenements or hereditaments, or any interest in or concerning them; or upon

[page 15] any agreement that is not to be performed within the space of one year from the making thereof; unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised. Section 17 No contract for the sale of goods, wares or merchandises for the price of £10 sterling or upwards shall be allowed to be good except the buyer shall accept part of the goods so sold and actually receive the same, or give something in earnest to bind the bargain or in part payment, or that some note or memorandum in writing of the said bargain be made and signed by the parties to be charged by such contract or their agents thereunto lawfully authorised.

A memorandum had to contain at least the essential elements of the agreement (including a description of the parties, the consideration and the subject matter of the agreement) and had to be signed by the party to be charged. The Statute of Frauds has, to varying degrees, been re-enacted in most common law jurisdictions.14 In the United Kingdom, the statute still applies to guarantees but has been superseded for contracts for the sale of an interest in land made after 27 September 1989.15 The Law of Property (Miscellaneous Provisions) Act 1989 (UK) now requires a contract for the sale of land to incorporate all the terms on which the parties expressly agreed in one document and be physically signed by each party.16 In the United States, many of the original provisions of the statute have survived in state and federal legislation, retaining similar wording to the original statute.17 Section 1 of Chapter 259 of the Massachusetts General Laws is an example: No action shall be brought: … Upon a contract for the sale of lands tenements or hereditaments or of any interest in or concerning them; … Unless the promise, contract or agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or by some person thereunto by him lawfully authorized.

A further example is §2–201(1) of the Uniform Commercial Code (US), as

variously enacted by the states: A contract for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some record sufficient to indicate that a contract for sale has been made between the parties and signed by the

[page 16] party against which enforcement is sought or by the party’s authorized agent or broker. …

The courts have historically given a broad interpretation to the Statute of Frauds to prevent it from becoming an instrument of fraud in the hands of the unscrupulous. Two issues arise when an agreement or memorandum falling within the statute is in electronic form. Is the electronic script ‘writing’ and is an electronic signature sufficient to satisfy the statute?

Telegrams, mailgrams, telexes and faxes 2.5 The courts have long accepted telegrams and telexes as sufficient memoranda in writing. In Howley v Whipple,18 the court gave an obiter analysis: So when a contract is made by telegraph, which must be in writing by the Statute of Frauds, if the parties authorize their agents either in writing or by parol, to make a proposition on one side and the other party accepts it through the telegraph, that constitutes a contract in writing under the Statute of Frauds; because each party authorises his agents, the company or the company’s operator, to write for him; and it makes no difference whether that operator writes the offer of the acceptance in the presence of his principal and by his express direction, with a steel pen an inch long attached to an ordinary pen holder, or whether his pen be a copper wire a thousand miles long. In either case the thought is communicated to the paper by the use of the finger resting upon the pen; nor does it make any difference that in one case common record ink is used, while in the other case a more subtle fluid, known as electricity, performs the same office.19

Godwin v Francis20 is a practical application of these remarks. The plaintiff made an offer by letter to buy land. The defendant, one of five co-owners of the land, answered by telegram: ‘Your offer for the Liddington estate is accepted.’21

The defendant signed instructions for the message to be sent. However, the telegram itself only contained the name of the defendant printed by the telegraph clerk. The other four co-owners repudiated the contract and sold the land at a higher price to another purchaser. The plaintiff sued the defendant. The defendant argued that there was no evidence of an agreement in writing sufficient to satisfy the Statute of Frauds. The Court of Common Pleas held that the instructions for the telegram, accepting the terms proposed by the plaintiff’s letter, were signed by the defendant. Further, a telegram written out and signed by the telegraph clerk, if done with the authority of the vendor, was a sufficient signature within the Statute of Frauds. The defendant had the authority to delegate to the clerk the power to sign for him, and the clerk’s signature was binding. However, a different outcome to Godwin v Francis22 was [page 17] reached in McNear v Petroleum Export Corporation.23 In that case, a broker sent a telegram to the appellant stating: Smith of Petroleum Export says will fill order for two cargoes gasoline. Will sign contracts when contracts for tanks etc are closed probably today. Making arrangements for General Petroleum to load first vessel in case of need W K THOMPSON24

In seeking damages for breach of the alleged contract, the appellant sought to argue that the telegram was a note or memorandum signed by either the respondent, because of the insertion of the name of the respondent’s General Manager ‘Smith of Petroleum Export’, or by the respondent’s authorised agent. However, the Supreme Court of California held that although the Statute of Frauds did not require a signature to be at the end of the document, Smith’s name was not inserted with the intention of authenticating the document and the broker had not signed as the respondent’s agent.

A modern example is Clipper Maritime Ltd v Shirlstar Container Transport Ltd,25 in which the plaintiff alleged that the defendant, during a telephone conversation, had guaranteed the performance of a defaulting third party of a charter with the plaintiff. The defendant argued that, if it had entered into a contract of indemnity, it was unenforceable pursuant to the Statute of Frauds. The plaintiff argued that three telexes exchanged by the parties to the charter were a note or memorandum sufficient to satisfy the statute. The court found there was an oral offer and acceptance of a guarantee and that the telexes, the last of which was signed by the defendant, constituted a sufficient note or memorandum of the guarantee. 2.6 A mailgram or fax may satisfy the requirement of writing. In Hessenthaler v Farzin,26 the Farzins accepted an offer for sale of land by mailgram stating: ‘We, Dr Mehdi and Marie Farzin, accept the offer of $520,000 for our property at 6175 and 6185 Hocker Drive Harrisburg, Pennsylvania.’ But on being provided with a copy of the offer for their signature, the appellants unilaterally attempted to add an additional term. On Hessenthaler’s suit for specific performance, the court held the mailgram was signed writing because it contained the essential terms of the agreement and sufficiently revealed the Farzins’ intention to adopt the writing as their own. However, in Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd,27 the faxes at issue were insufficient to indicate a final agreement. The plaintiff received a fax under the letterhead ‘Manildra Group’: ‘We wish to confirm our telephone conversation [page 18] of today’s date that you wish to purchase the property known as “Milton Downs” from us.’28 The fax listed nine points of sale and was signed ‘J T Honan, Managing

Director’. The plaintiff, by its executive director, Ms Campbell, replied by fax, annexing the defendant’s fax. The defendant then replied by fax later on the same day, ‘M/s Campbell, signed copy as requested’29 attaching a copy of Ms Campbell’s reply, which Honan had signed in the bottom right-hand corner. The plaintiff sued for specific performance. Young J found that the complexity of the transaction, the high price of $10.85 million, and the fact that the deposit was not considered in the faxes, suggested that the parties had not concluded an agreement. Even if the parties had concluded an agreement, the absence of a document signed by a representative of the defendant mentioning the defendant’s name also meant that the contract was unenforceable. 2.7 However, analogously to Progressive Casualty Insurance Company v Estate of Jose Juan Palomera-Ruiz and Giant Electric Corporation,30 a voice recording may not satisfy the Statute of Frauds. In Sawyer v Mills,31 a lawyer’s oral promise to pay an employee $1.06 million by instalments of $10,000 per month was secretly tape-recorded by the employee. However, the tape recording did not satisfy the Kentucky Statute of Frauds which applied to contracts not capable of being performed within one year. The lawyer’s voice on the tape recording was not an electronic signature under the E-Sign legislation32 because the secrecy of the tape recording negatived any knowledge or intent that may have made the promise otherwise enforceable.

Email — sale of land 2.8 Email may satisfy the requirement of writing for sale of land. In Shattuck v Klotzbach,33 communications between the parties regarding the sale and its conditions were conducted by email. When the vendor reneged, the purchaser brought an action to enforce the contract and recover damages for breach. The vendor sought a dismissal of the complaint for failure to state a claim, relying in part on the Statute of Frauds. In dismissing the vendor’s motion, the court held that all the essential terms for an agreement for a sale

of land (the parties, the locus, the nature of the transaction and the purchase price) were contained in the exchange of emails. [page 19] However, Shattuck was distinguished in Singer v Adamson34 in which the plaintiff sought specific performance of a contract for the sale of land she alleged had also been made by exchanges of email. The Massachusetts Land Court defined the issue as whether the parties merely engaged in negotiations regarding the purchase of land, or whether the dealings, carried out primarily by email communication, gave rise to a binding and enforceable contract. The court ruled that the emails did not amount to a contract and would not have amounted to a contract, even if all the emails involved had been hard copies signed by their senders and delivered by hand to the recipients. The court’s decision turned on the characterisation of the emails. Emails could, under the right circumstances, meet the demands of the Statute of Frauds and not bar formation of a binding contract for the sale of land. Emails, however, by their quick and casual nature, tended to lack the cautionary and memorialising functions of a traditional signed writing contemplated by the Statute of Frauds. The court found that, in the present case, the exchanges of emails were more akin to telephone conversations: Emails facilitate rapid, almost instantaneous communication, but in many cases they analogize more closely to telephone calls, or at least to voice mail messages, shot back and forth between parties whose chief goal is prompt response. In many instances, the emails reveal that the parties are really just ‘talking’ with the help of the internet, and not sitting down across a virtual table to electronically ‘write up’ a memorandum of any contractual significance. This is so notwithstanding that the requirements for a Statute of Frauds-compliant writing are not highly demanding.35

The court held that, whereas in Shattuck, above, the emails reflected detailed attention to many of the terms and provisions which would govern the purchase and sale, and indicated the close involvement of the parties’ lawyers in the transaction, no such detailed email correspondence had

occurred in the present case. The parties did not appreciate that the emails that shot back and forth were writings of the type that would memorialise contractual offer and acceptance. Similarly, in Rosenfeld v Zerneck,36 the plaintiff sent an email indicating his firm offer to purchase land. The defendant replied with an email confirming that he had accepted the price offered by the plaintiff and the date of settlement, and indicated that his attorney would prepare a contract of sale. On the plaintiff’s suit for specific performance, the court found the exchange of emails exhibited no meeting of the minds, as they lacked all the essential terms of the contract, including the amount of the deposit and how the parties intended to treat a commercial lease encumbering the land.37 [page 20] Both Shattuck v Klotzbach and Rosenfeld v Zerneck were considered in Vista Developers Corp v VFP Realty LLC.38 The general proposition in Rosenfeld v Zerneck that email could satisfy the Statute of Frauds for contracts for the sale of real property was not followed on a narrow reading of the New York statute on which the proposition was said to be based. However, it is doubtful that a court would now follow Vista Developers Corp v VFP Realty LLC in preference to Rosenfeld v Zerneck. 2.9 Canada has produced two decisions on the subject of land. In Leoppky v Meston,39 a separating de facto couple negotiated the price at which Leoppky would purchase Meston’s joint share of real property. Leoppky estimated a market value of $355,000 and Meston estimated $365,000. Meston emailed a third party: ‘William and I have reached an agreement and I am proud of both of us for coming to that point.’40 Meston also sent another email suggesting a final breakdown of the equity in the house owed by Leoppky to her. On Leoppky’s suit for specific performance, the court found that the parties had agreed to Meston’s higher

price. Further, the requirement for writing could be satisfied by electronic correspondence by reason of the emails having been tendered in paper form. Girouard v Drouet41 is an important decision of the New Brunswick Court of Appeal in which the purchaser emailed an offer of $155,000 for a condominium unit and offered to pay any legal fees and assume the existing mortgage. The vendor accepted the offer by email, agreeing to allow the purchaser to view the unit and offering to have a draft agreement prepared. But a few hours later the vendor reneged, claiming that the email discussion did not result in a binding agreement. The court, considering for the first time the relationships between contracts, emails, writing requirements, electronic signatures, the Statute of Frauds and the Electronic Transactions Act, observed that there was little Canadian or English authority on point.42 The court accepted that in principle and under legislation, there was no reason why an email should not satisfy the writing requirement under the Statute of Frauds.43 The series of emails read together were a sufficient memorandum containing the essential terms of an agreement for the sale of land.44 However, the court found no intention to form legal relations, holding that there was a rebuttable presumption against an intention to form a binding relationship by means of ‘an exchange of rapid-fire emails’, analogous to ‘recorded telephone conversations’.45 Further, the vendor’s offer to prepare a draft agreement [page 21] indicated that the parties did not intend to create a binding legal relationship until a formal contract was prepared and executed.46 Most recently in New Zealand, in Cox v Coughlan,47 the plaintiff agreed with the defendant to swap his property for the defendant’s tenanted property, the properties being of approximately equal value. The defendant sent signed standard form agreements to the plaintiff. The plaintiff made

hand-written changes to the documents, signed them and sent them to the defendant’s solicitor who sent them by email to the defendant without requesting the defendant to sign the counter-offer. Before settlement, the defendant’s tenant quit and the parties agreed by email to vary the contract to make completion conditional on approval of a tenant for the defendant’s property. The new tenancy agreement was for less rent and the plaintiff asked for a compromise amount of $3,000 to reflect the agreement that the swap should reflect equal value. The defendant refused to settle and resisted the plaintiff’s suit for specific performance on the ground, first, that he did not agree to the counter-offer and his solicitor had no authority to accept on his behalf, and second, that the agreement was not in writing under s 24 of the Property Law Act 2007. The court held that the defendant’s solicitor did have authority and that, under the New Zealand Electronic Transactions Act, the written record may be in electronic form and signed by an electronic signature.

Email — lease of land 2.10 In Crestwood Shops, LLC v Hilkene,48 the Court of Appeals of Missouri considered whether an email could constitute written notice of termination of a lease. In the course of acrimonious negotiations about an existing lease, the plaintiff lessee sent an email to the agent of the defendant lessor: I wish to release myself from the lease by March 24 if the owners can’t resolve the issues which cause concern for myself, Andy Fritzel and my workers … I will be on email only … if you send another certified letter, please copy on email so more time is not wasted.49

Later, the lessee sent another email to the agent, advising him that he could contact her via email if he had any questions. On the same day, the lessor, through the agent, accepted the appellant’s offer to terminate the lease. It was common ground that, as the lease was for five years, the lease was caught by the Statute of Frauds and any termination had to be in writing. At first instance, the lessee sought a declaration that the lease was still on foot, relying

on arguments that the email containing the offer to terminate was not writing sufficient to satisfy the Statute of Frauds. The court found against the lessee on all points. The Uniform Electronic Transactions Act (US) (UETA) gave legal effect to [page 22] contracts formed by electronic records where all parties to the agreement agreed to conduct transactions by electronic means.50 In this case, the parties communicated primarily through email and the lessee expressed a preference for email because of its speed. The lessee conveyed her offer to terminate via email and stated she could only be reached via email.

Email — option to purchase land 2.11 In Mathew v Chiranjeev,51 purchasers paid into the account of a vendor one per cent of an orally agreed purchase price for an option to purchase real property. Following a flurry of emails between agent, vendor and purchaser, the vendor pulled out of the sale and offered to refund the option price. The purchasers secured an order for specific performance which the vendors appealed to the Court of Appeal of Singapore. The court found that the emails evidenced a valid and binding contract for an option to purchase the property. Further, endorsing the approach of S M Integrated Transware Pte Ltd v Schenker (Singapore (Pte) Ltd52 that ‘no real distinction can be drawn between a type written form and a signature that has been typed onto an email’,53 the court found the emails satisfied the Statute of Frauds.54 Dittman v Cerone55 also concerned an option to purchase land entered into by a series of emails. The vendors argued that the emails did not satisfy the Statute of Frauds because the parties had not agreed to transact by electronic means and that the parties had not contemplated that electronic signatures alone would be sufficient to contract. However, the Court of Appeals of Texas

found that the evidence of a number of emailed offers and counter-offers was sufficient for it to find that the parties had intended to conduct business electronically. Email has been sufficient to evidence a right of first refusal under the New York Statute of Frauds. In Naldi v Grunberg,56 the Appellate Division of the Supreme Court of New York commented that although the state’s Electronic Signatures and Records Act did not specifically address whether an electronic record was a writing for the purposes of the Statute of Frauds, the vast growth in the use of email justified a broader construction of the term ‘writing’ to encompass records of electronic communications. [page 23]

Email — settlement agreements relating to land 2.12 There is an emerging subset of cases dealing with agreements settling proceedings involving transfer of land. In Boon v Boon,57 family law proceedings were settled by exchanges of emails, but later resisted by the husband in part on the ground the agreement did not satisfy the Statute of Frauds. The court found that although it was not necessary for an agreement settling litigation to satisfy formal requirements, the emails on their proper construction did not amount to a final agreement. In Waddle v Elrod,58 lawyers for parties contesting a transfer of land entered into a settlement by exchange of emails on the basis that Elrod would transfer the land back to Waddle. Elrod reneged on the agreement and Waddle sought to enforce the agreement. On final appeal to the Supreme Court of Tennessee, Elrod argued that the Statute of Frauds applied to settlement agreements requiring the transfer of land. The court not only found the statute applied but that the emails read together were a sufficiently signed memorandum or note of the agreement. In Williamson v Bank of New York Mellon,59 the bank began legal proceedings to foreclose on Williamson. Before the hearing, Williamson by

her lawyer and the bank entered into a settlement agreement by email in which the bank promised to pay Williamson $4,000 and Williamson promised to vacate the property on a stipulated date. Williamson then fired her lawyer and refused to abide by the agreement. The court held, applying the same test to the Texas Rule of Civil Procedure as applied to the Texas Statute of Frauds, that the emails read together were an agreement in writing. Further, under the Texas Uniform Electronic Transactions Act, the manually typed name of Williamson’s lawyer was a complying signature.60 Powell v City of Newton61 considered whether settlement of a dispute over an interest in land agreed to orally in open court was enforceable. Following the oral agreement the parties’ lawyers exchanged draft written documents by email. However, the plaintiff refused to sign. On appeal by the defendant, the Court of Appeals of North Carolina held that the emails signed by the plaintiff’s lawyer bound him, and anyway the plaintiff was caught by judicial estoppel, trumping the Statute of Frauds. The Supreme Court of North Carolina disagreed on the first point, holding that the parties did not agree to the use of electronic signatures, but held that the plaintiff was estopped from denying his assent in open court. Contrary to these decisions the Appellate Division of the Supreme Court of New York held in DeVita v Macey’s Inc,62 without giving much reasoning, that a confirmatory email was not writing sufficient to make the settlement enforceable under the rules of court. But the same court later distinguished DeVita in [page 24] Forcelli v Gelco Corp.63 On the facts of the later decision, the expression ‘Thanks Brenda Green’ indicated that the author had purposefully added her name to the particular email message indicating an intention to adopt the

contents of the email. Perhaps repenting of its earlier decision in DeVita, the court stated: … given the now widespread use of email as a form of written communication in both personal and business affairs, it would be unreasonable to conclude that email messages are incapable of conforming to the criteria of CPLR 2104 simply because they cannot be physically signed in a traditional fashion.64

Email — contracts for sale of goods 2.13 The Seventh Circuit confirmed that email could satisfy the requirement of writing under the Statute of Frauds for the sale of goods over $500 in Cloud Corporation v Hasbro Inc.65 Bazak International Corporation v Tarrant Apparel Group66 articulates the general position: Although emails are intangible messages during their transmission, this fact alone does not prove fatal to their qualifying as writings under the UCC. Aside from posted mail, the forms of communication regularly recognized by the courts as fulfilling the UCC ‘writing’ requirement, such as fax, telex and telegraph, are all intangible forms of communication during portions of their transmission. Just as messages sent using these accepted methods can be rendered tangible, thereby falling within the UCC definition, so too can emails … Additionally, because under any computer storage method, the computer system ‘remembers’ the message even after being turned off, whether or not the email is eventually printed on paper or saved on the server, it remains an objectively observable and tangible record that such a confirmation exists.

2.14 However, there must be evidence of a concluded contract. In Central Illinois Light Company v Consolidation Coal Company,67 the plaintiff and the defendant were negotiating a contract for the supply of coal and, in so doing, exchanging numerous emails, participating in telephone conferences and meeting in person. The parties never entered into a written contract. In May 2001, the defendant ceased negotiations. The plaintiff sued for breach of contract, relying partly on emails as memoranda in writing of a concluded agreement. In summarily dismissing the suit on the grounds that the alleged contract failed to meet the requirement of the Statute of Frauds under the Illinois Uniform Commercial Code, the District Court of Illinois accepted that emails could satisfy the Statute of Frauds. However, the language of the emails:

[page 25] [L]ooks great for a starting point. I have made some suggested changes which are always open to discussion … It will not take long to finalize things. … [f]or further discussion.68

clearly indicated that the parties were still negotiating and failed to corroborate evidence that a contract had been concluded. Similarly, in Toghiyani t/a First Class Refurbishing v Amerigas Propane Inc t/a Amerigas Partners,69 the Eighth Circuit found that an enforceable contract could not be inferred from the emails tendered by the appellant because they did not contain the essential durational elements required by the Missouri Statute of Frauds. Dow Chemical Company v General Electric Company70 stated a similar position for Michigan: Although Michigan Law recognizes that enforceable agreements may arise out of the exchange of email or conduct, such agreements must adhere to the elements of contract formation. In other words a valid contract presupposes mutual assent on all essential terms … As a general rule, discussions and negotiations alone are insufficient to satisfy the elements of a contract.71

2.15 Nevertheless an email containing the sender’s name, that is not itself relied on as an agreement, may be pleaded as confirmation of the existence of an oral agreement, enlivening the jurisdiction of the court to inquire into the terms of the agreement.72

Signature 2.16 The common law lays down no formal requirements for signatures.73 Crosses, pseudonyms, initials, abbreviations of names, surnames, trade names, partial signatures, words other than a name and identifying phrases can all be signatures. Signatures can also take the forms of seals, rubber stamps and printed names.74 However, a physical signature, in whatever form, affects both the content of a document and the document itself. An

electronic signature affects only the content and is, conceptually, quite different from [page 26] the physical alteration of a document envisaged at common law.75 Types of electronic signatures include typing a name into an electronic format, scanning a manuscript signature, clicking an ‘I accept’ button, using a digital (or cryptographic) signature,76 using a Personal Identification Number (PIN),77 making a voice print, or giving a retinal scan.78 Where a digital signature is contained on a card or other storage device, the use of the card to sign a document is analogous to using a seal.79 2.17 Digital signatures are created and verified by a system known as public key cryptography. Public key cryptography employs an algorithm using two different but mathematically related keys: one to create a digital signature, or transform data into an unintelligible form (private key), and one to verify the digital signature, or return the data to its original form (public key). The algorithm used to create the digital signature is known as the private key and is known only to the signatory. The algorithm used to verify the signature is known as the public key and is more widely known by recipients of the information. Although mathematically related, it is infeasible to derive the unknown private key from the known public key. A further function in the process is the use of an algorithm known as a hash value, which creates a digital fingerprint that is smaller than, but unique to, the original data. Any change to the data causes a different hash value. A digital signature will only be verified if the public key confirms that the signatory’s private key was used to sign the data and the hash value computed by the verifier is identical to the hash value extracted from the digital signature.80 Digital signatures have the advantage that they are many times more difficult to forge than traditional handwritten signatures.81 However, they

suffer from the obvious drawback of insecure management of the private key. A third party may gain access to a private key where a password is available to more than one person, or where the password itself is vulnerable to a hacker operating either in the real world or online.82

Validity 2.18 A signature — digital, electronic or otherwise — must manifest an intent to approve and adopt the contents of a document.83 In Wilkens v Iowa Insurance [page 27] Commissioner,84 Iowa insurance agents brought an action seeking to compel Allstate, based in Illinois, to comply with Chapter 515 of the Iowa Code which required that insurance policies in Iowa be written by a licensed Iowa agent. For some policies in Iowa, Allstate was itself the assigned agent. It purported to comply with the code by having one agent countersign these policies through a computer-generated typewritten name. The agents challenged this practice, arguing that Allstate failed to obtain direct physical countersigning as required under s 515.52. The Court of Appeals of Iowa stated: We find the fact that the signature is computer-generated rather than hand-signed does not defeat the purpose of the act. The issue is not how the name is placed on a sheet of paper; rather the issue is whether the person whose name is affixed intends to be bound. No one argues that the agent whose name was affixed did not intend to be bound. We find the signature requirements of the statute were met.85

2.19 Courts may hold an electronic signature to be valid in the absence of validating legislation. The Australian decision of Molodysky v Vema Australia Pty Ltd86 considered the effect of the defendant vendor making a signature by facsimile and then faxing a document entitled ‘Preliminary Agreement for the

Sale of Residential Property’ over the facsimile signature to the plaintiff. The plaintiff believed he had concluded an agreement in writing for the sale of the property by signing a copy of the fax and paying a $300 deposit. Nevertheless, the property was subsequently sold at auction to another party. The court found against the plaintiff on a construction of the relevant legislation. However, Cohen J did find that the delivery of the faxed copy of the agreement was service of an agreement signed by the vendor: The question of whether a facsimile bearing a person’s signature constitutes a document signed by that person is not easy to resolve. Where a statute requires a signature to be placed on a document it is sufficient if the person authorises the placing on the appropriate document of a signature by mechanical means such as a rubber stamp or engraving … A facsimile copy of the document is one which is sent by telephonic means and reproduced at the receiving end by what can be in general terms but somewhat inaccurately described as a photographic process. When a person sends a signature with the intention that it should be produced by facsimile then that person is authorising the placing on the facsimile copy of a copy of his signature with the intention that it be regarded as his signature. This of course does not apply in every case of a signature on a facsimile document but only if it is [the] intention of the person concerned that what appears on the final copy is to be regarded as that person’s signature for the purpose of authenticating the document. On that basis I see little difference between that and the authorising of the placing of a rubber stamp copy of the signature. The means of it actually appearing on the document are quite

[page 28] different but the effect is the same. I am therefore of the view that the copy of the agreement, when it bore the facsimile signature of the representative of the vendor, he intending it to be used for facsimile purposes and delivered as his signature, was a copy signed by that person.87

2.20 In Cloud Corporation v Hasbro Inc,88 the court concluded that the sender’s name on an email satisfied the signature requirement of the Statute of Frauds even though the email had no manuscript signature, and was made before the enactment of the Electronic Signatures in Global and National Commerce Act (US). Neither the common law, nor the UCC, required a hand-written signature. Further, it was not usual, although it was technically possible, to include an electronic copy of a handwritten signature in an email and, therefore, its absence did not create a suspicion of forgery. Also in Lamle

v Mattel Inc,89 the parties were engaged in negotiations for Mattel to licence and distribute a game invented by Lamle. Lamle alleged that on 11 July 1997, the parties had orally agreed to most of the terms of the licence, including a three-year term, the geographic scope of the licence, the schedule for payment and the percentage royalty. On 26 June 1997, an employee of Mattel sent Lamle an email, repeating these terms and ending: ‘Best regards Mike Bucher.’90 Lamle alleged that the authorised employee’s name in the email was a signature sufficient to satisfy the California Statute of Frauds. Because the email was sent before the enactment of electronic transactions legislation, the Court of Appeals had to evaluate its validity at common law. The court held that there was no meaningful difference between a signature typewritten on a telegram and a signature typewritten in an email, and concluded that the signature in the email was capable of satisfying the Statute of Frauds. In McGuren v Simpson,91 Harrison AsJ held that an email was in writing and signed by the maker for the purposes of the Limitation Act 1969 (NSW). The plaintiff, when he was in gaol, received a cheque for the proceeds of a personal injuries claim which he had the defendant pay into her own account. On the later break-up of the relationship, the plaintiff sought recovery of the money on the basis that the defendant had used the money mainly for her own purposes. The plaintiff commenced the action out of time, but relied on an email sent by the defendant, in which she stated: ‘Yes, I spent the money and I shouldn’t have …’92 as a confirmation of the cause of action, bringing it within time pursuant to s 54 of the Limitation Act 1969 (NSW). The email was sent before the Electronic Transactions Act 2000 (NSW) came into [page 29] force. Nevertheless, the Associate Justice applied the common law doctrine of ‘authenticated signature fiction’93 to find that, because the defendant’s name

appeared in the email and she expressly acknowledged the email as an authenticated expression of a prior agreement, the email was in writing and signed by the maker as required by the Limitation Act.94 In a later decision also considering s 54 of the Limitation Act 1969 (NSW), Stuart v Hishon,95 Harrison AsJ held that an email stating ‘I am unable to deal with this matter at the moment’ above the printed name ‘Tom’ was writing signed by the author typing his first name at the end of the email. It is unclear the extent to which her Honour relied on the New South Wales electronic transactions legislation to come to her decision. But her Honour did say: Mr Stuart typed his name on the foot of the email. He signed it by doing so. It would be an almost lethal assault on common sense to take any other view.96

Similarly, Pembroke J in Kavia Holdings Pty Limited v Suntrack Holdings Pty Ltd97 had no difficulty in finding that an email satisfied a contractual requirement for signed notice: The inclusion of the sender’s name on the email amounted to ‘signing’ for the purpose of the clause. The requirement of signing is intended to identify the sender and authenticate the communication. That is sufficiently achieved in an email by the setting out of the sender’s name together with the email address from which the email is despatched … Any other conclusion would produce a capricious and commercially inconvenient result that might have wide-reaching and unintended consequences in modern day trade and commerce.98

Validity under general requirements 2.21 Now, electronic signatures may be valid because of legislation enacted in many jurisdictions. For example, in On Line Power Tech Inc v Square D Company,99 a sales representative agreement between the plaintiff and the defendant was terminated but the parties continued to enter into sales representative agreements on a case-by-case basis, some of them made by exchange of email. The District Court of New York held the email agreements were valid and enforceable by virtue of New York and federal statutes recognising electronic signatures.

[page 30] The Supreme Court of Kansas and the Court of Appeal of Louisiana in the insurance cases of Barwick v Government Employee Co100 and Bonck v White101 held the appellants’ electronic signatures were ‘writings’ within the terms of the statutes governing the contracts of insurance because of the electronic transactions legislation enacted in each state. But, in DWC Pain Free Medical PC v Progressive Northeastern Ins Co,102 an electronic signature was not sufficient in circumstances where the insurer had discretion whether or not to accept an electronic signature, as legislation validating the use of electronic signatures did not require the insurer’s acceptance of the electronic signature. In the Australian decision of Faulks v Cameron,103 the plaintiff relied on an email sent by the defendant, stating in part ‘The agreement is that you get to keep everything, that is 100 per cent of the proceeds’ and signed, ‘Regards, Angus’104 as a separation agreement, sufficient to satisfy s 45 of the De Facto Relationships Act (NT) which required a separation agreement to be in writing and signed by the other de facto partner. The Supreme Court of the Northern Territory held that under s 9 of the Electronic Transactions (Northern Territory) Act 2000 (NT), the defendant’s emails identified him and indicated his approval of the information, and that the plaintiff had consented to the method of the communication. The agreement was writing signed by the other de facto partner for the purposes of the De Facto Relationships Act (NT). And in Bassano v Toft,105 the High Court of England accepted that clicking an ‘I accept’ button on a screen was a signature validated by s 7 of the Electronic Communications Act 2000 sufficient to satisfy the signature requirement under the Consumer Credit Act 1974.

Validity under the Statute of Frauds 2.22

In International Casings Group Inc v Premium Standard Farms Inc,106

the plaintiff and defendant terminated contracts for the supply of goods. They continued performing under the terms of the contracts and resumed negotiations regarding terms for new contracts principally by way of email. The District Court for the Western District of Missouri noted that the Statute of Frauds, contained within the Uniform Commercial Code (UCC), defined a signature broadly. It followed that s 2 of the UETA, which defined an electronic signature as ‘an electronic sound, symbol or process attached to or logically associated with a record’, applied to the Missouri UCC provisions. But even if a signature is not invalid solely by reason of its being in electronic form, the [page 31] question may remain whether it satisfies the functions of a signature required under the Statute of Frauds: 1.

to provide admissible and reliable evidence that the signatory approves and adopts the contents of a document;

2.

to authenticate the identity of the signatory;

3.

to reinforce the binding nature and legal effect of the document on the signatory; and

4.

to provide tangible proof of the source of the contents of the document.107

In Shattuck v Klotzbach,108 the defendant vendor intentionally typed his name at the end of all relevant emails regarding the sale of land. The court found that the emails sent by the vendor were intended to be authenticated by his deliberate choice to type his name at the end of all emails. Similarly, in Rosenfeld v Zerneck,109 the plaintiff sent an email with his typewritten signature at the end, indicating his firm offer for purchase of land. On his suit for specific performance, the court found the plaintiff’s typed signature

manifested an intention to authenticate the email for the purposes of the Statute of Frauds. International Casings Group Inc v Premium Standard Farms Inc110 did not even require a typed name to manifest intent. The court found that ‘by hitting the send button’ the parties intended to presently adopt and authenticate the content of the emails as their own writing. The court commented that the requirement of writing should not be construed to cloak a fraud: It would be contrary to the purpose of the UCC to permit a party to negotiate all the terms of an agreement, do so in a way which accurately records their negotiations and agreement, but then permit the party to escape responsibility for its promises because a piece of paper with a handwritten signature had not been produced.111

In Stevens v Publicis SA,112 the parties varied a contract of employment by an exchange of emails. The Appellate Division of the Supreme Court of New York found that the series of emails, setting forth the defendant’s proposal to change the terms of employment, the plaintiff’s acceptance of the terms and the defendant’s confirmation, memorialised the parties’ agreement. The emails were signed writings sufficient to satisfy the Statute of Frauds as the parties’ names at the ends of the emails signified their intent to authenticate the contents. 2.23 However, the courts are divided over the indicia of electronic intent. In Parma Tile Mosaic and Marble Co v Short,113 the Court of Appeals of New York [page 32] considered the signature requirement of a guarantee. Sime, a subcontractor, sought to purchase a large quantity of ceramic tiles from Parma. At the request of Parma, MLRS, the head contractor, faxed Parma a two-page document. The fax had a heading on each page giving the name ‘MRLS Construction’, a telephone number, the date and time, an unidentified

number and a page number. It was undisputed that, sometime before sending the fax, MRLS had programmed its fax machine to automatically imprint this information on every transmitted page. The heading only appeared on the transmitted document, not on the original. The fax was not sent with a cover letter or other identifying document. Parma asserted the document was a guarantee of Sime’s obligation to pay for the tiles and sought payment of Sime’s outstanding invoices from MRLS. MRLS refused to pay on the grounds the fax was merely an unsubscribed proposal for a guarantee, and was unenforceable. MRLS argued that the heading imprinted on the top of each page, transmitted by its fax machine, was merely an identification and was not intended to serve as a subscription within that term’s special meaning under the Statute of Frauds. Parma argued that, because MRLS intentionally programmed its fax machine to print its name on top of all faxed documents, the subscription requirement had been satisfied. The Court of Appeals of New York found the act of identifying and sending a document to a particular destination did not, by itself, constitute a signing authenticating the contents of the document for the purposes of the Statute of Frauds. The intentional act of programming a fax machine was insufficient, by itself, to demonstrate to the recipient the sender’s apparent intention to authenticate every document subsequently faxed. Intent was also at issue in S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd.114 The plaintiff entered into negotiations to lease its warehouse to the defendant. A number of documents, including a letter of intent marked ‘subject to contract’, a handling service agreement and a logistics service agreement, were exchanged by email. The defendant did not put its name at the bottom of any of its email messages. However, at the beginning of the defendant’s messages, the following line appeared: ‘From Tan Tian Tye’

Tan gave evidence that, at the time of sending the messages, he intended the recipients of the messages to know that they had come from him. No hard copy of any letter or document was ever sent by either party to the other. At

the last minute, the defendant decided not to proceed with the lease of the warehouse. The plaintiff sued for loss and damage pursuant to the defendant’s alleged wrongful repudiation of the contract. The High Court of Singapore considered there was evidence of a memorandum in writing sufficient to satisfy the Statute of Frauds, and went on to consider whether the memorandum was signed. Prakash J reasoned that the common law took a pragmatic approach to what would satisfy a signature [page 33] requirement, and that the authenticating function of the signature was more important than its form. The common law did not require a handwritten signature for the purpose of the Statute of Frauds — a typewritten or printed signature sufficed. Prakash J inferred that Tan’s failure to type his name at the bottom of his email messages was due to his knowledge that his name appeared at the head of every email message sent by him. Accordingly, the judge found that Tan intended to be identified as the sender of the message and that Tan’s name next to his email address satisfied the signature requirement of the Statute of Frauds. The High Court’s decision was approved by the Court of Appeal of Singapore, including Prakash J’s finding that Tan’s email address, that he knew was at the head of every email, was a sufficient signature under the Statute of Frauds.115 J Pereira Fernandes SA v Mehta116 also considered intent to approve and adopt a document by means of an electronic signature in England. The plaintiff supplied a company of which the defendant was the director with goods for which the company failed to pay. When the plaintiff presented the company with a winding up petition, the defendant asked a member of his staff to send an email to the plaintiff’s solicitor requesting the hearing of the petition be adjourned subject to his giving a personal guarantee for the sum owed by the company. The defendant’s name did not appear in the body of

the email but his email address was automatically inserted by an internet service provider. The plaintiff’s solicitor orally accepted the proposal and sent the agreement to the defendant. However, it was not returned and no money was received from the defendant. The plaintiff commenced proceedings against the defendant to enforce the guarantee. The Manchester County Court held that the email was a guarantee and that the presence of the defendant’s email address on the copy of the email received by the plaintiff’s solicitor constituted a sufficient signature for the purposes of the Statute of Frauds. However, on appeal, the High Court reversed the decision. A party could sign a document in a number of different ways as long as the signature was inserted with the intention of giving authenticity to the document, but the insertion of a person’s email address by an internet service provider after the document had been transmitted was incidental and not intended as a signature. S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd and J Pereira Fernandes SA v Mehta were both considered in the New Zealand decision of Welsh v Gatchell.117 Pursuant to an oral agreement for the sale of land, the vendor sent a fax recording the terms of the agreement to the purchaser, who did not sign it, but confirmed the contents by telephone. On the purchaser’s suit for specific performance, the High Court of New Zealand held that the fax was a memorandum of the agreement. In finding that the fax header was [page 34] not a signature for the purpose of the Statute of Frauds, the court appeared to prefer the approach of J Pereira Fernandes SA v Mehta to that of S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd. … a fax header printed using the machine’s capacity to add writing to the document as it is copied and sent cannot serve as a signature unless, perhaps, there is evidence that it was specifically inserted for the transaction concerned … And where the header is inserted automatically, it cannot

qualify as a signature because it was not affixed to the particular writing with the intention that by adding his or her name the sender would adopt its contents.118

2.24 A recent decision considering intent was Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd119 which concerned whether a sequence of emails containing the terms of a guarantee were signed writing under the Statute of Frauds. The English Court of Appeal had no difficulty in finding that the emails were writing, and that the name of the broker in the email was intended as a signature authenticating the writing, as it was not just a signature of a communication, but was known and intended to be effective to create the guarantee. However, in Regions Bank v Cabinet Works LLC,120 a debtor alleged that a bank was barred by res judicata arising out of an agreement to settle the dispute entered into by an exchange of emails over the initials and first names of the parties’ lawyers. The Court of Appeal of Louisiana held that the use of initials and first names did not establish that the lawyers had intended to do the legally significant act of signing the emails. And most recently, in SN4, LLC v Anchor Bank,121 a purchaser relied on an email containing an agreement for the sale of land that contained the purchaser’s signature, and that had gone back and forth between the parties, to enforce the agreement. The Court of Appeals of Minnesota accepted that an electronic signature could satisfy the Statute of Frauds, and that the bank by its agents had electronically signed the emails attaching the agreement. However, the court found that even if the agreement was a final agreement, which it was not, the bank’s electronic signatures on the emails containing the agreement were not electronic signatures of the agreement itself. 2.25 Parma Tile Mosaic and Marble Co v Short,122 J Pereira Fernandes SA v Mehta123 and Welsh v Gatchell124 stand for the proposition that, to satisfy the Statute of Frauds, an electronic signature must be made with the intent of the maker of the signature to approve and adopt the contents of the electronic transaction at issue. S M Integrated Transware Pte Ltd v Schenker Singapore

[page 35] (Pte) Ltd125 may or may not be consistent with these authorities, depending on the construction given to the evidence of Tan. Tan stated that he intended the recipients of his emails to know that they had come from him. If Tan was saying no more than he intended to be identified as the sender of the message, as MRLS intended in its fax to Parma, S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd126 is arguably wrong. However, if Tan was saying that he did not sign his emails because he knew his name was already displayed at the head of his email documents, the decision may be correct, although it carries the unlikely implication that Tan intended to be bound by every word he sent by email.

Electronic Transactions Legislation and the Statute of Frauds 2.26 The central purpose of electronic transactions legislation is to ensure that a transaction is not invalid because it takes place, wholly or partly, by means of one or more electronic means. However, the legislation merely removes one impediment to the legal effectiveness of electronic contracts. Whether a particular electronic contract is effective may well turn on legal rules outside the legislation127 such as the requirements of the Statute of Frauds. The High Court of Singapore considered the relationship between the Electronic Transactions Act 1999 (Sing) (ETA) and the Statute of Frauds in detail in S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd.128 No hard copy of any letter or document was ever sent by either party to a lease transaction, and the defendant argued that, even if there had been a concluded contract between the parties, s 4(1)(d) of the ETA, which stated: Parts II and IV shall not apply to any rule of law requiring writing or signatures in any of the following matters … (d) any contract for the sale or other disposition of immoveable property, or any interest in such property

precluded an electronic record or signature from satisfying the writing requirement for the disposition of land under s 6(d) of the Civil Law Act 1994 (Sing) (CLA), re-enacting the Statute of Frauds. The court found that the effect of s 4 of the ETA was that the plaintiff could not rely on the provisions of the ETA to satisfy the legal requirements for writing and signature for the disposition of land under s 6 of the CLA. However, that did not mean that s 4 of the ETA prohibited electronic writing and signatures from satisfying s 6 of the CLA. The ETA was passed to enable reliance on electronic [page 36] communications in commerce and could not be construed as disabling reliance by changing the common law position in relation to the CLA. Whether an email could satisfy the requirement for writing and signature depended on construing s 6 of the CLA itself, not by ‘blindly relying’ on the ETA.129 Pursuant to s 2 of the Interpretation Act 2002 (Sing), which provided the definition of writing and ‘expressions referring to writing including printing, lithography, typewriting, photography and other modes of representing or reproducing words or figures in visible form’, the emails at issue could be classified as falling within the meaning of ‘other modes of representing or reproducing words in visible form’ because, although in their transmitted or stored form they were nothing more than lists of binary numbers, they had another form when displayed. A visible representation of the words which formed the messages was, therefore, available to both the sender and the recipient. It followed that, while the underlying binary information was not ‘writing’, the screen display could satisfy the Interpretation Act 2000. The court concluded that the aim of the Statute of Frauds was to protect people and their property against fraud and sharp practice by legislating that

certain types of contracts could not be enforced unless there was written evidence of their existence and terms. Electronic writing was consistent with the policy of the statute as long as the existence of the writing could be proved: The ordinary man in the street, who not only conducts his business via computer but who is being encouraged to use technology in all areas of life and to become more and more technologically proficient, would be amazed to find that the law would not recognize a contract he had made electronically even though all the terms of the contract had been agreed and parties were perfectly ad idem. If parties who negotiate electronically do not wish to be bound until a formal document is signed, they can have recourse to the ‘subject to contract’ endorsement that can easily be added to their email correspondence.130

The District Court for the Eastern District of Wisconsin recently came to a similar view of the relationship between electronic transactions legislation and the Statute of Frauds in Alliance Laundry Systems LLC v Thyssenkrupp Materials NA.131 The defendant had invited the plaintiff to make an offer to purchase steel. The plaintiff made an offer by email, attaching a spreadsheet of the items it wished to purchase. The defendant emailed a response directing the plaintiff to supply a purchase order number so that the defendant could ‘start shipping this metal to [the plaintiff]’.132 The defendant eventually declined to ship the steel because the plaintiff had failed to pay earlier invoices. On the plaintiff’s motion for summary judgment, it was common ground that the Statute of Frauds under the UCC applied to the contract. The defendant argued that it had not agreed to form a contract [page 37] electronically under the UETA and, consequently, the emails were not writing for the purposes of the Statute of Frauds. Adelman J considered the point in a footnote to her judgment: Although defendant argues that under the Uniform Electronic Transactions Act (UETA) … parties cannot form a contract electronically unless they first agree to do so, defendant is not technically correct. The UCC, not the UETA, provides the substantive law that determines whether

parties form contract [sic], and nothing in the UCC prohibits the formation of agreements by electronic means … Thus in the present case, if the jury determines that the parties’ emails were sufficient to form a contract, the UETA will not prevent its enforcement. However … the UCC does require, with certain exceptions, that a contract for the sale of goods priced at $500 or more may be evidenced in writing by a writing ‘signed by the party against whom enforcement is sought’ … Whether an email signature constitutes the signature called for by the UCC is a question to which the UETA might be relevant.133

2.27 The requirement of writing under the Statute of Frauds remains curiously inert in the presence of electronic transactions legislation.134 In Welsh v Gatchell, Miller J stated that electronic transactions legislation: Facilitates the use of electronic writing and signatures but does not presume they meet the legal requirements for which they are employed. Whether they do so or not depends on accessibility of the record and reliability of the signature, both of which are factual questions … whether any given writing is a memorandum or note for the purpose of the Contracts Enforcement Act, and whether it has been signed, are questions of fact. An electronic signature will not prove adequate unless the court is satisfied that its insertion was intended to signify adoption of the electronic note or memorandum of which it forms part or with which it is otherwise associated.135

Electronic transactions legislation enables electronic writing to satisfy the Statute of Frauds. However, the courts do not need to rely on electronic transactions legislation to find that electronic communications may satisfy the requirement for writing under the Statute of Frauds. Further, the legislation will not make electronic communications writing for the purposes of the statute if the writing is not otherwise sufficient.

Conclusion 2.28 Courts considering whether electronic writing satisfies statutory requirements may not be concerned with the medium of the writing, be it by telex, fax, email, SMS text or webpage. The suggestion that electronic [page 38] communications are not writing because they consist of strings of numbers

and symbols located on a server136 has been firmly rejected in S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd,137 and by the Law Commission for England and Wales which has stated that, while an electronic document itself may not be in writing, the screen display is.138 However, a problem remains. Brereton J was right to say in Islamic Council of South Australia Inc v Australian Federation of Islamic Councils Inc that there is a fundamental distinction between the spoken and the written word. But, as the court in Singer v Adamson pointed out, emails and by extension SMS text are ambiguous.139 They may approximate electronically written-up memoranda, or they may approximate electronic speaking. Whether or not an electronic communication satisfies a statutory requirement for writing will depend on the court determining the antecedent question of whether the communication approximates the spoken or written word. It may be a point of fine distinction whether emails or SMS text messages are signed memoranda or are simply electronic talking. But if the electronic communication approximates the written word, the content, rather than the form, will be determinative. The content of electronic communications in transactions for the sale of land, in particular, will be insufficient if essential terms are omitted. 2.29 The central issue for electronic signatures will remain proving the nexus between the signature, in whatever form it may be, and the person whose signature it purports to be, and proving the intent of that person to approve and adopt the signed contents.140 The act of typing a name at the bottom of an email, or hitting a send button, may be sufficient to manifest intent to approve and adopt the contents of an electronic document. However, it is probably insufficient for a name to be automatically imprinted or transmitted on a document. The decision in S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd,141 that an email address automatically transmitted at the head of an email message is a signature sufficient to satisfy the Statute of Frauds, is probably wrong and should not be followed.

2.30 Common law courts should be wary of any suggestion that electronic transactions legislation renders electronic communications valid for the purposes of the Statute of Frauds simply because the communications are in electronic form. Electronic transactions legislation will not make electronic [page 39] communications writing for the purposes of the statute if the writing is not otherwise sufficient. Conversely, the courts do not need to rely on electronic transactions legislation to find that electronic communications satisfy the requirement. Finally, electronic transactions legislation should not be construed as transforming electronic communications which are the equivalent of informal oral exchanges into the equivalent of formal written documents.

1.

See R A Ray, ‘You’ve Got Mail … But Do You Have a Contract? Does an Email Satisfy the Arkansas Statute of Frauds’ (2007) 60 Arkansas Law Review 707 at 717, 719.

2.

Clyburn v Allstate Insurance Company (1993) 826 F Supp 955.

3.

Clyburn v Allstate Insurance Company (1993) 826 F Supp 955 at 957.

4.

Re RealNetworks Inc Privacy Litigation 2000 US Dist LEXIS 6584.

5.

Bols Distilleries BV (t/a Bols Royal Distilleries) v Superior Yacht Services Ltd [2007] 1 WLR 12; [2006] UKPC 45.

6.

In another decision involving Gibraltar, Victor Chandler International v Customs and Excise Commissioners [2000] 2 All ER 315, the English Court of Appeal held that for the purposes of s 9(1)(b) of the Betting and Gaming Duties Act 1981, which protected revenue by prohibiting offshore bookmakers advertising in the United Kingdom, the phrase ‘advertisements in documentary form’ extended to direct electronic transmissions from Gibraltar.

7.

Vergara Hermosilla v Coca Cola 2011 US Dist LEXIS 17517.

8.

Islamic Council of South Australia Inc v Australian Federation of Islamic Councils Inc [2009] NSWSC 211.

9.

Islamic Council of South Australia Inc v Australian Federation of Islamic Councils Inc [2009] NSWSC 211 at [20].

10.

Animax Films Pty Limited v Sim Logic Pty Limited [2011] NSWCA 73.

11.

Progressive Casualty Insurance Company v Estate of Jose Juan Palomera-Ruiz and Giant Electric Corporation (2010) 231 P 3d 384 (Ariz Ct App).

12.

Cutrone v Mortgage Electronic Registration Sys (2013) 981 F Supp 2d 144 citing Bank of New York v Silverberg (2011) 86 AD 3d 274.

13.

Re Cafeteria Operators LP (2003) 299 BR 411.

14.

See, for example, in Australia: Guarantee. NT: Law of Property Act 2000 s 58; Qld: Property Law Act 1974 s 56; Tas: Mercantile Law Act 1935 s 6; Vic: Instruments Act 1958 s 126; WA: Statute of Frauds 1677 s 4. Sale of land. ACT: Imperial Acts (Substituted Provisions) Act 1986 Sch 2 Pt 11 4(1); NSW: Conveyancing Act 1919 s 54A; NT: Law of Property Act 2000 s 62; Qld: Property Law Act 1974 s 59; SA: Law of Property Act 1936 s 26(1); Tas: Conveyancing and Law of Property Act 1884 s 36; Vic: Instruments Act 1958 s 126; WA: Statute of Frauds 1677 s 4. Sale of Goods. Tas: Sale of Goods Act 1896 s 9; WA: Sale of Goods Act 1895 s 4.

15.

H G Beale (ed), Chitty on Contracts, 29th ed, Sweet & Maxwell, London, 2004, at 4–009.

16.

Firstpost Homes v Johnson [1995] 4 All ER 355.

17.

L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005 at 418–20.

18.

Howley v Whipple (1869) 48 NH 487.

19.

Howley v Whipple (1869) 48 NH 487 at 488.

20.

Godwin v Francis (1870) LR 5 CP 295.

21.

Godwin v Francis (1870) LR 5 CP 295 at 297.

22.

Godwin v Francis (1870) LR 5 CP 295.

23.

McNear v Petroleum Export Corporation (1929) 208 Cal 162.

24.

McNear v Petroleum Export Corporation (1929) 208 Cal 162 at 164.

25.

Clipper Maritime Ltd v Shirlstar Container Transport Ltd [1987] 1 Lloyd’s Rep 546.

26.

Hessenthaler v Farzin (1989) 564 A 2d 990.

27.

Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) NSW ConvR 55–498.

28.

Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) NSW ConvR 55–498 at 58, 628.

29.

Twynam Pastoral Co Pty Ltd v Anburn Pty Ltd (1989) NSW ConvR 55–498 at 58, 628.

30.

Progressive Casualty Insurance Company v Estate of Jose Juan Palomera-Ruiz and Giant Electric Corporation (2010) 231 P 3d 384 (Ariz Ct App).

31.

Sawyer v Mills (2009) 295 SW 3rd 79.

32.

15 USC § 7001(a)(1).

33.

Shattuck v Klotzbach (2001) 14 Mass L Rep 360.

34.

Singer v Adamson 2003 WL 23641985; affirmed by the Appeals Court of Massachusetts (2005) 837 NE 2d 313.

35.

Singer v Adamson 2003 WL 23641985; affirmed by the Appeals Court of Massachusetts (2005) 837 NE 2d 313.

36.

Rosenfeld v Zerneck (2004) 776 NYS 2d 458.

37.

See also 731 Airport Associates v H & M Realty Associates LLC (2002) 799 A 2d 279.

38.

Vista Developers Corp v VFP Realty LLC (2007) 847 NYS 2d 416.

39.

Leoppky v Meston (2008) 87 Alta LR (4th) 238.

40.

Leoppky v Meston (2008) 87 Alta LR (4th) 238 at [17].

41.

Girouard v Drouet [2012] NBJ No 136.

42.

Girouard v Drouet [2012] NBJ No 136 at [2], [3].

43.

Girouard v Drouet [2012] NBJ No 136 at [32].

44.

Girouard v Drouet [2012] NBJ No 136 at [36], [37].

45.

Girouard v Drouet [2012] NBJ No 136 at [41].

46.

Girouard v Drouet [2012] NBJ No 136 at [50].

47.

Cox v Coughlan [2014] NZHC 164.

48.

Crestwood Shops, LLC v Hilkene (2006) 197 S W 3d 641.

49.

Crestwood Shops, LLC v Hilkene (2006) 197 S W 3d 641 at 645, 646.

50.

See also the obiter remarks of Stengel J in The Prudential Insurance Company of America v Paul M Prusky and Steven G Prusky as Trustees of the MFI Associates, Ltd Profit Sharing Plan (United States District Court for the Eastern District of Pennsylvania, Civil Action No 04–CV–462, July 2005, unreported).

51.

Matthew v Chiranjeev [2009] SGCA 51.

52.

SM Integrated Transware Pte Ltd v Schenker (Singapore (Pte) Ltd [2005] 2 SLR 651.

53.

Mathew v Chiranjeev [2009] SGCA 51 at [39].

54.

Section 6(d) Civil Law Act.

55.

Dittman v Cerone 2013 Tx App LEXIS 2343.

56.

Naldi v Grunberg (2010) 80 AD 3d 1.

57.

Boon v Boon (2000) 187 NSR (2d) 143.

58.

Waddle v Elrod (2012) 367 SW 3d 217.

59.

Williamson v Bank of New York Mellon (2013) 947 F Supp 2d 704.

60.

See also Klebanoff v Haberle (2008) 978 So 2d 598, in which the Court of Appeal of Louisiana upheld an agreement by exchange of emails compromising litigation.

61.

Powell v City of Newton (2010) 703 SE 2d 723.

62.

DeVita v Macey’s Inc (2007) 36 AD 3d 751.

63.

Forcelli v Gelco Corp (2013) 109 AD 3d 244.

64.

Forcelli v Gelco Corp (2013) 109 AD 3d 244 at 250.

65.

Cloud Corporation v Hasbro Inc (2002) 314 F 3d 289 (7th Cir).

66.

Bazak International Corporation v Tarrant Apparel Group (2005) 378 F Supp 2d 377 at 383.

67.

Central Illinois Light Company v Consolidation Coal Company (2002) 235 F Supp 2d 916.

68.

Central Illinois Light Company v Consolidation Coal Company (2002) 235 F Supp 2d 916 (8th Cir) at 921.

69.

Toghiyani t/a First Class Refurbishing v Amerigas Propane Inc t/a Amerigas Partners (2002) 309 F 3d 1088.

70.

Dow Chemical Company v General Electric Company (2005) 58 UCC Rep Serv 2d (Callaghan) 74.

71.

Dow Chemical Company v General Electric Company (2005) 58 UCC Rep Serv 2d (Callaghan) 74. See also 2001 Trinity Fund LLC v Carrizo Oil & Gaz Inc (2012) 393 SW 3rd 442 where there was insufficient evidence of an agreement making it unnecessary for the court to consider whether the emails were writing under the Statute of Frauds.

72.

Polyad Company v Indopco Inc 2007 US Dist LEXIS 71925.

73.

Bassano v Toft [2014] EWHC 377 (QB) at [42], [45]; Hessenthaler v Farzin (1989) 564 A 2d 990 at 993; Mathew v Chiranjeev [2009] SGCA 51 at [29].

74.

S Mason, ‘Electronic Signatures in Practice’ (2006) 6 J High Tech L 148 at 149.

75.

C Reed, Internet Law: Text and Materials, Butterworths, London, 2000, at 157.

76.

S Mason, ‘Electronic Signatures in Practice’ (2006) 6 J High Tech L 148 at 158.

77.

United States v Miller (1995) 315 US App DC 141.

78.

B Dugan and B Dugan, Electronic Transactions: Electronic Transactions Act 2002, LexisNexis NZ Ltd, Wellington, 2004, at 154.

79.

C Reed, Internet Law: Text and Materials, Butterworths, London, 2000, at 165.

80.

American Bar Association (ABA), Digital Signature Guidelines, Chicago, 1996, reprinted in C Reed, Internet Law: Text and Materials, Butterworths, London, 2000, at 162–4.

81.

C Reed, Internet Law: Text and Materials, Butterworths, London, 2000, at 165.

82.

B Dugan and B Dugan, Electronic Transactions: Electronic Transactions Act 2002, LexisNexis NZ Ltd, Wellington, 2004, at 201, 202.

83.

Bassano v Toft [2014] EWHC 377 (QB) at [42]; Welsh v Gatchell [2009] 1 NZLR 241 at [52].

84.

Wilkens v Iowa Insurance Commissioner (1990) 457 NW 2d 1.

85.

Wilkens v Iowa Insurance Commissioner (1990) 457 NW 2d 1 at 3.

86.

Molodysky v Vema Australia Pty Ltd (1989) NSW ConvR 55-446.

87.

Molodysky v Vema Australia Pty Ltd (1989) NSW ConvR 55-446 at 58,235–58, 236.

88.

Cloud Corporation v Hasbro Inc (2002) 314 F 3d 289.

89.

Lamle v Mattel Inc (2005) 394 F 3d 1355 (Fed Cir).

90.

Lamle v Mattel Inc (2005) 394 F 3d 1355 (Fed Cir) at 1357.

91.

McGuren v Simpson [2004] NSWSC 35.

92.

McGuren v Simpson [2004] NSWSC 35 at [14].

93.

[I]f the name of the party to be charged … is placed on the document said to constitute the written memorandum of the contract, it is to be treated as a signature … if such party expressly or impliedly indicates that he recognises the writing as being an authenticated expression of the contract …: Pirie v Saunders (1961) 104 CLR 149 at 154, 155.

94.

McGuren v Simpson [2004] NSWSC 35 at [22].

95.

Stuart v Hishon [2013] NSWSC 766.

96.

Stuart v Hishon [2013] NSWSC 766 at [34].

97.

Kavia holdings Pty Limited v Suntrack Holdings Pty Ltd [2011] NSWSC 716.

98.

Kavia holdings Pty Limited v Suntrack Holdings Pty Ltd [2011] NSWSC 716 at [33].

99.

On Line Power Tech Inc v Square D Company 2004 WL 1171405 (SDNY).

100. Barwick v Government Employee Co 2011 Ark LEXIS 111. 101. Bonck v White (2013) 115 So 3d 651. 102. DWC Pain Free Medical PC v Progressive Northeastern Ins Co (2006) 14 Misc 3d 800. 103. Faulks v Cameron (2004) 32 Fam LR 417. 104. Faulks v Cameron (2004) 32 Fam LR 417 at [33]. 105. Bassano v Toft [2014] EWHC 377 (QB). 106. International Casings Group Inc v Premium Standard Farms Inc (2005) 358 F Supp 2d 863. 107. C Reed, Internet Law: Text and Materials, Butterworths, London, 2000, at 156; S Mason, ‘Electronic Signatures in Practice’ (2006) 6 J High Tech L 148 at 159; B Dugan and B Dugan, Electronic Transactions: Electronic Transactions Act 2002, LexisNexis NZ Ltd, Wellington, 2004, at 152. 108. Shattuck v Klotzbach (2001) 14 Mass L Rep 360. 109. Rosenfeld v Zerneck (2004) 776 NYS 2d 458. 110. International Casings Group Inc v Premium Standard Farms Inc (2005) 358 F Supp 2d 863. 111. International Casings Group Inc v Premium Standard Farms Inc (2005) 358 F Supp 2d 863 at 873. 112. Stevens v Publicis SA (2008) 50 AD 3d 253. 113. Parma Tile Mosaic and Marble Co v Short (1996) 87 NY 2d 524. 114. S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651. 115. Mathew v Chiranjeev [2009] SGCA 51 at [40]. 116. J Pereira Fernandes SA v Mehta [2006] 2 All ER 891. See also Gachot v Sanson [2009] NZCCLR 27 in which the Court of Appeal of New Zealand found an oral guarantee to have been evidenced by an email. 117. Welsh v Gatchell [2009] 1 NZLR 241. 118. Welsh v Gatchell [2009] 1 NZLR 241 at [63]. 119. Golden Ocean Group Ltd v Salgaocar Mining Industries PVT Ltd [2012] 3 All ER 842. 120. Regions Bank v Cabinet Works LLC (2012) 92 So 3d 945. 121. SN4, LLC v Anchor Bank (2014) 848 NW 2d 559. 122. Parma Tile Mosaic and Marble Co v Short (1996) 87 NY 2d 52. 123. J Pereira Fernandes SA v Mehta [2006] 2 All ER 891. 124. Welsh v Gatchell [2009] 1 NZLR 241. 125. S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651. 126. S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651. 127. B Dugan and B Dugan, Electronic Transactions: Electronic Transactions Act 2002, LexisNexis NZ Ltd, Wellington, 2004, at 27. 128. S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651. 129. S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651 at 679. 130. S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651 at 682, 683.

131. Alliance Laundry Systems LLC v Thyssenkrupp Materials NA 2008 US Dist LEXIS 58985. 132. Alliance Laundry Systems LLC v Thyssenkrupp Materials NA 2008 US Dist LEXIS 58985 at 14. 133. Alliance Laundry Systems LLC v Thyssenkrupp Materials NA 2008 US Dist LEXIS 58985 at 14, fn 3. 134. See Mathew v Chiranjeev [2009] SGCA 51 at [37]. 135. Welsh v Gatchell [2009] 1 NZLR 24 at [65], [75]. 136. S Christensen, W Duncan and R Low, ‘The Requirements of Writing for Electronic Land Contracts — The Queensland Experience Compared with Other Jurisdictions’ (2003) 10 E Law at [10], [11]. 137. S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651. 138. S Christensen and R Low, ‘Moving the Statute of Frauds to the Digital Age’ (2003) 77 ALJ 416 at 417. 139. Singer v Adamson 2003 WL 23641985; affirmed by the Appeals Court of Massachusetts (2005) 837 NE 2d 313. 140. S Mason, ‘Electronic Signatures in Practice’ (2006) 6 J High Tech L 148 at 164. 141. S M Integrated Transware Pte Ltd v Schenker Singapore (Pte) Ltd [2005] 2 SLR 651.

[page 41]

Chapter 3 Offer and Acceptance Jafta did communicate his acceptance via SMS. An SMS is as effective a mode of communication as an email or a written document. In view of these findings, the court concludes that a contract of employment came into existence: Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84

Introduction 3.1 Common law courts usually apply an analysis of offer and acceptance to determine whether parties have reached agreement. But commercial reality does not always lend itself to this approach. Commonwealth courts have acknowledged that there may be a degree of artificiality in applying the tools of offer and acceptance to the problem of commercial contract formation.1 In the United States, offer and acceptance has also played a primary role in determining the existence of agreement, although there is a greater willingness, reflected in §22(2) of the Restatement (Second) of Contracts,2 to find agreement in the absence of an identifiable offer and acceptance.3 3.2 Electronic contracts made by email adhere easily to established principles of contract formation. Electronic contracts formed by webpage do not. Although established principles suggest that displays of goods for purchase are invitations to treat, this is probably not true for displays of goods and services online. It is more likely that, where an online display consists of a standard form agreement on an interactive website posted via a machine, the display is an offer because it is an expression of a willingness to be bound to a clear statement of terms capable of unilateral acceptance without further negotiation. There is support in the case law for the notion that an interactive

display of terms on a computer is an offer. While there is a practical objection that a proposal for [page 42] the sale of goods should not amount to an offer because the seller should not be bound to supply an unforeseeable demand, it is difficult to see how this argument applies to the sale of online services, information and software.4

Offer 3.3 An offer must manifest a willingness to be bound to a clear statement of terms capable of unilateral acceptance without further negotiation.5 Acceptance must be unequivocal and correspond precisely with the offer.6 These principles are readily applicable to contracts made by email.7 In SEKO Worldwide LLC v Four Soft Limited,8 a plaintiff sought to resolve litigation by sending an email stating: As an additional sign of good faith and willingness to find a quick solution to this debacle, we will offer you $75,000 USD to settle and we will prepare the settlement and release agreement. This offer is only valid if accepted by 5 pm CST on Friday 6 April 2007.

To which the defendant replied: To enable both our organisations to focus on our core activities and move on, we will accept your offer of USD $75K as full and final settlement. Please go ahead and send the settlement agreement.9

The plaintiff sued to enforce the agreement. The defendant objected that there had been no meeting of the minds in respect of the USD $75,000 amount, which it had calculated in rupees at a more favourable exchange rate. The court found that on an objective determination of the parties’ intent, based on their writings, the plaintiff had offered, and the defendant had

accepted, United States dollars. The email agreement was enforceable in its terms. [page 43]

Offer of standard form terms 3.4 The principles of offer and acceptance are more difficult to apply to electronic contracts made by webpage.10 Three characteristics of webpage contracts make it likely that an online display of terms is an offer, rather than an invitation to treat: webpage contracts are typically standard form contracts; webpage contracts are presented by a machine; and webpage contracts are interactive. Many online contracts are business to consumer contracts in which consumers either click an icon acknowledging terms of a standard contract, or are presented with a hyperlink, which they may or may not notice, linking to terms of a standard contract. The terms are often ‘long, detailed, full of legal jargon’, and ‘one sided’. Consumers fail, ‘in a reliable and predictable fashion’, to read the terms, and businesses exploit this failure.11 Hillman and Rachlinski take an optimistic view of competition within the internet restraining online businesses from overly exploiting consumers, arguing that the internet gives consumers an unparalleled opportunity to comparison shop and investigate businesses. However, the authors concede that internet consumers are no more likely than real world consumers to actually read standard terms. Other scholars are less sanguine. Kim states that online consumer contracts are ‘aberrant’ because their ubiquity, intangibility and flexibility encourage consumer habituation, reducing the signalling effect of contracts and deterring consumers from reading terms.12 Kim has doubted whether the practice of the courts in treating electronic contracts ‘just like’ paper contracts sufficiently acknowledges the differences between them, arguing that form has an impact on perception: Electronic contracts create a feedback loop, with customer consent becoming automatic as

consumers become habituated to the ubiquity of electronic contracts. Because consumers fail to notice, companies modify and increase the number of terms further perpetuating consumer habituation. Consequently, electronic contracts are lengthier and their terms more aggressive than their paper counterparts.13

Beshuisen recommends domestic consumer protection legislation to deal with the problem of ‘huge electronic contracts filled with onerous provisions’.14 [page 44] Trakman takes the middle ground between the views of Hillman and Rachlinski, and Kim and Beshuisen: There is a grain of truth to the new-found market power of cyber consumers. Some consumers may well be more discriminating in choosing among suppliers than consumers were in decades past. Some may act efficiently in accepting standardised conditions that are one sided in return for lower prices, or in accepting higher prices to secure extended warranty services … Most will click ‘I agree’ because they do not care to study the fine terms surrounding those on which they have agreed. One should nevertheless not overstate these new-found powers of consumers. Time has not stood still for mass suppliers either. Not only have cyber-suppliers, among others, devised standardized form contracts in their favour. They have taken full advantage of cyber-purchasing patterns brought about by instantaneous communications in mass markets, including by misinforming purchasers.15

Ultimately, however, Trakman rejects the positions of both Kim and Beshuisen: ‘Wrap’ contracts are insufficiently different from other forms of rolling contracts to warrant distinctive treatment. With the possible exception of browse-wrap contracts, disputes over conditions in ‘wrap’ contracts should be resolved without carving out new remedies devoted specifically to e-commerce. Nor are new classes of mass online consumers sufficiently different from offline consumers of the past to warrant special rules to protect them.16

3.5 The giving of standard terms, typically a ticket, has generally been characterised as an offer. In MacRobertson Miller Airline Services v Commissioner of State Taxation (WA),17 a case was stated to the High Court of Australia of a prospective airline passenger who, in response to an inquiry,

is informed whether and when a flight is available and its cost. A printed ticket is issued in return for the price and, on the day of the flight, the passenger uses the ticket to secure a seat on the flight. Members of the court held that the ticket was an offer capable of acceptance by conduct, although for different reasons. Barwick CJ, because of a clause exempting the airline from any obligation to carry the passenger, analysed the transaction as a unilateral contract. Stephen J, however, characterised the issue of the ticket as an offer accepted by the conduct of the passenger in retaining the ticket without objection, having had a reasonable opportunity to read the terms. Formation of a contract did not occur on the issue of the ticket but sometime afterwards, either by the conduct of the passenger in taking the benefit of the ticket or after a reasonable opportunity for both reading the terms and returning the ticket had elapsed.18 In Canada, [page 45] Punnett J of the British Columbia Supreme Court has applied ‘ticket case’ reasoning expressly to browsewrap terms displayed by webpage: If notice of the terms is sufficient, the issue in principle then becomes whether or not the terms are accepted by confirmation either by express agreement or by implied conduct. Communication of acceptance to the offeror is normally fundamental to the formation of a contract. However, the key issue is whether there is a bargain. Has the offeree accepted the terms in a manner which is ‘equivalent to acceptance’. Conduct may constitute acceptance. In this case the defendant had clear notice of the terms hence the nub of the dispute between these parties is whether there has been communication by the defendant[s] … of their acceptance of an offer [citations omitted].19

Offer by machine 3.6 Standard form offers made by machine have the additional characteristic that there is no-one with whom to negotiate. The problems of machine-made offers of standard terms were apparent to courts in the United States when they dealt with machine-vended contracts of insurance. The

courts imposed a particular obligation of ‘reasonable communicativeness’ on insurance companies relying on exclusion terms in these contracts.20 Because the vendor was not available in person to explain the terms to the consumer, the physical appearance of the offer had to put the consumer on notice that it contained legally binding terms, and the consumer had to be able to meaningfully inform him or herself of the terms before entering into the contract.21 In Lachs v Fidelity & Casualty Company of New York,22 Lachs was the daughter of the deceased who had bought insurance from a vending machine at an airport. The machine displayed the words: Airline Trip Insurance: 25c for Each $5,000 Maximum $25,000.23

These words were repeated beneath on a placard. Also on the placard, in much smaller type, were the words: Covers first one way flight shown on application (also return flight if round trip airline ticket purchased) completed in 12 months … on any scheduled airline.24

Having put five 25 cent coins into the slot, the deceased received a form to fill out the details of the flight and the intended beneficiary. A copy of the printed terms was not posted on the machine and the machine was placed in front of a counter utilised by all non-scheduled airlines operating out of [page 46] the airport. Minutes after takeoff, the deceased’s unscheduled airliner crashed. Lachs claimed on the policy, but the insurer denied the claim on the basis that the policy only insured scheduled airlines. On appeal, the court by majority upheld the first instance verdict in favour of Lachs. In doing so, the majority commented on the consequences of dealing with a machine: There must be a meeting of minds achieved between the applicant and the company through an application and signs and lettering, for while the applicant has a mind, the machine has none and

cannot answer questions. If the appellant had paid for a living salesman, the deceased would not have purchased the insurance, since the insurance did not cover her trip.25

The minority argued that the coverage of an insurance policy could not be expanded from coverage of scheduled airlines to coverage of unscheduled airlines, simply because the deceased could not talk to a salesman. However, in Steven v Fidelity and Casualty Company of New York,26 the Supreme Court of California agreed with the majority in New York on similar facts. The appellant’s husband purchased a return air ticket from Los Angeles and a $62,500 life insurance policy from a vending machine at the airport, naming the appellant as beneficiary. Across the top of the policy were the words: DO NOT PURCHASE MORE THAN A TOTAL OF $62,500 PRINCIPAL SUM NOR FOR TRAVEL ON OTHER THAN SCHEDULED AIRCARRIERS …27

On one leg of the trip, unexpectedly and for good reason, the deceased changed to an unscheduled carrier. The unscheduled carrier crashed and the respondent denied liability on the basis of the clause excluding liability for flights on unscheduled carriers. The majority, in finding for the appellant, commented on the challenge to the conventional freedom to contract analysis presented by standard form contracts delivered by machine: We do not here deal with the orthodox insurance policy sold in the protective aura of the insurer’s explanation and discussion of its terms … The inanimate machine told the purchaser nothing, and even if he had wanted to ask about the coverage in the event of an emergency, the box would not have answered … The disparity in bargaining power between the insured and the insurer here is so tremendous that the insurer had adopted a means of selling policies which makes bargaining totally impossible. The purchaser lacks any opportunity to clarify ambiguous terms … To equate the bargaining table, where each clause is the subject of debate, to an automatic vending machine, which issues a policy before it can even be read, is to ignore basic distinctions. The proposition that the precedents must be viewed in the light of the imperatives of the age of the machine has become almost axiomatic. Here the age of the machine is no mere abstraction; it presents itself in the shape of an instrument for the mass distribution of standard contracts.28

[page 47] 3.7

Neither of these cases dealt specifically with the issue of offer and

acceptance. However, in Thornton v Shoe Lane Parking Ltd,29 the court found that the machine had made the offer. The plaintiff entered an automatic car park which he had not entered before. The plaintiff stopped at a red light and took a ticket from a machine. The ticket contained a term stating: ‘Issued subject to conditions … displayed on the premises.’ On a pillar opposite the ticket machine were conditions, including an exclusion from liability clause. On the light turning green, the plaintiff drove into the car park. Lord Denning MR, in words that echo those of Lachs and Steven, above, famously commented that the machine was mute: The customer pays his money and gets a ticket. He cannot refuse it. He cannot get his money back. He may protest to the machine, even swear at it. But it will remain unmoved. He is committed beyond recall. He was committed at the very moment when he put his money into the machine. The contract was concluded at that time.30

The inability of the customer, even notionally, to return the ticket caused Denning MR to reject a ticket case analysis of the transaction: 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 consumer puts his money into the slot. The terms of the offer are contained in the notice placed on or near the machine stating what is offered for the money. The customer is bound by those terms as long as they are sufficiently brought to his notice before-hand, but not otherwise.31

Thornton was recently applied in R (on application of Software Solutions Partners Limited) v Her Majesty’s Commissioners for Customs and Excise32 which considered contracts of insurance entered into by automated software. A broker wanting to effect an insurance contract for a customer entered the potential policyholder and risk details for the required product into Software Solutions Partners Ltd’s (SSP’s) software which validated the details and generated quotes from all the insurers linked to the system. The quotes were based on predetermined qualification criteria that SSP had agreed with the insurers. Once the customer had decided on insurance, SSP’s software electronically made the ‘decision’ as to whether the risk was acceptable to the insurer and calculated the premium for the product without referring back to

the insurer. Once the customer agreed to the price and terms, the policy was binding on the insurer. Customs and Excise ruled that the relevant supplies made by SSP were not VAT exempt because the essential aspects of the work of an insurance agent [page 48] were lacking in SSP’s automated process. To determine whether SSP was assessable for VAT, the court had to determine the nature of the contracting process to determine whether SSP was an agent or intermediary entitled to the exemption. The court applied Thornton: Conceptually, the analysis is similar to that set out by Lord Denning MR in the well known case of Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 … Insurers hold out the SSP software as the automatic medium for contract formation. Once the broker, like the plaintiff in Thornton putting his money into the machine, has input the necessary data into the electronic process, no further human intervention is necessary for the formation of a binding contract between broker and insurer.33

The court found that the insurer made the offer and the broker, on behalf of the principal, gave an acceptance. However, the court commented obiter that the usual position, in most electronic transactions, was that the consumer made the offer which the supplier reserved the right to accept or reject. While it is true to say that it is usual in insurance contracts for the broker, on behalf of the principal, to make the proposal and for the insurer to accept it, the court gave no authority for the proposition that most electronic transactions involved the purchaser making an offer, and the vendor making the acceptance. For the reasons stated below, the court’s comments regarding electronic transactions generally are probably wrong.

Offer by interactive webpage 3.8 Websites display varying degrees of interactivity. Zippo Manufacturing Co v Zippo Dot Com Inc,34 which has been widely followed in the United

States, categorised websites into three classes: passive websites that do little more than make information available; in the middle ground, websites of limited interactivity; and active websites by which the site operator clearly does business over the internet. In Gator.Com Corp v L L Bean,35 the respondent, incorporated and resident in Maine, operated a virtual store available online to Californian residents. The website was highly interactive, allowing Californian consumers to communicate in real time with the respondent’s staff. The Ninth Circuit held that the respondent clearly did business over the internet. In American Eyewear Inc v Peepers Sunglasses and Accessories Inc,36 the defendant’s servers allowed users to log on, browse interactively and then submit an electronic form, giving address and credit card details, for the product to be packaged and delivered. The court found the defendant’s website fell into the middle [page 49] category. In Mink v AAAA Development LLC,37 the respondent ran a site posting information about products and services, providing a printable mailin order form, a toll-free telephone number, mailing address and electronic mailing address, but did not allow users to purchase products or services online. The Fifth Circuit held that the site was passive. However, Mink contrasts with V J Lively v Ijam Inc and Monarch Computer Systems Inc38 in which the respondent consumer, resident in Oklahoma, ordered a computer by telephone after having viewed it on a website. The Court of Civil Appeals of Oklahoma held that the appellants, resident in Georgia, sought to do business wherever the website was viewed. Rapp VCJ, although in dissent, concurred in this aspect of the court’s reasoning: I would hold the appellants are not a passive internet business for the reason they posted a website on the internet offering merchandise for sale … and intended to invite all who viewed the website to examine and accept their offer of sale. [The appellants] intended to, and sought to do business

wherever the website was viewed and its posted offer accepted. Here the website was accessed and the offer accepted when the order was placed via telephone.39

Although the American courts developed categories of websites by interactivity to assist in determining whether they had personal jurisdiction over parties resident outside the jurisdiction, these same categories may assist courts to determine whether webpage contracts are offers or not. It is most likely, V J Lively v Ijam Inc notwithstanding, that a court would consider a display on a passive website to be an invitation to treat.40 A display in the middle category of websites, where users exchange information with a host computer, would be an invitation to treat or an offer, depending on the circumstances; and a display on a fully interactive website conducting business as a virtual store would be an offer. 3.9 The display of a standard form agreement on an interactive website via a machine is most likely to be an offer because it is an expression of a willingness to be bound to a clear statement of terms, capable of unilateral acceptance, without further negotiation. The standard terms, which are often lengthy and detailed, are clear statements of the circumstances under which the offeror is willing to be bound. Interactivity renders the standard terms capable of unilateral acceptance. Posting the terms by machine indicates the offeror’s willingness to be bound without further negotiation. The key to this conclusion is Denning MR’s remark that, in dealing with a machine, the consumer is ‘committed beyond recall’.41 Unlike in Pharmaceutical Society of [page 50] Great Britain v Boots Cash Chemists (Southern) Ltd,42 where there was still notionally a bargain to be made between the consumer and the cashier, or MacRobertson Miller Airline Services v Commissioner of State Taxation (WA),43 where the traveller still had the notional opportunity to reject the terms of the ticket and apply for a refund, the webpage user, on indicating an

electronic acceptance, is committed beyond recall and a contract is made. It follows that, at least for webpage purchases, the vendor may make the offer and the purchaser the acceptance.44 3.10 There is support in the cases for the view that, at common law, standard terms displayed on an interactive website are offers. In Specht v Netscape Communications,45 the Second Circuit characterised the online presentation of terms as an offer. Netscape displayed various software programs on its website, including Communicator and SmartDownload, which visitors to the site were invited to download free of charge. During the installation of Communicator, the plaintiffs were automatically shown a scrollable text of that program’s licence agreement and were not permitted to complete the installation until they clicked on a ‘Yes’ button to indicate that they accepted all the licence terms.46 The Ninth Circuit also considered the question of offer in Douglas v United States District Court for the Central District of California.47 The appellant had contracted for long distance telephone calls with America Online. Talk America acquired the business and continued to provide services to existing customers. Talk America, without notice, then added four provisions to its service contract (additional charges, a class action waiver, and arbitration and choice of law clauses) by posting the revisions on its website. The court found the revised contract was an offer that did not bind the parties until it was accepted. The appellant never had any reason to visit the website as his credit card was automatically debited and, even if he had visited the website, a party to a contract had no obligation to periodically check the terms of a contract to see whether they had been changed. The Ninth Circuit’s finding contrasted with an earlier finding of the Ontario Superior Court of Justice in Kanitz v Rogers Cable Inc,48 in which the defendant provided cable television service and high speed internet access to subscribers in Canada. The user agreement on page one stated: We may change, modify, add or remove portions of this agreement at any time. We will notify you of any changes to this agreement by posting notice

[page 51] of such changes on the Rogers@Home web site, or sending notice via email or postal mail.49

In November 2000, the defendant amended the user agreement to add, among other things, an arbitration clause which stated that any claim would be referred to and determined by arbitration, and that the subscriber waived any right to commence or participate in any class action. On 12 January 2001, the defendant posted the version of the agreement containing the arbitration clause on its customer support website. In addition, from mid-January to mid-February 2001, the fact that the user agreement had been amended was noted on the main page of the customer support site that displayed links to a further page that contained: a link to the amended agreement; an explanation that the user agreement governed the relationship between the parties; a statement that the agreement was periodically updated; and a statement of the date the agreement was last updated. The defendant also posted email bulletins to subscribers advising of the amendments. The court found there was an onus on the plaintiffs to check the defendant’s website from time to time and they had been given reasonable notice of the arbitration clause. The different outcome in the two cases is explicable on the ground that Kanitz, unlike Douglas, was on notice that the agreement could be varied. As long as Rogers Cable notified Kanitz of the new terms by an agreed method, Kanitz carried the obligation of monitoring his email for notice of changes, or periodically checking the website. Once Rogers Cable had notified Kanitz of the new terms by the agreed methods, it was entitled to assume that Kanitz accepted them by not informing it of his rejection of the new terms within a reasonable time of their being posted on its website. This analysis suggests that, whereas the principles governing the initial formation of a webpage contract are given by Thornton v Shoe Lane Parking Ltd,50 any variation of the contract involving posting the changes online and an agreed method of notice might be governed by the principles articulated in the ticket cases.51 In a more recent decision from Ontario, Ontario College of Pharmacists v

1724665 Ontario Inc (Global Pharmacy Canada),52 the court, rather like the court in Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd,53 had to consider where Global Pharmacy Canada was selling prescription drugs before it could determine whether there was a breach of regulations governing their sale. Global Pharmacy Canada was an internet pharmacy with its headquarters in Belize. Customers ordered pharmaceuticals [page 52] by completing a Patient Order Form on Global Pharmacy Canada’s website. The pharmaceuticals were then shipped to the customers from India. Customers with a Canadian IP address were unable to access the website and Global Pharmacy Canada did not ship pharmaceuticals to Canadian addresses. The court had regard to the circumstances that Canadian legislation said nothing about communication of acceptance, and that, in the case of internet agreements, notice of acceptance will usually be the offeree’s assent to the terms of the offeror’s website.54 The court determined the sale of prescription drugs was taking place in Ontario for two alternative reasons. First, because the offer was the terms for sale of prescription drugs on Global Pharmacy Canada’s Belize website and the acceptance was the customer’s electronic forwarding of the Patient Order Form to Global Pharmacy Canada’s processing service centre located in Mississauga, Ontario. Second, if the Patient Order Form sent to Mississauga, Ontario, was an offer, the processing of the customer’s payment at Mississauga was acceptance.55 Australia also seems to accept that terms displayed on a website are an offer. In Centrebet Pty Ltd v Baasland,56 a professional gambler living in Norway completed an application for an account with an online sports bookmaker whose business and computers were located in Sydney. A term of the agreement was that the parties submitted to the jurisdiction of the courts

of the Northern Territory. After the gambler had incurred significant losses, the bookmaker sought leave from the Supreme Court of the Northern Territory to serve a writ on the gambler in Norway. In granting leave, the Master held that the contract between the parties had been made in Sydney where the application had been received.57

Revocation 3.11 An offer may be withdrawn at any time before it is accepted, but, to be effective, the withdrawal must be communicated to the offeree.58 In IVI Pty Ltd v Baycrown Pty Ltd,59 the parties were negotiating a contract for the sale of land. The purchaser was advised by a solicitor, although the solicitor would not have conveyed the land in the event of an agreement. At the request of the vendor’s solicitor, the purchaser’s solicitor gave out his email address. During negotiations, the principal negotiator for the [page 53] purchaser indicated that he did not use email and that the safest way to communicate with him was by fax. The vendor then signed the contract for sale. The purchaser indicated it would sign after a meeting of its directors. On the evening of 23 October 2002, the vendor’s solicitor sent an email to the purchaser’s solicitor purporting to revoke the offer. The purchaser’s solicitor, for good reason, did not actually read the email until 25 October 2002. The email was also sent to the vendor’s real estate agent. On the morning of 24 October 2002, the real estate agent contacted the purchaser and said the vendor was ‘wanting to pull out of the contract’ and that he ‘thought the vendor wanted to withdraw’. On the afternoon of 24 October 2002, the purchaser sent a fax to the vendor accepting the offer, and informing the

vendor that the purchaser’s solicitor did not act on the conveyance. On the vendor’s refusal to sell, the purchaser sued for specific performance. The Court of Appeal of Queensland held that there was no special formula to successfully communicate the withdrawal of an offer, but it was essential that it be made clear to the offeree that the offeror no longer wished to proceed. The email revoking the offer was not received by the purchaser before the purchaser’s faxed acceptance of the offer was communicated to the vendor. The real estate agent’s words to the purchaser did not make it clear to the purchaser that the vendor did not wish to proceed. Further, on the facts of the case, the solicitor to whom the email was sent had no actual authority to represent the purchaser in negotiations or communications with the vendor. It followed that the solicitor had neither actual nor implied authority to accept a communication withdrawing the offer.

Acceptance 3.12 The leading authority on common law electronic acceptance is the South African decision of Jafta v Ezemvelo KZN Wildlife.60 An employer emailed an offer of employment commencing on 1 February 2007, and, not having received a reply, sent another email attaching a letter urging the employee to accept by the end of December 2006. The employee, who had previously indicated he did not want to commence employment on 1 February 2007, replied by email but the employer denied receiving it. On 29 December 2006, the employee received an SMS text message from Ms Phakathi of the employer stating that if he failed to confirm the offer, the position would be offered to the next candidate. The employee replied by SMS: Have responded to the affirmative through a letter emailed to you this evening for the attention of your CEO. Had problems with email I had to go to internet cafe.61

[page 54]

The employer argued that the SMS was not a reasonable form of acceptance and, further, that it was not an unequivocal acceptance of the offer. The court found that the employee’s reply in the SMS ‘to the affirmative’ was a direct response to the inquiry of whether he would commence on 1 February 2007 and was an unequivocal acceptance of all the terms of the offer. Further, having been received by the employer late on 29 December 2006, the employee had accepted within the time given for acceptance in the offer. Although an emailed offer called for an emailed acceptance, it was unclear whether an SMS was an appropriate mode of acceptance. However, the court found that, because the employer had initiated communication by SMS, it was proper for the employee to accept the emailed offer by SMS. Although the employer denied that the acceptance by SMS had been communicated to it because Ms Phakathi was not authorised to receive it, the court held that, because she had directed the employee to write to her, she had implied that she was authorised to both send and receive communications about his employment. Further, because Ms Phakathi was the Human Resources Officer, the employer held her out to have authority to receive acceptance of the offer. Finally, the court was satisfied that, under s 24 of the Electronic Communications Transactions Act 2002, the SMS was a valid electronic communication between the employee as originator and the employer as addressee. Jafta v Ezemvelo KZN Wildlife has been accepted as authority for the propositions that SMS has become a means of entering into contracts, is the equivalent of email for evidentiary purposes and is subject to electronic transactions legislation.62 However, SMS is a casual means of communication and it is questionable whether representations evidenced by it have the promissory quality evidenced by email or paper.

An offer must be accepted by the offeree 3.13 An offer does not form a binding agreement until it has been accepted by the offeree. In Williams v America Online Inc,63 the plaintiffs alleged that,

on installing AOL version 5.0, the program caused unauthorised changes to the configuration of their computers so that they were unable to access nonAOL internet service providers, were unable to run non-AOL email programs and were unable to access personal information and files. The defendant sought to summarily dismiss the plaintiff’s claim on the grounds that the terms of service provided for Virginia as the exclusive forum for all AOL consumer disputes. The plaintiffs argued that the forum selection clause was unenforceable because their computers were altered before they were offered an opportunity to agree to the terms of service. They adduced evidence that the AOL 5.0 installation [page 55] process caused harm before the user clicked the ‘I agree’ button. Consequently, subscribers ‘agreed’ to the terms of service after the configuration of the computer had been altered. The Massachusetts Superior Court found that the forum selection clause did not apply to harm that occurred before the parties entered into a contractual relationship.

An acceptance must be communicated to the offeror 3.14 In Trimex International Fze Limited v Vedanta Aluminium Ltd,64 Trimex made a commercial offer by email to Vedanta on 15 October 2007. Following several exchanges of emails in which Trimex extended time to accept, Vedanta emailed an acceptance at 3:06 pm on 16 October 2007 under the subject header ‘re: offer for imported bauxite’ stating: ‘We confirm the deal for five shipments.’65 The Supreme Court of India held that an agreement was concluded when the acceptance was communicated to Trimex by Trimex opening Vedanta’s email shortly after 3:06 pm on 16 October 2007.

Acceptance must be unequivocal 3.15 In Jafta v Ezemvelo KZN Wildlife,66 the Labor Court of South Africa held that the words ‘to the affirmative’ communicated by SMS were an unequivocal acceptance of the offer. Earlier, in La Forrest v Ford,67 an appellant received two similar offers of compromise from two solicitors each representing the respondents. Within the time for which the offers were expressed to be open, the appellant sent an email and a fax respectively to each solicitor accepting the offers. However, the appellant subsequently found the terms of the discharges and notices of discontinuance unacceptable and she refused to discontinue the proceedings. The respondents applied to the Supreme Court of Queensland for an order that the proceedings be permanently stayed on the grounds that the proceedings had been compromised between the parties. The appellant argued that communication by email was not capable of creating contractual relations and that the words of her email, ‘I advise I am prepared to accept this offer’ fell short of an unequivocal acceptance of the offer. Atkinson J found that, pursuant to ss 4 and 8(1) of the Electronic Transactions Act 1999 (Cth), an email was capable of creating legal relations. By her own evidence, the appellant confirmed she had sent the relevant email and that email was a common form of communication between her and one of the solicitors. His Honour found further that the words ‘I am prepared to accept’ could constitute the acceptance of an offer as no reservation was expressed or implied. The Court of Appeal of Queensland affirmed the decision. [page 56]

Silence does not amount to acceptance 3.16 An offeror cannot construe mere silence as an acceptance.68 In SmartText Corporation v Interland and KFKI Systems Inc,69 the plaintiff

operated two websites which were its primary interfaces for sales. The defendant bought the plaintiff’s web hosting account from a previous web host and decided to migrate one of the plaintiff’s websites, www.teneron.com, to its own server. It was industry custom and practice that the old website at the previous server was not shut down until the new website at the new server was fully operational. In early January 2002, the defendant emailed the plaintiff, inviting it to accept or decline the new website. The plaintiff declined, citing problems with the new site. The defendant allegedly fixed the problems and, on 22 January 2002, emailed the plaintiff again, inviting it to accept or decline the new site. The plaintiff made no reply. On 27 January 2002, the defendant sent another email to the plaintiff stating in part: If we have still not heard from you within five more days, we will assume that the [new] site is correct and redirect your domain to point to your site hosted at Interland. In this event you will be deemed to have accepted your new hosting plan and Interland’s Terms of Service.70

As the plaintiff made no response within five days, the defendant redirected the domain to its own server and began providing web hosting services. The plaintiff told the defendant of problems with the new website and expressed concerns about the planned migration of its remaining website. Nevertheless, the defendant migrated the remaining site and, despite the plaintiff notifying it that the new site did not work, shut down the old site. The plaintiff sued in negligence and breach of contract. The defendant sought to have the plaintiff’s action summarily dismissed in reliance on the arbitration clause in its terms of service which, it claimed, formed an agreement between the parties. The defendant argued, based on §69(1)(a) of the Restatement (Second) of Contracts, that the plaintiff’s nonreply to the email of 27 January 2002 was an acceptance, since the plaintiff had had a reasonable opportunity to reject the offer and knew that the defendant made the offer in expectation of reward. However, the court found an arguable case that, once the defendant had unilaterally shut down the original sites, the plaintiff had no option but to conduct its business on the defendant’s server and it was an issue of fact for a jury whether the five-day

deadline, imposed by the defendant, constituted a reasonable opportunity to reject. In addition, the court found it was arguable that the defendant had neither stated, nor given the plaintiff reason to understand, that the plaintiff’s silence would be taken as [page 57] an acceptance of the offer. The defendant could not turn mere silence into an acceptance imposing liability.

An acceptance must be given within a reasonable time 3.17 Where the offer does not state a time for acceptance, the offer must be accepted within a reasonable time.71 In LJ Korbetis v Transgrain Shipping BV,72 an owner, relying on a term of a charterparty providing for private arbitration of disputes, faxed the name of an arbitrator to a charterer, which rejected the proposal by return of fax and made its own counter proposal of an arbitrator. On 5 April 2004, the owner faxed an agreement to the counter proposal, but it was not received by the charterer because the fax number omitted the international dialling code and it was sent to a local number in Greece, rather than to the charterer in the Netherlands. The owner was unaware that the charterer had not received its fax, and, not having heard from the charterer, sent a further fax to the wrong number requesting confirmation of the appointment of the arbitrator. The owner then contacted the arbitrator by phone and fax, copying the fax to the correct number for the charterer on 24 December 2004, and the arbitrator sent his own fax to both parties confirming his appointment. The charterer denied the arbitrator was validly appointed within the time provided for under the charterparty. The owner failed on an argument that a contract was formed on 5 April 2004 by application of the postal acceptance rule. In the alternative, the owner argued

that the charterer’s counter-offer remained open for acceptance and was accepted on 24 December 2004. Toulson J held that the critical question was whether a reasonable time had expired by 24 December 2004.73 Having regard to the arbitration provision in the charterparty (‘All disputes from time to time arising out of this contract shall, unless the parties forthwith agree on a single arbitrator …’), he found that the timeframe contemplated by the word ‘forthwith’ meant that acceptance after eight months was outside a reasonable time for acceptance of the offer.

A counter-offer is not an acceptance 3.18 Where an electronic acceptance is made on different or additional terms to the offer, it is generally a counter-offer.74 In Northland Airlines Ltd v Dennis Ferranti Meters Ltd,75 the defendant offered, by telegram, an airplane for sale without specifying any time for delivery: [page 58] Confirming sale to you — aircraft — £27,000, fob Winnipeg. Please remit £5000 for account of Helicopter Maintenance Ltd, Hambros Bank, Bishopsgate, London in EC2. Please cable acknowledgment.

The plaintiff replied by telegram: This is to confirm your cable and my purchase — aircraft set out in terms of your cable. Price £27,000 — delivered fob Winnipeg. £5,000 — your bank in trust for your account pending delivery. Balance payable on delivery. Please confirm delivery to be made 30 days within this date.76

On the defendant selling to another purchaser, the plaintiff successfully sued the defendant for damages. The defendant appealed, saying there was no contract for sale between the parties. The Court of Appeal held that the purported acceptance introduced two new terms and was not an acceptance of the offer. The offer required £5,000 to be paid immediately whereas the purported acceptance made the payment conditional on delivery of the

aircraft. The offer did not state a time for delivery and was read by the court as requiring delivery within a reasonable time, whereas the purported acceptance introduced a term that delivery occur within 30 days. In Lim v dotTV Corp,77 the defendant offered the domain name ‘Golf.tv’ for sale via a public auction over its website. The plaintiff submitted the highest bid and received an email by the defendant, stating: ‘Congratulations! You have won the auction for the following domain name: “Domain Name – golf” …’78 The defendant then reneged and publicly offered the domain name again for a higher price. The plaintiff initially complained that the bid for the domain name ‘Golf.tv’ was an offer accepted by the defendant’s email, before amending the complaint to allege that the bid was an acceptance of the defendant’s offer and that the email merely recorded the agreement. The Court of Appeal of California held that it was open for the plaintiff to plead that the defendant had made an offer. The court further held that, even if the defendant had made an invitation to treat, it was open to the plaintiff to plead that his offer was accepted by the defendant’s email. The court rejected the defendant’s argument that an acceptance specifying ‘--golf’ did not conform to the plaintiff’s offer for ‘Golf.tv’. The court found that the defendant was plainly not making a counter-offer, and that, because ‘--golf’ did not qualify as any other domain name, it could not be read as referring to anything but the plaintiff’s offer. In CX Digital Media v Smoking Everywhere Inc,79 CX Digital acted as a middleman between its network of online publishers and clients that wanted to advertise online. CX Digital made clients’ advertising campaigns available to affiliates who placed clickable adverts for the clients. If clients [page 59] sold anything as a consequence of an ad being clicked, they owed CX Digital a

unit payment, and CX Digital owed its affiliate a unit payment. Smoking Everywhere, a promoter of E-Cigarettes, promised to pay CX Digital $45 for each sale as defined in an ‘insertion order’ in their electronic agreement. CX Digital maintained that the definition of sale, and the 200 sales a day limit that might be invoiced to Smoking Everywhere in the insertion order, had been varied by instant messaging between the parties. As a consequence, CX Digital began to invoice for more sales. Smoking Everywhere refused to pay and CX Digital removed the advertising campaign from its network. At trial, it became apparent that the technical consequence of changing the definition of sale would be that click traffic would be directed to two new URLs. Altonaga J held that the instant messages: CX Digital: Smoking Everywhere:

Have you placed the pixels for the two new pages Please send me both pixels and test links so we can make sure this is correct

demonstrated that, objectively, Smoking Everywhere had communicated its agreement to the variation.80 Further, the instant messages: CX Digital:

Smoking Everywhere CX Digital:

We can do 2000 orders/day by Friday if I have your blessing … [a]nd I want the AOR when we make your offer number one on the network NO LIMIT Awesome!

indicated that Smoking Everywhere had not merely not accepted CX Digital’s offer of 2000 leads a day to be invoiced, but had counter-offered that there should be no limit, the counter-offer being accepted by CX Digital.81 However, where a contract has already been formed, any proposed changes will be an offer to modify the existing terms. In Vergara Hermosilla v Coca Cola,82 Coca Cola, in the course of a telephone conversation, asked Vergara, a lyricist, to assign it copyright in lyrics he had translated into Spanish. Later on the same day, he consented by email to the assignment for $1 on the condition that he be given credit as the adapter of the Spanish version. Following this email, Coca Cola sent a draft contract to Vergara which he rejected because it did not contain a provision for credit. On Vergara suing

for breach of copyright, he argued that his email proposal had been rejected by Coca Cola’s counter-offer contained in the draft contract. But the District Court for the Southern District of Florida held that Vergara’s email was a valid assignment of copyright, and that the draft contract in writing was an offer to modify the terms of the assignment which Vergara was free to reject. [page 60]

Promissory Estoppel 3.19 Although electronic communications between parties may not amount to a contract, the representations contained in the communications may ground an action in promissory estoppel.83 Actions for recovery based on detrimental reliance are common in the United States, reflected in §90(1) of the Restatement (Second) of Contracts:84 A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.

In Osseiran v International Finance Corp,85 the plaintiff sought to gain a controlling shareholding in a company, MECG, by purchasing MECG shares from the defendant. The plaintiff formed the expectation, on the basis of a series of emails exchanged between him and the defendant, that he would enter into a contract with the defendant for the purchase of its MECG shares. In reliance on the representations in the emails, he began purchasing MECG shares from other stockholders. However, the defendant repeatedly postponed executing a formal agreement, while at the same time promising that it would soon execute the formal agreement and that it fully intended to complete the transaction. The defendant did not complete the transaction and sold its MECG shares to another party. The plaintiff sued in contract and in the alternative, promissory estoppel, alleging he had spent $1 million

without achieving control of MECG. On the defendant’s motion to strike out the pleadings, the plaintiff failed to establish a claim in contract, as the defendant’s emails explicitly stated that the defendant’s acceptance was subject to documentation, and that the agreement would come into force only after a written agreement was signed. It followed that the emails expressed no intent to be bound. However, the District Court for the District of Columbia found that the plaintiff had established an arguable claim that he had relied on the defendant’s repeated promises to sign the draft stock sale agreement, and had relied on this promise to his detriment. In Harold H Huggins Realty Inc v FNC Inc,86 the plaintiffs had agreed to an arbitration clause in an online user agreement in 2002. The same user agreement provided that it could be modified at any time by the defendant posting terms in the same location, effective thirty days after posting, subject to the defendant asking users to acknowledge the changes. In 2005, the defendant posted modifications that did not include an arbitration clause. The defendant did not ask users to acknowledge the changes, but existing users logging on [page 61] after the changes were posted would have seen a banner at the top of the webpage drawing attention to the modifications. On the plaintiffs commencing proceedings, the defendant denied the modifications were effective. The District Court for the District of Maryland, applying the substantive law of Mississippi, held that although the plaintiffs could not demonstrate detrimental reliance sufficient to establish a promissory estoppel, the defendants were estopped from denying the changes under a doctrine of equitable ‘quasi-estoppel’ recognised in Mississippi, precluding a party from ‘asserting to another’s disadvantage, a right inconsistent with a position [it has] previously taken’ in circumstances of unconscionability.87

The unconscionability arose because, before the plaintiffs had brought the proceedings, the defendant had never asserted that its modifications had failed, and had never sought to correct the failure by notifying subscribers that the 2002 agreement still applied.88 However, in 2001 Trinity Fund LLC v Carrizo Oil & Gas Inc,89 in which two oil companies failed to agree by exchange of emails to continue an agreement after it had automatically terminated, the Court of Appeals of Texas concluded that the email statements ‘that will work … [y]es has been my final answer’ made after the agreement terminated were too vague and indefinite to support a promissory estoppel to the same effect.90

Illusory Contracts 3.20 Finally, a series of decisions have held electronic contracts to be unenforceable because they were illusory. A contract may be uncertain where the terms are not final, or illusory where one party retains a discretion whether or not to perform.91 In Comb v PayPal Inc,92 the defendant provided an online payment service that allowed for business or private individuals to send and receive payments via the internet. The defendant generated revenue from transaction fees and the interest it derived from holding funds until they were sent. Prospective customers entered into an online agreement with the defendant. Under the terms of the agreement, the defendant could change the agreement, without prior notice, by posting the revised agreement on its website. As well, the defendant, ‘at its sole discretion’, could restrict accounts, withhold funds, undertake its own investigation of a customer’s financial record, close accounts and procure ownership of all funds unless, and until, the customer was ‘later [page 62]

determined to be entitled to the funds in dispute’.93 The defendant itself made the final decision whether a dispute existed. On being sued by the plaintiffs, the defendant moved to compel arbitration in reliance on the agreement. The court found that the ability of the defendant to unilaterally determine and alter the terms of the contract, seemingly at will, rendered the contract unenforceable. In Defontes v Dell Computers Corporation,94 in which Dell sought to stay proceedings in reliance on an arbitration clause, the Superior Court of Rhode Island cited Comb v PayPal Inc and commented that, because the entire contract between Defontes and Dell could be unilaterally changed by Dell without notice or negotiation, the arbitration clause was illusory and unenforceable. However, the Supreme Judicial Court of Maine, in Stenzel v Dell,95 came to the opposite conclusion in respect of the same provision. On appeal, the court found that, prior to a customer’s acceptance of the shrinkwrap licence,96 Dell was free to unilaterally alter the agreement but, once a customer had accepted the agreement, it could not be altered by either party without a formal written agreement to do so. Nevertheless, in construing arbitration clauses in clickwrap agreements, the courts in the United States have been remarkably consistent. In Harris v Blockbuster Inc,97 Harris alleged breach of privacy arising out of her renting a video online, and Blockbuster sought to rely on an arbitration clause in the contract. The District Court for the Northern District of Texas held that the clause was illusory because Blockbuster reserved the right to modify the terms and conditions of the agreement, including the arbitration clause ‘at its sole discretion’ and ‘at any time’.98 In Grosvenor v Quest Communications Intern, Inc,99 Grosvenor alleged that Quest, in breach of its promise that the monthly cost of his internet service would stay the same as long as he remained a customer, raised the rate it charged for the service. On Quest raising a compulsory arbitration clause under the agreement, Grosvenor successfully argued that the clause was illusory because Quest retained an unfettered right to unilaterally change its existence or scope without notice. A similar result

was reached in In re Zappos.com, Inc Customer Data Security Breach Litigation,100 in which customers of the online retailer sued it for damages for breaching security. Because Zappos could unilaterally change the agreement, including the arbitration clause, at any time without notice to the consumer, the court remarked laconically: ‘[T]he agreement allow[ed] Zappos to hold its customers and users to the promise to arbitrate while reserving its own escape hatch.’101 [page 63] However, in In re H&R Block IRS Form 8863 Litigation,102 the District Court of Missouri rejected arguments that an arbitration clause in an electronic contract with H&R Block was illusory because H&R Block would not invoke the arbitration clause against individual claims brought by consumers in a small claims court, and the ‘opt out’ provision would still catch consumers under arbitration clauses from contracts in prior tax years. The court agreed with H&R Block that the small claims clause simply gave consumers the benefit of bringing a small claim if they wished, and a number of consumers had in fact opted out of the arbitration provision without adverse consequences.

Conclusion 3.21 There is a significant distinction between the principles governing the formation of non-webpage electronic contracts and webpage electronic contracts. Non-webpage electronic contracts conform easily to established principles of the bargain theory of contract formation. Webpage contracts do not. Webpage proposals consist of standard form terms displayed on an interactive website generated by computer. At common law, these proposals are likely to be offers as they express a willingness to be bound to a clear

statement of terms capable of immediate acceptance, without further negotiation. An issue may arise whether the machine is sufficiently interactive to make an offer. Common law courts may adopt a classification of the interactivity of websites similar to that already adopted by courts in the United States. A display on a passive website, akin to an advertisement, may be an invitation to treat. A display on a fully interactive website, such as an online store conducting a business, may well be an offer. A display in the middle category, where a user is able to exchange information with a host computer, may or may not be an offer, depending on the circumstances. The objection that a proposal for the sale of goods should not amount to an offer because the seller should not be bound to supply an unforeseeable demand should not apply to the sale of online services, information and software.103 The consequence of terms being offered by an interactive machine is that the only terms incorporated into a webpage contract are those terms that are reasonably communicated to the offeree before the offeree is committed beyond recall. In Thornton v Shoe Lane Parking Ltd,104 this occurred when Thornton physically put his money into the slot of the ticket machine. The online equivalent, where an agreement appears in a series of logically connected webpages leading the user from an approval of terms, to a selection of goods and services and the provision of credit card details, occurs when the offeree [page 64] performs the ‘last act’ of clicking the virtual ‘OK’ button.105 This approach appears to have been followed in eBay International AG v Creative Festival Entertainment Pty Ltd,106 where Rares J held that webpage contracts were made by the purchasers’ final act of signing online.107 However, an exception to the analysis in Thornton v Shoe Lane Parking Ltd108 may occur where an

existing online contract is varied according to an agreed method of posting and giving notice of the new terms. In this scenario, a ticket case analysis may apply and acceptance may occur some time after the offeree has had a reasonable opportunity of reading the new terms. Notice of terms, then, is the key to the analysis of webpage contracts. The cases on electronic acceptance reflect the position that, unlike webpage contracts, electronic contracts made by email, SMS text, telegram, fax and telex are likely to conform to established principles of contract formation. With the exception of Jafta v Ezemvelo KZN Wildlife and Williams v America Online,109 none of the cases on acceptance really turned on the fact that the agreements were made electronically. Rather, they turned on established principles of whether there was an unequivocal acceptance, whether silence could constitute an acceptance, and whether acceptance had been in the same terms as the offer. It follows there may be no real distinction between the principles governing the formation of electronic contracts per se and the formation of non-electronic contracts. But there remains a significant distinction between the principles governing the formation of webpage electronic contracts, and the formation of non-webpage electronic contracts.

1.

See, for example, New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 per Lord Wilberforce at 167; Gibson v Manchester City Council [1978] 1 WLR 520 per Lord Denning MR at 30 (reversed on appeal [1979] 1 WLR 294).

2.

‘A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.’ See also §2–204 of the Uniform Commercial Code (US).

3.

L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005, at 82.

4.

S Christensen, ‘Formation of Contracts by Email — Is It Just the Same as Post?’ (2001) QUTLJJ 3.

5.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [3–19], [3–20]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.22]; H G Beale (ed), Chitty on Contracts, 29th ed, Sweet & Maxwell, London, 2004, at 2–002. See also Century 21 Canada Limited Partnership v Rogers Communications Inc (2012) 338 DLR (4th) 32 at [82] citing Sookman (1989) Computer, Internet and Electronic Commerce Law, loose leaf (Carswell Toronto, Ontario) at [10.3].

6.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [3–07], [3–08]; N C Seddon and M P Ellinghaus, (2008) Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.13]–[3.17]. H G Beale (ed), Chitty on Contracts, 29th ed, Sweet & Maxwell, London, 2004, at 2–025.

7.

Email uses two functional protocols, Simple Mail Transfer Protocol (SMTP) for writing and sending messages to a mail server and Post Office Protocol/Internet Message Access Protocol (POP/IMAP) to retrieve messages from a mail server: J Hogan-Doran, ‘Jurisdiction in Cyberspace: The When and Where of On-line Contracts’ (2003) 77 ALJ 377 at 383.

8.

SEKO Worldwide LLC v Four Soft Limited (2007) 503 F Supp 2d 1059.

9.

SEKO Worldwide LLC v Four Soft Limited (2007) 503 F Supp 2d 1059 at 1060.

10.

Hyper Text Mark Up Language (HTML) format webpages are downloaded to the user’s computer using Hyper Text Transfer Protocol (HTTP) over the World Wide Web (WWW). HTTP protocol handles communications between computers connected to the web: J Hogan-Doran, ‘Jurisdiction in Cyberspace: The When and Where of On-line Contracts’ (2003) 77 ALJ 377 at 385.

11.

R A Hillman and J J Rachlinski, ‘Standard Form Contracting in the Electronic Age’ (2002) 77 NY Law Review 429 at 432, 433, 468.

12.

N S Kim, ‘Situational Duress and the Aberrance of Electronic Contracts’ (2014) 89(1) ChicagoKent Law Review 265–287 at 265.

13.

N S Kim, ‘Situational Duress and the Aberrance of Electronic Contracts’ (2014) 89(1) ChicagoKent Law Review 265–287 at 270, 272.

14.

M Beshuisen, ‘Just Click Here: A Brief Glance at Absurd Electronic Contracts and the Law Failing to Protect Consumers’ (2005) 14 Dalhousie Journal of Legal Studies 35 at 56.

15.

L Trakman, ‘The Boundaries of Contract Law in Cyberspace’ (2009) 22(2) International Business Law Journal 159–197 at 162.

16.

L Trakman, ‘The Boundaries of Contract Law in Cyberspace’ (2009) 22(2) International Business Law Journal 159–197 at 160.

17.

MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125.

18.

MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 per Stephen J at 139.

19.

Century 21 Canada Limited Partnership v Rogers Communications Inc (2012) 338 DLR (4th) 32 at [73].

20.

J M Moringiello, ‘Signals, Assent and Internet Contracting’ (2004) 57 Rutgers L Rev 1307 at 1338.

21.

J M Moringiello, ‘Signals, Assent and Internet Contracting’ (2004) 57 Rutgers L Rev 1307 at 1338.

22.

Lachs v Fidelity & Casualty Company of New York (1954) 306 NY 357.

23.

Lachs v Fidelity & Casualty Company of New York (1954) 306 NY 357 at 362.

24.

Lachs v Fidelity & Casualty Company of New York (1954) 306 NY 357 at 362.

25.

Lachs v Fidelity & Casualty Company of New York (1954) 306 NY 357 at 366.

26.

Steven v Fidelity and Casualty Company of New York (1962) 58 Cal 2d 862.

27.

Steven v Fidelity and Casualty Company of New York (1962) 58 Cal 2d 862 at 866.

28.

Steven v Fidelity and Casualty Company of New York (1962) 58 Cal 2d 862 at 877, 883, 884.

29.

Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163.

30.

Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169.

31.

Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169.

32.

R (on application of Software Solutions Partners Limited) v Her Majesty’s Commissioners for Customs and Excise [2007] EWHC 971 (QBD, Admin Ct).

33.

R (on application of Software Solutions Partners Limited) v Her Majesty’s Commissioners for Customs and Excise [2007] EWHC 97 (QBD, Admin Ct) at [66].

34.

Zippo Manufacturing Co v Zippo Dot Com Inc (1997) 952 F Supp 1119.

35.

Gator.Com Corp v L L Bean (2003) 341 F 3d 1072 (9th Cir).

36.

American Eyewear Inc v Peepers Sunglasses and Accessories Inc (2000) 106 F Supp 2d 895.

37.

Mink v AAAA Development LLC (1999) 190 F 3d 333 (5th Cir).

38.

V J Lively v Ijam Inc and Monarch Computer Systems Inc (2005) 114 P 3d 487.

39.

V J Lively v Ijam Inc and Monarch Computer Systems Inc (2005) 114 P 3d 487 at 498.

40.

S Christensen, ‘Formation of Contracts by Email — Is It Just the Same as Post?’ (2001) QUTLJJ 3 at 5.

41.

Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169.

42.

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 QB 401.

43.

MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125.

44.

N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.5].

45.

Specht v Netscape Communications (2002) 306 F 3d 17 (2d Cir).

46.

Specht v Netscape Communications (2002) 306 F 3d 17 (2d Cir) at 31.

47.

Douglas v United States District Court for the Central District of California (2007) 495 F 3d 1062 (9th Cir).

48.

Kanitz v Rogers Cable Inc (2002) 21 BLR (3d) 104.

49.

Kanitz v Rogers Cable Inc (2002) 21 BLR (3d) 104 at [7].

50.

Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163.

51.

MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 per Stephen J at 139.

52.

Ontario College of Pharmacists v 1724665 Ontario Inc (Global Pharmacy Canada) [2013] ONSC 4295.

53.

Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] 1 All ER 482.

54.

Ontario College of Pharmacists v 1724665 Ontario Inc (Global Pharmacy Canada) [2013] ONSC 4295 at [131].

55.

Ontario College of Pharmacists v 1724665 Ontario Inc (Global Pharmacy Canada) [2013] ONSC 4295 at [140].

56.

Centrebet Pty Ltd v Baasland (2012) 272 FLR 69.

57.

Centrebet Pty Ltd v Baasland (2012) 272 FLR 69 at [25].

58.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [3–43], [3–44]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.52]–[3.53].

59.

IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205.

60.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84.

61.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84 at [7].

62.

P Stoop, ‘SMS and Email Contracts: Jafta v Ezemvelo KZN Wildlife’ 21 SA Merc LJ 110–125 at 124.

63.

Williams v America Online Inc 2001 WL 135825 (Mass Super).

64.

Trimex International Fze Limited v Vedanta Aluminium Ltd (2010) 3 SCC 1.

65.

Trimex International Fze Limited v Vedanta Aluminium Ltd (2010) 3 SCC 1 at [7].

66.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84.

67.

La Forrest v Ford [2001] QCA 455.

68.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [3–29]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.40].

69.

SmartText Corporation v Interland and KFKI Systems Inc (2003) 269 F Supp 2d 1257.

70.

SmartText Corporation v Interland and KFKI Systems Inc (2003) 269 F Supp 2d 1257 at 1260.

71.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [3–55]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.60].

72.

LJ Korbetis v Transgrain Shipping BV [2005] EWHC 1345 (QB).

73.

LJ Korbetis v Transgrain Shipping BV [2005] EWHC 1345 at [18].

74.

However, see the discussion of §2–207 of the Uniform Commercial Code (US).

75.

Northland Airlines Ltd v Dennis Ferranti Meters Ltd (1970) 114 Sol J 845.

76.

Northland Airlines Ltd v Dennis Ferranti Meters Ltd (1970) 114 Sol J 845 at 845.

77.

Lim v dotTV Corp (2002) 99 Cal App 4th 684.

78.

Lim v dotTV Corp (2002) 99 Cal App 4th 684 at 688.

79.

CX Digital Media v Smoking Everywhere Inc 2011 US Dist LEXIS 29999.

80.

CX Digital Media v Smoking Everywhere Inc 2011 US Dist LEXIS 29999 at 19.

81.

CX Digital Media v Smoking Everywhere Inc 2011 US Dist LEXIS 29999 at 25.

82.

Vergara Hermosilla v Coca Cola 2011 US Dist LEXIS 17517.

83.

See Waltons Stores Interstate Ltd v Maher (1988) 164 CLR 387.

84.

See L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005 at 210, 211.

85.

Osseiran v International Finance Corp (2007) 498 F Supp 2d 139.

86.

Harold H Huggins Realty Inc v FNC Inc (2008) 575 F Supp 2d 696.

87.

Harold H Huggins Realty Inc v FNC Inc (2008) 575 F Supp 2d 696 at 711.

88.

The court also found that the defendant had waived its right to compel arbitration: Harold H Huggins Realty Inc v FNC Inc (2008) 575 F Supp 2d 696 at 713.

89.

2001 Trinity Fund LLC v Carrizo Oil & Gas Inc (2012) 393 SW 3rd 442.

90.

2001 Trinity Fund LLC v Carrizo Oil & Gas Inc (2012) 393 SW 3rd 442 at 458.

91.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [4–13].

92.

Comb v PayPal Inc (2002) 218 F Supp 2d 1165.

93.

Comb v PayPal Inc (2002) 218 F Supp 2d 1165 at 1173, 1174.

94.

Defontes v Dell Computers Corporation 2004 RI Super LEXIS 32.

95.

Stenzel v Dell (2005) 870 A 2d 133.

96.

See Chapter 6, ‘Shrinkwrap, Clickwrap and Browsewrap Agreements’.

97.

Harris v Blockbuster Inc (2009) 622 F Supp 2d 396.

98.

Harris v Blockbuster Inc (2009) 622 F Supp 2d 396 at 398.

99.

Grosvenor v Quest Communications Intern, Inc (2012) 854 F Supp 2d 1021.

100. In re Zappos.com, Inc Customer Data Security Breach Litigation (2012) 893 F Supp 2d 1058. 101. In re Zappos.com, Inc Customer Data Security Breach Litigation (2012) 893 F Supp 2d 1058 at 1065. 102. In re H&R Block IRS Form 8863 Litigation 2014 Master Case No 4:13-MD-02474. 103. S Christensen, ‘Formation of Contracts by Email — Is It Just the Same as Post?’ (2001) QUTLJJ 3 at 5. 104. Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163. 105. N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.44]. 106. eBay International AG v Creative Festival Entertainment Pty Ltd (2006) 170 FCR 450. 107. The final transactional act was a ‘confirmation’ from the offeror. 108. Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163. 109. Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84; Williams v America Online Inc 2001 WL 135825 (Mass Super).

[page 65]

Chapter 4 The Postal Acceptance Rule, Time and Place of Receipt and Jurisdiction Flottweg’s acceptance was communicated by email to Olivaylle at its olive grove in Victoria. Experience suggests that email is often, but not invariably, a form of near instantaneous communication. I consider that there are analogies to be drawn with the way the law developed in relation to telex communications in an earlier era where what I have termed ‘the instantaneous communication rule came to be adopted perhaps at the expense of scientific precision but not so in relation to common commercial understanding. I consider that the contract was made where the acceptance was received: Olivaylle v Flottweg AG (No 4) (2009) 255 ALR 632

Introduction 4.1 An agreement is usually formed at the time an acceptance is received by the offeror.1 The postal acceptance rule, which holds that a contract is made at the time of posting, is an established exception to the receipt rule and applies when it is reasonable to send an acceptance by post.2 The postal acceptance rule, called the ‘mailbox’ rule, also applies to acceptances by post in the United States.3 The rule does not apply to instantaneous communications for the reason that an offeree usually knows immediately if the attempt to communicate is unsuccessful, and can reasonably be held to bear the risk of non-formation of a contract. Because electronic contracts are made at a distance, the time the contract is made may indicate the place at which it is made. This, in turn, may give rise to complex questions of the

proper law of the contract and jurisdiction if the offeror and offeree reside in different jurisdictions. This chapter considers [page 66] the interaction between the receipt and postal acceptance rules and the jurisdiction of common law courts to adjudicate electronic contracts where one of the parties resides outside the jurisdiction.4

The Receipt Rule 4.2 Acceptances by instantaneous means attract the receipt rule. In Bhagwandas Goverdhanda Kedia v M/S Girdharilal Parshottamdas,5 parties entered into an agreement by long distance telephone call. The offer was spoken at Ahmedabad and the acceptance at Khamgaon. The majority of the Supreme Court of India held that a telephone conversation is analogous to parties being in the presence of one another and the time and place of the contract is the time and place of the receipt of the acceptance by the offeror.6 It followed that the contract was made in Ahmedabad. In Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd,7 the respondent, resident in Western Australia, also entered into an agreement over the telephone with the appellant, resident in Denmark, that the appellant would sell Eurobonds and deal with the proceeds as instructed by the respondent. In a telephone conversation, the respondent outlined its requirements and asked: ‘Can Sydbank accept this?’ The appellant replied: ‘Yes. We can accept that and handle it from here.’ The respondent then said: ‘Then please repeat what we have agreed so I am absolutely sure that we have covered all the details.’8 The appellant failed to deal with the proceeds from the sale of the Eurobonds as instructed by the respondent. The respondent sued for breach

of contract as well as misleading and deceptive conduct pursuant to the Trade Practices Act 1974 (Cth). On appeal, the appellant sought to have service of the respondent’s originating process set aside on the grounds that the Federal Court of Australia did not have jurisdiction. The Full Court of the Federal Court held that acceptance by the appellant of the respondent’s offer had been received by the respondent in Australia and consequently the contract had been formed in Australia. Apple Corps Limited v Apple Computer, Inc9 was a dispute over jurisdiction that turned on the construction of words spoken over the telephone, one party being in California and the other in London. Apple Computer, based in California, argued that the words spoken in California proposing completion [page 67] of the agreement were an offer, and the words spoken in London agreeing to the proposal resulted in an agreement made in California. Apple Corps argued the offer to complete was made in London. Mann J characterised the positions of the parties: Each side sought to analyse the facts so that in effect the penultimate words were uttered within their jurisdiction in order that the final words of acceptance should be uttered outside the jurisdiction and received within it.10

On the basis that Apple Corps only had to establish ‘a good arguable case’ to invoke jurisdiction, the court found it had jurisdiction on the basis the contract was likely made in London. In obiter remarks,11 Mann J also considered the possibility that, because identifying offer and acceptance may be ‘extremely forced and introduces a highly random element’12 into an analysis of formation of contract, it was arguable that the agreement was actually made in the two jurisdictions simultaneously. His Honour accepted there was no authority for or against the point and found that Apple Corps

also had a good arguable case sufficient to invoke English jurisdiction that the contract was made in both California and England.

The Postal Acceptance Rule 4.3 The postal acceptance rule is an exception to the usual rule of receipt and applies only to non-instantaneous communications. The rule has been extended to telegrams. In Cowan v O’Connor,13 the plaintiff sent a telegram from outside the city of London to the defendant within the city, directing the defendant to place a number of bets on horse races. The defendant replied by telegram from the city, ‘you are on’. The plaintiff claimed he had not received the proceeds of the bets and sued the defendant for breach of contract. The court held that the proper jurisdiction was the city of London, as that is where the contract had been made: I think that where, as here, a person opens a correspondence and initiates a transaction by telegram he must be treated as though he were, through it, speaking to the person to whom such a telegram is directed, at the place to which he directs it to be sent, and where he intends it to be delivered; and if he desires a reply by telegram such reply must be considered as given to him at the telegraph office from whence such reply is dispatched.14

In Express Airways v Port Augusta Air Services,15 the plaintiff, situated in Queensland, negotiated and concluded an agreement by phone with the [page 68] defendants in South Australia. The plaintiff then sent a telegram through the post office to the telex receiver of the defendants commencing: ‘Confirm agreement to purchase …’16 The plaintiff sued for breach of contract in the Supreme Court of Queensland. The defendant applied to have service of process set aside on the grounds that the contract had been made in South Australia and, consequently, the court had no jurisdiction. The court found that the

telegram was merely a confirmation of an agreement that had earlier been concluded by telephone between the parties, and that the contract was made in South Australia. However, if the telegram had been an acceptance, the novel point arose as to whether the contract was made at the time and place of sending the telegram, or at the time and place of receipt of the telex. The court, noting there was no agreement in the academic authorities on the point, held that the contract would have been made on receipt of the telex message in South Australia. The reasoning of the court is unclear, but it is possible that, since the offer was made by instantaneous means over the telephone, the offeror neither contemplated nor intended a less speedy acceptance by telegram and the postal acceptance rule was not engaged.17

Acceptance by telex 4.4 The courts have been reluctant to extend the ambit of the postal acceptance rule beyond telegrams. It is well known that in Entores Ltd v Miles Far East Corporation,18 the Court of Appeal declined to extend the exception to include an acceptance by telex. The plaintiff argued that, in the United States, a contract made by telephone was made at the place where the acceptance was spoken. Acceptance by telex in the present case was clearly contemplated by the parties and the postal acceptance rule should accordingly apply. The court, primarily Denning LJ, rejected this proposal. In England, there was no clear rule about communications made by telephone or telex, and telex communications did not differ in principle from cases where parties were in the presence of each other. The court expressly indicated that the risk of non-communication of the acceptance should remain with the offeree and not, as in the American case, be shifted to the offeror. Entores suffered from the defect that, although the court characterised telexes as instantaneous rather than non-instantaneous communications attracting the postal acceptance rule, telex communications were not always instantaneous. Whatever doubts may have been held about the correctness of

the decision, Entores was applied in New South Wales in Mendelson-Zeller Co Inc v T & C Providores Pty Ltd.19 The plaintiff, an exporter of fruit incorporated in California, sued the defendant, incorporated in New South Wales, for a [page 69] liquidated sum. The defendant cross-claimed for breach of implied warranties of merchantable quality and fit for purpose. In its cross-defence, the plaintiff argued that the applicable law was that of California, not New South Wales. On a separate hearing of the preliminary point of which law applied, Rogers J found that communications between the parties relied primarily on telexes, and that from time to time, the defendant accepted the plaintiff’s offer to supply fruit at the price stated in a telex of 19 January 1979. The defendant’s acceptances resulted in contracts when they were received by the plaintiff in California. The House of Lords finally considered the issue of acceptances by telex in Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH.20 The appellant argued for doctrinal consistency, submitting that the common law principle, that where the parties are apart, acceptance is at the place where the acceptor stands, should not change according to the means of communication chosen, be it by telex, telephone or letter. The respondent emphasised the pragmatic reasons for the development of the postal acceptance rule, arguing that it was a true exception to the receipt rule. The House of Lords affirmed the decision in Entores but stopped short of saying that the postal acceptance rule could never apply to telexes. Each individual case had to be decided according to the intentions of the parties, sound business practice and by a judgment of where the risks of noncommunication of acceptance should lie. Fraser LJ, in particular, was sympathetic to the appellant’s argument but saw no reason to shift the risk of

non-communication from the offeree to the offeror.21 In general, their Lordships were satisfied that the postal acceptance rule should remain a commercially expedient exception to the usual rule of receipt.22 In Leach Nominees Pty Ltd v Walter Wright Pty Ltd, an acceptance by telex was held to be an exception to the receipt rule.23 The respondent, a building block manufacturer, sued the applicant in the Supreme Court of Western Australia for breach of a contract of carriage made by telex. The applicant brought a motion to have the service of the writ set aside on the grounds that the contract was made in Victoria, not Western Australia. The evidence was that the offer had been made by the applicant, situated in Melbourne, by telex to the respondent’s agent in Perth. The agent did not have a telex machine and received notice of the telexed offer by a telephone call from the Chief Telegraph Office at Perth. The agent responded by telephoning the Chief Telegraph Office and dictating a reply to be sent to the applicant by public telex. There was evidence that, once the agent had made the telephone call, the telex was beyond his recall. There was further evidence that, although a telephoned message to the Chief Telegraph Office was usually transmitted immediately, there were circumstances under which it might be delayed. [page 70] The Master noted that where communication was not instantaneous, the offeror could waive the benefit of receiving actual notification of acceptance. In the present case, the evidence was that the telex messages were not instantaneous. Further, the offer was made by the applicant’s private telex to the respondent’s agent by way of the public telex system and the applicant must have known that an answer would be by way of a public telex operated by a third party. Accordingly, the applicant impliedly indicated a public telex response as a mode of acceptance. It followed there was a strong arguable case

that the contract was made when the respondent’s agent gave the message of acceptance to the telex operator in Perth.

Acceptance by fax 4.5 Since Brinkibon, the courts have declined to extend the exception to acceptances by fax. In Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd,24 the respondent, a company incorporated and resident in New South Wales, requested the manufacture and supply of goods from the appellant, a company incorporated and resident in New Zealand. The appellant faxed the respondent: ‘Will confirm order on our official confirmation sheets, over next few days. Please accept this as our confirmation in meantime.’25 Later, the appellant sent a further ‘acknowledgment of order’, containing conditions of sale significantly different from those proposed by the respondent. The respondent rejected these terms by telex. Further telexes ensued, but the issue was never resolved. The appellant shipped goods to the respondent but the respondent alleged the goods were deficient and sued the appellant for breach of contract in the Supreme Court of New South Wales. By a majority, the Court of Appeal of New South Wales found the faxed confirmation was an acceptance and the contract was made in New South Wales where the fax was received. Kirby P, in dissent, agreed that if the fax was an acceptance, it would have made a contract in New South Wales. However, his Honour found the fax was no more than an indication of a good faith intention to contract. At best, the respondent was on notice that the appellant’s acceptance was conditional on a further document still to be received. Reese Bros was followed in Australia by Egis Consulting Australia Pty Ltd v First Dynasty Mines Ltd,26 where the plaintiff in Western Australia made an offer to the defendant in the Yukon Territory of Canada. The defendant accepted the offer by a fax received in Western Australia. The defendant objected to an ex parte order for leave to serve it out of jurisdiction on the basis, inter alia, that the contract was made in Canada. However, the court found that the facts of the case were a

[page 71] straightforward example of the instantaneous communications receipt rule and that the contract had been made in Western Australia. In Canada, the Court of Appeal for Ontario considered a faxed acceptance in Eastern Power Ltd v Azienda and Ambiente,27 in which the appellant was incorporated in Ontario and the respondent in Italy. The parties negotiated a joint venture agreement to develop alternative energy sources in Rome. An agreement was signed by the respondent in Italy and faxed to the appellant. The appellant signed the agreement in Ontario and faxed it back to Italy. Later, the respondent also signed and faxed a letter of intent to the applicant in Ontario, which signed and faxed it back to Italy. The agreement was terminated by the respondent and the appellant forwarded an invoice to the respondent for $478,547 for costs relating to the project. The respondent filed a summons in Rome, seeking a declaration that it had no liability to the applicant. The appellant commenced an action in Ontario, seeking damages against the respondent for costs incurred and loss of profits. At first instance, the court set aside service of the appellant’s statement of claim in Italy and stayed the action in Ontario on forum non conveniens factors. The appellant appealed, in part, on the question of where a contract is formed when acceptance is communicated by fax. The Court of Appeal disagreed with the appellant’s contention that the postal acceptance rule applied in the case of faxes. The court reasoned that, like the telex considered in Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft,28 fax was an instantaneous form of communication. It followed that the contract in question in the present case was formed in Italy. In the course of its decision, the court cited with approval a decision of Haliburton J in Joan Balcom Sales Inc v Poirier.29 In this case, a real estate agent located in Berwick, in the County of Kings, sold real estate, located in Annapolis County, for vendors resident in Ottawa. The agent prepared a listing agreement and, later, a sales agreement in Berwick and

faxed the documents to Ottawa. The respondents signed the agreements and faxed them back to Berwick. After the property had been sold, the vendors deducted $1,200 from the agent’s commission to compensate a tenant for short notice. The agent sought to recover the balance of the commission owing on the sale in accordance with the agreement. In obiter comments, Haliburton J held that, as a general rule, no contract was complete or executed until acceptance of the offer was communicated to the offeror and the risk of acceptance not being communicated was borne by the offeree. However, when post was the primary method of commercial communication, the postal acceptance rule gave the offeree the certainty of a firm contract. Acceptance by later technologies, such as telephone and telex, adheres to the general rule because they are instantaneous forms of communication. Acceptances by fax are similarly instantaneous and should also be subject to the general rule. [page 72] In England, the High Court in L J Korbetis v Transgrain Shipping BV,30 considered the question of whether an arbitrator had been validly appointed by fax to arbitrate a dispute between a ship owner and a charterer under a charterparty. The owner faxed the name of an arbitrator to the charterer, which rejected the proposal by return of fax and made its own counter proposal. The owner faxed an agreement to the counter proposal, but it was not received by the charterer because the fax number omitted the international dialling code, sending the fax to a local number in Greece, rather than to the charterer in the Netherlands. The owner was unaware that the charterer had not received its fax, and, not having heard from the charterer, sent a further fax to the wrong number requesting confirmation of the appointment of the arbitrator. The owner then contacted the arbitrator and the arbitrator sent his own fax to both parties confirming his appointment. The charterer denied the arbitrator was validly appointed

within the time provided for under the charterparty. The owner argued that although the owner’s acceptance had not been communicated to the charterer for many months, an agreement was validly formed under the postal acceptance rule on faxing the acceptance. The court found the postal acceptance rule did not apply because the fax had been incorrectly addressed: ‘Common sense dictates that it is unfair to the intended recipient that he should be bound by something which he is unlikely to receive because of the fault of the sender.’31

Acceptance by email 4.6 In Olivaylle v Flottweg AG (No 4),32 the respondent, based in Germany, accepted the counter-offer of the applicant, based in Australia, by email. It was common ground between the parties that the contract was made in Australia, the place of the receipt of the respondent’s email. Logan J agreed, expressing the view that the instantaneous communication rule applied to emails. Flottweg’s acceptance was communicated by email to Olivaylle at its olive grove in Victoria. Experience suggests that email is often, but not invariably, a form of near instantaneous communication … It is enough to observe that I consider that there are analogies to be drawn with the way the law developed in relation to telex communications in an earlier era where what I have termed ‘the instantaneous communication rule’ came to be adopted, perhaps at the expense of scientific precision but not so in relation to common commercial understanding. Thus, by analogy with cases concerning the position with what were, or were treated as, other forms of instantaneous communication, I consider that the contract was made where the acceptance was received, ie in Victoria …33

4.7 Where contract formation by non-instantaneous means is contemplated by the parties, the postal acceptance rule shifts the uncertainty of whether [page 73]

a contract has been made from the offeree to the offeror.34 It follows that electronic contracts may be subject to the postal acceptance rule if they are non-instantaneous. The question, then, becomes whether the contemplated electronic communication is instantaneous or non-instantaneous. The main means of making a contract online are the exchange of Simple Mail Transfer Protocol (SMTP) email and use of Hyper Text Transfer Protocol (HTTP)-based webpages.35 Email consists of a multi-stage ‘store and forward’ process which, depending on connections, outages and the occasional disorder of the internet, may take seconds, minutes or, in some extreme cases, weeks. There is no easy way for the message sender to know or verify whether the message has been received and error messages are limited mainly to emails that are ‘returned to sender’ because of errors in the email address. Websites, on the other hand, progress a customer through webpages using a real-time exchange of data. Webpage users are informed of errors and are able to take greater responsibility for the exchange of information as a result.36 Communication via interactive websites is virtually instantaneous and there seems little reason why the receipt rule should not apply to contracts made by webpage.37 Emails are more problematic. First, they can be thought of as non-instantaneous and analogous to post. Once an email message is sent, the sender loses control of the message as it passes through the hands of intermediaries. There may be a period of some minutes, or even days, before an acceptance may be communicated to an offeror and, if there is a technical delay, the offeree may not be aware of it. At this technical level, it stands to reason that the postal acceptance rule should apply to email. However, the second way of thinking about emails is that although they are not perfectly instantaneous, they are generally very fast and current software allows for the precise identification of the time of sending and delivery. As well, in the case of failed delivery, the sender may receive a message to that effect.38 This analysis suggests that the receipt rule, not the postal acceptance rule, should apply to emails.

Ultimately, it is not the technical operation of SMTP that decides the question, but the policy of the law in keeping the postal acceptance rule as a true exception to the receipt rule. In Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH,39 the House of Lords was aware that telexes [page 74] were non-instantaneous,40 but was concerned to confine the ambit of the postal acceptance rule to that of a true exception to the receipt rule. It is this reasoning that suggests the common law may be slow to apply the postal acceptance rule to emails. Nevertheless, it remains open to a court considering contracts formed by email, to determine whether the offeror or the offeree should bear the risk of the non-formation of a contract depending on the facts of the case.

Recalling an Electronic Acceptance 4.8 Email has the facility to allow a party to recall a message. There are a number of technical outcomes on sending a message, recalling it and replacing it with a new message, depending on the settings for the Microsoft software program ‘Outlook’ that the recipient has on their system: 1.

‘Tracking options’ and ‘Process requests and responses on arrival’ selected: Both the original message and the recall message are received in the recipient’s inbox. Assuming the original message has not been read, the original message is deleted, the recipient is informed that the sender deleted the message from his or her mailbox and the recipient reads the new message.

2.

‘Tracking options’ and ‘Process requests and responses on arrival’ not selected: Both the original message and the recall message are received

in the recipient’s inbox. On the recipient’s computer, one of the following occurs: (a) If the recipient opens the recall message first, the original message is deleted and the recipient is informed that the sender deleted the message from his or her mailbox, and the recipient reads the new message; or (b) if the recipient opens the original message first, the recall fails, and both the old and new messages are available for the recipient to read. 3.

Original message moved to another folder and recall message remaining in inbox: The recipient receives a message indicating that a recall attempt failed. Both the old and new messages are available for the recipient to read.

4.

Original message and recall message moved to same folder: On the recipient’s computer, one of the following occurs: (a) If the recipient opens the recall message first, the original message is deleted and the recipient is informed that the sender deleted the message from his or her mailbox, and the recipient reads the new message; or (b) if the recipient opens the original message first, the recall fails, and both the old and new messages are available for the recipient to read.41 [page 75]

Where the recalled email is an acceptance of an offer, and the new email is a retraction of the acceptance, there are a number of possible outcomes, according to whether the receipt rule, or the postal acceptance rule, or any statutory modification of the rules applies.

4.9 In scenarios 1, 2(a) and 4(a), if the receipt rule applies without statutory modification, the acceptance is not communicated to the offeror because the email remains unread and no contract is formed. However, if the postal acceptance rule applies, the question arises whether the retraction of the acceptance is effective to prevent a contract from forming. On a strict application of the rule, the retraction would not be effective. Scenarios 2(b), 3 and 4(b) are more complex. If the receipt rule applies without any statutory modification, whether or not a contract is made may depend on the order in which the emails are read. If the original message is read first, a contract is formed and the new email is ineffective to retract the acceptance. However, if the postal acceptance rule applies, one case on point may be a decision made 185 years ago in Dunmore v Alexander.42 A Lady Agnew offered the services of Alexander to the Countess of Dunmore. The Countess accepted this offer by letter, posted to Lady Agnew on 5 November 1826. Lady Agnew passed this letter on to Alexander. Meanwhile, the Countess posted a second letter to Lady Agnew on 6 November 1826, withdrawing the acceptance. This letter arrived after the first, but Lady Agnew forwarded this letter ‘by express’ to Alexander. As a consequence, Alexander received both letters at the same moment. Alexander brought an action for breach of contract. The Countess of Dunmore argued there was no contract. At first instance, the Sheriff Substitute defined the issue as ‘whether a party who accepts of an offer is entitled, at the same moment … to retract his acceptance’.43 The Sheriff Substitute found that it was beyond the power of the Countess of Dunmore at any time, however short the interval, to retract the acceptance. On appeal, the majority found that simultaneous receipt of the two letters by Alexander was determinative. Lady Agnew’s authority to hire Alexander was withdrawn before communication of the acceptance was made to Alexander. However, Lord Craigie dissented, holding that Lady Agnew was effectively the broker between the parties. As a consequence, on receipt by

Lady Agnew of the letter of 5 November 1826, the contract was complete and no subsequent letter from the Countess of Dunmore could annul the contract by the mere circumstance of the two letters being received simultaneously by Alexander. Dunmore v Alexander is unsatisfactory, as it appears to turn on the question of the authority of Lady Agnew to bind Alexander, rather than the question of the power of an offeree to retract an acceptance made by post before it was communicated to the offeror. [page 76] Somewhat more recently, in Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd,44 a purchaser of land sent the vendor an executed counterpart of the contract of sale with a covering letter stating: ‘The contract is forwarded on the basis that it will be held by you on our behalf pending receipt by us of an identical contract signed by the vendor company.’45 The vendor posted a counterpart contract to the purchaser but, before the purchaser had received the contract, telephoned and withdrew the acceptance of the purchaser’s offer. The purchaser maintained that a contract for sale of land was made on the vendor posting its counterpart of the contract. Hedigan J held that the postal acceptance rule did not apply as the purchaser had specified receipt of the vendor’s counterpart contract. However, in obiter comments, the judge noted that if the postal acceptance rule did apply, an after-posting revocation of an acceptance would probably be ineffective.46 Nunin is also unsatisfactory because of the difficulty of characterising purchaser and vendor as offeree and offeror. However, in scenarios 2(b), 3 and 4(b) above, the better approach is that if the postal acceptance rule applies, the contract is irrevocably made at the time the offeree sends the acceptance and the acceptance cannot be subsequently withdrawn.

Time and Place of Receipt

Time 4.10 Absent electronic transactions legislation, the courts are in some disarray in determining the time and place of receipt of electronic communications. In Schelde Delta Shipping BV v Astarte Shipping Ltd (The ‘Pamela’),47 the charterers failed to pay a hire instalment. The owner’s brokers sent a message by telex at 19 minutes to midnight on Friday night giving notice that the owners intended to withdraw the vessel. The telex was received by the charterers’ telex machine at the same time it was sent. An issue arose whether the telex was received when it was sent, or at the time it came to the notice of the charterer on the opening of business on Monday. The judge found that the telex was received at the opening of business on Monday: What matters is not when the notice is given/sent/dispatched/issued by the owners but when its content reaches the mind of the charterer. If the telex is sent in ordinary business hours, the time of the receipt is the same as the time of dispatch because it is not open to the charterer to contend that it did not in fact come to his attention … a notice which arrives at 23.41 on a Friday night is not to be expected to be read before opening hours on the following Monday.48

[page 77] However, a different result was reached by the Court of Appeal in Anson v Trump.49 The defendant served an amended defence by fax transmission at 9.42 am on 22 November 1996. At 10.05 am, the plaintiff, without actual notice of the fax, entered default judgment. Order 65 r 5(2B) of the rules of court stated: Service by fax may be effected where — (a) the party serving the documents acts by a solicitor, (b) the party on whom the document is served acts by a solicitor and service is effected by transmission to the business address of such a solicitor …50

The issue before the court was whether the concept of ‘transmission’ in the rule implied a reasonable time after transmission of the fax for actual communication of it to the relevant person. The court found that the rule did not import a gloss of reasonable lapse of time for actual communication.

Service by fax was effected when the complete document was received into the recipient’s fax equipment. It followed that the defendant had effected service of the amended defence at about 9.42 am, before entry of the default judgment. 4.11 Schelde Delta Shipping BV v Astarte Shipping Ltd (The ‘Pamela’) and Anson v Trump may have been reconciled by the Supreme Court of South Australia in Dwyer v Canon Australia Pty Ltd (2007) 247 LSJS 438 in which the plaintiff asserted that documents had been served by fax pursuant to the Corporations Act 2001 (Cth), but the defendant denied receiving them. Debelle J held that, except where rules of court permitted, proof of transmission was not sufficient to prove service. Although the question of time of communication was not raised, it would follow that, in the absence of rules of court to the contrary, time of service would be the time of actual or constructive communication. Austar Finance v Campbell51 was concerned with service by an email that was not read, but came to a similar conclusion in respect of service of process under the Corporations Act 2001. A plaintiff faxed an affidavit supporting an application to set aside a statutory demand to the defendant before the last day for service, and then sent a filed copy of the application by email on the last day for service. The defendant received the fax and the email, but did not open the email until three days later. The question before the court was whether originating process transmitted to an email address routinely accessed by the recipient, but not read, was validly served. In answering the question Austin J found that a transmitted email was generally stored in a server not normally located in the intended recipient’s premises. He held that service of originating process to set aside a statutory demand was only valid if it was ‘actually received in readable form’.52 His Honour distinguished between the possibility of personal service by fax, where a physical document is ‘left’ at the

[page 78] premises to which it is sent, and an email which has no physical presence until it is read and printed out.53 His Honour concluded that the affidavit was validly served, but the originating process was not. A contrary position appears to have been reached in Hickory Developments Pty Limited v Schiavello (Vic) Pty Ltd.54 Schiavello emailed documents comprising an application for adjudication on the last day permitted under the Building and Construction Industry Security of Payment Act 2002 (Vic). The court accepted that the emails were actually transmitted to a server in Mona Vale, New South Wales which was in a different state to the adjudicator which was located in Victoria. The court held there was no reason why an application should not be commenced electronically, with the date and time of the filing determined by the date and time of receipt of the transmission by the adjudicator’s server. It followed that the application was in time, because physical receipt of the documents was not required under the Act. The different conclusion reached in Hickory Developments compared to Dwyer and Austar Finance is only explicable on the basis that it considers different legislation. Finally, in Anterra Sunridge Power Centre Ltd v Calgary (City),55 a taxpayer’s appeal to an assessor against its property tax assessment was dismissed because it had failed to ‘disclose’ its evidence within time. The taxpayer had sent its evidence by email on the day of the deadline to an agreed email address. The taxpayer received no error message or message of non-delivery. The assessor denied having received the email within the stipulated time. On appeal to the Alberta Court of Queen’s Bench, the court identified the question as being whether the taxpayer had to prove receipt by the assessor, or whether it was sufficient to prove sending the email to the email address provided by the assessor. The court, on a construction of the relevant statute, found that it would be overly burdensome to a citizen’s rights to require the taxpayer to prove that the email had been received, and

consequently it had disclosed its evidence within time. This decision is contrary to the decision in Schelde Delta Shipping BV and consistent with Anson, although for a different reason. In Anson, the court was construing rules of court, whereas in Anterra the court had regard to a broader principle of construction taking account of citizens’ rights.

Place 4.12 There may also be uncertainty as to the place of receipt of an electronic communication. In Bernuth Lines Ltd v High Seas Shipping Ltd,56 the applicant, a charterer, sought to set aside a final award on the basis that the email notice of the arbitration had not been effectively served. The [page 79] email address to which the notice was sent by the respondent shipowner was not an address that appeared on any previous communication from the applicant, although it appeared on the applicant’s website. A number of emails were sent to the address, including the arbitrator’s final award. The emails had been received in the applicant’s cargo booking department but ignored because staff thought that legal correspondence would have gone elsewhere. The court held that service of the notice was valid. The emails had actually been received at an email address that was held out as the only email address of the applicant. The fact that the emails had failed to reach the appropriate personnel was an internal failing of the applicant and did not affect the validity of service. Finally, in Groff v America Online,57 the Superior Court of Rhode Island was unsure where a webpage contract had been made: It is not clear, in this electronic age, where the last place the contract was executed. Was it when the plaintiff clicked the ‘I agree’ button … in Rhode Island, or where that message was received at defendant’s mainframe in Virginia. The place where the transaction has been or is to be performed

appears to take place where defendant’s mainframe is located [in Virginia]. This Court is not satisfied that the contract was executed in Rhode Island, or to be performed in Rhode Island.58

Electronic transactions legislation 4.13 Electronic transactions legislation provides for time of dispatch according to when an electronic communication leaves an information system under the control of the originator. Time of receipt varies according to whether an electronic information system has been designated for the purpose of receiving communications or not. In the former case, the time of receipt runs from when it is capable of being retrieved. In the latter, the time of receipt only commences to run once the communication is capable of being retrieved and the addressee has become aware of the communication.59 The place of dispatch and receipt is taken to be where the originator of the communication and the addressee have their places of business.60 Where the parties have more than one place of business, the place of business with the closest connection with the underlying transaction is taken to be the relevant place of business or, if this does not apply, the parties’ principal places of business are to count.61 Where a party does not have a place of business, their ordinary place of residence is to count.62 [page 80] On its face, the time of dispatch rule appears to mirror the postal acceptance rule, as an email communication which is dispatched but never ultimately received is deemed to be dispatched the moment it leaves the server of an internet service provider under the control of the originator. It follows that where an email is an acceptance of an offer, the dispatch rule transfers risk to the offeror. An email address at the head of an email may reasonably be taken to designate that email address for the purpose of receiving an electronic communication. However, an email address given in a

paper document supplying personal information may not reasonably be taken as designating an address for the purpose of an electronic communication. Equally, the listing of an email address or facsimile number on a letterhead, or similar document, may not amount to a designation for the purposes of the Act.63 The place of receipt provisions resolve what might otherwise be complex problems of jurisdiction. Because the place of origin or place of receipt of an electronic communication is taken to be the usual place of business or residence of the originator or recipient, it does not matter that, at the time of communication, the information system was located in a jurisdiction foreign to both parties or, for that matter, that, at the time of receipt, the information system may have been in a jurisdiction foreign to both parties. Dugan and Dugan comment that the place of dispatch and receipt rules reflect a choice of law analysis that selects the applicable jurisdiction as the jurisdiction with the closest connection to the transaction. However, an obvious problem arises where e-businesses spread their centres of operation and, consequently, their usual places of business over several jurisdictions.64 4.14 Electronic transactions legislation does not resolve the question of whether the postal acceptance rule applies to contracts made by email because it does not determine which party should bear the risk of actual non-receipt of an email acceptance. If the receipt rule is applied to email communications then, under the legislation, an acceptance is received either at the time it enters the offeror’s designated information system, or when it comes to the attention of the offeror. The place of receipt, governing the law of the contract, will be the usual business or residential address of the offeror. If the postal acceptance rule applies, the acceptance is dispatched and the contract is formed at the time it enters an information system outside the control of the offeree. The place of the dispatch, governing the law of the contract, is the usual place of business or residence of the offeree. It remains for a court to determine whether or not the postal acceptance rule should apply.

[page 81]

Jurisdiction 4.15 Internet transactions often involve multiple jurisdictions, and, since websites are accessible worldwide, the prospect that a website owner might be served with proceedings commenced in a far-off jurisdiction is a real possibility.65 In litigation involving Yahoo! Inc, La Ligue Contre Le Racisme et L’Antisemitisme (LICRA) and L’Union Des Etudiants Juifs de France (UEJF), for example, users of Yahoo! posted Nazi-related propaganda and memorabilia, the sale of which were illegal in France, on Yahoo!’s site. Although Yahoo!’s French subsidiary did not permit such postings, Yahoo!’s United States-based site did not prohibit the postings, pursuant to the First Amendment to the United States Constitution. However, end users in France were able to access Yahoo!’s United States site. LICRA served process on Yahoo! in the United States and proceeded against Yahoo! in the Tribunal de Grande Instance de Paris. In UEJF et LICRA v Yahoo! Inc,66 the court held in 2000 that it was entitled to determine the dispute since the content found on the site was available to French residents and was unlawful under French law. The court made an interim order requiring Yahoo! to take action in California to prevent access in France to the offending sites under threat of a substantial penalty. In Yahoo! Inc v LICRA,67 Yahoo sought a declaration from the United States District Court for the Northern District of California that the order of the Paris Court was unenforceable in the United States because it contravened the First Amendment. The District Court found that it had personal jurisdiction to hear the matter because LICRA had purposefully availed itself of Californian jurisdiction by, inter alia, using the United States Marshall’s office to effect service of the Paris Court’s order on Yahoo! in California. The District Court declared that the French court lacked jurisdiction and that the judgment, anyway, offended the United States

Constitution. On appeal, a three-judge panel of the Ninth Circuit reversed the decision on the grounds the District Court improperly exercised personal jurisdiction over LICRA and UEJF.68 However, this decision was vacated by the Full Bench and set down for a rehearing en banc.69 In 2006, a majority of the Ninth Circuit sitting en banc finally held that the District Court had personal jurisdiction over the defendants.70 The Full Court held that sending a cease and desist letter to a forum resident did not, in itself, enliven personal jurisdiction, nor did service of documents in a forum in connection with a suit brought in a foreign jurisdiction. However, foreign litigants obtaining orders in a foreign jurisdiction, commanding compliance in the forum on threat of a penalty, did [page 82] enliven the personal jurisdiction of a court of the forum. Nevertheless, the Full Court by a majority reversed the decision of the District Court and remanded the matter with directions to dismiss the action on other grounds. Two jurisdictions, three courts, five hearings and six years later, LICRA and UEJF finally obtained orders against Yahoo! in California that they may or may not be able to enforce. This series of cases demonstrates the difficulty of applying national laws to transactions entered into by a medium transcending national boundaries.

Australia Choice of law 4.16 Freedom of electronic contract allows contracting parties to specify the law of the contract. Where a choice of law clause is provided, Australian courts favour giving effect to the choice of the parties, provided the selection is bona fide and does not offend public policy.71 The Supreme Court of the

Northern Territory in Centrebet Pty Ltd v Baasland72 had no difficulty in upholding a clause in a website agreement selecting the law of the Northern Territory as governing the agreement. Where an electronic contract does not state the governing law, the Australian conflict of law rule states that the law of the jurisdiction with the closest connection to the contract will be applied. In Mendelson-Zeller Co Inc v T & C Providores Pty Ltd,73 it was common ground that a series of contracts, made primarily by telex, made no express choice of law. The court, in determining the system with which the transaction had its closest and most real connection, took into consideration: where the contract was made; where the contract was performed; the place of residence or business of the parties; and the nature and subject matter of the contract. The weight given to these factors will vary according to the circumstances. The defendant, from time to time, accepted the plaintiff’s offer of supply at a price stated in a telex of 19 January 1979 and these acceptances resulted in contracts made in California. It followed that the law of the contract was that of California. In Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd,74 involving contracts made by fax and telex between New Zealand and New South Wales, the Court of Appeal of New South Wales applied Bonython v Commonwealth of Australia,75 holding that the law of the contract was the system of law by reference to which the contract was made or to which the transaction had its [page 83] closest and most real connection. The majority found that the circumstance that the contract was to be performed in New Zealand was material, but this consideration was outweighed by the circumstances that, in the view of the majority, the contract was made in New South Wales, it provided for arbitration in New South Wales and incorporated, by reference, the terms

and conditions of Australian Standards. It followed that the law of the contract was the law of New South Wales.

Jurisdiction 4.17 An Australian court’s jurisdiction to adjudicate a dispute arises when the defendant is personally served with originating process. Leave to proceed against a party outside a court’s jurisdiction may be granted if a contract which is the subject of that legal process falls within the categories specified by the rules of that court. Leave might be refused or a stay of proceedings might be granted if the forum is clearly inappropriate.76 A forum will be clearly inappropriate if litigation between the same parties involving the same subject matter is pending in another forum or it would otherwise be ‘vexatious or oppressive’ for the proceedings to continue.77 In Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd,78 the Court of Appeal of New South Wales accepted that a court in New South Wales should only decline to exercise jurisdiction on the ground of forum non conveniens if the pursuit of the action in the court would be ‘clearly inappropriate’, consistent with the High Court of Australia’s decision in Oceanic Sun Line Special Shipping Co Inc v Fay.79 The heavy onus on an applicant for a stay was apparent in Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd.80 The Full Court of the Federal Court upheld a first instance decision denying Sydbank’s application for a stay. Sydbank argued that: it had never carried on business in Australia; all relevant events, apart from the telephone conversation, occurred in Denmark; its witnesses resided in Denmark; all correspondence was in Danish; and expert evidence could be given in a Danish court as to any loss and damage suffered by Bannerton. Bannerton, on the other hand, carried on a business in Australia and had its registered office there. The representations occurred in Australia, Sydbank’s failure to disclose its change of mind occurred there, and there was an arguable case that the proper law of the contract was the law of Western Australia. The Full Court held that Sydbank

had failed to discharge its onus of demonstrating that Australia was so inappropriate a forum that continuation of the proceedings in Australia would be vexatious and oppressive. [page 84]

Canada 4.18 In Canada, rules of court provide for service of process outside of jurisdiction with leave, where there is a real and substantial connection with the forum. If a foreign online vendor is carrying on business within the forum, a Canadian court will likely find a real and substantial connection between the out-of-jurisdiction vendor and the forum.81 In Pacific International Securities Inc v Drake Capital Securities,82 the plaintiff was a British Columbia share dealer which had made a contract, by telephone and fax, with the defendant, a securities dealer in California, for the purchase of shares. The shares would normally have been delivered by electronic transaction. On the defendant’s failure to deliver the shares, the plaintiff served a writ on the defendant with the leave of the court on the basis of a real and substantial connection between the cause of action and British Columbia. The Court of Appeal for British Columbia upheld the validity of service on the basis that the plaintiff had suffered damage in British Columbia. In obiter remarks, the court also held that the defendant carried on business in the jurisdiction through electronic means, even though it had no physical presence: Securities transactions involve intangible property effected by electronic means through various intermediaries in different physical locations. In the world of electronic commerce, physical locations can become almost incidental and other factors assume greater importance … it is at least arguable on the facts asserted by Pacific that the defendants can be said to carry on a business in British Columbia.83

The Canadian courts retain a discretion to decline jurisdiction on the

grounds of forum non conveniens.84 In Eastern Power Ltd v Azienda and Ambiente,85 the appellant, located in Ontario, communicated an acceptance by fax to the respondent in Italy. The appellant sought damages and loss of profits in Ontario. The Court of Appeal for Ontario affirmed the primary judge’s decision to stay the proceedings on the basis that Italy was the more appropriate forum. The court took into account the facts that the contract was formed in Italy and that the proper law of the contract was Italian law.

United States 4.19 In the United States, whether a court has personal jurisdiction over an online defendant depends on whether the conduct falls within the ‘long arm’ statute of the jurisdiction, and whether the exercise of jurisdiction [page 85] is consistent with the right to due process under the Constitution. The statutory inquiry is similar to the inquiry made by Australian and Canadian courts of the rules governing their jurisdiction over foreign defendants.86 The constitutional inquiry involves whether the court has either general or specific jurisdiction. A court may exercise general jurisdiction, not limited to a cause of action arising out of a particular contact with the jurisdiction, where a defendant’s contacts with the forum are continuous and systematic. In Gator.Com Corp v L L Bean,87 the respondent, incorporated in Maine, was not authorised to do business in California, had no agent for the service of process in California and was not required to pay taxes in California. However, it sold millions of dollars worth of products in California, mailed a substantial number of catalogues and packages to California, targeted large numbers of Californians by direct email and maintained a large number of online accounts for Californians. Californians could also view and buy products online as well as

interact with customer service representatives in real time over the internet. The appellant caused pop-ups offering coupons for the respondent’s competitors to appear on the respondent’s website that at least partially obscured the website. The appellant sought a declaration in California that it was not infringing the respondent’s rights. On appeal, the Ninth Circuit found that the respondent’s extensive marketing and sales and the presence of a sophisticated website operating as an online store in California constituted continuous and systematic contacts with the jurisdiction sufficient to enliven the court’s general jurisdiction.

Minimum contacts test 4.20 In the case of online defendants, however, courts generally rely on specific jurisdiction, enlivened where a defendant has at least ‘minimum contacts’ with the jurisdiction. One of the earliest internet cases dealing with personal jurisdiction was CompuServe Inc v Patterson.88 Patterson, based in Texas, had contracted with CompuServe, based in Ohio, to upload shareware onto CompuServe’s system for CompuServe’s subscribers to use and purchase. When CompuServe commenced marketing shareware similar to Patterson’s, he alleged that CompuServe was infringing his common law copyright. CompuServe sought a declaration in Ohio that it had not infringed copyright, but at first instance the District Court held that Patterson’s links with Ohio were too tenuous to support personal jurisdiction. On appeal, the Sixth Circuit held that Patterson had sufficient contacts with Ohio because he had knowingly and [page 86] purposefully contracted to market in other states using CompuServe, based in Ohio, as his distribution centre: Patterson chose to transmit his software from Texas to CompuServe’s system in Ohio … myriad

others gained access to Patterson’s software via that system, and … Patterson advertised and sold his product through that system. Though all this happened with a distinct paucity of tangible, physical evidence, there can be no doubt that Patterson purposefully transacted business in Ohio.89

4.21 The leading United States case applying the minimum contacts test to internet transactions is Zippo Manufacturing Co v Zippo Dot Com Inc.90 The plaintiff, a Pennsylvania corporation with its principal place of business in Pennsylvania, manufactured, among other things, ‘Zippo’ lighters. The defendant, a California corporation with its principal place of business in California, operated a website and internet news service, and had obtained exclusive use of the domain names ‘zippo.com’, ‘zippo.net’ and ‘zipponews. com’. The defendant’s contacts with Pennsylvania occurred almost exclusively over the internet. Its website, containing information about the company, advertisements and an application for its internet news service, was available in Pennsylvania and about two per cent of its subscribers were Pennsylvanians. In addition, it had entered into agreements with seven Pennsylvania internet access providers to permit their subscribers to access the defendant’s internet news service. On the plaintiff commencing an action in Pennsylvania for infringement of its trademark, the defendant sought to summarily dismiss the action for want of the court’s personal jurisdiction. In dismissing the motion, the court held that specific jurisdiction permitted it to exercise personal jurisdiction over a non-resident defendant for forumrelated activities where the relationship between the defendant and the forum fell within the ‘minimum contacts’ framework. The test of minimum contacts was that: 1.

the defendant must have sufficient minimum contacts with the forum state;

2.

the claim asserted against the defendant must arise out of those contacts; and

3.

the exercise of the jurisdiction must be reasonable. The court articulated a ‘sliding scale’ test of sufficient minimum contacts

according to the nature and quality of commercial activity conducted over the internet. At one end of the spectrum were situations where the defendant clearly did business over the internet. At the opposite end were situations where the defendant had simply posted information on an internet site which was accessible to users in foreign jurisdictions. The latter was not grounds for the exercise of personal jurisdiction. The middle ground was occupied by interactive websites where a user could exchange information with the [page 87] host computer. In these cases, the exercise of jurisdiction was determined by examining the level of interactivity and commercial nature of the exchange of information that occurred on the website. The court concluded that the defendant had contracted with approximately 3,000 individuals and seven internet access providers in Pennsylvania. The intended object of these transactions was the downloading of the electronic messages forming the basis of the plaintiff’s action. It followed the court had personal jurisdiction over the defendant. Zippo was applied by the Fifth Circuit in Mink v AAAA Development LLC.91 The appellant, resident in Texas, developed a computer program to track furniture sales information. He submitted patent and copyright applications for the program. The appellant alleged that the respondent, a furniture retailer with its principal place of business in Vermont, conspired to copy his system to create an identical system for its own financial gain. The respondent maintained a website, posting information about the respondent’s products and services, that was accessible by residents in Texas. The website provided a printable mail-in order form, a toll-free telephone number, a mailing address and an electronic mailing address. The website did not allow users to purchase products or services online and there was no evidence that the website enabled the respondent to do anything more than reply to an

email from a website user. The Fifth Circuit, applying Zippo, found that the presence of email access, a printable order form and a toll-free number on a website did not, without more, establish minimum contacts sufficient to enliven personal jurisdiction in Texas. Zippo was also applied by the Ninth Circuit in Gator.Com Corp v L L Bean.92 Although the respondent had multiple contacts with California, the operation of the virtual store available online to Californian residents would have been sufficient to establish specific jurisdiction under the sliding scale test. The respondent’s website was highly interactive and very extensive and the respondent clearly did business over the internet. In words echoing the Court of Appeal of British Columbia in Pacific International Securities Inc v Drake Capital Securities,93 the Ninth Circuit commented: It is increasingly clear that modern businesses no longer require an actual physical presence in a state in order to engage in commercial activity there. With the advent of e-commerce, businesses may set up shop, so to speak, without ever actually setting foot in the state where they intend to sell their wares. Our conceptions of jurisdiction must be flexible enough to respond to the realities of the modern marketplace … Businesses who structure their activities to take full advantage of the opportunities that virtual commerce offers can reasonably anticipate that these same activities will potentially subject them to suit in the locales they have targeted.94

[page 88] And in Jagex Limited v Impulse Software,95 a United Kingdom owner of an interactive game, ‘Runscape’, brought an action in Massachusetts against defendants based in Florida alleging they had violated copyright by marketing internet tools that could be used to cheat the game, reducing its appeal for ‘honest’ players. The District Court for Massachusetts held that, under the Zippo sliding scale test, while the defendants had not specifically sought out Massachusetts customers, these customers were not discouraged, and they had access to the defendants’ interactive website to enter into electronic agreements. It followed that the defendants had purposely availed themselves of the Massachusetts jurisdiction.

In Bragg v Linden Research Inc,96 the District Court for the Eastern District of Pennsylvania even exercised personal jurisdiction over a virtual world. Bragg joined Second Life, a virtual world operated by Linden, in which members represent themselves by avatars whose interactions with one another were ‘limited only by the human imagination’.97 Avatars could acquire virtual land, make improvements to the land, exclude other avatars from the land and rent or sell the land to other avatars for profit. Members paid real money to Linden as tax on the land. Bragg claimed that he was induced into investing in virtual land in Second Life by representations made by one Rosedale on behalf of Linden, and that Linden, unlike the operators of other virtual worlds, would recognise members’ full property rights in Second Life. A dispute arose when Bragg acquired a parcel of virtual land named ‘Taessot’ for $300. Linden emailed Bragg that he had acquired the land improperly. Linden took the land away and froze Bragg’s account, effectively confiscating all the virtual property and currency he had acquired in Second Life. On Bragg bringing suit in Pennsylvania against Linden and Rosedale, Rosedale sought to dismiss his claim for lack of personal jurisdiction. Rosedale sought to argue that his statements did not subject him to personal jurisdiction in Pennsylvania because none of the statements were targeted directly at Pennsylvania, as opposed to the nation at large. However, the court found that Rosedale, in orchestrating a campaign at a national level, made representations to Pennsylvanians to purchase virtual land in Second Life. Further, Rosedale: … was the hawker sitting outside Second Life’s circus tent, singing the marvels of what was contained inside to entice customers to enter. [Once inside] participants could even interact with Rosedale’s avatar on Second Life during town hall meetings that he held on the topic of virtual property.98

The court found Rosedale’s marketing was interactive rather than passive, and demonstrated sufficient minimum contacts with Pennsylvania to support specific personal jurisdiction.

[page 89] 4.22 However, Zippo is distinguishable. In the Court of Civil Appeals of Oklahoma in V J Lively v Ijam Inc and Monarch Computer Systems Inc,99 the respondent, resident in Oklahoma, saw a computer on a website, published by the appellants resident in Georgia, and ordered the computer by telephone. The court held that, although the respondent ordered the computer by telephone, it received the appellant’s information via the internet. The majority doubted the test used in Zippo applied: ‘A traditional analysis can be used because it emphasizes the result of the internet activity, rather than the use of the internet’ [emphasis added].100 The court found that the key to personal jurisdiction in internet-related cases was the nature and quality of internet activity: If we were to hold that the ability of an out-of-state resident to access a website was enough to establish jurisdiction, personal jurisdiction could almost always be found in any jurisdiction in the country … The operator of a website should be able to measure with some predictability the forums in which he or she may be subjected to jurisdiction … We hold that the amount of contacts or orders originating from persons within Oklahoma must be taken into consideration when determining whether personal jurisdiction exists … the fact that the appellants had a website that anyone in Oklahoma could access, in and of itself is not enough to permit our courts to exercise personal jurisdiction over the [appellants].101

The Court of Civil Appeals of Oklahoma held that a passive website could enliven personal jurisdiction if sufficient contacts with the forum state resulted from it. However, on the facts before it, the only contact the appellant had with Oklahoma was the sale of the computer to the respondent. The court held that a single transaction over the internet was not sufficient to enliven minimum contacts. Zippo suffers from the flaw that it focuses on the internet activity itself, defined by the level of interactivity, rather than the result of the internet activity. There is no reason in principle why a passive website that generates multiple contacts with a forum should not enliven the jurisdiction of that forum. Similarly, there is no reason why a fully interactive site that generates

merely sporadic contacts with the forum should enliven jurisdiction. However, in both cases a single transaction will be insufficient to enliven jurisdiction. In Malone v Berry102 and Sayeedi v Walser,103 the Court of Appeals of Ohio and the Civil Court of the City of New York both held it insufficient to prove purposeful availment of a jurisdiction where a single transaction has been conducted online via eBay between members where one member is outside the jurisdiction. A defendant will also not fall within jurisdiction merely [page 90] because of random, fortuitous or attenuated contacts.104 For instance, where a defendant’s online connection with a jurisdiction is nothing more than a mass email originated by it and forwarded by a third party to the jurisdiction, the connection is ‘random and fortuitous’ and insufficient to support an exercise of the court’s jurisdiction.105 In R M C Publications Inc v Doulos PM Training,106 a defendant, resident in Texas, used software copyrighted and licensed by the plaintiff, resident in Minnesota. The plaintiff sued the defendant in Minnesota for installing more copies of the software than he should have, and sharing the software with unauthorised persons. The defendant’s contacts with Minnesota were limited to ordering the software online from the plaintiff and contacting the plaintiff by telephone and email for technical support. Further, every time the defendant activated the software, it communicated over the internet with the plaintiff’s licence servers in Minnesota. In transferring the proceedings to Texas, the District Court of Minnesota found that the defendant’s purchasing of software and licences from the plaintiff was ‘clearly insufficient’ to support personal jurisdiction.107 Personal jurisdiction could also not arise from the contacts between the defendant’s software and the plaintiff’s servers on activation of the software. Finally, the court found that because a long

distance sale alone did not found personal jurisdiction, contacts closely related to the purchase, such as communications for the purpose of technical support, could also not found jurisdiction. Since Zippo was decided, the Courts of Appeals have added the criterion of ‘intentionality’ to the sliding scale test so that a court has personal jurisdiction where ‘a person directs electronic activity into the state with the manifested intent of engaging in business or other interactions within the state’ or ‘if the website is interactive to a degree that reveals specifically intended interaction with residents of the state’ or by ‘directly targeting [a] website to the state knowingly interacting with the residents of the forum state’.108 So, to have minimum contacts, an e-business must intentionally avail itself of the opportunity to conduct activities in the forum. The mere acts of a nonresident entering into an electronic contract or engaging in a single electronic transaction in a particular jurisdiction are probably, of themselves, insufficient to enliven the personal jurisdiction of a court of that jurisdiction. It is more likely that purposeful electronic availment of a jurisdiction consists of regular and pervasive e-business within the jurisdiction.109 An e-business may avoid subjecting itself to the personal jurisdiction of a foreign court by [page 91] having a clickwrap agreement incorporating either a forum selection clause, or including a disclaimer that it does not sell products in a particular jurisdiction or jurisdictions, or disabling its site so as not to accept orders from a particular jurisdiction or jurisdictions.110

Conclusion 4.23 The common law courts have consistently applied the receipt rule to acceptances by telex and fax. It is likely that they will continue to apply the

receipt rule to acceptances by email because of the policy argument that the postal acceptance rule should remain a true exception to the receipt rule. However, in the same way that there were circumstances in Leach Nominees Pty Ltd v Walter Wright Pty Ltd111 leading the court to apply the postal acceptance rule to an acceptance by telex, there may well arise circumstances where a court may be persuaded to apply the postal acceptance rule to an acceptance by email. Once a court has decided which rule applies, electronic transactions legislation in each jurisdiction determines the time and place of acceptance. In general, under the receipt rule, a contract will be made either at the time the electronic acceptance enters the information system designated by the offeror for the purpose of receiving it, or, if no system was designated, at the time when the electronic acceptance comes to the notice of the offeror. The place of the contract will be the place where the offeror has its usual place of business. If the postal acceptance rule applies, the contract will be made at the time the electronic acceptance leaves an information system under the control of the offeree and at the place where the offeree has its usual place of business. Companies conducting online business with customers in the United States may be subject to the jurisdiction of a United States court. Merely entering into a contract with a customer in the United States, or making an isolated sale, is unlikely to enliven jurisdiction. However, regular commercial activity using an interactive website within the jurisdiction may fall within the ‘sliding scale’ test of minimum contacts articulated by Zippo Manufacturing Co v Zippo Dot Com Inc.112 Online traders can seek to avoid being subject to foreign jurisdiction by incorporating arbitration, choice of law and forum selection clauses into their online contracts. They can also include a contractual disclaimer that they do not sell products in the jurisdiction they wish to avoid. Ultimately, a company trading online could disable its site so as not to accept orders from the jurisdiction it wishes to avoid.

1.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [3–26]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.22].

2.

H G Beale (ed), Chitty on Contracts, 29th ed, Sweet & Maxwell, London, 2004, at 2–047.

3.

L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005, at 82, 83.

4.

For a discussion of the application of the Rome Convention to cross-border electronic contracts entered into within the European Union, see H G Beale (ed), Chitty on Contracts, 29th ed, Sweet and Maxwell, London, 2004, at 30-092–30-098.

5.

Bhagwandas Goverdhanda Kedia v M/S Girdharilal Parshottamdas (1966) AIR 543.

6.

The dissent, which held the contract was made at the place the acceptance was spoken, turned on a construction of s 4 of the Indian Contract Act which was not adapted to the invention of the telephone.

7.

Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 149 ALR 134.

8.

Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 149 ALR 134 at 142.

9.

Apple Corps Limited v Apple Computer, Inc [2004] EWHC 768.

10.

Apple Corps Limited v Apple Computer, Inc [2004] EWHC 768 at [31].

11.

Apple Corps Limited v Apple Computer, Inc [2004] EWHC 768 at [36]–[43].

12.

Apple Corps Limited v Apple Computer, Inc [2004] EWHC 768 at [42].

13.

Cowan v O’Connor (1888) 20 QBD 640.

14.

Cowan v O’Connor (1888) 20 QBD 640 at 642.

15.

Express Airways v Port Augusta Air Services [1980] Qd R 543.

16.

Express Airways v Port Augusta Air Services [1980] Qd R 543 at 543.

17.

See Tallerman & Co Pty Ltd v Nathan’s Merchandise (Vic) Pty Ltd (1957) 98 CLR 93 at 111–12.

18.

Entores Ltd v Miles Far East Corporation [1955] 2 QB 327.

19.

Mendelson-Zeller Co Inc v T & C Providores Pty Ltd [1981] 1 NSWLR 366.

20.

Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34.

21.

Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 at 43.

22.

Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 at 48.

23.

Leach Nominees Pty Ltd v Walter Wright Pty Ltd (1985) 85 FLR 427.

24.

Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106; [1988] NSWCA 417. Note: (1988) 5 BPR 11,106 is only a partial report.

25.

Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106 at 11,107; [1988] NSWCA 417. Note: (1988) 5 BPR 11,106 is only a partial report.

26.

Egis Consulting Australia Pty Ltd v First Dynasty Mines Ltd [2001] WASC 22.

27.

Eastern Power Ltd v Azienda and Ambiente (1999) 178 DLR 4th 409.

28.

Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft [1983] 2 AC 34.

29.

Joan Balcom Sales Inc v Poirier [1991] 28 ACWS (3d) 551.

30.

L J Korbetis v Transgrain Shipping BV [2005] EWHC 1345 (QB).

31.

L J Korbetis v Transgrain Shipping BV [2005] EWHC 1345 (QB) at [11].

32.

Olivaylle v Flottweg AG (No 4) (2009) 255 ALR 632.

33.

Olivaylle v Flottweg AG (No 4) (2009) 255 ALR 632 at [25].

34.

J Hogan-Doran, ‘Jurisdiction in Cyberspace: The When and Where of Online Contracts’ (2003) 77 ALJ 377 at 380, 381.

35.

Other means include voice mail, VOIP SMS text messaging and bulletin boards: A Davidson, ‘Acceptance by Email and the “Postal Acceptance Rule”’ (2006) Proctor 37 at 38.

36.

J Hogan-Doran, ‘Jurisdiction in Cyberspace: The When and Where of Online Contracts’ (2003) 77 ALJ 377 at 384, 385.

37.

J Hogan-Doran, ‘Jurisdiction in Cyberspace: The When and Where of Online Contracts’ (2003) 77 ALJ 377 at 387.

38.

F F Wang, ‘E-Confidence: Offer and Acceptance in Online Contracting’ (2008) 22(3) International Review of Law, Computers and Technology 271–278 at 277.

39.

Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34.

40.

Brinkibon Ltd v Stahag Stahl und Stahlwarenhandelsgesellschaft mbH [1983] 2 AC 34 at 42 cited in Leach Nominees Pty Ltd v Walter Wright Pty Ltd (1985) 85 FLR 427 at 433.

41.

Technical information published by Microsoft Corporation in 2008 at http://office.microsoft.co‐ m/en-us/outlookHA010917601033.aspx, accessed 15 July 2008.

42.

Dunmore v Alexander (1830) 9 Sh (Ct of Sess) 190.

43.

Dunmore v Alexander (1830) 9 Sh (Ct of Sess) 190 at 191, 192.

44.

Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74.

45.

Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74 at 77.

46.

Nunin Holdings Pty Ltd v Tullamarine Estates Pty Ltd [1994] 1 VR 74 at 81.

47.

Schelde Delta Shipping BV v Astarte Shipping Ltd (The ‘Pamela’) [1995] 2 Lloyd’s Rep 249.

48.

Schelde Delta Shipping BV v Astarte Shipping Ltd (The ‘Pamela’) [1995] 2 Lloyd’s Rep 249 at 252.

49.

Anson (Lady Elizabeth) (t/a Party Planners) v Trump [1998] 3 All ER 331.

50.

Anson (Lady Elizabeth) (t/a Party Planners) v Trump [1998] 3 All ER 331 at 336.

51.

Austar Finance v Campbell (2007) 215 FLR 464.

52.

Austar Finance v Campbell (2007) 215 FLR 464 at [49].

53.

Austar Finance v Campbell (2007) 215 FLR 464 at [60].

54.

Hickory Developments Pty Limited v Schiavello (Vic) Pty Ltd (2009) 26 VR 112.

55.

Anterra Sunridge Power Centre Ltd v Calgary (City) [2014] ABQB 223.

56.

Bernuth Lines Ltd v High Seas Shipping Ltd [2006] 1 All ER (Comm) 359.

57.

Groff v America Online A 2d 1998 WL 307001 (R I Super).

58.

Groff v America Online A 2d 1998 WL 307001 (R I Super) at 4.

59.

Electronic Transactions Act 1999 (Cth) s 14A(1).

60.

Electronic Transactions Act 1999 (Cth) s 14B(1).

61.

Electronic Transactions Act 1999 (Cth) s 14B(2)(c), (d).

62.

Electronic Transactions Act 1999 (Cth) s 14B(2)(e).

63.

B Dugan and B Dugan, Electronic Transactions: Electronic Transactions Act 2002, LexisNexis NZ Ltd, Wellington, 2004 at 57.

64.

B Dugan and B Dugan, Electronic Transactions: Electronic Transactions Act 2002, LexisNexis NZ Ltd, Wellington, 2004 at 77, 79.

65.

G I Zekos, ‘State Cyberspace Jurisdiction and Personal Cyberspace Jurisdiction’ (2007) 15 Int’l JL & Info Tech 1 at 4.

66.

LICRA and UEJF v Yahoo! Inc (Superior Court of Paris, 22 May 2000, unreported).

67.

Yahoo! Inc v LICRA (2001) 145 F Supp 2d 1168.

68.

Yahoo! Inc v LICRA (2004) 379 F 3d 1120 (9th Cir).

69.

Yahoo! Inc v LICRA (2005) 399 F 3d 1010 (9th Cir).

70.

Yahoo! Inc v LICRA (2006) 433 F 3d 1199 (9th Cir).

71.

M Saadat, ‘Jurisdiction and the Internet after Gutnick and Yahoo!’ (2005) Journal of Information Law and Technology (JILT), available at http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/2005_1/sa‐ adat at 8; B Zeller, ‘Is the Sale of Goods (Vienna Convention) Act the Perfect Tool to Manage Cross Border Legal Risks Faced by Australian Firms?’ (1999) 6(3) MurUEJL 28 at [13], [14].

72.

Centrebet Pty Ltd v Baasland [2013] NTSC 59.

73.

Mendelson-Zeller Co Inc v T & C Providores Pty Ltd [1981] 1 NSWLR 366.

74.

Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106; [1988] NSWCA 417.

75.

Bonython v Commonwealth of Australia [1951] AC 201.

76.

Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247, 248.

77.

Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 247, 248.

78.

Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 11,106; [1988] NSWCA 417.

79.

Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197.

80.

Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 149 ALR 134.

81.

S Bhalloo, ‘Jurisdictional Issues in Electronic Commerce Contracts: A Canadian Perspective’ (2004) 225 Comp L R and Tech J VIII at 233, 244–6.

82.

Pacific International Securities Inc v Drake Capital Securities (2000) 194 DLR 4th 716.

83.

Pacific International Securities Inc v Drake Capital Securities (2000) 194 DLR 4th 716 at 723.

84.

S Bhalloo, ‘Jurisdictional Issues in Electronic Commerce Contracts: A Canadian Perspective’ (2004) 225 Comp L R and Tech J VIII at 237.

85.

Eastern Power Ltd v Azienda Communale Energia and Ambiente (1999) 178 DLR 4th 409.

86.

S Bhalloo, ‘Jurisdictional Issues in Electronic Commerce Contracts: A Canadian Perspective’ (2004) 225 Comp L R and Tech J VIII at 253.

87.

Gator.Com Corp v L L Bean (2003) 341 F 3d 1072 (9th Cir).

88.

CompuServe Inc v Patterson (1996) 89 F 3d 1257 (6th Cir).

89.

CompuServe Inc v Patterson (1996) 89 F 3d 1257 (6th Cir) at 1264–5.

90.

Zippo Manufacturing Co v Zippo Dot Com Inc (1997) 952 F Supp 1119.

91.

Mink v AAAA Development LLC (1999) 190 F 3d 333 (5th Cir).

92.

Gator.Com Corp v L L Bean (2003) 341 F 3d 1072 (9th Cir).

93.

Pacific International Securities Inc v Drake Capital Securities (2000) 194 DLR 4th 716.

94.

Gator.Com Corp v L L Bean (2003) 341 F 3d 1072 (9th Cir) at 1081.

95.

Jagex Limited v Impulse Software (2010) 750 F Supp 2d 228.

96.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593.

97.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593 at 595.

98.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593 at 600.

99.

V J Lively v Ijam Inc and Monarch Computer Systems Inc (2005) 114 P 3d 487.

100. V J Lively v Ijam Inc and Monarch Computer Systems Inc (2005) 114 P 3d 487 at 495. 101. V J Lively v Ijam Inc and Monarch Computer Systems Inc (2005) 114 P 3d 487 at 497. 102. Malone v Berry (2007) 174 Ohio App 3d 122 at [19]–[21]. 103. Sayeedi v Walser (2007) 835 NYS 2d 840. 104. J D Frieden and S P Roche, ‘E-Commerce: Legal issues of the Online Retailer in Virginia’ 13 Ric JL & Tech (2006), available at http://www.Law.Richmond.edu/jolt/v13i2/article5.pdf at 30. 105. See Reliance Nat Indem Co v Pinnacle Cas Assur Corp (2001) 160 F Supp 2d 1327 at 1333. 106. R M C Publications Inc v Doulos PM Training 2007 US Dist LEXIS 89144. 107. R M C Publications Inc v Doulos PM Training 2007 US Dist LEXIS 89144. 108. Capitol Federal Savings Bank v Eastern Bank Corporation (2007) 493 F Supp 2d 1150 at 1160 citing decisions from the 3rd, 4th and 6th Circuit Courts. 109. Machulski v Hall (2002) 210 F Supp 2d 531 at 539. 110. American Eyewear Inc v Peepers Sunglasses and Accessories Inc (2000) 106 F Supp 2d 895 at 904– 905. 111. Leach Nominees Pty Ltd v Walter Wright Pty Ltd (1985) 85 FLR 427. 112. Zippo Manufacturing Co v Zippo Dot Com Inc (1997) 952 F Supp 1119.

[page 93]

Chapter 5 E-Auctions eBay by its terms and conditions eschews any role as auctioneer, nor does eBay have authority to execute a contract. I do not accept the contention that there were contracts only between eBay and the buyer and between eBay and the seller. It has been recognised even in relation to traditional auctions that existence of a contract between vendor and auctioneer can sit together with a contract between the vendor and purchaser. Online auctions are not the only commercial environment in which parties come together pursuant to agreed guidelines and are able to form contracts in a different way to the usual fashion of offer and acceptance: Smythe v Thomas (2007) 71 NSWLR 537

Introduction 5.1 An auctioneer is normally the agent of the vendor and has authority to accept a bid on behalf of the vendor, although a vendor may withdraw at any time before the fall of the hammer. If the highest bid above a reserve is accepted by the auctioneer but the vendor fails to sell, the bidder has an action for breach of contract against the vendor by reason of the auctioneer’s agency.1 In the absence of any agency on the part of the auctioneer, the question arises whether the successful bidder has an enforceable contract against the breaching vendor. In an auction without reserve, there is some support in common law jurisdictions outside the United States for the proposition that, where the auctioneer fails to sell to the highest bidder, the auctioneer may be independently liable to the bidder for failing to conduct the auction as agreed.2 The United States has similar rules for auctions with reserve, but an invitation to bid for goods at an auction without reserve is an offer to sell at any price,3 and goods cannot be

[page 94] withdrawn unless no bid is received within a reasonable time.4 The principal issues in e-auctions are whether online auction houses, such as eBay, are agents of the vendor, whether an online bidder and vendor may still enter into an enforceable agreement in the absence of auction house agency, and whether an online invitation to bid without reserve is an unconditional offer.

Online Auction and Agency 5.2 E-auctions can be either business-to-person, where the auction website has physical control of the goods and accepts payment for them, or personto-person where the auction website is not involved in either holding the goods or processing payment.5 An example of a business-to-person e-auction is CNH Capital Canada Limited v Diamond 4 Holdings Ltd6 in which the Supreme Court of British Columbia held that an e-auction was a ‘public auction’ for the purposes of the sale of security by a creditor under the Personal Property Security Act RSBC 1996. The court reasoned that it made no difference to a debtor at risk in the sale process if the means of determining the highest bid above reserve was by physical means or virtual auction. However, possible problems with business-to-person e-auctions are suggested in P R Transport Agency v Union of India.7 A vendor had to sell to a lower bidder because there had been an error in the automated process, either in data entry or in the operation of the software or hardware, which meant that the highest bid had not been considered. eBay’s person-to-person operation was described by Rares J in eBay International AG v Creative Festival Entertainment Pty Ltd:8 Registered users of eBay websites, known as members, are able to buy and sell many types of goods and services online. eBay charges fees for sellers to advertise and offer items for sale on the eBay website. No fees are payable by buyers or bidders … A member who meets eBay’s requirements for listing items for sale can use one, or a combination, of two different formats for sale, namely an auction format or a fixed price format known as ‘buy it now’. These formats operate in the

following way. In the auction format listing, the seller offers the relevant item or items, by describing it or them, setting a starting price and identifying the duration of the listing. Potential buyers or bidders search or browse the eBay website, visit the listing and place bids on the item. At the expiry of the listing the highest bidder is obliged, in accordance with the terms of eBay’s user agreement, to buy the item from the seller for the price specified in the highest bid.9

[page 95] eBay is the archetypal online auction house. eBay essentially provides two services, as an online retail site and as an online auction site. For either service, sellers must register and fill in an online form requesting a listing for a specified duration, choosing to sell either by fixed price or by auction. For a fixed price listing, the seller designates the price. For an auction-style listing, the seller selects a starting price for bidding and may also select a reserve price. Under an auction-style listing, bidders can choose either to personally monitor the auction and update their bids manually, or they can choose the ‘automatic bidding’ system. With automatic bidding, the bidder informs eBay of the highest price he or she is prepared to pay for an item and, starting at the listed price, automatic bidding increases the bid to maintain the bidder as the highest bidder, until the bidder’s highest price has been reached.10 eBay has always insisted that it provides a transactional venue and is not a party, either as a retailer or as an auctioneer, to transactions occurring on its site, although it and other online auction houses hosting fixed price listings may still be liable as third parties. In Rugby Football Union v Viagogo Ltd,11 Viagogo operated a for profit online site, similar to eBay’s retail function, offering a secondary market for the onsale of sports and entertainment tickets. The Rugby Football Union argued that when tickets for rugby matches were sold on Viagogo’s site for more than their face value, it was a breach of the civil law, but alleged no wrongdoing against Viagogo. Instead, the Rugby Football Union sought a Norwich order against Viagogo to disclose information allowing discovery of the alleged wrongdoers. The High Court of England and Wales, in exercise of its discretion, made the order.

5.3 However, eBay, has consistently disclaimed direct liability, relying on contractual terms expressly denying that it is involved in the bidder–vendor transaction, or that any agency is created under its user agreement. Initially, there was some doubt as to whether or not eBay was an agent. In Hendrickson v eBay Inc,12 the District Court for the Central District of California in obiter remarks did not accept that eBay was a mere venue: eBay repeatedly characterizes its website as merely an online venue that publishes ‘electronic classified ads’. However, eBay’s description grossly oversimplifies the nature of eBay’s business. A review of eBay’s website shows eBay operates far more than a sophisticated online classified service … eBay’s website is known first and foremost as an Internet auction website. eBay’s Internet business features elements of both traditional swap meets — where sellers pay for use of space to display their goods — and traditional auction houses — where goods are sold via the highest bid process.13

[page 96] However, most courts have accepted, somewhat reluctantly, that eBay is not an agent. The District Court for the Northern District of California stated in eBay Inc v Bidder’s Edge Inc:14 eBay offers sellers the ability to list items for sale and prospective buyers the ability to search these listings and bid on items. The seller can set the terms and conditions of the auction. The item is sold to the highest bidder. The transaction is consummated directly between the buyer and seller without eBay’s involvement.15

The Court of Appeals of Tennessee in Evans v Matlock16 also appeared to accept that eBay was not involved in the transaction between bidder and vendor. The bidder made a bid on eBay which was accepted by the vendor. The vendor then sold the item to a third party. The bidder sued the vendor for breach of contract and the third party for interfering in contractual relations. At first instance, the vendor brought an unsuccessful motion for summary dismissal based on an arbitration clause contained in eBay’s user agreement. In dismissing the vendor’s appeal, the court held that the arbitration clause was applicable only to controversies between eBay and a

user, and not to controversies between users. The court accepted that eBay was only a venue, and that it ‘was not involved in the actual transaction between buyers and sellers’ and could ‘not ensure that a buyer or seller will actually complete a transaction’.17 In Grace v eBay,18 the Court of Appeal of California, considering another clause in eBay’s user agreement: Because we are a venue, in the event that you have a dispute with one or more users, you release eBay (and our officers and directors …) from claims, demands and damages (actual and consequential) of every kind of nature, known and unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or any way connected with such dispute.19

also accepted that eBay was merely a ‘venue’ in its terms. In Block v eBay,20 the plaintiff sought to argue that eBay was in breach of these same terms because its automatic bidding system made it the agent of the bidder. However, the District Court for the Northern District of California dismissed the plaintiff’s claim on the basis that only users, not eBay, were bound by these terms, as they operated only to limit eBay’s liability. eBay’s status as an agent was also obliquely considered by the High Court of England and Wales in L’Oréal SA v eBay International AG.21 One of the [page 97] issues was whether eBay Europe was liable at common law for trademark infringements committed by users of its site. L’Oréal argued that eBay Europe was a joint tortfeasor either by procurement or by common design. One of the arguments relied on by L’Oréal was that, as an auctioneer, eBay Europe was liable to the true owner of the property right and could protect itself by insurance.22 Arnold J was attracted to this argument: eBay and its competitors have created a new form of trade which carries with it a higher risk of infringement than more traditional methods of trade. I consider that there is much to be said for the view that, having created that increased risk and profited from it, the consequences of that

increased risk should fall upon eBay rather than upon the owners of the intellectual property rights that are infringed.23

However, his Honour implicitly rejected the analysis of eBay Europe as an auctioneer by finding that eBay was under no legal duty to prevent infringement of third parties’ trademarks. Although eBay Europe facilitated trademark infringement, facilitation with knowledge and an intention to profit was not sufficient to make eBay Europe a joint tortfeasor.24

Online Auction With Reserve 5.4 The issue of agency becomes acute when a vendor fails to sell to the highest online bidder above reserve. In Smythe v Thomas,25 the defendant vendor registered an aircraft on eBay with a notation of a ‘minimum bid’ of $150,000 open for 10 days. Following the listing, there was communication between the plaintiff bidder, a registered eBay user, and the defendant. The defendant agreed that the aircraft would be ready to fly from Albury to Adelaide by the time of delivery and stated he would like the purchase completed within six weeks of payment of the deposit, but that it was ‘negotiable’. On the last day, the plaintiff made a bid in accordance with eBay rules for $150,000. The eBay rules included: Binding Bids. Except for items to which the Non-Binding Bid Policy … applies, if you receive at least one bid at or above your stated minimum price (or in the case of reserve auctions, at or above the minimum price), you are obligated to complete the transaction with the highest bidder upon the item’s completion, unless there is an exceptional circumstance.26

Both the plaintiff and the defendant received a notification from eBay to the effect that the plaintiff had ‘won’ the aircraft. The vendor refused to complete the transaction. [page 98] The plaintiff claimed that, as a result of being the highest bidder and his bid

meeting the description of the minimum bid, he had entered into a contract for the sale of goods with the defendant. The defendant denied that a contract was formed, arguing that the only contracts in existence were between eBay and the plaintiff and eBay and the defendant. The defendant also argued that the placement of an advertisement for sale by the defendant on eBay was no different to the placement of a classified advertisement in a newspaper and was no more than an invitation to treat, and that, even if there was an offer, the time for payment remained to be negotiated and there was no complete agreement. In granting specific performance to the plaintiff, Rein AJ held that both the bidder and the vendor had agreed to accept the terms and the conditions of eBay, so there was no difficulty in treating the parties as having accepted that the online auction had features similar to, and different from, real world auctions. There was no agent as eBay (by its terms and conditions) denied any role as auctioneer and had no authority to execute a contract. However, there was nothing preventing a contract between the vendor and eBay sitting together with a contract between the vendor and the purchaser. Ultimately, the vendor had offered to sell to anyone who made the highest bid over the minimum amount within the specified time. Kariyawasam and Guy’s assertion that the court held that the online auction ‘created a contract in the same way as a traditional auction — the auctioneer is the agent of the seller and the agent can accept a bid on behalf of the seller’ is wrong, as is their conclusion that ‘an eBay sale essentially constitutes an auction’.27 The court held the transaction resulted in an enforceable contract for the sale of goods not as a consequence of the agency of eBay, but as a consequence of the vendor making an offer capable of acceptance by the bidder conforming to the terms of the offer. 5.5 In Smythe v Thomas, the vendor had agreed that the highest bid over the reserve would be a binding bid.28 Bergcraft v eBay29 considered the circumstance of a bid for real property that was non-binding under eBay’s

user agreement. The plaintiff listed a New Jersey ski and tennis resort on eBay with a minimum bid of $1m and an undisclosed reserve of $3.9m. A bidder placed a bid for $3.9m, but later retracted it. Following the retraction, the next highest bid was $2.5m. The plaintiff argued that, since the non-binding bid policy didn’t explicitly state that the non-retraction policy did not apply to non-binding bids, it must have applied. Or alternatively, by allowing the bidder to withdraw its bid, eBay prevented future buyers from being introduced to the plaintiff by [page 99] allowing the retracting bidder to ‘cast a shadow’ over the plaintiff’s auction item. The Superior Court of New Jersey held that imposing an obligation on eBay to police improper retractions, in the context of 50 million users of the site negotiating over 11 million items, would be unfairly burdensome, and the absence of a bid retraction policy for non-binding bids suggested that bids on items in the non-binding category were simply a way to introduce interested potential sellers to interested potential buyers.

Online Auction Without Reserve 5.6 Lim v dotTV Corp30 turned on whether an online auction was without reserve. The defendant offered the domain name ‘Golf.tv’ for sale via a public auction over its website. The plaintiff submitted the highest bid and received an email by the defendant stating: ‘Congratulations! You have won the auction for the following domain name: “Domain Name: -- --golf” …’ The defendant disavowed the agreement, notified the plaintiff that it had decided to release him from the bid, stated that the plaintiff should disregard the email which was sent by a technical mistake and publicly offered the domain name again for a higher price. The plaintiff’s amended complaint

alleged that its bid was an acceptance of the defendant’s offer and that the email merely recorded the agreement. The plaintiff’s amended complaint was not caught by §2–328 of the Uniform Commercial Code (Cal), which stated that auctions were with reserve unless there were express words to the contrary, because a domain name was not goods falling under the Code. The Court of Appeal of California held that it was open for the plaintiff to plead that, by offering a public auction for the domain name, the defendant posed not an invitation to treat but an offer by promising that the defendant would accept the highest bid received within a set period of time. The court further held that, even if the website’s announcement was an invitation to treat, it was open to the plaintiff to plead that its offer was accepted via the email. The decision suggests that where there is no stated reserve, it is open for a court to construe an invitation to bid as an offer capable of acceptance by the highest bidder.

Conclusion 5.7 The agency of an auctioneer arose from the practical difficulties of a vendor communicating and negotiating directly with a large number of potential bidders. However, these difficulties are largely absent on the internet. Where an online transaction enables a vendor to communicate with a large number of potential bidders, it seems entirely reasonable that a contract may [page 100] be entered into directly between the vendor and the highest bidder without the involvement of an intermediary. eBay has consistently maintained that its online auction site simply facilitates a series of communications following which the ultimately

successful bidder and seller may enter into a contract. A successful person-toperson e-auction involves not only agreements between the vendor and the auction site and the bidder and the auction site, but also between the vendor and the bidder.31 In Smythe v Thomas,32 the Supreme Court of New South Wales accepted that a transaction over eBay is not an auction and that eBay was neither an auctioneer nor an agent for the vendor. However, as a matter of commercial policy, the judgment appears to give certainty to users of online auction sites by holding that, where a vendor and a bidder have both agreed to the conditions of use of an online auction site, the vendor makes an offer capable of acceptance by the bidder conforming to the terms of the offer. It follows that a successful online bidder seeking to assert the existence of an agreement with a vendor for the sale of goods may not need to establish agency on the part of the online auction house. The bidder may simply rely on having complied with the terms of the vendor’s offer without qualification. It is to the benefit of online bidders if eBay transactions are not auctions. O’Sullivan33 points out that consumer protection laws often do not apply to auctions, for policy reasons including a seller such as a sheriff or a bailiff under a forced sale not being able to undertake that goods are of merchantable quality and fit for purpose, and bidders being able to rely on auctioneers as licensed professionals.34 These policy considerations do not apply to most transactions on internet auction sites and there is substance in O’Sullivan’s conclusion that internet auction purchasers should have the same protections as ordinary consumers.35

1.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [3–11]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.18]–[3.20].

2.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [3–11]; L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005, at 77, 78; H G Beale (ed), Chitty on Contracts, 29th ed, Sweet and Maxwell, London, 2004, at 2–010.

3.

L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press,

Melbourne, 2005, at 80. 4.

§2–328 Uniform Commercial Code (US). L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005, at 80.

5.

A E Reynolds, ‘E-Auctions: Who Will Protect the Consumer?’ (2002) 18 JCL 75 at 81, 82.

6.

CNH Capital Canada Limited v Diamond 4 Holdings Ltd 2012 BCSC 942.

7.

P R Transport Agency v Union of India AIR 2006 All 23.

8.

eBay International AG v Creative Festival Entertainment Pty Ltd (2006) 170 FCR 450.

9.

eBay International AG v Creative Festival Entertainment Pty Ltd (2006) 170 FCR 450 at [4]–[5]. See also Ginsburg v Dinicola 2007 WL 1673533 at [18], [19].

10.

Ewart v eBay Inc 2010 WL 4269259 (ND Cal) at 1; Block v eBay Inc 2012 WL 1601471 at 1.

11.

Rugby Football Union v Viagogo Ltd [2011] EWHC 764 (QB).

12.

Hendrickson v eBay Inc (2001) 165 F Supp 2d 1082.

13.

Hendrickson v eBay Inc (2001) 165 F Supp 2d 1082 at 1084. The Tribunal de Grande Instance Paris also found that a public sale over the internet was an ‘auction’. An online auction was open to all interested internet users as long as they registered beforehand and agreed to the contractual clause governing online sales. For the purposes of organising and carrying out an auction, the internet consisted of a vast auction room: Chambre Nationale Des Commissaires Priseurs v NART SAS [2001] ECC 24.

14.

eBay Inc v Bidder’s Edge Inc (2000) 100 F Supp 2d 1058.

15.

eBay Inc v Bidder’s Edge Inc (2000) 100 F Supp 2d 1058 at 1060.

16.

Evans v Matlock 2002 Tenn App LEXIS 906.

17.

Evans v Matlock 2002 Tenn App LEXIS 906.

18.

Grace v eBay (2004) 16 Cal Rptr 3d 192.

19.

Grace v eBay (2004) 16 Cal Rptr 3d 192 at 196.

20.

Block v eBay Inc 2012 WL 1601471

21.

L’Oréal SA v eBay International AG [2009] EWHC 1094 (Ch).

22.

L’Oréal SA v eBay International AG [2009] EWHC 1094 (Ch) at [363].

23.

L’Oréal SA v eBay International AG [2009] EWHC 1094 (Ch) at [370]

24.

L’Oréal SA v eBay International AG [2009] EWHC 1094 (Ch) at [382].

25.

Smythe v Thomas (2007) 71 NSWLR 537.

26.

Smythe v Thomas (2007) 71 NSWLR 537 at [7].

27.

K Kariwasam and S Guy, ‘The Contractual Legalities of Buying and Selling on eBay: Online Auctions and the Protection of Consumers’ (2009) 19 Journal of Law, Information and Science 42– 72 at fn 32 and p 66.

28.

Smythe v Thomas (2007) 71 NSWLR 537.

29.

Bergcraft and Hidden Valley Inc v eBay Inc and Dave & Jamie No L-566–02 2003 NJ Super Ct (1 October 2003).

30.

Lim v dotTV Corp (2002) 99 Cal App 4th 684.

31.

A E Reynolds, ‘E-Auctions: Who Will Protect the Consumer’ (2002) 18 JCL 75 at 84.

32.

Smythe v Thomas (2007) 71 NSWLR 537.

33.

T O’Sullivan, ‘The Exclusion of Consumer Rights in e-Auctions — Is an e-Auction Really an Auction at All?’ (2010) 4(6) World Academy of Science Engineering and Technology 905–910.

34.

T O’Sullivan, ‘The Exclusion of Consumer Rights in e-Auctions — Is an e-Auction Really an Auction at All?’ (2010) 4(6) World Academy of Science Engineering and Technology 905–910 at 909.

35.

T O’Sullivan, ‘The Exclusion of Consumer Rights in e-Auctions — Is an e-Auction Really an Auction at All?’ (2010) 4(6) World Academy of Science Engineering and Technology 905–910 at 909, 910.

[page 101]

Chapter 6 Shrinkwrap, Clickwrap and Browsewrap Agreements Reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by consumers are essential if electronic bargaining is to have integrity and credibility: Specht v Netscape Communications (2002) 306 F 3d 17

Introduction 6.1 United States decisions in electronic contract cases refer to ‘shrinkwrap’, ‘clickwrap’ and ‘browsewrap’ contracts. The expression shrinkwrap derives from cases involving the delivery of computer software wrapped in plastic packaging where consumers have assented to the seller’s enclosed terms by opening the packaging and not returning the software. Clickwrap describes cases where consumers have assented to terms displayed on a screen, either by CD-ROM or online, by clicking on a virtual button. Browsewrap describes webpages displaying hyperlinks referring to terms displayed on webpages within the same website or on a related website. Not all shrinkwrap, clickwrap and browsewrap contracts are necessarily electronic contracts. Many shrinkwrap contracts are not electronic,1 and browsewrap terms may not result in enforceable agreements. The expressions more accurately refer to the approach that courts in the United States have taken to determining the existence and extent of consumer assent to terms pursuant to the Uniform Commercial Code (UCC). Shrinkwrap cases turn on identifying whether a communication is an acceptance or a counter-offer. Clickwrap cases turn on whether there are factors vitiating terms otherwise

adopted by a virtual signature. Browsewrap cases are concerned with the sufficiency of notice of the terms of an alleged electronic agreement. [page 102]

The Uniform Commercial Code 6.2 All three approaches to contract formation rely on the UCC. Section 2– 204 of the UCC, particularly subs (2), makes it clear that an analysis of offer and acceptance is less important in determining whether a contract exists than an analysis of whether there has been a meeting of the minds between the parties. Formation in General (1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.

Subsection (2) is not so much a modification of the common law in the United States, as a reflection of it, as stated in §22(2) of the Restatement (Second) of Contracts. A manifestation of mutual assent may be made even though neither offer nor acceptance can be identified and even though the moment of formation cannot be determined.

The artificiality of the device of offer and acceptance has been acknowledged outside of the United States by Lord Wilberforce in New Zealand Shipping Co Ltd v A M Satterthwaite & Co,2 and by Lord Denning MR in Gibson v Manchester City Council3 and Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd.4 The last decision, in particular, highlighted the problem of identifying the terms of a contract using an analysis of offer and acceptance where there had been an exchange of standard form contracts, with each standard form drafted to protect the party’s own interests, resulting in a ‘battle of the forms’.

6.3 Section 2–206 of the UCC modifies the common law principles of offer and acceptance: Offer and Acceptance in Formation of Contract (1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; … (2) Where the beginning of a requested performance is a reasonable mode of acceptance, an offeror that is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. (3) A definite and seasonable expression of acceptance in a record operates as an acceptance even if it contains terms additional or different from the offer.

[page 103] Where an offeror does not specifically require a particular manner of acceptance, §2–206(1) allows an offeree to accept in any reasonable manner and by any reasonable medium. Section 2–206(2) also allows an offeree to accept by performance if commencement of performance is a reasonable mode of acceptance and the offeror receives notice of the acceptance within a reasonable time.5 Section 2–206(3) is a significant modification of the common law. 6.4 Section 2–207, as enacted by most states, attempts to ameliorate the problem of the battle of the forms by creating an exception to the rule that acceptance must correspond with the terms of an offer: Additional Terms in Acceptance or Confirmation (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provision of this act.

For merchants, subs (2) provides that an acceptance that states additional or different terms may still be an effective acceptance unless the terms materially alter the offer, the offer expressly precludes additional terms, or the offeror objects within a reasonable time. Subs (3) provides that a contract will be established where the parties by their conduct recognise the existence of a contract even though the writings of the parties do not establish a contract. The terms of a contract under subsection (3) consist of the express terms on which the parties agree, and the terms implied by the UCC.6 The intention of the legislature in enacting §2–207 was explained in Arizona Retail Systems Inc v The Software Link:7 [page 104] The drafters of the UCC sought to abolish certain common law rules that made little sense in the light of modern business practices. Before enactment of the code the courts held that each time a form was exchanged as part of an acceptance, a counter-offer was made if the terms of the form varied in any way from the terms of the original offer. Section 2–207, in many cases, turns what used to be counter-offers into acceptances. If a party accepts an offer but adds some additional or inconsistent terms, the response is nevertheless considered an acceptance and the code provides for how to deal with the additions or inconsistencies. Section 2–209 picks up where section 2–207 leaves off by setting forth rules for modification of contract after their formation.8

These principles are somewhat familiar to common lawyers outside the United States from the remarks of Lawton LJ in Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd,9 who, applying Article 7 of the Uniform Law on the Formation of Contracts for the International Sale of Goods (which was in similar terms to §2–207 of the UCC), found that the proposed additional

terms of the acceptance were materially different from those of the offer and were a counter-offer. In Australia, Article 19 of the Convention on Contracts for the International Sale of Goods (Vienna Convention), enacted in all states and territories,10 provides that, for the international sale of goods, an acceptance with additional conditions is regarded as a counter-offer unless the additional terms do not materially alter the terms of the offer. Where the additions or alterations are non-material, the acceptance will be effective provided the offeror does not object.

Shrinkwrap Contracts 6.5 United States decisions on ‘money now, terms later’ purchases of computer software have varied according to different applications of §2–204, §2–206 and §2–207 of the UCC made by the Third and Seventh Circuits to similar facts. In Step-Saver Data Systems Inc v Wyse Technology and The Software Link Inc,11 Step-Saver developed and marketed a multi-user computer system. Included in the system was software that Step-Saver had purchased from the defendants. On marketing and installing its system, StepSaver began to receive complaints from customers. Step-Saver sued both defendants for breach of warranty. At first instance, the District Court for the Eastern District of Pennsylvania held that the licence delivered with the software purchased from The Software Link [page 105] (TSL) contained the final and complete terms of the contract between the parties. On appeal, Step-Saver argued that the contract with TSL was formed at an earlier time, when TSL agreed on the telephone to ship the software. TSL countered that too many terms were missing from the telephone discussion and that it effectively made a counter-offer of the terms of the

licence, which Step-Saver accepted on opening the package. The Third Circuit agreed with Step-Saver. Under §2-207, Step-Saver had not given express assent to the terms of the later licence which materially altered the terms of the earlier agreement. Consequently, Step-Saver was not bound by the licence terms. The court’s reasoning was based on findings that the transaction was merchant-to-merchant, that Step-Saver was the offeror, and that the terms of the licence materially altered the terms of the phone agreement. Step-Saver was followed by the District Court of Arizona in Arizona Retail Systems Inc v The Software Link.12 The court made the point that, although acceptance of an offer could be inferred from conduct, assent to a material alteration of terms had to be express. The defendant, which designed and sold software, faxed the plaintiff promotional material suggesting that it had fixed earlier problems with its PC-MOS software. Following a telephone conversation, in which terms were discussed, the plaintiff ordered an evaluation copy. The defendant sent an evaluation copy, accompanied by a live copy. The materials, wrapped in shrinkwrap plastic, contained a limited use licence agreement stating that the materials could be returned after a specified period. After a short evaluation, the plaintiff decided to keep the system. Pursuant to this decision, the plaintiff periodically made further orders by telephone, agreeing on the specific goods, the quantity and price. However, the system proved unsatisfactory to the plaintiff’s customers. The plaintiff claimed against the defendant and the defendant filed a motion for summary judgment on the ground that the licence agreement provided the exclusive remedy for the plaintiff’s claims. For the initial transaction, the court found the plaintiff requested an evaluation disk, the defendant made an offer of the live disk by including it with the evaluation disk, and the contract was formed when, after the plaintiff opened the shrinkwrap of the live copy, the plaintiff accepted the live copy by keeping it. However, for the subsequent transactions, the court rejected the defendant’s argument that, pursuant to §2–207 of the UCC, the licence

agreement was a proposed modification of the agreement entered into by telephone. The court held that §2–207 required express assent to proposed modifications. Assent could not be inferred from conduct. The court found that, by agreeing to ship the goods, the defendant entered into a contract with the plaintiff. At best, the licence agreement was a proposal to modify that had not been accepted by the plaintiff. Section 2–207 was drafted to ensure that the seller did not gain an advantage merely by being the last party to send a form. [page 106] It was not unreasonable to require a seller to discuss important terms before shipping and the seller could have protected itself by not shipping the software until it obtained assent to terms it considered essential.

The Seventh Circuit and ‘layered contracting’ 6.6 However, a very different approach was taken by the Seventh Circuit in ProCD v Zeidenberg.13 The respondent bought computer software containing information compiled from telephone directories produced by the appellant. The box that the computer software was sold in contained a declaration that the software came with restrictions stated in the enclosed licence. The licence was encoded on the CD-ROM disks and appeared on a user’s screen every time the software ran, requiring the user to click on an ‘I Agree’ button before being able to access the program. The licence was also printed in a manual. The licence limited use of the software to non-commercial purposes. However, the respondent formed Silken Mountain Web Services Inc to resell the information and made the information available over the internet. The appellant sought an injunction. At first instance, the court held the licence ineffectual because its terms did not appear on the outside of the packaging. The court found that a purchaser

could not agree to, and could not be bound by, terms that were secret at the time of purchase. On appeal, the Seventh Circuit reversed the decision. The Seventh Circuit was able to come to this conclusion because it determined that §2–207 did not apply because no battle of the forms was involved. It followed that, pursuant to §2–206, the absence of a timely rejection was sufficient to show assent to the terms of the licence. The Seventh Circuit affirmed that a purchaser could not agree to hidden terms. However, a vendor was not obliged to put the entire terms of the contract on the outside of the packaged goods. The licence could be enforced when there was a notice on the outside, terms on the inside, and a right to return the software for a refund if the terms were unacceptable — which was a right that the licence expressly extended. The use of the software, after the buyer had had time to read the licence, resulted in the acceptance of the terms even if they were disadvantageous for the buyer, unless they were objectionable on grounds applicable to contracts in general. The Seventh Circuit expanded its reasoning in Hill v Gateway 2000 Inc,14 in which the plaintiffs ordered a computer from the defendants by credit card over the telephone. Besides the computer, the shipment contained a list of terms, including an arbitration clause which governed the relationship between the plaintiff and the defendant, unless the plaintiff returned the computer within 30 days. The plaintiffs admitted noticing the list of terms [page 107] but denied reading it closely enough to discover the agreement to arbitrate. After 30 days, the plaintiffs filed an action against the defendants. The defendants sought to enforce the term of arbitration. The court, upholding the arbitration clause, concluded that the contract was not formed with the placement of a telephone order or with the delivery of the goods. Instead, an enforceable contract was formed by a process of ‘layered contracting,’

culminating when the consumer decided to retain the merchandise beyond the 30-day period specified in the agreement.15 The court explained that its decision reflected the realities of evolving commercial practice. The onus of risk fell on the purchaser. Cashiers could not be expected to read legal documents to customers before ringing up sales, and purchasers who accepted an offer took the risk that unread terms may in retrospect prove unwelcome. The Seventh Circuit has been widely followed, including by the Appellate Division of the Supreme Court of New York in Brower v Gateway 2000 Inc,16 in which the appellants purchased computers and software products from the defendant either by mail or telephone order. It was the defendant’s practice to include with the merchandise a copy of its ‘Standard Terms and Conditions Agreement’. The agreement contained an arbitration clause and a clause stating: ‘By keeping your … computer system beyond thirty (30) days after the date of delivery, you accept these Terms and Conditions.’17 The Supreme Court, New York County, granted the respondent’s motion to dismiss the appellant’s complaint on the ground that there was a valid agreement to arbitrate between the parties. On appeal, the Appellate Division upheld the arbitration agreement by expressly applying Hill,18 holding that it was open to the purchaser to reject the merchandise and the contract within 30 days of receipt of the merchandise. In Salco Distributors LLC v Icode Inc,19 the defendant invited acceptance of its licence by the conduct of installing its software. The plaintiff installed the software after having the opportunity to review the licence on three occasions: on opening the envelope containing the software and a hard copy of the licence; on inserting the CD and seeing the licence displayed on the screen before installation; and on registering the software. The District Court for the Middle District of Florida expressly followed ProCD in holding that §2–207 did not apply because there had been no ‘battle of the forms’ requiring the court to decide which one prevailed. The court held that the shrinkwrap terms were enforceable.20

[page 108]

ProCD v Zeidenberg distinguished 6.7 However, the District Court of Kansas declined to follow the Seventh Circuit in Klocek v Gateway Inc.21 The defendant, which sold computers, always included a copy of the standard terms and conditions agreement in the box containing the computer battery, power cables and instruction manuals. At the top of the first page, the standard terms stated: NOTE TO THE CUSTOMER This document contains Gateway 2000’s Standard Terms and Conditions. By keeping your Gateway 2000 computer system beyond five (5) days after the date of delivery, you accept these terms and conditions.22

On the plaintiff filing a complaint, the defendant brought a motion for summary dismissal, asserting that the plaintiff must arbitrate the claim pursuant to the agreement. In a widely cited decision, the court distinguished ProCD on the basis that ProCD found §2–207 inapplicable because there was no battle of the forms. The court found that although §2–207 was often invoked in cases of a battle of the forms, nothing in the language of §2–207 precluded application where there was only one form. It followed that, pursuant to the ‘consumer to merchant’ provisions of §2–207, the defendant’s acceptance would only be a counter-offer capable of acceptance if it was expressly made conditional on the plaintiff’s consent to the additional or different terms. The defendant provided no evidence that it had informed the plaintiff that the transaction was conditional on the plaintiff’s acceptance of the terms and conditions. The court concluded the act of keeping the computer past five days was not sufficient to demonstrate the plaintiff expressly agreed to the standard terms. Klocek was followed by the Court of Civil Appeals of Oklahoma in V J Lively v Ijam Inc and Monarch Computer Systems Inc.23 The respondent, resident in Oklahoma, viewed a computer on a website published by the

appellants, resident in Georgia. The respondent ordered the computer by telephone and it was delivered with an invoice containing a forum selection clause nominating Georgia. The respondent claimed that, after sending the computer to the second appellant for repairs, it never received the computer back. On appeal, the question was whether the terms of the invoice became part of the contract. There was a question of fact as to whether the respondent was a merchant, or a consumer. The majority held that if the respondent was a consumer, the respondent did not expressly accept the terms pursuant to §2-207 and the terms of the invoice did not become part of the agreement. If the respondent was a merchant, the additional terms would only become part of the contract if they were not material, and forum selection clauses were material. Either way, the forum selection clause was not incorporated in the contract. [page 109] The Superior Court of Rhode Island also distinguished ProCD in Defontes v Dell Computers Corporation.24 Defontes purchased a computer and optional service contract from the defendant. The defendant provided customers with its terms and conditions agreement in three ways: via a hyperlink on the bottom of the defendant’s webpage enclosed with an acknowledgement of an order; and enclosed with the computer when it was shipped to the consumer. The agreement contained an arbitration clause. Defontes, and the class she represented, alleged that the defendant overcharged by collecting taxes on contracts when they were not applicable. On Dell seeking to rely on the arbitration clause, the court held that in ProCD the buyer was found to have accepted the seller’s terms by using the software and failing to return it, pursuant to §2–206 of the UCC. However, in ProCD, there was an express disclaimer telling purchasers that, if they were unwilling to agree to the shrinkwrap terms and conditions, they could reject the terms by returning the product. In Defontes’ case, there was no such express contingency. The

purchasers were not given sufficient notice of the method to reject the terms and, therefore, did not ‘knowingly consent’ to them. The District Court of Illinois also distinguished ProCD in a transaction that took place solely over the internet. In Sotelo v DirectRevenue,25 the defendants offered software downloadable for free from their website. The defendants bundled spyware with the software, allowing them to monitor web browsing behaviour and deliver targeted advertisements to users. Every time spyware was downloaded, the user was presented with the opportunity, via hyperlink, to read the agreement prior to downloading. The agreement stated that software was installed, that it would monitor computer use and that targeted advertising would be delivered. The user could not proceed until he or she had either read the agreement or had chosen to skip it. Further, each pop-up advertisement appeared with a question mark in a corner, giving the user a further opportunity to read the agreement, although the question marks did not indicate that they linked to the agreement. The plaintiff sued, inter alia, for trespass, alleging that, in downloading free software from the defendants’ website, he also unwittingly downloaded the defendants’ spyware. The defendants sought to stay litigation pending arbitration pursuant to the agreement. The plaintiff argued that, because he downloaded the software from a third party distributor, he never saw the agreement prior to the spyware being downloaded and was not bound by its terms. In finding the plaintiff could not be compelled to arbitrate, the court distinguished ProCD on the basis that the plaintiff was not on notice of the agreement before installing the spyware. 6.8 ‘Pay now, terms later’ decisions in the United States rely heavily on provisions of the UCC. The Third Circuit in Step-Saver26 held that additional terms were prohibited under §2–207(2)(b) which did not allow material [page 110]

terms to be added by implication. The Seventh Circuit, in ProCD, on the other hand, found that §2–207 was inapplicable because there was no battle of the forms as contemplated by the section. Consequently, the Seventh Circuit was able to find the existence of a contract pursuant to §2–204 and conclude that the absence of a timely rejection, pursuant to §2–206, was sufficient to show assent. The essential difference between these applications of the UCC is that the Step-Saver line of cases found a concluded contract at the time of the purchase order, whereas the ProCD line of cases found a concluded contract sometime after receipt of the box of software, when the consumer had had the opportunity to return the software but had failed to do so. This last aspect of the Seventh Circuit’s approach to the making of a shrinkwrap agreement, the ‘layered contracting’ approach, has not been without its critics. In M A Mortenson Company Inc v Timberline Software Corporation,27 the majority of the Supreme Court of Washington28 distinguished Step-Saver and preferred the ‘layered contracting’ analysis of Hill, pursuant to §2–204 of the UCC. However, Sanders and Alexander JJ, in dissent, were sharply critical of this reasoning: Instead of creating a new standard of contract formation — the majority’s nebulous theory of ‘layered contracting,’ [we] would look to the accepted principles of the UCC and the common law … Because the parties entered a binding and enforceable contract prior to the delivery of the software, [we] would treat [the respondent’s] licence agreement as a proposal to modify the contract requiring either express assent or conduct manifesting assent to those terms.29

The United States shrinkwrap decisions are problematic because there is no agreement between the Circuit Courts on how to analyse the transactions under the UCC. The outcomes vary according to whether the courts find §2– 207 applicable or not. The decisions of the Seventh Circuit in ProCD and Hill are particularly difficult in that they have led to the concept of a ‘layered contracting’ approach to contract formation, with the result that the search costs of ascertaining the existence of onerous clauses in shrinkwrap terms have been shifted to consumers. An intriguing example of a shrinkwrap decision made without the assistance of the UCC is the Scottish decision of Beta Computers (Europe) Ltd

v Adobe Systems (Europe).30 A supplier delivered software in a package which showed that it was subject to strict end user licence conditions between the purchaser and the software manufacturer, and further stated ‘Opening the Informix SI software package indicates your acceptance of these terms and conditions’. The conditions were visible through the wrapping. The purchaser attempted to return the package unopened, but the supplier refused to accept its return and sued for the price. The court held the purchaser was entitled to [page 111] return the package because the third party licence tendered by the supplier sought to import material terms of a contract between the supplier and the purchaser. There could be no concluded contract until the purchaser accepted the conditions. The court gave the analysis: … the tender of the goods with an offer to complete the bargain in terms of the conditions derived from the [software manufacturer] seems to me to avoid creating unacceptable theoretical dangers. Further, it enables … the purchaser a right of election between accepting the [software manufacturer’s] conditions and rejecting the goods.31

Clickwrap Contracts 6.9 ProCD v Zeidenberg32 established a principle of importance for electronic contracts. Electronic terms could be incorporated under the UCC in circumstances where the terms were splashed on the screen and the user could not proceed without making a positive indication of acceptance.33 Although ProCD was a CD-ROM case, clickwrap analysis applies equally to agreements entered into over the internet.

CD-ROM clickwrap 6.10

The analysis of CD-ROM clickwrap agreements under the UCC is

exemplified by i.LAN Systems Inc v Netscout Service Level Corp.34 The parties had entered into a written agreement whereby the plaintiff agreed to resell the defendant’s software to customers. Later, the plaintiff bought the unlimited right to use the defendant’s software, along with perpetual upgrades and support. This allowed the plaintiff to rent, rather than sell, the defendant’s software to customers. On the plaintiff suing the defendant for specific performance, the defendant argued that, pursuant to the clickwrap agreement which the plaintiff entered into on downloading the software, its liability was limited. On hearing the parties’ respective motions for summary judgment, the District Court for Massachusetts found that, to the extent the written agreement was silent, the clickwrap agreement filled the void. The court analysed the clickwrap agreement under §2–204 and §2–207 of the UCC.35 The court reasoned that if the proper analysis was under §2–204, i.Lan manifested assent to the clickwrap licence agreement when it clicked on a virtual box stating, ‘I agree’. However, if the proper analysis was under §2– 207 there were two forks: first, whether the clickwrap licence was a counteroffer, [page 112] or, second, whether it was an acceptance assented to explicitly, implicitly or by default. The court found the clickwrap agreement was a counter-offer that had been explicitly accepted by i.Lan under §2–207. The court noted in obiter comments that if ProCD was correct to enforce a shrinkwrap licence under §2-204, where an assent was implicit, then it must also be correct to enforce a clickwrap licence where the assent was explicit. David & Associates Inc v Internet Gateway36 also applied a §2–204 and §2207 analysis to a clickwrap agreement. The plaintiff manufactured and distributed games on CD-ROM to be played using an exclusive free internet service. The packaging of each CD-ROM contained a statement that the use

of the game was subject to an end user licence agreement (EULA), and that the use of the internet service was subject to terms of use. However, the terms themselves were not contained in the packaging. On inserting the CD-ROM into a computer, the EULA appeared on its screen. The game could not function if the ‘I Agree’ button at the end of the EULA was not clicked. Firsttime users of the free internet service were presented with the terms of use and could not use the internet service without clicking the ‘I Agree’ button. The defendants, dissatisfied with the functioning of the internet service, joined other individuals in a scheme called ‘bnetd project’. The project, a functional equivalent to the internet service, was designed to address the difficulties users experienced with the service created by the plaintiffs. The plaintiffs sued for breach of contract. On their motion to summarily dismiss the plaintiff’s claim, the defendants argued that the only agreement between the parties was a simple offer and acceptance of the sale of software. However, the court found that pursuant to §2–204, a contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognises the existence of a contract. An agreement sufficient to constitute a contract for sale could be found even though the moment of its making was uncertain. It followed that the EULA and terms of use agreements were clickwrap agreements. On the defendants arguing that the EULA and terms of use were additional terms to which they had not assented, the court found that the software packaging indicated the software was subject to a EULA and the internet service to the terms of use. The defendants had assented to the EULA on installation and assented to the terms of use on using the website for the first time. Unlike Klocek v Gateway Inc,37 on which the defendants sought to rely, the defendants were not being penalised for inaction, but instead were being held to contract terms to which they had positively assented. Finally, in M A Mortenson Company Inc v Timberline Software Corporation,38 the appellant had used the respondent’s ‘Bid Analysis’ software

to prepare construction bids since 1990. In 1993, the appellant installed a new computer [page 113] system and sought updated software from the respondent. On 12 July 1993, the appellant issued a purchase order, which was signed by an agent of the respondent. The purchase order contained terms confirming the purchase price, set-up fee, delivery charges and sales tax. The purchase order did not contain an entire contract clause. The respondent’s agent delivered the software to the appellant and installed it. The full text of the respondent’s licence agreement was enclosed with each disk and on the inside cover of the instruction manual. In addition, the first screen that appeared each time the software was used referred to the agreement. The agreement contained a clause limiting the respondent’s liability for damages to the purchase price of the software. In December 1993, the appellant used the software to prepare a construction bid. The appellant won the bid but afterwards realised that, due to a flaw in the software, it had submitted a bid nearly $2m lower than intended. The appellant sued for damages. At first instance, the respondent successfully moved for summary judgment in reliance on the limitation of liability clause. The Court of Appeals upheld the judgment and the appellant appealed to the Supreme Court of Washington. The appellant argued that the purchase order was an entire contract. The terms of the respondent’s clickwrap licence were not part of the contract and therefore unenforceable. However, the majority found that a clause in the purchase order stating that an upgrade would be carried out on terms to be determined at a later date, and the absence of an entire contract clause, supported the conclusion that the purchase order was not the complete agreement between the parties. The appellant further argued that the licence agreement made material alterations to the contract to which it never agreed,

pursuant to the Washington equivalent of §2–207 of the UCC. The majority distinguished Step-Saver and preferred the ‘layered contract’ analysis of Hill, pursuant to §2–204 of the UCC, holding that the contract included the terms of the licence agreement and that the appellant’s use of the software indicated its assent to the terms. Although the ‘layered contracting’ approach taken by the majority was subject to a robust dissent, the remarkable thing about this judgment is that the majority was prepared to hold that a clickwrap agreement effectively trumped a signed written agreement entered into by both parties.

Online clickwrap contracts 6.11 Three early online clickwrap cases are Groff v America Online,39 the New Jersey Appellate Court decision in Caspi v Microsoft Network LLC40 and the Court of Appeals of Texas decision in Barnett v Network Solutions Inc.41 In Groff v America Online, the plaintiff accepted the defendant’s offer of unlimited online service. The plaintiff then alleged that, at the time of making [page 114] the agreement, the defendant knew it was unable to provide the service, contrary to Rhode Island consumer protection legislation. The plaintiff sought to avoid the forum selection clause contained in the agreement on the basis that he never ‘saw, read, negotiated for or knowingly agreed to be bound by’ it.42 The Superior Court of Rhode Island heard that the plaintiff would not have been able to use the defendant’s system without affirmatively choosing to accept the terms of service by clicking an ‘I agree’ button immediately next to the ‘read now’ button and then clicking the ‘I agree’ button next to the ‘I disagree’ button at the end of the terms of service. The court found that a party who signs an instrument manifests his assent to it and cannot later

complain that he did not read or understand the contents. The plaintiff had clicked two ‘I agree’ buttons and had effectively signed twice. In Caspi v Microsoft Network, the appellants entered into online subscriber agreements with the Microsoft Network (MSN) over the internet. In order to enter into this contract, the appellants had to scroll down a membership agreement and click on an ‘I Agree’ field, posted at the end of the agreement. The agreement included a choice of law and forum selection clause, nominating the state of Washington. When MSN changed its service plan and subsequently charged the appellants an increased membership fee without prior notice, the appellants sued on several different grounds, including breach of contract in the Superior Court of New Jersey. On appeal, the Appellate Division upheld the forum selection clause, finding the appellants had signified their assent by clicking the agreement. In Barnett v Network Solutions Inc, Barnett entered into an online agreement with Network Solutions Inc to register domain names. The electronic format required Barnett to scroll through the contract in order to accept its provisions. One of the provisions was a forum selection clause requiring any suit to be brought in Virginia. Barnett claimed that Network Solutions failed to register the domain names and commenced proceedings in Texas. The Court of Appeals of Texas upheld the validity of the forum selection clause.43

Specht v Netscape Communications 6.12 One of the most important online electronic contract cases, which distinguishes between clickwrap and browsewrap contracts, is the Second Circuit decision of Specht v Netscape Communications.44 On its website, Netscape offered various software programs, including Communicator and SmartDownload, which visitors to the site were invited to download free of charge. During the installation of Communicator, the plaintiffs were automatically shown a scrollable text of that program’s licence agreement, which included an arbitration clause, and were not permitted to complete the

[page 115] installation until they clicked on a ‘Yes’ button to indicate that they accepted all the licence terms. The licence agreement, however, made no mention of SmartDownload. When installing SmartDownload, the plaintiffs were not shown any licence agreement located before the ‘download’ button and did not have to agree to any licence terms. The sole reference to SmartDownload’s licence terms on the webpage was located in text that became visible to the plaintiffs only if they scrolled down to the next screen: ‘Please review and agree to the terms of the Netscape SmartDownload software license agreement before downloading and using the software.’45 The plaintiffs would then have had to browse through several different screens before being able to find a display of the licence agreement which included an arbitration clause nominating California. Once the plaintiffs had initiated the download of SmartDownload, the existence of licence terms was not mentioned while the software was running or at any later point in the plaintiffs’ experience of the product.46 After downloading, whenever the plaintiffs used Netscape’s Communicator — a software program that permitted internet browsing — the program created and stored, on each of their hard drives, a small text file known as a ‘cookie’ that functioned as an electronic identification tag for future communications between their computers and Netscape. When they installed SmartDownload — a separate software ‘plug-in’ that served to enhance Communicator’s browsing capabilities — it created and stored on the hard drive another string of characters, known as a ‘key,’ which similarly functioned as an identification tag in future communications with Netscape. Each time a computer user employed Communicator to download a file from the internet, SmartDownload assumed from Communicator the task of downloading the file and transmitted to Netscape the address of the file being downloaded, together with the cookie created by Communicator and the key

created by SmartDownload. The plaintiffs claimed that this constituted unlawful ‘eavesdropping’. The defendants sought, unsuccessfully, to compel arbitration and to stay court proceedings in reliance on the arbitration clause contained in the Communicator and SmartDownload licence agreements. At first instance, the District Court for the Southern District of New York held that the plaintiffs’ claim rested on the unlawful operation of the SmartDownload program, not of the Communicator program. However, the bare act of downloading the SmartDownload software did not unambiguously manifest assent to the arbitration provision in the licence because a reasonably prudent internet user, in circumstances such as these, would not have known of, or learned of the existence of, the licence terms before responding to the defendants’ invitation [page 116] to download the free software. The defendants did not provide reasonable notice of the licence terms and the plaintiffs were consequently not bound. On appeal, the Second Circuit affirmed the District Court’s decision and held that, for the SmartDownload software, clicking on the download button did not communicate assent to the licence terms as the offer did not make clear that clicking on the download button signified assent to those terms. Whereas it was true that a party could not avoid the terms of a contract on the ground that he or she failed to read it before signing, an exception to this general rule existed when, like in this case, the writing did not appear to be a contract and the terms were not called to the attention of the recipient. No contract was formed with respect to the undisclosed term. The plaintiffs were responding to an offer that did not carry an immediate visible notice of the existence of licence terms or require unambiguous assent to those terms.

Under these circumstances, no reasonable person would have known of the existence of licence terms. Specht is important for two reasons. First, it distinguished between enforceable clickwrap contracts and unenforceable browsewrap contracts. Second, it articulated the test for the validity of a clickwrap agreement: reasonably conspicuous notice of the terms and an unambiguous manifestation of assent. The key to the decision is that SmartDownload was offered for free. It was not apparent to users that the website was a contractual document. It followed that users had to be put on notice of the terms and required to give unambiguous consent before they could be bound to the terms of the SmartDownload licence.

Decisions since Specht v Netscape Communications 6.13 Since Specht, the ubiquity of online clickwrap agreements has become such that courts now have no trouble in validating express terms of an online agreement assented to by the click of a virtual button.47 In Siedle v National Association of Securities Dealers Inc,48 the plaintiffs had downloaded material from the defendant’s website and used it for commercial purposes, contrary to the express provisions of two clickwrap agreements to which the plaintiffs had agreed on downloading information from the website. The plaintiffs sought a declaration they were entitled to publish and sell the downloaded material for profit. On the defendants bringing a motion for dismissal, on the basis that the plaintiff’s claims failed because they were bound by the provisions of the click agreements, the District Court for the Middle District of Florida commented: ‘There are any number of cases from other state and federal courts expressly and implicitly approving the validity of click agreements.’49 [page 117]

In DeJohn v The .TV Corporation International, Register.com Inc and Verisign Inc,50 DeJohn submitted applications to .TV via Register’s website to register six domain names and tendered the advertised price for each — $50. All but one of the applications was rejected by .TV because the registration price was actually much higher. Register notified DeJohn within 72 hours and refunded his money. DeJohn sued for, inter alia, breach of contract. The defendants successfully sought summary dismissal for improper venue, pursuant to the forum selection clauses in the contracts with Register and .TV.51 The District Court for the Northern District of Illinois held that DeJohn was subject to the clear and unambiguous express terms of the agreement entered into with Register. Similarly, in Koresko v RealNetworks Inc,52 the District Court for the Eastern District of California held the plaintiff to a forum selection clause he had expressly agreed by clicking ‘I agree’ on the online end user licence agreement. In Feldman v Google Inc,53 the plaintiff purchased advertising for his law firm from the defendant. Whenever an internet user conducted a search using keywords concerning certain pharmaceutical drugs, the plaintiff’s ad would appear. The plaintiff was required to enter into an online contract before placing any ads. Toward the top of the screen, a notice in bold print appeared: ‘Carefully read the following terms and conditions.’54 The terms and conditions appeared in a window which allowed the potential advertiser to scroll down and read the agreement. The terms, which included a forum selection clause nominating California, appeared in 12 point font in seven paragraphs. At the bottom of the window, viewable without scrolling down, was a box and the words: ‘Yes I agree to the above terms and conditions.’55 The plaintiff had to click onto this box to proceed. If the plaintiff had clicked on ‘continue’ he would have been returned to the same page and could not have advanced to the next step. The District Court for the Eastern District of Pennsylvania held that if the test in Specht was satisfied, and there was no fraud, failing to read the clickwrap agreement did not excuse noncompliance with its terms.

Specht was considered and applied by the Intermediate Court of Hawai’i in Durrett v ACT Inc,56 in which Durrett took a standardised admissions test for tertiary education in the United States. Durrett was accused of cheating and ACT cancelled her score. To register for the exam, Durrett had to electronically check a box saying she agreed to abide by the ACT’s rules and procedures including an agreement to arbitrate any challenge to a decision by ACT to cancel a score. Although Durrett denied that she was bound by the arbitration [page 118] agreement, the link to the arbitration provision was located directly above the virtual box. The court held: Durrett was conspicuously confronted with the fact that she was agreeing to binding arbitration and provided with the opportunity to view those terms immediately before she indicated her agreement by electronically checking the box.57

The Court of Appeals of Ohio,58 the Court of Appeals of Indiana59 and the Supreme Court of New York60 have all held that, by clicking ‘I Accept’ to a prominent display of terms, a party bound itself to all the terms and conditions of an agreement. Recently, the United States Court of Appeal for the Tenth Circuit61 considered the validity of clickwrap terms for the jurisdictions of Florida and Oklahoma. Technicians installing television and internet services gave customers a hardcopy of the terms and conditions, and then required the customers to click an ‘I Acknowledge’ button on a web application on the technician’s laptop before commencing the installation. Customers could also not get access to the installed internet service without registering by clicking ‘I Agree’ to terms presented in a scroll box. The court held that both clickwrap agreements were of the type that were ‘routinely upheld’.62 And in Kraft Real Estate Investments LLC v Homeway.com Inc,63 the plaintiffs alleged the defendant had breached a contract for advertising by changing the address of their rental properties from ‘North Myrtle Beach’ to

‘Myrtle Beach’ leading to a decrease in rental inquiries and profits. The defendants relied on limitation of liability and disclaimer of liability clauses in a click contract that required agreement to the terms available via a hyperlink on the webpage. The plaintiffs denied recalling any terms or conditions posted on the webpage, or remembering clicking an ‘I agree’ box, but the court accepted they had in fact clicked ‘I agree’. It followed that lost profits were not recoverable for breach because recovery was expressly prohibited by the terms of the contract. 6.14 Lately, Specht tends to have been distinguished. In Grosvenor v Qwest Corporation,64 in which Qwest sought to enforce an arbitration agreement, the judge described it as ‘dense with qualifiers’.65 On commencing to install Qwest’s software, Grosvenor saw in the install window the message: Legal Agreements. Please read the terms including arbitration and limits on Qwest liability at www.quest.com/legal (‘Qwest Agreement’) that governs your

[page 119] use and Qwest’s provision of the services and equipment you ordered from the list below.66

Had Grosvenor gone to the www link, he would have found further terms and a series of links to other webpages. In the install window, there was further text informing Grosvenor of terms and then a scroll box containing the install agreement headed ‘Important, Binding Legal Information’. The first lines of the scroll box read: Your click below on ‘I Accept’ is an electronic signature and acknowledges: (1) you agree the Qwest agreement contains the terms under which service and equipment are provided to you …67

Below the scroll box was further text stating that an ‘I Accept’ click was an electronic signature and Grosvenor was given the option of a ‘Cancel’ button. Extraordinarily, the court was reluctant to find that an agreement had been formed, distinguishing the facts from those of Specht on the basis that in the latter case the users were downloading free software, there was minimal

mention of contractual terms and users were not asked expressly to manifest consent. However, the existence of a paper document post-dating the electronic agreement and referring to it finally persuaded the court that an agreement did exist. It was, surely, unnecessary for the court to rely on the post-contractual document. The obviousness of the contractual nature of the online terms and the repeated statements as to the binding nature of clicking the ultimate ‘I accept’ button should have been sufficient to indicate that an agreement had been formed.

Modified clickwrap contracts 6.15 Both aspects of Specht are apparent in modified clickwrap contracts, which incorporate elements of both clickwrap and browsewrap contracts. In Swift v Zynga Game Network,68 the plaintiff, as representative of a class, alleged deceptive conduct against the defendant. All first time players of the online Zynga game were presented with a screen request asking players whether they wished to allow Zynga access to their profile information. Under the statement there was a large ‘Allow’ button, a smaller ‘cancel’ link, and smaller grey font stating: By proceeding, you are allowing YoVille to access your information and you are agreeing to the Facebook Terms of Service in your use of YoVille. By using YoVille, you also agree to the YoVille Terms of Service.69

The underlined terms were blue hyperlinks. The defendant sought orders to stay the class action and for individual arbitration in reliance on terms of [page 120] the online agreements. The plaintiff argued that the arbitration terms were not incorporated because, whereas clickwrap contracts conventionally presented terms onscreen and did not allow the user to proceed without clicking assent to them, in this instance the click incorporated hyperlinks to

the terms. This ‘modified clickwrap’ process was insufficient to put the plaintiff on notice of the terms. A Magistrate Judge of the District Court for the Northern District of California held that the plaintiff was presented with an opportunity to read the terms of service: … clickwrap presentations providing a user with access to the terms of service and requiring a user to affirmatively accept the terms, even if the terms are not presented on the same page as the acceptance button, are sufficient.70

More recently, the decision of the Magistrate Judge was followed by a judge of the same court in Moretti v Herz Corp.71 The plaintiff reserved a hire car in Mexico on a website carrying the representation that the estimated total cost of the hire was $365, including taxes and fees. The website did not inform the plaintiff that he would be required to purchase compulsory personal liability insurance at an arbitrary currency exchange rate. The plaintiff completed the agreement by checking an ‘acceptance box’ acknowledging he accepted terms provided by a hyperlink. After the plaintiff was charged $683.59 for the car hire, he sued for fraud and deceit. On the defendant seeking to transfer proceedings to Delaware in reliance on a forum selection clause in the agreement, the court held the clause was validly incorporated following the earlier decision in Swift v Zynga Game Network Inc. In Fteja v Facebook,72 a similar result was reached by a different process of reasoning. A Facebook user denied that he was bound by a forum selection clause in the terms of agreement between Facebook and its users. A potential user had to click a virtual button saying ‘sign up’ twice, the second time over a message stating: ‘By clicking Sign Up, you are indicating that you have read and agree to the Terms of Service.’ The phrase ‘Terms of Service’ in the message was itself a hyperlink to the terms. The District Court for the Southern District of New York considered dicta in Specht that clicking on a virtual button did not communicate assent to a contract unless it was clear that clicking on the button would itself signify assent, and observed that in Specht, the terms and conditions were not visible. The court considered that the facts before it gave rise to principles governing

both clickwrap and browsewrap contracts. The reference to the terms and conditions appearing immediately below the second ‘sign up’ button was indicative of a clickwrap analysis. But the terms themselves were only accessible via a hyperlink contained within the reference and did not ‘force the [page 121] user to actually examine the terms before assenting’.73 The court analogised the problem to one in which: Facebook maintains a roadside fruit stand displaying bins of apples. For the purposes of this case, suppose that above the bins of apples are signs that say ‘By picking up this apple you consent to the terms of sale of this fruit stand. For those terms, turn over this sign’.74

Applying this analogy, the court held there was no difference between turning over a sign and clicking through to another screen on a website. Fteja was bound because he was informed of the consequences of his click. 6.16 A decision of a Magistrate Judge in the District Court for Kansas in Mortgage Plus Inc v Docmagic Inc d/b/a Document Systems Inc75 offers a glimpse of how a court in the United States might approach a clickwrap contract problem without the assistance of the UCC. The plaintiff entered into an agreement with the defendant for access to, and use of, the defendant’s software and document preparation services. Pursuant to the agreement, the defendant shipped a CD-ROM containing the software to the plaintiff. In order to install the software, the plaintiff had to view a window displaying a licence and user agreement which contained a forum selection clause nominating California. At the end of the agreement the following words appeared: ‘Do you accept all the terms of the preceding Licence Agreement? If you choose No, Setup will close.’76 The commercial relationship between the parties consisted of the plaintiff using the software to enter mortgage details into an electronic worksheet. The

worksheet was then sent electronically to the defendant which returned final home loan documents by email for printing. The plaintiff claimed that the software produced non-compliant loan documentation and sued the defendant for damages. The defendant sought for the proceedings to be transferred to California, pursuant to the forum selection clause contained in the CD-ROM agreement. As the UCC applied only to the sale of goods, common law principles applied to an agreement for the supply of services. The Magistrate Judge found that, because of the lack of evidence as to the terms of the original agreement, the court could not find that the CD-ROM clickwrap agreement materially altered the terms of the original agreement. It followed that the plaintiff had affirmatively assented to the agreement by clicking the ‘Yes’ button as a prerequisite of installing the software. Further, the installation and use of the software by the plaintiff constituted an affirmative acceptance of the terms assented to. In the United Kingdom, in Building Register Ltd v Weston,77 the English High Court considered, without deciding, the consequences of a clickwrap agreement. The defendant acting for his company sought to be listed as a ‘verified contractor’ on the claimant’s database. It was not possible to make [page 122] payment for the listing without the defendant ticking a box stating ‘tick here to show you have read our terms and conditions’. The terms and conditions included a provision for automatic extension of the listing unless either party gave notice in writing three months prior to the expiry of the current listing. The defendant soon after complained, saying the lengthy terms and conditions had not been brought to his attention and that as a result of a ‘high pressure sell over the phone’ his click signature had been inadvertent. In the County Court, the defendant accepted that he was bound by his signature,

but said that the claimant had not performed to the standard of its prior representations because of the lack of ‘hits’ on the claimant’s list for the defendants’ services. Following judgment in the County Court, the defendant published a website defaming the claimant by alleging he had been ‘duped’ into making the click signature. The High Court held that the defendant could not defend the claimant’s claim on the basis that it was the truth, as this would involve re-arguing a matter that had been litigated and decided adversely to the defendant in the County Court.

Browsewrap Contracts 6.17 The difference between clickwrap and browsewrap contracts is that assent to terms may exist in the former but not the latter.78 If there is a presentation of the terms of the contract and affirmative acceptance of them, courts will likely find that a contract exists. If there is a presentation of the terms without affirmative acceptance, a court will require actual or constructive notice of the terms and use of the website before finding existence of a contract.79 Specht v Netscape Communications80 distinguished between a clickwrap contract, enforceable in its terms, and a browsewrap contract, the terms of which were unenforceable because of lack of notice. During the installation of Communicator, the plaintiffs were automatically shown a scrollable text of that program’s licence agreement, which included an arbitration clause, and were not permitted to complete the installation until they clicked on a ‘Yes’ button to indicate that they accepted all the licence terms. However, on installing SmartDownload, the plaintiffs were not shown any terms located before the ‘download’ button and did not have to agree to any terms before downloading. The SmartDownload presentation was an attempt to form a browsewrap contract, the terms of which were unenforceable. Pollstar v Gigmania Ltd81 is an early example of a browsewrap contract.

Pollstar created and developed up-to-the-minute time sensitive concert information that was published daily on its website. An internet user could [page 123] download the information from Pollstar’s webpage and use it, subject to conditions of a licence agreement, stating: Any person using information from this web site hereby agrees to the following terms: 1.

All documents and information may only be used for informational purposes.

2.

All documents and information may only be used for non-commercial purposes.

3.

Any copy of these documents or information or portions thereof must include the copyright notice and this License Agreement.

Any duplication, transmission by any method, or storage in an information retrieval system of any part of this publication for purposes other than those stated above is strictly prohibited without the specific written permission of the publisher. This includes, but is not limited to, transcription into any form of computer system for audio text, print or visual retrieval …82

The licence agreement was not set out on the homepage but on a different webpage linked to the homepage. Also, users did not have to click an ‘I agree’ button before accessing the information. Users were alerted to the fact that use was subject to a licence agreement by a notice, in small grey print on a grey background, which was not underlined. The website also contained small blue text which appeared to be a link, but was not. Pollstar alleged that Gigmania downloaded the information Pollstar provided and copied it onto its own website. Gigmania moved for summary dismissal of the complaint. In denying Gigmania’s motion, the District Court for the Eastern District of California accepted that many visitors to Pollstar’s site may not have been aware of the licence agreement as notice of the licence agreement did not stand out. Also, as the text was not underlined, many users may not have been aware that the licence agreement was linked to the homepage. In addition, the fact that the website had small blue text which, when clicked on, did not link to another page may have confused visitors who may have thought that no coloured small text linked to a different webpage.

Furthermore, unlike clickwrap licences, which appeared onscreen when a CD or diskette was inserted, or when a webpage was downloaded, and did not let consumers proceed without indicating acceptance, this licence was merely part of a website and the user assented to the contract by visiting the website. However, despite these observations, the court considered, relying on ProCD v Zeidenberg,83 that a party could enter into an electronic agreement by using the offered services without first seeing the terms. It followed that Pollstar’s browsewrap licence agreement may arguably have been valid and enforceable. In Ticketmaster Corp v Tickets.Com Inc,84 the website of the plaintiff allowed customers to buy tickets to various events online, mainly by providing access [page 124] to other websites selling tickets via a hyperlink. On the plaintiff’s homepage, there were instructions and a directory to event pages which, in turn, provided basic information about the event and a description of how to order tickets. The homepage also contained, if the user scrolled to the bottom, terms and conditions which prohibited copying for commercial use. However, a user did not have to view the terms before proceeding to an event page. Further, a user could bypass the homepage entirely and proceed directly to the event pages. The defendant employed an electronic ‘spider’ or ‘crawler’ to review the internal webpages of the plaintiff. The spider extracted electronic information and the defendant took what it wanted for commercial purposes and discarded the rest. The defendant’s hyperlink then took its customers from the extracted information on its site directly to the plaintiff’s interior webpages, bypassing the plaintiff’s homepage. The plaintiff, by an amended complaint, sued the defendant for, inter alia, breach of contract. The court found that there was evidence that the defendant was fully familiar with the conditions the plaintiff imposed on users, due, in part, to a letter

from the plaintiff to the defendant quoting the conditions. The court commented that, while it would be convenient to have a rule requiring unequivocal assent to conditions by, for instance, clicking on an ‘I agree’ icon, the law had not developed in that way. The court found that a contract could be formed by proceeding into the interior pages after knowledge, or presumptive knowledge, of the conditions accepted when doing so. Ticketmaster has since been widely followed. In Druyan v Jagger,85 the court relied on Ticketmaster to say: Courts have consistently held that the use of a website for such purposes as purchasing a ticket manifests the user’s assent to the Terms of Use, and that such terms constitute a binding contract as long as the terms are sufficiently conspicuous.

6.18 In browsewrap agreements, it is uncertain how parties have reached consensus on terms sufficient to make a contract. In Register.com Inc v Verio Inc,86 applicants to register a domain name had to provide Register.com with details, including at a minimum, their name, postal address, telephone number and email. Register.com permitted use of this data by third parties: ‘… for any lawful purposes except to: … support transmission of mass unsolicited commercial advertising or solicitations via email.’87 Any person could submit a query for the details of domain name registrants and Register.com would supply the information, along with the terms of use of its website. As well as acting as a registrant, Register.com was in the business of offering domain name-related services on an ‘opt in’ basis. As such, Register.com enjoyed a commercial advantage over other domain name service providers which were not also domain name registrars. [page 125] Verio was a non-registrar domain name service provider. It devised automated software to submit multiple inquiries of Register.com’s database for details of domain name registrants. On acquiring the information, Verio

sent registrants marketing solicitations by email, telemarketing and direct mail. Register.com informed Verio that it was violating the terms it had agreed on submitting queries for information. Register.com also retrospectively changed the relevant clause to bar mass solicitation by direct mail, electronic mail or telephone. Verio ceased using Register.com’s information for mass email solicitation but continued with direct mail and telephone marketing. At first instance, Register.com obtained a preliminary injunction against Verio. On appeal, Verio argued it was not bound by Register.com’s terms. The majority found Verio could not avail itself of the reasoning in Specht to disavow the terms because, in Specht, the download was a one-off activity. In the present case, each day the appellant repeatedly downloaded data from the Register.com website and each day it repeatedly received notice of the terms on which Register.com made the data available: We recognize that contract offers on the Internet often require the offeree to click on an ‘I agree’ icon … [But] it is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a decision to take the benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms, which accordingly become binding on the offeree.88

In dissent, Parker J stated that the contract was neither a clickwrap, signalling unambiguous assent or rejection, nor a browsewrap, where the terms were accessible via a hyperlink. His Honour agreed with the majority that a single request would not have manifested assent to the terms of use of Register.com’s website, as a party could not manifest assent to terms until having a chance to review them. However, he also found that it could not reasonably be inferred that Verio assented to Register.com’s proposed terms simply because it made multiple queries for information with knowledge of the terms. Register.com’s repeated proposals could reasonably have been repeatedly rejected by Verio. Verio was followed in Southwest Airlines Co v Boardfirst LLC,89 which has become an influential decision. Boardfirst, through its website, assisted Southwest’s customers to secure the right to board first on Southwest flights.

On the customer providing details, a Boardfirst employee logged onto Southwest’s website and obtained the desired ‘A’ boarding pass. Once the pass had been obtained, Boardfirst charged the customer $5 and emailed a confirmation. On 20 December 2005, Southwest sent the CEO of Boardfirst a cease and desist letter, informing her that Southwest’s terms prohibited the use of its website for commercial purposes. Boardfirst continued using Southwest’s website for its own business. Southwest’s homepage stated in small print [page 126] at the bottom of the page: ‘… [u]se of the Southwest websites … constitutes acceptance of our Terms and Conditions.’90 On clicking on the words ‘Terms and Conditions’, which were distinguished in blue print, the website user was taken to a page displaying the terms, including the prohibition on using the website for commercial purposes. Southwest sued Boardfirst for breach of contract, arguing that, in continuing to use the website after having actual knowledge of the terms, Boardfirst had formed a binding agreement between the parties. The District Court for the Northern District of Texas considered the characteristics of a browsewrap contract: Browsewraps may take various forms but typically they involve a situation where a notice on a website conditions use of the site upon compliance with certain terms or conditions, which may be included on the same page as the notice or accessible via a hyperlink … A defining feature of a browsewrap license is that it does not require the user to manifest assent to the terms and conditions expressly — the user need not sign a document or click on an ‘accept’ or ‘I agree’ button. A party instead gives his assent simply by using the website … As browsewraps have become more prevalent in today’s increasingly e-driven commercial landscape, the courts have been called upon to determine their enforceability. Though outcomes in these cases is mixed, one general principle that emerges is that the validity of a browsewrap license turns on whether a website user has actual or constructive knowledge of a site’s terms and conditions prior to using the site … Where a website fails to provide adequate notice of the terms, and there is no showing

of actual or constructive knowledge, browsewraps have been found unenforceable.91 (footnotes omitted)

The court considered that, in the present case, Boardfirst had actual knowledge of the terms conditioning the use of Southwest’s website since the cease and desist letter of 20 December 2005. It followed that the present case ‘resembled Verio more than Specht’.92 Boardfirst had actual knowledge of the terms and continued to use Southwest’s website. It had bound itself to the terms imposed by Southwest by its conduct in continuing to use Southwest’s website. 6.19 Southwest Airlines Co v Boardfirst was considered and followed in Hines v Overstock.Com Inc.93 Overstock contended that Hines was caught by an arbitration agreement agreed to by her use of Overstock’s website. Hines had no actual notice of the Terms and Conditions. Nor did she have constructive notice, as the relevant hyperlink could not be seen without scrolling to the bottom of the page, an action that was unnecessary for her to complete a purchase on the site. Hines v Overstock was itself relied on in In re Zappos.com, [page 127] Customer Data Security Breach Litigation.94 Customers sued an online retailer for breach of security of their personal information contained in the retailer’s website. The retailer sought to rely on a provision for arbitration contained in its site’s terms and conditions. The decision summarised the approach of United States Federal Courts to browsewrap agreements: With a browsewrap agreement, a website owner seeks to bind website users to terms and conditions by posting the terms somewhere on the website, usually accessible through a hyperlink located somewhere on the website … Because no affirmative action is required by the website user to agree to the terms of a contract other than his or her use of the website, the determination of the validity of a browsewrap depends on whether the user has actual or constructive knowledge of a website’s terms and conditions. Where, as here, there is no evidence that plaintiffs had actual

knowledge of the agreement, the validity of a browsewrap contract hinges on whether the website provides reasonable notice of the terms of the contract [citations omitted].95

The court concluded that although hyperlinks to the retailer’s terms appeared on every webpage, the links were in the ‘same size, font and colour as most other insignificant links’. The court concluded that there was no constructive notice of the terms because the hyperlinks were: … inconspicuous, buried in the middle to bottom of every Zappos.com webpage among many other links and the website never direct[ed] a user to the Terms of Use. No reasonable user would have reason to click on the Terms of Use, even those users who have alleged that they clicked and relied on statements found in adjacent links, such as the site’s ‘Privacy Policy’.96

A contrary decision on different facts was reached in E K D bhnf Dawes v Facebook Inc,97 in which a class of Facebook users sued Facebook for misappropriating their names and likenesses for commercial reasons without their consent. Facebook relied on a forum selection clause contained in its site’s browsewrap agreement. The court upheld the agreement, finding that not only were users required to attest that they had read Facebook’s terms of service available via a hyperlink, but that the terms were hyperlinked on every page of the site in underlined blue text contrasting with a white background. 6.20 Century 21 Canada Limited Partnership v Rogers Communications Inc98 is an important example of a browsewrap contract considered outside of the UCC. Century 21’s website listed properties for its brokers and agents. Century 21 alleged that Rogers Communications’ subsidiary, Zoocasa, scraped data from Century 21’s website for display on its own website. Zoocasa admitted it took the information for its own use. The issue was whether it had [page 128] breached the terms of use of the Century 21 website. The British Columbia Supreme Court held that Zoocasa had actual knowledge of the terms of use of

Century 21’s website, and its conduct after it had knowledge of the terms breached the contract. The court relied on the earlier decision of Canadian Real Estate Association v Sutton (Quebec) Real Estate Services Inc99 in which the defendant used a site knowing that user conditions applied, and even imposed similar conditions on its site. The court in Century 21 stated: A properly enforceable browsewrap agreement will give the user opportunity to read it before deeming the consumer’s use of the website as acceptance of the Terms of Use. In the case at bar, notice is not an issue given the defendant has acknowledged it was aware of the Terms of Use and what conduct was deemed to be acceptance.100

In the Irish decision of Ryanair Ltd v Billigfluege.de GMBH,101 the plaintiff, which published a website giving price comparisons for flights, alleged that the defendant scraped the information and published it for its own users at a fee. The plaintiff sued for breach of the terms of use of its website, which also contained an exclusive jurisdiction clause in favour of the Irish courts. The defendant denied entering into the contract. The Irish High Court held that the defendant had been afforded a reasonable opportunity to read the terms before entering into the contract, and that the exclusive jurisdiction clause was contained in the terms of use on the plaintiff’s website highlighted by a hyperlink. The plaintiff had taken appropriate steps to ensure that the terms were brought to the user’s attention through their inclusion on the website via a clearly visible hyperlink. Although the court wrongly characterised the contract as a ‘click-wrap agreement’,102 the court’s reasoning is consistent with it having found that the defendant was on constructive notice of the terms of use.103

Conclusion 6.21 In the United States, shrinkwrap, clickwrap and browsewrap contracts may be made pursuant to §§2–202, 2–204, 2–206 and 2–207 of the UCC. Dickens104 suggests that apparently inconsistent decisions in fact outline a

[page 129] consistent approach taken by United States courts to the problem of standard form electronic contracts. Dickens argues that, in order to ‘slice through’ the inconsistencies, one should not get entangled in arguments over the prevailing UCC provisions. For online clickwrap agreements, Specht established a two-tier test of reasonably conspicuous notice and unambiguous manifestation of assent. The test differentiates between enforceable clickwrap agreements and unenforceable browsewrap agreements. Unambiguous consent, according to Dickens, implies that consumers have the opportunity to reject an agreement. Where an online agreement meets the two-part test, including the ability to reject, it will be upheld. For CD-ROM clickwrap cases, the ability to read and reject becomes the ability to return. In ProCD, the court held that, at the time of purchase, Zeidenberg had agreed to the inclusion of a licence agreement and had failed to return the software within the time stipulated in the licence. In Hill, the court extended the ProCD decision to allow for a ‘layered contract’ where the timing of the contract was indefinite. Klocek rejected ProCD on the grounds that §2–207 was determinative. However, Klocek still relied on the ‘notice of subsequent terms’ theory established in ProCD. Dickens concludes that the key to the cases is explicit consent and this cannot be established without either the opportunity to reject the terms or return the goods. Dickens’ ingenious argument should, in the main, be rejected. The provisions of the UCC cannot simply be dismissed as an entanglement to be avoided. The cases in point do not consider common law principles, but rather particular provisions of the UCC. In Step-Saver, the Third Circuit held that additional terms were proposals prohibited under §2–207(2)(b) which did not allow material terms to be added by implication. The Seventh Circuit in ProCD, on the other hand, found that §2–207 was inapplicable because the section only contemplated a battle of the forms, a position later expressly rejected in Klocek. In addition, the finding by the Seventh Circuit of a ‘layered

contracting’ process in Hill, the subject of robust criticism by the minority in M A Mortenson Company Inc v Timberline Software Corporation,105 relies on §2–204(2), which allows for the existence of a contract, even though the time of its formation may be indeterminate. Clickwrap analyses, similarly, rely on the UCC. In David & Associates Inc v Internet Gateway,106 the court made an express finding that the clickwrap agreement was valid by virtue of §2–204, which allows a contract for sale of goods to be made in any manner sufficient to show agreement, including conduct by both parties recognising the existence of a contract. Dickens’ argument should be accepted, however, insofar as he argues that the key to online contracting is explicit assent to all the terms of the contract before the contract is entered into. This reasoning is quite consistent with common law authority.107 [page 130] 6.22 The common law has accepted, somewhat uneasily, the idea that the time of formation of a contract may not be capable of precise identification. In the ticket cases, acceptance by conduct is held to have occurred after the offeree has had a reasonable time to read and reject the terms.108 However, courts outside of the United States, even if they are able to accept an indeterminate time of contract formation, are unlikely to adopt the view that an acceptance is effective where the acceptance contains terms different from those of the offer. Although the adoption of such a principle would prevent a party from avoiding a contract on the basis of a minor variation between offer and acceptance, such a principle remains inconsistent with common law principles of contract formation.109 The one area where United States decisions on shrinkwrap and CD-ROM clickwrap cases may influence a common law court outside of the jurisdiction is the international sale of goods under the Vienna Convention. Common law courts outside the United States should find an online

clickwrap agreement enforceable. Where terms are conspicuously displayed and positive assent has been given to them, there is no reason not to enforce the agreement. Notice can be actual or constructive, as where an icon indicating acceptance is accompanied by a notice that legal terms apply to the transaction, even though the terms themselves are not immediately visible.110 The critical element is the positive act of clicking on an icon to indicate assent. A single click is sufficient.111 This conclusion holds whether the click is analysed as a signature adopting the terms, or as evidence that the terms were brought to the notice of the offeree before entering into the contract. The key to browsewrap contracts is actual or constructive notice. Where there is notice of terms, but no positive assent, a court may or may not enforce the terms. In Specht, the Second Circuit took the view that the offer to download free software was not obviously contractual in nature and, as a consequence, found that the hyperlink at the bottom of the webpage was not sufficient to put the users on sufficient notice of the terms. In Pollstar v Gigmania,112 the webpage was more obviously contractual in character but a grey hyperlink against a grey background still gave insufficient notice of the terms. Common law courts outside the United States should determine whether browsewrap terms are enforceable by applying ordinary principles of notice to the circumstances of the online transaction. 1.

See, for example, Meridian Project Systems Inc v Hardin Construction Company LLC (2006) 426 F Supp 2d 1101.

2.

New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 at 167.

3.

Gibson v Manchester City Council [1978] 1 WLR 520 at 30, reversed on appeal [1979] 1 WLR 294.

4.

Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401 at 404.

5.

K J Hazelwood, ‘Let the Buyer Beware: The Seventh Circuit’s Approach to Accept or Return Offers’ (1998) 55 Washington and Lee Review 1287.

6.

J Paterson, A Robertson and P Heffey, Principles of Contract Law, 2nd ed, Lawbook Co, Sydney, 2005, at [3.135].

7.

Arizona Retail Systems Inc v The Software Link (1993) 831 F Supp 759.

8.

Arizona Retail Systems Inc v The Software Link 831 F Supp 759 (1993) at 762, 763.

9.

Butler Machine Tool Co Ltd v Ex-Cell-O Corp (England) Ltd [1979] 1 WLR 401.

10.

Sale of Goods (Vienna Convention) Act 1987 (ACT); Sale of Goods (Vienna Convention) Act 1986 (NSW); Sale of Goods (Vienna Convention) Act 1987 (NT); Sale of Goods (Vienna Convention) Act 1987 (Qld); Sale of Goods (Vienna Convention) Act 1986 (SA); Sale of Goods (Vienna Convention) Act 1987 (Tas); Sale of Goods (Vienna Convention) Act 1987 (Vic); Sale of Goods (Vienna Convention) Act 1986 (WA).

11.

Step-Saver Data Systems Inc v Wyse Technology and the Software Link Inc (1991) 939 F Supp 2d 91 (3rd Cir).

12.

Arizona Retail Systems Inc v The Software Link (1993) 831 F Supp 759.

13.

ProCD v Zeidenberg (1996) 86 F 3rd 1447 (7th Cir).

14.

Hill v Gateway 2000 Inc (1997) 105 F 3d 1147 (7th Cir).

15.

Hill v Gateway 2000 Inc (1997) 105 F 3d 1147 (7th Cir) at 1148, 1149.

16.

Brower v Gateway 2000 Inc (1998) 246 AD 2d 246.

17.

Brower v Gateway 2000 Inc (1998) 246 AD 2d 246 at 248.

18.

Hill v Gateway 2000 Inc (1997) 105 F 3d 1147 (7th Cir).

19.

Salco Distributors LLC v Icode Inc 2006 LEXIS 9483.

20.

See also Rinaldi v Iomega Corp 1999 WL 1442014 (Del Super Ct); Westerndorf v Gateway 2000 Inc 2000 WL 307369 (Del Ch).

21.

Klocek v Gateway Inc (2000) 104 F Supp 3d 1332.

22.

Klocek v Gateway Inc (2000) 104 F Supp 3d 1332 at 1334, 1335.

23.

V J Lively v Ijam Inc and Monarch Computer Systems Inc (2005) 114 P 3d 487.

24.

Defontes v Dell Computers Corporation 2004 RI Super LEXIS 32.

25.

Sotelo v DirectRevenue (2005) 384 F Supp 2d 1219.

26.

Step-Saver Data Systems Inc v Wyse Technology and the Software Link Inc (1991) 939 F Supp 2d 91 (3rd Cir).

27.

M A Mortenson Company Inc v Timberline Software Corporation (2000) 140 Wn 2d 568.

28.

Guy, Smith, Madsen, Talmadge JJ, Ireland Visiting Judge.

29.

M A Mortenson Company Inc v Timberline Software Corporation (2000) 140 Wn 2d 568 at 589.

30.

Beta Computers (Europe) Ltd v Adobe Systems (Europe) Ltd (1996) SLCR 587.

31.

Beta Computers (Europe) Ltd v Adobe Systems (Europe) Ltd (1996) SLCR 587 at 587.

32.

ProCD v Zeidenberg (1996) 86 F 3rd 1447 (7th Cir).

33.

ProCD v Zeidenberg (1996) 86 F 3rd 1447 (7th Cir) at 1452.

34.

i.LAN Systems Inc v Netscout Service Level Corp (2002) 183 F Supp 2d 328.

35.

The court applied the UCC rather than the common law although there was an issue as to whether section 2 of the Code applied to software licences.

36.

David & Associates Inc v Internet Gateway (2004) l334 F Supp 2d 1164.

37.

Klocek v Gateway Inc (2000) 104 F Supp 3d 1332.

38.

M A Mortenson Company Inc v Timberline Software Corporation (2000) 140 Wn 2d 568.

39.

Groff v America Online A 2d 1998 WL 307001 (RI Super).

40.

Caspi v Microsoft Network LLC (1999) 732 A 2d 528.

41.

Barnett v Network Solutions Inc (2001) 38 SW 3d 200.

42.

Groff v America Online A 2d 1998 WL 307001 (RI Super).

43.

Followed by the District Court N D Texas Dallas Division in Recursion Software Inc v Interactive Intelligence Inc (2006) 425 F Supp 2d 756.

44.

Specht v Netscape Communications (2002) 306 F 3d 17 (2nd Cir).

45.

Specht v Netscape Communications (2002) 306 F 3d 17 (2nd Cir) at 23.

46.

Specht, on the other hand, never obtained or used SmartDownload but instead operated a website from which visitors could download certain electronic files that permitted them to create an account with an internet service provider called WhyWeb. Specht alleged that every time a user who had previously installed SmartDownload visited his website and downloaded WhyWebrelated files, the defendants intercepted this information.

47.

A Imtian, H S Kim, L Leff and D Greenwood, ‘XML for Click-Through Contracts’ 17(2) International Journal of Law and Information Technology 206–219 at 206.

48.

Siedle v National Association of Securities Dealers Inc (2002) 248 F Supp 2d 1140.

49.

Siedle v National Association of Securities Dealers Inc (2002) 248 F Supp 2d 1140 at 1143.

50.

DeJohn v The .TV Corporation International, Register.com Inc and Verisign Inc (2003) 245 F Supp 2d 913.

51.

It was common ground that, in entering into a clipwrap agreement with Register, the contract with .TV was incorporated by reference.

52.

Koresko v RealNetworks Inc (2003) 291 F Supp 2d 1157.

53.

Feldman v Google Inc (2007) 513 F Supp 2d 229.

54.

Feldman v Google Inc (2007) 513 F Supp 2d 229 at 233.

55.

Feldman v Google Inc (2007) 513 F Supp 2d 229 at 233.

56.

Durrett v ACT Inc 2011 Haw App LEXIS 767.

57.

Durrett v ACT Inc 2011 Haw App LEXIS 767 at 17.

58.

Durick v eBay Inc 2006 WL 2672795 (Ohio App 7 Dist).

59.

Jallali v National Board of Osteopathic Medical Examiners, Inc (2009) 908 NE 2d 1168

60.

Moore v Microsoft Corporation (2002) 293 AD 2d 587.

61.

Hancock v American Telephone and Telegraph Company (2012) 701 F 3d 1248.

62.

Hancock v American Telephone and Telegraph Company (2012) 701 F 3d 1248 at 1258.

63.

Kraft Real Estate Investments LLC v Homeway.com Inc 2012 US Dist LEXIS 8282

64.

Grosvenor v Qwest Corporation (2012) 854 F Supp 2d 1021.

65.

Grosvenor v Qwest Corporation (2012) 854 F Supp 2d 1021 at 1026.

66.

Grosvenor v Qwest Corporation (2012) 854 F Supp 2d 1021 at 1026

67.

Grosvenor v Qwest Corporation (2012) 854 F Supp 2d 1021 at 1026, 1027.

68.

Swift v Zynga Game Network (2011) 805 F Supp 2d 904.

69.

Swift v Zynga Game Network (2011) 805 F Supp 2d 904 at 908.

70.

Swift v Zynga Game Network (2011) 805 F Supp 2d 904 at 912.

71.

Moretti v Herz Corp 2014 US Dist LEXIS 50660.

72.

Fteja v Facebook (2012) 841 F Supp 2d 829.

73.

Fteja v Facebook (2012) 841 F Supp 2d 829 at 838.

74.

Fteja v Facebook (2012) 841 F Supp 2d 829 at 838.

75.

Mortgage Plus Inc v Docmagic Inc d/b/a Document Systems Inc 2004 US Dist LEXIS 20145.

76.

Mortgage Plus Inc v Docmagic Inc d/b/a Document Systems Inc 2004 US Dist LEXIS 20145.

77.

Building Register Ltd v Weston [2014] EWHC 2361 (QB).

78.

See R J Casamiquela, ‘Contractual Assent and Enforceability in Cyberspace’ (2002) 17 Berkeley Tech LJ 475 at 476.

79.

R J Casamiquela, ‘Contractual Assent and Enforceability in Cyberspace’ (2002) 17 Berkeley Tech LJ 475 at 486.

80.

Specht v Netscape Communications (2002) 306 F 3d 17 (2nd Cir).

81.

Pollstar v Gigmania Ltd (2000) 170 F Supp 2d 974.

82.

Pollstar v Gigmania Ltd (2000) 170 F Supp 2d 974 at 976.

83.

ProCD v Zeidenberg (1996) 86 F 3rd 1447 (7th Cir).

84.

Ticketmaster Corp v Tickets.Com Inc 2003 US Dist LEXIS 6483.

85.

Druyan v Jagger (2007) 508 F Supp 2d 228 (SDNY) at 237.

86.

Register.com Inc v Verio Inc (2004) 356 F 3d 393.

87.

Register.com Inc v Verio Inc (2004) 356 F 3d 393 at 396.

88.

Register.com Inc v Verio Inc (2004) 356 F 3d 393 at 403.

89.

Southwest Airlines Co v Boardfirst LLC 2007 US Dist LEXIS 96230.

90.

Southwest Airlines Co v Boardfirst LLC 2007 US Dist LEXIS 96230 at [5].

91.

Southwest Airlines Co v Boardfirst LLC 2007 US Dist LEXIS 96230 at [14]–[16].

92.

Southwest Airlines Co v Boardfirst LLC 2007 US Dist LEXIS 96230 at [20].

93.

Hines v Overstock.Com Inc (2009) 668 F Supp 2d 362.

94.

In re Zappos, Inc Customer Data Security Breach Litigation (2012) 893 F Supp 2d 1058.

95.

In re Zappos, Inc Customer Data Security Breach Litigation (2012) 893 F Supp 2d 1058 at 1063, 1064.

96.

In re Zappos, Inc Customer Data Security Breach Litigation (2012) 893 F Supp 2d 1058 at 1064.

97.

E K D bhnf Dawes v Facebook Inc (2012) 885 F Supp 2d 894.

98.

Century 21 Canada Limited Partnership v Rogers Communications Inc (2012) 338 DLR (4th) 32.

99.

Canadian Real Estate Association v Sutton (Quebec Real Estate Services Inc) [2003] CanLII 22519 (Que CS). The decision is in French.

100. Century 21 Canada Limited Partnership v Rogers Communications Inc (2012) 338 DLR (4th) 32 at [108]. 101. Ryanair Ltd v Billigfluege.de GMBH [2010] IL Pr 22. 102. Ryanair Ltd v Billigfluege.de GMBH [2010] IL Pr 22 at [23]. The court states in this paragraph that

the defendant was required to ‘review and assent to’ the hyperlinked terms but the plaintiff at [17] seems to have argued only that the defendant’s use of the website was an unambiguous manifestation of assent. 103. See also Ryanair v Bravofly [2009] IL Pr 41 in which the Irish High Court at [68], [69] acknowledged an issue of a jurisdiction clause appearing in an electronic agreement without determining the validity of either the agreement or clause. 104. R L Dickens, ‘Finding Common Ground in the World of Electronic Contracts: The Consistency of Legal Reasoning in Clickwrap Cases’ (2007) 11 Marq Intell Prop L Rev 380. 105. M A Mortenson Company Inc v Timberline Software Corporation (2000) 140 Wn 2d 568. 106. David & Associates Inc v Internet Gateway (2004) l334 F Supp 2d 1164. 107. Thornton v Shoe Lane Parking [1971] 2 QB 163; eBay International AG v Creative Festival Entertainment Pty Ltd (2006) 170 FCR 450; Smythe v Thomas (2007) 71 NSWLR 537. 108. MacRobertson Miller Airline Services v Commissioner of State Taxation (WA) (1975) 133 CLR 125 at 139. 109. N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [3.28]. 110. See also N S Kim, ‘Situational Duress and the Aberrance of Electronic Contracts, 89(1) ChicagoKent Law Review 265–287 at 267–268. 111. LTVN Holdings LLC v Odeh 2009 US Dist LEXIS 103075. 112. Pollstar v Gigmania Ltd (2000) 170 F Supp 2d 974.

[page 131]

Chapter 7 Incorporation of Terms Parties to a written contract have the obligation to read what they sign; and, absent actual or constructive fraud, they are not excused from the consequences attendant upon a failure to read the contract. The same rule applies to contracts which appear in electronic form: Barnett v Network Solutions Inc (2001) 38 SW 3d 200

Introduction 7.1 In general, express terms are incorporated into an agreement if the parties assent to those terms. Express terms may be incorporated by signature, by notice and conduct, by prior dealing or by reference. Terms may also be implied by law or in fact. United States principles are similar, but courts dealing with standard form contracts place less emphasis on the objective manifestation of assent and more on whether there has been subjective assent on the part of consumers to terms.1 In particular, United States courts may shift the onus onto the party relying on the standard terms to show that the terms have been drawn to the attention of the other party, reflected in §211(3) of the Restatement (Second) of Contracts.2

Signature 7.2 Webpage contracts are often lengthy and complex standard form contracts presented to the consumer on a ‘take it or leave it’ basis. Courts, attempting to reconcile the competing principles of holding individuals to their bargains but not holding individuals to bargains to which they have not brought assenting minds, have recognised the commercial reality that it is not

[page 132] practicable to adjudicate the issue of assent for every term in every webpage contract. Consequently, the rule is that in the absence of fraud or other special circumstances, an electronic signature adopts all the terms of a contract, whether or not the person signing knows the terms of the contract.3 An electronic signature is capable of performing the same function as a handwritten signature. In eBay International AG v Creative Festival Entertainment Pty Ltd,4 purchasers could obtain tickets online for the Big Day Out festival from either the Big Day Out website or the Ticketmaster website. Rares J found a contract was made when purchasers electronically signed the terms of the contract online and characterised the online purchase of tickets as: … a contract in writing signed by the parties. By clicking on the relevant buttons and, by the computer bringing up all terms needed to purchase a ticket … the whole transaction was in writing, signed and agreed by the parties.5

In Groff v America Online,6 the plaintiff was unable to use the America Online system or become an America Online member without accepting the terms of service by clicking an ‘I agree’ button immediately next to the ‘read now’ button, and then clicking a further ‘I agree’ button next to the ‘I disagree’ button at the end of the terms of service. The plaintiff, nevertheless, sought to avoid the forum selection clause contained within the contract by claiming he never ‘saw, read, negotiated for or knowingly agreed to be bound by’7 the clause. The court held that a party who signed an instrument manifested his or her assent to it and could not later complain that he or she did not read or understand the contents. The plaintiff could not have enrolled unless he clicked two ‘I agree’ buttons. The plaintiff had effectively signed twice. In Barnett v Network Solutions Inc,8 the appellant entered into a contract for the respondent to register domain names. The electronic format required the appellant to scroll through the contract, which contained a forum

selection clause, in order to accept its provisions. When the appellant claimed the respondent had failed to register the domain names, the respondent brought a motion to dismiss the claim in reliance on the forum selection clause. On appeal, the Court of Appeals of Texas upheld the respondent’s motion, expressly equating electronic contracts with written contracts. Parties to a written contract had the obligation to read what they signed. Absent fraud, they were not excused from the consequences of failing to read the contract. By the very nature of the electronic format of the contract, the appellant had to scroll through the portion of the contract containing the forum selection [page 133] clause before he accepted the terms and had had an adequate opportunity to read and understand the forum selection clause. The Eighth Circuit, in Bell v Hollywood,9 held that a young employee was bound by the an arbitration clause in an electronic contract of employment she had signed: ‘The parties to an agreement should be able to rely on the fact that affixing a signature which acknowledges one has read, understood, and agreed to be bound by the terms of an agreement means what it purports to mean.’10 The Seventh Circuit, in Treiber & Straub Inc v United Parcel Service Inc and UPS Capital Insurance Agency,11 later reiterated that a party cannot sign an electronic contract and then renege based on its failure to read it. The appellant, located in Wisconsin, entered into an online contract with the respondents to send a ring worth $105,000 by air to California. The appellant signified agreement to the terms of service by clicking a virtual box on the screen. As a first-time shipper, the appellant was also required to click a second time to agree to the same terms of service. The terms of service stated that the respondents would not ship any items of ‘unusual value’, defined as

items worth more than $50,000, nor would it be responsible or liable for such items, nor would it offer insurance, even limited to $50,000, for items of unusual value. The appellant, nevertheless, took out insurance for $50,000 for the ring. On the respondents losing the ring, the appellant submitted an insurance claim for $50,000 but the respondents disclaimed liability under the contract. The appellant sued. The court held that the fact that the appellant had clicked not once, but twice, to assent to the terms of service was enough to ensure that it had agreed to the terms. More recently, in Durrett v ACT, Inc,12 the Intermediate Court of Appeals of Hawai’i stated in respect of an electronically checked box: Ms Durrett electronically signed the agreement, asserting thereby that she had read, understood and agreed to its terms, but stated in a declaration thereafter that she had not, in fact read or understood ACT’s procedures and requirements. ‘The general rule of contract law is that one who assents to a contract is bound by it and cannot complain that he has not read it or did not know what it contained. [emphasis in original]13

And in 2014, in In re H&R Block IRS Form 8863; Bullock v HRB Tax Group Inc14 clients had even confirmed their signatures to documents stating: ‘I agree that I have reviewed the documents below and hereby confirm my intention [page 134] to electronically sign each of these acknowledgements and agreements’.15 The District Court for the Western District of Missouri found it necessary to repeat again that any failure of the signatories not to read the documents was not an excuse to contract formation. 7.3 The effect of an electronic signature may be vitiated by the presence of fraud or other special circumstances. Scarcella v America Online16 raises important considerations for web signatures. The plaintiff entered into a membership agreement with the defendant by electronically ticking a virtual

box indicating his assent to the terms of the agreement, comprising a ‘terms of service’ and ‘rules of the road’ which included a forum selection clause. However, the screen inviting prospective members to agree to the terms appeared before the agreement itself appeared. Further, it was possible to bypass the terms of the agreement by simply clicking on the ‘I agree’ button. Even if the prospective member persisted and clicked on the ‘read now’ button, the following message appeared: ‘Because TOS and ROR are detailed, they are lengthy, and while we encourage you to take the time to read them now, we understand if you are eager to just explore the service.’17 The prospective member was then presented with a second opportunity to press an ‘OK I agree’ button. The court indicated, without deciding, that the defendant may well have procured the plaintiff’s assent by deceit. The defendant used language effectively encouraging prospective customers to skip the agreement, while enjoying the protection of signed assent to it. In these circumstances, the plaintiff may not have been bound by his electronic signature. A signature may also be vitiated when the document does not appear to be contractual in nature, and the terms are not drawn to the attention of the signatory. In Specht v Netscape Communications,18 Netscape offered the software programs Communicator and SmartDownload which visitors to the site were invited to download free of charge. During the installation of Communicator, the plaintiffs were automatically shown a scrollable text of that program’s licence agreement, which included an arbitration clause, and were not permitted to complete the installation until they clicked on a ‘Yes’ button to indicate that they accepted all the licence terms. The licence agreement, however, made no mention of SmartDownload. When installing SmartDownload, the plaintiffs were not shown any licence agreement located before the ‘download’ button and did not have to agree to any licence terms. The sole reference to SmartDownload’s licence terms on the webpage was located in text that became visible to the plaintiffs only if they scrolled down to

[page 135] the next screen. In finding that the plaintiffs were not bound by the arbitration clause in the SmartDownload agreement, the Second Circuit stated: It is true that a party cannot avoid the terms of a contract on the ground that he or she failed to read it before signing. But … an exception to this general rule exists when the writing does not appear to be a contract and the terms are not called to the attention of the recipient. In such a case, no contract is formed with respect to the undisclosed term.19

7.4 These cases display an orthodox approach to the incorporation of terms by signature.20 However, academic writing has questioned whether the act of clicking an intangible icon on a webpage is really equivalent to setting a mark on a paper with the intention of approving the paper’s contents. Gautrais challenges the assumption that a computer monitor has the same qualities of readability as paper.21 Sellers who propose electronic contracts are subject to no physical limits on the length of a webpage contract, even though users of the internet expect the process to save time. Further, there are no set standards regarding the online placement of onerous contractual terms, such as forum selection, arbitration and choice of law clauses.22 Hillman and Rachlinski also comment that individuals treat the internet primarily as ‘amusement, information-gathering for real-world transactions, or window shopping’, and may be too quick to complete their online purchases.23 They doubt that e-consumers give the same weight to an electronic signature as they do to a traditional signature.24 McDonald doubts that under the law of England and Wales, clicking an ‘I agree’ button is a signature, and, if it is, she views such an approach as ‘having a considerable capacity for unfairness’.25 It is reasonable to argue that a click is too simple to indicate intent. It is too easy to click on an icon in search of further information without realising that the action may have legal significance. The cyber reader may not associate him or herself with an electronic text in the same way that the reader of a paper contract associates with the text. It is more likely that the cyber reader

simply browses through a webpage without in any way taking ownership of it.26 Furthermore, Scarcella v America Online suggests that these characteristics of [page 136] webpage contracts are probably well known to e-commerce businesses and are exploited by them. Nevertheless, courts in the United States, Canada, England, Australia and elsewhere now routinely accept that a click signature, absent fraud or misrepresentation, binds the signatory in the same way as a paper signature. Signatures are not an issue of fairness, but an issue of evidence facilitating proof of a written agreement where neither fraud nor misrepresentation has been alleged. Courts considering electronic contracts should be alert to the usual circumstances vitiating a signature, such as where a signatory does not reasonably know that the webpage is contractual in nature.

Agency 7.5 Authority to sign is relevant to whether terms are incorporated or even whether a party is bound at all. In Hugger Mugger LLC v Netsuite Inc,27 the plaintiff entered into a written agreement with the defendant which purported to incorporate the terms of service agreement posted on the defendant’s website. The plaintiff’s IT manager clicked the ‘I agree’ button on the webpage agreement which contained a forum selection clause. The defendant succeeded in enforcing the clause against the plaintiff. Although the IT manager did not have actual authority to sign contracts on behalf of the plaintiff, he had ostensible authority. The IT manager had been extensively involved in the negotiations with the defendant, and had been provided with the user ID and password necessary to gain access to the

account and to receive the authorisation number from the defendant. It followed that the defendant was entitled to believe that the plaintiff’s IT manager had authority to enter into the clickwrap contract on behalf of the plaintiff. A principal was found similarly liable for his agent’s conduct in the course of business in Ghaed v Telus Communications.28 A psychiatrist’s secretary with access to his business email used it to register the practice as a client of Telus by clicking on an ‘accept’ icon on an electronic version of the agreement. The digital agreement was then automatically emailed back to Telus, and the practice had the opportunity of saving the file to pdf and printing it out for its records. However, it was accepted that no hard copy of the agreement was printed out. The psychiatrist denied the agreement. The secretary gave evidence that she would not enter into a contract for the practice without the psychiatrist’s consent and the Supreme Court of British Columbia found that the psychiatrist was bound by the terms. Abramson v America Online Inc29 concerned the apparent authority of a family member. The plaintiff, a professional artist, expressed a desire for internet [page 137] access to her husband. Her son then obtained an email account for her with the defendant. The plaintiff claimed that her email address was subsequently used as the purported originator of thousands of pornographic emails and she sued on various causes of action. The plaintiff argued that she was not bound by an arbitration clause in the member agreement, entered into by the son, requiring her to litigate in Virginia. However, the District Court of Texas held that the plaintiff had transmitted apparent authority to her son indirectly through her communications with her husband. The courts have declined to find a relationship of agency where it was

inconsistent with the parties’ agreement or representations as to agency. In BMMSoft Inc v White Oaks Technology Inc,30 White Oaks acquired BMMSoft software for use by the ultimate licensee, the United States Department of the Air Force. Engineers for White Oaks called and emailed BMMSoft on numerous occasions for support in installing the software. On each occasion they had to click on an ‘I agree’ box appearing on a screen displaying the terms of the end user licence agreement. The evidence was that the engineers were installing the software at a United States facility in Fort Washington. On BMMSoft suing White Oaks for breach of the licence, White Oaks argued that it had clicked ‘I agree’ as agent for the ultimate licensee. The court accepted that the parties to the EULA were BMMSoft and the United States, the ‘you’ in the EULA being the licensee, not White Oaks. In National Auto Lenders Inc v SysLocate Inc,31 the plaintiff bought GPS units from the defendant to track hire cars over which it had a lien. The units were defective and the plaintiff and the defendant entered into negotiations to resolve the dispute. While negotiations were on foot, the defendant posted an online click wrap agreement which had the effect of limiting the plaintiff’s ability to recover its loss. The plaintiff instructed its employees to refrain from logging onto the defendant’s website to prevent involuntary acceptance of the agreement. The plaintiff also informed the defendant that only named individuals were authorised to enter into agreements. After this, the defendant merged with another entity, Procon, which became the surviving corporation. Procon posted its own terms online with similar limitations of liability. However, the plaintiff could not track its vehicles without agreeing to Procon’s terms, and one of its employees accessed Procon’s site, triggering an acceptance of the terms. Procon argued that the signatories had apparent authority to accept its terms but the plaintiff denied they had legal authority. Unsurprisingly, the District Court for Florida found that it was unreasonable for the defendant to believe that the signatures were made with authorisation. 7.6

Agency may or may not be inferred by the use of an email address

related to an alleged principal. In CSX Transportation Inc v Recovery Express Inc and [page 138] d/b/a Interstate Demolition and Environmental Corp,32 the plaintiff received an email from one Albert Arillotta who expressed interest in buying railcars for scrap. Arillotta was a partner of Interstate Demolition and Environmental Corp (IDEC). IDEC shared business premises and facilities with another company, Recovery Express Inc (Recovery). Recovery assisted IDEC by allowing it to share resources, including telephone, fax and email facilities. In an email, Arillotta represented himself to be ‘from interstate demolition and recovery express’. Further, his email address was ‘[email protected]’. On the faith of Arillotta’s inquiry, the plaintiff delivered railcars for scrap worth $115,000 to IDEC. IDEC made out a cheque to the plaintiff which was dishonoured. IDEC subsequently went into liquidation, allegedly because of the fraud of Arillotta. The plaintiff sought to recover the money from Recovery, alleging that Arillotta had either actual authority or apparent authority to bind Recovery. The principal question before the District Court was whether an email domain name, of itself, cloaked a purported agent with apparent authority to bind a principal. Although IDEC and Recovery shared premises and facilities, the plaintiff’s only knowledge of Arillotta’s authority was of his email signature and, possibly, his representation that he was ‘from interstate demolition and recovery express’. The court found that the plaintiff was unreasonable in relying solely on a domain name: Granting an email domain name by itself does not cloak the recipient with carte blanche authority to act on behalf of the grantee. Were this so, every subordinate employee with a company email address — down to the night watchman — could bind a company to the same contracts as the president.33

The court further commented that it could find no case where giving a

business card, access to a company car, or access to company stationery conferred apparent authority. These indicia conveyed an association between purported principal and agent, but no reasonable person could conclude that the association conferred apparent authority. However, CSX Transportation was recently distinguished by the Court of Appeals of Texas in PanAmerican Operating Inc v Maud Smith Estate.34 Maud Smith Estate entered into an agreement by exchange of emails with an independent contractor who held himself out as a representative of PanAmerican. PanAmerican denied the contractor had authority to bind it. The court at first instance found that the contractor was clothed with the indicia of authority because PanAmerican provided the contractor with an email address, [email protected], a phone line and an office. On appeal, PanAmerican, relying on CSX Transportation, argued that an email address was not sufficient to indicate authority. But the court held that, unlike [page 139] in CSX Transportation, PanAmerican had a formal business relationship with the contractor, expected him to contract with third parties on its behalf for its own business objectives, and the tools of authority included more than just an email address.

Notice 7.7 Contracts offered by machine impose a special duty on the offeror to sufficiently bring the terms of the contract to the notice of the offeree before the contract is formed. In Lachs v Fidelity & Casualty Co of New York,35 it will be recalled, the deceased had procured insurance from a vending machine at an airport, displaying the words: ‘Airline Trip Insurance: 25c for Each $5,000 Maximum $25,000.’36 These words were repeated beneath on a placard. Also

on the placard in much smaller type were the words: ‘Covers first one way flight shown on application (also return flight if round trip airline ticket purchased) completed in 12 months … on any scheduled airline.’37 A copy of the printed terms was not posted on the machine and the machine was placed in front of a counter utilised by all non-scheduled airlines operating out of the airport. The deceased’s unscheduled airliner crashed and the appellant denied the claim on the basis that the policy only insured scheduled airlines. In finding for the respondent, the majority held that, because the terms were offered by way of a machine which could not explain the terms, the appellant should have taken additional care. The appellant, in illuminated lettering on the machine and on its application form, could have added proper unambiguous words or a definition of ‘scheduled airlines’. At the least, it should not have placed its vending machine in front of a counter utilised by all the non-scheduled airlines using the airport. In Steven v Fidelity and Casualty Company of New York,38 the deceased, for good reason, had to change from a scheduled to an unscheduled airline during the course of his trip. The majority of the Supreme Court of California found that it was reasonable for a consumer to expect insurance to cover the whole journey, including ‘reasonable substituted transport necessitated by emergency’. If the insurer did not propose such coverage, it should have plainly and clearly brought the limitation of liability to the attention of the purchaser. The majority stated: We do not here deal with the orthodox insurance policy sold in the protective aura of the insurer’s explanation and discussion of its terms. The vending machine emitted a complex stereotyped document, which, because of the short time elapsing before the start of the deceased’s flight hardly afforded him

[page 140] an opportunity even to read the policy. The mass-made contract, sold by the machine under such conditions, symbolizes the kind of transaction that lends to the accepted rules a special gloss of interpretation … the expected coverage of the policy can only be defeated by a provision for

limitation which has been plainly brought to the attention of the insured. The notice of noncoverage of the policy, in a situation in which the public may reasonably expect coverage, must be conspicuous, plain and clear.39

In Thornton v Shoe Lane Parking Ltd,40 Lord Denning MR made it quite clear that for offers made by machine, terms could not be subsequently incorporated by the offeree’s conduct in not returning the ticket: The terms of the offer are contained in the notice placed on or near the machine stating what is offered for the money. The customer is bound by those terms as long as they are sufficiently brought to his notice before-hand, but not otherwise.41

7.8 Contracts offered online carry a similar obligation to bring notice of terms to the offeree. In Specht v Netscape Communications,42 Netscape offered the software programs Communicator and SmartDownload, which visitors to the site were invited to download free of charge. The sole reference to SmartDownload’s licence terms on the ‘SmartDownload Communicator’ webpage was located in text that only became visible if the plaintiffs scrolled down to the next screen: ‘Please review and agree to the terms of the Netscape SmartDownload software license agreement before downloading and using the software.’43 The plaintiffs would then have had to browse through several different screens before being able to find a display of the licence agreement, including the arbitration clause. Once the plaintiffs had initiated the download, the existence of SmartDownload’s licence terms was not mentioned while the software was running or at any later point. The Second Circuit concluded that a reference to the existence of licence terms on a submerged screen was not sufficient to place consumers on inquiry or constructive notice of those terms. The plaintiffs may have had as much time as they needed to scroll through the multiple screens on the webpage, but there was no reason to assume that the plaintiffs would scroll down to subsequent screens simply because the screens were there. The court articulated a two-stage test for the validity of a clickwrap agreement: 1.

reasonably conspicuous notice; and

2.

unambiguous manifestation of assent.

An unambiguous manifestation of assent may well be given by clicking an ‘I agree’ or an ‘I accept’ icon on a webpage, or by conduct in using a webpage. [page 141] But what amounts to reasonably conspicuous notice? The courts have considered notice of terms in a scroll box, most commonly associated with clickwrap agreements and, increasingly, notice by hyperlink, most commonly associated with browsewrap agreements.

Reasonably conspicuous notice by scrollbox 7.9 It is reasonably conspicuous notice if the terms of an electronic contract are displayed in reasonably sized text in a scroll box. In Caspi v Microsoft Network LLC,44 the plaintiffs had to scroll down a membership agreement and click on an ‘I Agree’ field, posted at the end of the agreement. The Appellate Division of the Superior Court of New Jersey found the plaintiffs had received adequate notice of the forum selection clause as they were free to scroll through the various computer screens that presented the terms of their contracts before clicking their agreement. There was nothing extraordinary about the size or placement of the text. It is also reasonably conspicuous notice if only a portion of the electronic agreement is immediately visible in the scroll box. In Novak d/b/a Pets Warehouse v Overture Services Inc,45 ten lines of the 300-line contract were visible to the plaintiff in a scroll box. The court found the font was ‘easy to read’ and the plaintiff was under no time limitation to read the terms. The court likened scrolling to turning the hard copy pages in a multi-page agreement.46 In Feldman v Google Inc,47 Feldman purchased advertising for his law firm from Google. The defendant charged the plaintiff each time its ad was clicked

on by a user. Feldman alleged ‘click fraud’, by which pranksters or competitors with no interest in his firm’s services clicked on the ad to drive up advertising costs. Feldman further alleged that Google had the capacity to determine which clicks were fraudulent, but did nothing to prevent the fraud. Google sought summary dismissal in reliance on the forum selection clause contained in its click contract with Feldman. Feldman was required to enter into an online contract before placing any ads. Toward the top of the screen, a notice in bold print appeared: ‘Carefully read the following terms and conditions’.48 The terms and conditions appeared in a window which allowed the potential advertiser to scroll down and read the agreement. The terms, including a forum selection clause, appeared in 12 point font in seven paragraphs. A link to a print version of the contract was offered at the top of the window. At the bottom of the window, viewable without scrolling down, was a box and the words: ‘Yes I agree to the above terms and conditions.’49 Feldman had to click this box to proceed. If he had clicked on [page 142] ‘continue’ he would have been returned to the same page and could not have advanced to the next step. The court held that although Feldman had to actively scroll through the text box, he was not denied notice because there was sufficient notice of the agreement itself. The agreement was presented in readable 12 point font and was only seven paragraphs long. A printer-friendly version was also available. The court found that a reasonably prudent internet user would have known of the existence of terms in the agreement. In Scherrillo v Dunn & Bradstreet,50 Scherrillo sued in New York for negligent misrepresentation in a report purchased online. Dunn and Bradstreet sought to transfer the hearing to New Jersey relying on a forum

selection clause in its online contract. Dunn & Bradstreet’s evidence was that online purchasers of advice were required to register and the bottom quarter to third of the registration page contained a scrollbox titled ‘Terms and Conditions’. Below the scroll box was the text: ‘I have read and AGREE to the terms and conditions shown above.’51 Next to the text was a check box. At the bottom of the page was another check box entitled ‘Complete Registration’. If the ‘Complete Registration’ was checked without the terms and conditions having been checked, the user was unable to complete registration and was returned to the registration page. Scherrillo, however, relied on evidence that it was possible to navigate through the website using a tab key, and check the terms and conditions box by pressing the spacer bar, rather than using a mouse. Scherrillo maintained he had checked the terms and conditions box inadvertently by pressing the spacer bar when tabbing through the application. The court found that Scherrillo’s evidence was not credible and that he had voluntarily checked the terms and conditions box and assented to the terms. 7.10 Canada had already taken a similar approach to terms displayed in a scrollbox. In Rudder v Microsoft,52 a proposed class of plaintiffs alleged that the defendant had taken payments from their credit cards and claimed for breach of contract, breach of fiduciary duty, misappropriation and punitive damages. The defendant brought a motion for a permanent stay of proceedings relying, inter alia, on the forum selection clause in the online contract executed by the plaintiffs. The plaintiffs, although otherwise relying on the agreement, claimed they had no notice of the forum selection clause, arguing that, because only a portion of the agreement was presented on the screen at one time, the terms of the agreement were effectively ‘fine print’. The Ontario Superior Court of Justice found there were no factual foundations for the plaintiffs’ contentions. Potential members were required to electronically acknowledge acceptance of terms by clicking on an ‘I agree’ button. The entire agreement was readily viewable by using the scrolling function. All of the terms of the agreement

[page 143] were displayed in the same format, and terms viewed via scrolling were not materially different from terms viewed by turning the pages in a multi-page paper agreement. Three years later, in Kanitz v Rogers Cable Inc,53 the defendant provided cable television service and high-speed internet access to subscribers in certain parts of Canada. The user agreement on page one stated in part: We may change, modify, add or remove portions of this agreement at any time. We will notify you of any changes to this agreement by posting notice of such changes on the Rogers@Home website, or sending notice via email or postal mail.54

In November 2000, the defendant amended the user agreement to add, among other things, an arbitration and class action waiver clause. In January 2001, the defendant posted the version of the agreement containing the new clause on its customer support website. In addition, from mid-January to mid-February 2001, the fact that the user agreement had been amended was noted on the main page of the customer support site that linked to the amended agreement, an explanation that the user agreement governed the relationship between the parties, a statement that the agreement was periodically updated, and a statement of the date that the agreement had last been updated. The defendant also posted email bulletins to subscribers advising of the amendments. The plaintiffs sought to bring a class action against the defendant. The defendant, relying on the new clause, moved to stay the proceedings. The court found the plaintiffs had been given reasonable notice of the amendments. There was an onus on the plaintiffs to check the defendant’s website from time to time and it was reasonable to expect them to do more than simply go to the main page of the defendant’s website to find the amendments. In answer to the plaintiff’s contention that the agreement was unduly cumbersome and the arbitration and class action waiver clause was buried in the agreement, the court found that, as a matter of fact, it took a

review of only five screens of the defendant’s website to get to the user agreement. Further, applying Rudder v Microsoft, the court found that, although the agreement was in a scroll box, the arbitration and class action waiver clause was separately defined with its own header, was displayed the same as all other clauses in the agreement, was not contained within a larger clause and was not in fine print or tucked away. The court concluded the clause was ‘upfront and easily located’ by anyone who wished to take the time to scroll through the document for even a cursory view of its contents.55 Rudder v Microsoft was recently considered in Douez v Facebook Inc.56 Douez was one of class of users of Facebook who sought to sue Facebook for using their names and images for commercial purposes without their consent [page 144] in breach of the Privacy Act (BC). Facebook sought to stay the proceedings on the basis that the class had agreed to a forum selection clause in Facebook’s online terms of use in favour of Santa Clara County, California. Considering the online forum selection clause, the British Columbia Supreme Court found that, printed out, one version of the terms was 13 pages long with the clause appearing on the tenth page. Another version was in ‘very small font’ making up ‘tiny terms’.57 However, the court found that Rudder v Microsoft Corp was authority for the proposition that obscurity did not necessarily defeat a forum selection clause. The court upheld the validity of the clause, although it ultimately held it had jurisdiction under the Privacy Act. The United States Court of Appeal for the Tenth Circuit reached a similar result for similar reasons in Hancock v American Telephone and Telegraph Company,58 where AT&T emailed its internet customers that an arbitration clause had been added to the terms and conditions of its service and that, by continuing to use it, customers signified their agreement to the change. Customers disclaimed notice of the arbitration clause. The court held that

three short paragraphs, followed by an explanation of the meaning of the arbitration clause and a link to the new terms and conditions, was plain and sufficient notice of the arbitration clause. An unusual twist of these facts, in which the proposer of a modification to an arbitration clause later disclaimed it, was considered in Harold H Huggins Realty Inc v FNC Inc.59 The plaintiffs had agreed to an arbitration clause in an online user agreement in 2002. The same user agreement provided that it could be modified at any time by the defendant posting terms in the same location, effective 30 days after posting. Importantly, users would be ‘asked to acknowledge’ acceptance of the changes on the first time they logged in after the changes had been posted.60 In 2005, the defendant posted modifications that did not include an arbitration clause. On the plaintiffs commencing proceedings, the defendant then denied the modifications were effective. The District Court for the District of Maryland held that the modifications were effective because the modifications had been posted for more than 30 days, and construing the ambiguous requirement of acknowledgment against the defendant as drafter, the acknowledgment of the plaintiffs was not a condition precedent to the effectiveness of the modifications.61

Reasonably conspicuous notice by hyperlink 7.11 Initially, courts were reluctant to hold that hyperlinks, without more, gave sufficient notice of interior terms. In Pollstar v Gigmania Ltd,62 the plaintiff [page 145] published concert information on its website which users could download and use, subject to a licence agreement. Users did not have to click assent to the agreement before accessing the information, but they were alerted that use was subject to a licence agreement by a notice in small grey print on a

grey background which was not underlined and did not otherwise stand out. The website also contained small blue text which appeared to be, but was not, a hyperlink. The plaintiff alleged that the defendant downloaded its information and copied it onto its own website, contrary to the agreement. The court found that users of the plaintiff’s site may not have been aware of the licence agreement as notice did not stand out. Also, as the text was not underlined, many users would not have understood that the licence agreement was linked to the homepage. Further, the fact that the website had small blue text which, when clicked on, did not link to another page may have confused visitors into thinking that no coloured small text provided a hyperlink. Defontes v Dell Computers Corporation63 expressly applied and followed Specht in finding that a hyperlink at the bottom of the defendant’s webpage, linking to a contract containing an arbitration clause, was not sufficient to put the plaintiffs on notice of the terms of sale. In West Waters v Earthlink Inc and Onemain Inc,64 the First Circuit went further, doubting whether West Waters had even seen hyperlinks to an agreement, much less was on notice that it was bound to arbitrate any dispute with OneMain. However, in Net2Phone Inc v The Superior Court of Los Angeles County and Consumer Cause,65 the Court of Appeal of California remarked obiter that a forum selection clause, notified by a hyperlink on each page of a website, would have been enforceable, as notifying terms by a hyperlink was common practice in internet business and not unfair. 7.12 Two further cases decided at appellate level in 2005 indicated that the courts were beginning to accept that hyperlinks may be sufficient to put parties on notice of terms. First, in Aral v Earthlink Inc,66 Earthlink intended that users could not install a Digital Subscriber Line without clicking on an icon indicating they had read and agreed to the terms and conditions of Earthlink’s service agreement. Earthlink also posted the service agreement — which contained choice of law, arbitration, and class action waiver clauses — by means of hyperlinks on the majority of the pages of its website, including

its homepage. Aral alleged that the appellant charged him fees for the four- to five-week period between the time the service was ordered and the time the service could be accessed, causing each subscriber a loss of between $40 and $50. Aral sought to avoid the arbitration and class action waiver provisions by arguing that, because he was a software engineer, he had successfully installed [page 146] Earthlink’s software without having to click on the icon indicating assent. The Court of Appeal of California, nevertheless, found that the hyperlinks on Earthlink’s website had put Aral on notice of the terms. Second, in Hubbert v Dell Corp,67 the plaintiffs purchased computers online through the defendant’s website. On each of the five webpages of the web application form, the defendant’s terms and conditions of sale, including an arbitration provision, were accessible by clicking on a blue hyperlink. The last three webpages stated that all sales were subject to Dell’s terms and conditions of sale. The plaintiffs sued for, inter alia, false, misleading and deceptive conduct. The plaintiffs agreed that contracts had been formed by their online purchases, but they denied that the arbitration clause was part of the contract. On appeal, the Appellate Court of Illinois found that the blue hyperlinks and the statement that all sales were subject to conditions were sufficient to create a binding arbitration agreement between the appellant and the respondents, likening the blue hyperlinks to a multi-page written contract. The court also found that although there was no requirement for conspicuousness, the blue type made the hyperlinks conspicuous. Further, the statement that sales were subject to conditions should have placed a reasonable person on notice to find out the terms before making a purchase. The Supreme Court of Canada considered notice by hyperlink in Dell Computer Corp v Union des Consommateurs and Olivier Dumoulin.68 On 4 April 2003, the appellant’s website indicated prices of $89 and $118 for two

models of computers, rather than the correct retail prices of $379 and $549. On 5 April 2003, the appellant blocked access to the webpages at the usual address. However, Dumoulin used a deep link to gain access to the webpages and order one of the computers at the lower advertised price. The appellant then posted a correction notice and announced it would not process orders for computers at the lower prices. The appellant refused to honour Dumoulin’s order at the lower price. At the bottom of every page of the website was a clearly visible hyperlink. On clicking the hyperlink, the first paragraph of the appellant’s terms and conditions stated: PLEASE READ THIS DOCUMENT CAREFULLY! IT CONTAINS VERY IMPORTANT INFORMATION ABOUT YOUR RIGHTS AND OBLIGATIONS, AS WELL AS LIMITATIONS AND EXCLUSIONS THAT MAY APPLY TO YOU. THIS DOCUMENT CONTAINS A DISPUTE RESOLUTION CLAUSE.69

The respondents filed a motion to commence a class action against the appellant. The appellant sought a referral of the dispute to arbitration, in reliance on the arbitration clause in the contract. The Superior Court and Court of Appeal for Quebec held that the arbitration clause could not be set up against Dumoulin. [page 147] On appeal, the weight of the Supreme Court’s judgment was concerned with the application of private international law to the arbitration clause under the Civil Code of Quebec (CCQ). In this respect, the court was divided. However, the court unanimously found that under §§1435–1437 of the CCQ, which laid down rules for the validity of clauses in contracts of adhesion and consumer contracts, the arbitration clause was incorporated into the electronic agreement and that it bound the respondents. While the majority confined itself to construing the relevant provisions of the CCQ, the minority took a more expansive approach. The minority held that a hyperlinked document is incorporated by reference if the hyperlink is functional and

clearly visible. The hyperlink at issue was in smaller print and located at the bottom of every shopping webpage on the site, consistent with industry standards. The hyperlink was evident to Dumoulin. The minority rejected the proposition that the arbitration clause was buried or obscured, adopting Kanitz v Rogers Cable Inc:70 [The arbitration clause] is displayed just as all the other clauses of the agreement are displayed. It is not contained within a larger clause dealing with other matters, nor is it in fine print or otherwise tucked away in some obscure place designed to make it discoverable only through dogged determination. The clause is upfront and easily located by anyone who wishes to take time to scroll through the document for even a cursory view of its contents.71

Reasonably conspicuous notice of onerous terms 7.13 Mandatory terms, such as forum selection, arbitration, choice of law and limitation of liability clauses, are onerous and must be ‘reasonably communicated’ to the offeree. It is not necessary to highlight onerous terms in bold type or capitals, as long as the terms are not submerged in fine print. In Forrest v Verizon Communications Inc,72 the appellant alleged that, despite signing up for a high-speed dial-up service, he never received the service. The Court of Appeals for the District of Columbia upheld the validity of the respondent’s forum selection clause. Although the clause, which appeared in a scroll box, was not in capital letters, in type size and appearance it was consistent with the agreement as a whole. This was adequate notice, and the fact that the scroll box displayed only a small portion of the agreement was not fatal to the provision of adequate notice.

Forum selection clauses 7.14 A forum selection clause that is clear and unambiguous is ‘reasonably communicated’ where the offeree is required to assent to an online user [page 148]

agreement which contains the clause.73 In Liberty Syndicates at Lloyds v Walnut Advisory Corporation,74 the District Court for the District of New Jersey considered reasonable communication in the context of clickwrap and browsewrap contracts: Generally courts have enforced forum selection clauses in clickwrap agreements, finding that the clickwrap agreement, which collects all of the terms of the agreement in a single dialogue and then requires the user to affirmatively accept the agreement before proceeding, makes every term equally visible. On the other hand, courts have only enforced the forum selection clauses in browsewrap agreements when the specifics surrounding agreement revealed either that the user knew or should have known about the existence of the terms and conditions that contained the forum selection clause. The central issue in both of these types of agreements is whether or not the forum selection clause is ‘immediately visible’ [citations omitted].75

Major v McAllister76 is a frequently cited example of the application of these principles. The appellant used a website offering free referrals to construction contractors. The search process used a number of screens, each hyperlinked to the defendant’s terms and conditions containing limitations of liability, choice of law and forum selection clauses. The plaintiff clicked next to a hyperlinked message, ‘By submitting you agree to the Terms of Use’. On the appellant claiming against the defendant, it relied on the forum selection clause in the terms of use. In upholding the clause, the Court of Appeals of Missouri held that, unlike the facts in Specht, the hyperlinked message gave notice of the existence of terms of use and similar links were on every other website page, visible without having to scroll the page. Occasionally, reasonable communication has turned on the identity of the site user. In Motise v America Online,77 the plaintiff signed into the America Online account of his step-father. The plaintiff alleged that the defendant unlawfully released his screen name on a listserve that was illegally publishing private information about the plaintiff, including daily transcripts of electronic eavesdropping of his private telephone conversations and other activities at his home in Pennsylvania. The defendant argued that its terms of service, which included a forum selection clause nominating Virginia, applied to members, such as the plaintiff’s step-father, and users, such as the plaintiff, and that the cause of action should, consequently, be brought in Virginia. The

plaintiff argued that, as a mere user of his step-father’s account, he had no notice of the forum selection clause. The court held that the forum selection clause had not been reasonably communicated to the plaintiff, although it transferred the case to Virginia on other grounds. [page 149] A different result was reached in Burcham v Expedia Inc.78 Burcham alleged the defendant had made online misrepresentations about the existence of hotel facilities. It was uncontested that a user of the defendant’s site could not book a hotel room without either having a pre-existing online account, or using the site as a visitor. In either event, a user would have to click agreement to the defendant’s terms and conditions, including a forum selection clause. On the defendant seeking to have the suit dismissed for improper venue, Burcham claimed he had no recollection of seeing any user agreement on the defendant’s website and could not recollect whether he had used the site as a visitor or by logging onto an account. He argued that he may have gained access to the site by unknowingly logging onto an account created on his computer by another person in his office. The court found against Burcham on the facts. But it also cited authority that where a user logged in on another’s account, both the user and the other were equally bound.79 In Hoffman v Supplements Togo Management,80 an attorney bought pills advertised to boost sex drive online, with the intention of launching a class action for breaches of consumer protection laws. At first instance the plaintiff was precluded from bringing the claim in New Jersey because of a forum selection clause in the defendant’s online agreement. But on appeal, the Appellate Division of the Superior Court of New Jersey, applying the test of reasonable notice it had enunciated in Caspi v Microsoft Network, found the forum selection clause was unreasonably masked because it was not visible on

the purchaser’s computer screen unless he or she scrolled down to a ‘submerged’ part of the webpage where the clause appeared. The court found that unlike Caspi v Microsoft Network, but similar to Specht, the website was designed so that it was unlikely a person would ever see the forum selection clause.81 Hoffman was recently cited in a scholarly judgment by the District Court of New York, First District in Jerez v JD Closeouts LLC concerning a hyperlinked forum selection clause.82 The court found the forum selection clause remained unincorporated into the parties’ agreement because it was: ‘“[B]uried and submerged” on a webpage that could only be found by clicking on an inconspicuous link on the company’s “About Us” page.’83

Arbitration clauses 7.15 Campbell v General Dynamics Government Systems Corporation84 considered whether an employer gave sufficient notice of a mandatory arbitration agreement in a dispute resolution policy that had been emailed to [page 150] employees company-wide. The employee received between ten and 100 emails every day. The email did not indicate that the agreement affected an employee’s right to litigate a claim, or that the agreement contained an arbitration clause. The text of the policy was not in the email itself, although it was posted on the company’s intranet. The email encouraged employees to ‘review the enclosed materials carefully’.85 The enclosed materials were two hyperlinks in the email linking to a brochure explaining the policy and a handbook containing the policy itself. Although the employer kept a tracking log indicating that the employee had opened the email, it did not track whether employees clicked on the hyperlinks. Applying a test of ‘some minimal level of notice’86 the Court of Appeals for the First Circuit accepted that a mass email could be sufficient to give notice. However, the court found

that, in this instance, the email did not state directly that the policy contained an arbitration agreement, nor did it put recipients on constructive notice of the contractual significance of the policy. Further, although the policy was in formal language, the language of the email was relatively casual, suggesting that the policy was a ‘kinder gentler alternative to litigation’.87 It did not convey the information that employees’ access to judicial determination of disputes was extinguished. In Schnabel v Trilegiant Corporation,88 the plaintiffs, in the course of making a purchase online, enrolled with Great Fun to receive discounts on a variety of products and services for a monthly membership fee. The enrolment page indicated that Great Fun would email the plaintiffs so they could ‘start saving today’ but that: ‘[T]here’s no obligation to continue … call us to cancel before the end of [the] FREE trial and owe us nothing.’89 The enrolment page contained a hyperlink to terms and conditions including an arbitration clause. The email also contained the terms and conditions. At first instance, Trilegiant failed to argue that the plaintiffs were on constructive notice of the hyperlinked arbitration clause, so on appeal Trilegiant was confined to arguing that the email imported the arbitration clause on either a shrinkwrap theory, or a proposed amendment theory of incorporation. On either theory, the Court of Appeals, Second Circuit held that the plaintiffs had not accepted the offer of terms contained in the email because of the lack of constructive notice of the contractual nature of the offer: We do not think that an unsolicited email from an online consumer business puts recipients on inquiry notice of the terms enclosed in that email and those terms’ relationship to a service in which the recipients had already enrolled and that a failure to act affirmatively to cancel the membership will, alone, constitute assent.90

[page 151]

Limitation of liability and indemnification clauses

7.16 In AV v iParadigms LLC,91 school students sought to sue iParadigms for breach of copyright for archiving their intellectual property on the ‘Turnitin’ website, contrary to express disclaimers on the students’ written work not consenting to it being archived. iParadigms’ terms and conditions included: Turnitin and its services are maintained by iParadigms, LLC [‘Licensor’] and are offered to you, the user [‘User’] conditioned on your acceptance without modification of the terms, conditions and notices contained herein.92

The terms and conditions also included limitation of liability and indemnity clauses. The District Court for the Eastern District of Virginia held that the students were bound by the clickwrap agreement. iParadigms’ liability was limited under the clickwrap agreement, and, even if it was not, the students’ attempts to modify the agreement failed because the clickwrap agreement provided that its terms were not modifiable. In PDC Laboratories Inc v Hach Company,93 the plaintiff claimed it was not on notice of the respondent’s limitation of liability clause. The court, applying Hubert v Dell, found that the term was hyperlinked on three separate pages of the online order form in underlined, blue and contrasting text. It was the contrast of the hyperlinks, rather than their repetition, that was determinative. 7.17 The incorporation of a term limiting liability in an electronic contract by signature or notice is not the end of the analysis. In Robet v Versus Brokerage Services Inc,94 Robet traded securities using the discount electronic trading brokerage system offered by the defendant. The defendant had a stringent limitation of liability clause and a disclaimer of any assurance that the system would operate error free in its terms and conditions posted online and delivered to new account holders by mail. The system did in fact err, purchasing too many shares. A combination of lack of automatic notice, erroneous data entry by the defendant and Robet’s independent attempt to self-correct by selling the surplus shares resulted in Robet suffering a significant loss. The court declined to enforce the exclusion of liability clause

on the ground that an exclusion clause should not be interpreted so broadly as to exclude a party from liability for failing to provide the very thing bargained for in the agreement.95 [page 152]

Course of Dealings 7.18 Terms may be incorporated by a prior consistent course of dealings over a sufficiently long period of time. However, mere prior use may not be sufficient to establish a positive intention to incorporate a particular term subsequently.96 In M A Mortenson Company Inc v Timberline Software Corporation,97 the appellant had used the respondent’s software to prepare construction bids since 1990. In 1993, the appellant installed a new computer system and issued a purchase order for updated software. The purchase order contained terms confirming the purchase price, set-up fee, delivery charges and sales tax but no entire contract clause. The full text of the respondent’s licence agreement, containing a clause substantially limiting the respondent’s liability for damages, appeared on the first screen each time the software was used. The appellant sued for damages, due to a flaw in the software. On appeal to the Supreme Court of Washington, the majority found that the appellant was on notice of the licence terms because it and the respondent had engaged in a course of dealings during which the appellant had previously purchased licensed software from the respondent and there was clear evidence of an unquestioned use of licence agreements throughout the software industry. 7.19 It is possible that incorporation by a course of dealings might also arise from the repeated automated use of a website. In Register.com Inc v Verio Inc,98 Verio was a non-registrar domain name service provider. It devised automated software to submit multiple inquiries of Register.com’s

database for details of domain name registrants. On acquiring the information, Verio sent registrants marketing solicitations by email, telemarketing and direct mail, contrary to the terms of use of the information stipulated by the respondent. On appeal, Verio argued that because it was only given the terms after it had gained access to Register.com’s website, it had no notice of the terms. The majority of the Second Circuit held that if Verio had submitted only one query, it may have been able to argue that it obtained the data without assenting to Register.com’s terms. However, each day Verio repeatedly downloaded data, and each day it received notice of the terms on which Register.com made the data available. Parker, Circuit Judge, dissented, saying that it could not reasonably be inferred that Verio assented to Register.com’s proposed terms simply because it made multiple queries for information with knowledge of the terms. Register.com’s repeated proposals could have been repeatedly rejected by Verio. [page 153] In Cairo Inc v Crossmedia Services Inc,99 both parties operated websites that allowed users to search for products on sale at local retailers. The plaintiff automatically compiled information from retailers’ weekly circular webpages, some of which were enabled by the defendant. Each of the defendant’s webpages displayed a notice that, by using the site, a user agreed to abide by terms of use which contained a forum selection clause nominating Illinois. The plaintiff sought a declaration in California that it did not infringe the defendant’s rights. In granting the defendant’s motion for summary dismissal in reliance on the forum selection clause contained in the contract, the District Court for the Northern District of California held that the clause was enforceable because the plaintiff’s repeated and automated use of the defendant’s website formed the basis for imputing knowledge to the plaintiff of the terms on which the defendant’s services were offered.

Incorporation by Reference 7.20 There is no doubt in principle that an online term may be incorporated by reference.100 However, the reference must be more than a general reference. Whether or not a reference effectively incorporates an online term is a matter of construction. In Hugger Mugger LLC v Netsuite Inc,101 the plaintiff entered into a written agreement with the defendant which incorporated an online terms of service agreement, including a forum selection clause, posted on the defendant’s website. A hard copy of the terms of service was not attached to the agreement but its online location was printed in the agreement: In consideration of the licence fee paid by customer and subject to the terms of this agreement and the terms of service posted at www.NetSuite.com, or successor website, NetSuite grants customer, its employees, and agents a non-exclusive, non-transferable licence to use the service for internal business purposes … This agreement and incorporated terms of service represent the entire agreement …102

The District Court of Utah found that the language of the licence agreement clearly incorporated by reference the terms of service. However, Hugger Mugger was distinguished by the District Court for the Eastern District of Michigan in Manasher v NECC Telecom.103 Unlike in Hugger Mugger, where the language of the licence agreement clearly ‘referred to, identified and incorporated the online terms’, the phrase ‘NECC’s Agreement “Disclosure and Liabilities” can be found online at www.necc.us’104 was not sufficient to incorporate the arbitration clause contained in the online terms. [page 154] The Court of Appeal of Florida had exhibited the same reasoning in Affinity Internet Inc, d/b/a SkyNetWeb v Consolidated Credit Counseling Services Inc.105 Affinity promised to provide computer and web hosting internet services to Consolidated Credit. The contract stated: ‘This contract is

subject to all of SkynetWEB’s terms, conditions, user and acceptable use policies located at http://www.skynetweb.com/company/legal/legal.php (“user agreement”).’106 The user agreement mandated arbitration. On Consolidated Credit suing, Affinity sought to compel arbitration in reliance on the user agreement. The court, in considering whether a written agreement to arbitrate existed, found that the contract contained no clear language evidencing an intention of the parties to incorporate the terms of the user agreement. A mere reference to the electronic document was not sufficient to incorporate its terms into the contract. In Crabb v GoDaddy.com Inc,107 the plaintiffs contracted with GoDaddy for registration of domain names. The plaintiffs never used the domain names, and GoDaddy ‘parked’ the domain names on a webpage full of advertising from which it derived revenue. On the plaintiffs suing GoDaddy in unjust enrichment, GoDaddy contended that it had contractual permission from the plaintiffs to use the domain names as advertising space because its Universal Terms of Agreement incorporated the Parked Page Service Agreement by reference. However, the Universal Terms of Agreement contained reference to both a Domain Registration Agreement, which the plaintiffs undoubtedly assented to, and the Parked Page Agreement, which was at issue. The Universal Terms of Agreement did not clearly inform customers which agreement applied to which services, and there was no reason to think that both agreements always went together. The District Court for the District of Arizona held the Parked Page Service Agreement was not incorporated by reference. Recently the Supreme Court of Appeals of West Virginia, in State of West Virginia (Ex rel U-Haul Co) v Zakaib,108 considered whether a contract signed on an online terminal stating that customers ‘received and agree[d] to the terms and conditions of this Rental Contract and the Rental Contract Addendum’ incorporated the terms of an unsigned paper addendum into the contract. On the facts, the addendum was invariably given to customers after the electronic contract had been signed. The court found the general

reference in the electronic agreement was not sufficient to incorporate the memorandum and that because the addendum was supplied after signature there was no basis on which to impute knowledge of its terms prior to contract. [page 155] In Australia, a general reference to online terms is also not sufficient. In eBay International AG v Creative Festival Entertainment Pty Ltd,109 purchasers could obtain tickets online for the Big Day Out festival from either the Big Day Out website or the Ticketmaster website. Purchasers of tickets from Ticketmaster’s website were told that if they were not already Ticketmaster members they had to become members. It was a condition of membership that users of Ticketmaster’s website accepted the terms of use on the website which included the term: This purchase policy is subject to and incorporates by this reference, the Terms of Use. Each ticket that you purchase is a licence to attend a particular event and is subject to the additional terms set forth in that ticket.110

Once a user could log in, they were able to move to the next stage of the Ticketmaster website to purchase tickets. During the whole of the process, a purchaser from Ticketmaster online could not access any information that set out any conditions at all on the ticket or on the Big Day Out website. In fact, the tickets had a printed condition stating that if the ticket was resold for profit, it would be cancelled and the holder refused entry. Rares J held that the ‘vague and general reference’ in Ticketmaster’s purchaser policy to terms displayed on tickets could not substitute for the necessity to draw specifically to someone’s attention unusual or significant terms affecting the proposed relationship. If Creative wanted to impose a condition of contract in the Ticketmaster online sale, it had to bring notice of such a condition to the attention of the purchaser online at the time of purchase.111

Against this line of cases is One Beacon Insurance Company v Crowley Maritime Services Inc.112 The Court of Appeals for the Fifth Circuit considered whether a paper contract incorporated by reference online terms under Admiralty law. The web address given in the paper contract did not itself display the terms and conditions referred to, but provided directions as to how to locate them on the site. Once located, the terms were displayed in four point font. Despite these factual problems, the court held that the website terms were validly incorporated by reference. The court held that the language referring to the terms was prominently displayed in capital letters, they referred to a single document being the website, the terms and conditions were available on a site that was easily navigated and the parties were sophisticated commercial entities. [page 156]

Express and Implied Terms 7.21 The terms of an electronic contract may be express or implied. They may be conditions, breach of which give rise to the right of termination and damages, or they may be warranties, breach of which give rise merely to damages. Breach of an intermediate term may or may not give rise to the right of termination.113 The equitable rule, in respect of time, is that failure to perform on time does not, generally, give rise to the right of termination unless the termination follows a notice setting an additional reasonable period for performance.114 However, the Supreme Court of New Zealand has recently held that time for the notification of an electronic settlement is of the essence. In Larson v Rick Dees Ltd,115 the respondent purchaser purchased ten residential units from the appellant vendor. The vendor stipulated a procedure for remote settlement, involving paying a bank cheque into the vendor’s solicitor’s bank account and sending notification of payment by fax.

Time was of the essence and, on the last day for settlement, the purchaser paid the settlement funds to the vendor’s solicitor’s trust account by electronic funds transfer just before 5 pm. Just after 5 pm, the purchaser sent the vendor a fax confirming the payment and undertaking not to reverse the transaction. The vendor refused to complete the transaction. At first instance, the High Court of New Zealand dismissed the purchaser’s suit for specific performance. On appeal, the Court of Appeal of New Zealand held that the agreement stipulated that payment could be made up to and including 5 pm on the last day. Had payment been made at 5 pm, the fax could not have been dispatched until after that time. It followed that, in the absence of an express provision to the contrary, the parties had agreed on a faxed notification within reasonable time of the payment. A faxed notification within 10 minutes of payment satisfied this requirement. The Supreme Court of New Zealand, however, rejected this reasoning, holding that purchasers who choose a remote settlement must pay within a sufficient time to allow for providing the vendor with knowledge of the payment of cleared funds before any contractual deadline.

Implied Terms 7.22 A term may be implied in fact to give business efficacy to an agreement.116 A generic term may also be implied by law into contracts belonging to a [page 157] particular class of agreements where the term is necessary to protect rights normally conferred by contracts of that class. The established classes of contracts are not closed and include contracts for the sale of goods.117

Terms implied for business efficacy 7.23 In Trumpet Software Pty Ltd v Ozemail Pty Ltd,118 the Federal Court of Australia was prepared to imply a term for business efficacy into a licence governing the distribution of shareware. Trumpet marketed and distributed a computer software program, Trumpet Winsock, that allowed users to connect with the internet through an internet service provider. Trumpet distributed the software as shareware, allowing potential users to evaluate the program before paying a registration fee. The shareware could be distributed either by CD-ROM, or by installing it on a file transfer protocol for potential users to download directly from the internet. Ozemail entered into negotiations with Trumpet to distribute the software as CD-ROMs attached to the cover of a computing magazine. Trumpet declined to agree to the distribution of its current non-time-locked shareware, but agreed to allow distribution of a future time-locked version. However, before the time-locked version was ready for distribution, Trumpet terminated negotiations with the respondent. Ozemail, nevertheless, arranged for the non-time-locked shareware to be distributed. Ozemail also modified the software, obscuring the fact that the product was shareware and that the applicant had a right to be paid should users decide to keep it. Heerey J found that, in the absence of consideration moving from Ozemail, Trumpet was entitled to revoke the bare licence at any time and that Trumpet had revoked any licence before the distribution of the software. However, his Honour also remarked obiter that if the licence had not been revoked, he would have implied a term into it governing distribution of the shareware by intermediaries. By analogy with a contractually implied term, a term would have been implied for business efficacy that the shareware should be distributed in its entirety and without modification. Therefore, even if Ozemail had distributed the shareware under licence, it had breached an implied term of the licence by modifying the program.

Terms implied by law

7.24 There is an issue as to whether there is a statutorily implied term in a contract for the sale of software that the software will be fit for purpose. Whether or not a term is implied may depend on whether the software is goods. In Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty [page 158] Ltd,119 the Supreme Court of New South Wales considered whether software was goods for the purposes of the Trade Practices Act 1974 (Cth) and the Sale of Goods Act 1923 (NSW) in circumstances where the plaintiff had entered into a contract for the supply of three items of computer hardware and two items of software — an accountancy package and a word processing package. Rogers J reasoned that programs were the instructions or commands telling the hardware what to do. Although the program was an algorithm or formula, it was, of necessity, contained in a physical medium. It followed that the sale of a computer system, comprising both hardware and software, was a sale of goods within the meaning of both the Commonwealth and state legislation. However, Rogers J left it open as to whether the algorithm itself was goods: It may be a debatable question whether or not the sale of computer software by itself is sufficient to constitute a sale of goods within the meaning of the legislation. I do not wish it to be thought that I am of the view that software by itself may not be goods.120

Rogers J’s conclusions are consistent with decisions considering similar legislative provisions in the United States. In Chatlos Systems v National Cash Register Corp,121 the plaintiff bought computer hardware, software and incidental services from the defendant. The defendant had represented that a particular computer system provided functions for accounts receivable, payroll, order entry, inventory deletion, state income tax and cash receipts. However, ultimately, only the payroll function operated. The plaintiff sued for breach of contract, breach of implied warranties and fraudulent misrepresentation. The District Court of New Jersey decided that the transaction was for sale of goods, notwithstanding the incidental service

aspects of the arrangement. It followed that the Uniform Commercial Code (UCC) implied a warranty that the goods would be fit for purpose. In Advent Systems Limited v Unisys Corporation,122 the Third Circuit considered whether software was goods for the purposes of the UCC as enacted in Pennsylvania. The court found that software referred to a medium that stored input and output data, and computer programs within the mediums of hard disks, floppy disks and magnetic tapes. Although the program itself may have been able to secure copyright as intellectual property, once it was loaded onto a medium that was tangible, moveable and available in the market place, it was a good. The court drew an analogy to compact discs where the music produced by the artist was, in itself, not goods. However, when transferred to a laser-readable disc, it became a merchantable commodity. The court concluded there were strong policy arguments for defining software as a good within the UCC. [page 159] 7.25 The sale of software contained in a physical medium, such as a CDROM, is a sale of goods for the purposes of implying terms of merchantable quality and fitness for purpose under the relevant legislation. However, the software itself may not be a good for the purposes of the relevant legislation. In St Albans City and District Council v International Computers Ltd,123 Sir Iain Glidewell held that software was not goods under the Sale of Goods Act 1979 (UK), but that a warranty of fitness for purpose was implied at common law. St Albans Council had entered into a contract with International Computers for a computer program enabling the council to calculate population figures preparatory to levying the community charge. Pursuant to the contract, an employee of International Computers went to the council’s premises and transferred the program from a disk in his possession into the council’s computer. The software was defective and the program

miscalculated the population figures due to the error. As a result, the council collected nearly half a million pounds less than it should have. The council sued for damages. The Court of Appeal upheld judgment for the council, although it reduced the quantum of damages. During the course of argument, the issue arose whether software was a ‘good’ implying terms of quality and fitness for purpose into the contract. Glidewell LJ distinguished between the disk containing the program and the program itself. The disk was clearly a good within the definition of the Act. However, the program equally clearly was not. Glidewell LJ held that if the disk containing the defective program had been transferred from International Computers to the council by way of sale, it would have been a sale of goods attracting the implied warranties under the Act. However, on the facts, International Computers merely licensed the council to use its program. Glidewell LJ found that, in the circumstances, the defective program was not a good and no statutory warranties as to its quality or fitness were implied. Nevertheless, in the absence of a statutory term, he would have been prepared to imply a common law warranty into the contract that the computer program should be ‘reasonably fit for, that is reasonably capable of achieving, the intended purpose,’124 specified in the council’s invitation to tender. In Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd,125 Comrad contracted to deliver and install a software package designed to assist Gammasonics in its management of the work flow of its clients. The software was delivered by remote internet download onto Gammasonics’ server. After Gammasonics had downloaded the software it terminated the contract for breach of a number of terms, including Comrad’s failure to provide a system of merchantable quality and fit for its intended purpose. The question arose whether a software system delivered by means of [page 160]

remote download was a ‘good’ under the Act. Fullerton J considered St Albans City & District Council v International Computers Ltd but the clear point of distinction was that in St Albans the program was uploaded from a disk inserted into the council’s computer whereas in Gammasonics, the program was transferred by download from the internet. Glidewell LJ’s decision was distinguishable because of the way software was conceptualised at the time of his judgment. Fullerton J stated: The process of installing a software programme by means of a remote internet download might be better conceptualised by recognising that the programme is, at least initially, contained in the physical medium or depository, after which in the process of being downloaded it leaves that place and is transferred (either by a conduit, by physical means, or by an electronic transmission of signals or digital codes), during which time it is uncontained in any physical sense. Upon arrival at the new depository, the programme is then rehoused in any physical medium. It is evident that at the beginning of the installation process the software programme, being contained in a physical medium, would meet the definition of ‘goods’, irrespective of the means by which it is to be transferred. However, if Glidewell LJ’s reasoning is followed, one is forced to the conclusion that although the programme which is transferred via a disc would remain as a ‘good’ throughout the process of installation, a software programme which is downloaded, and which is converted from being a software programme possessing the character of a ‘good’ at one point thereafter loses its character as a ‘good’ in the process of being delivered even if it reconverts to a ‘good’ at the end point when it is rehoused in a tangible and moveable form.126

Her Honour also reviewed academic writing to the effect that there was a discernible trend towards characterising software simpliciter as goods,127 although there was a distinction between online downloads that result in the delivery of a digitised application, and online access to a database without delivery of anything except the access itself. Fullerton J accepted that it was illogical for consumers purchasing software in the form of CDs or DVDs to be protected by the statutory warranties but for consumers downloading the same software directly from the internet or from a supplier not to have the same protection. Nevertheless, the illogicality was a matter for the legislature and her Honour held that the Sale of Goods Act did not apply to the defective program downloaded by Gammasonics. Her Honour indicated that it may be open to her to imply terms as to fitness for purpose and merchantable quality

at common law under the principles of BP Refinery (Western Port) v Shire of Hastings128 but, for reasons of procedure, it was unnecessary to do so. [page 161] The principles that emerge from these decisions at general law, beginning with Toby Constructions, are: 1.

The sale of a computer system comprising both hardware and software comprises the sale of goods attracting statutory warranties.

2.

Where software is contained in a physical medium and is uploaded into another system, the software may be goods for the purposes of the statutory warranties.

3.

Where software is downloaded from the internet, it is not goods within the statutory definition attracting the warranties.

4.

Where software is not downloaded but is retrievable via internet access, it is a service that may attract statutory warranties.

Conclusion Signature and notice 7.26 In eBay International AG v Creative Festival Entertainment Pty Ltd,129 Rares J held that an electronic signature was capable of performing the same function as a handwritten signature. This is consistent with United States decisions that have applied an orthodox approach to the adoption of electronic terms by the click of a mouse, despite doubt that the act of clicking an intangible icon on a webpage is equivalent to setting a mark on paper with the intent of adopting the contents. The informal character of online signatures is probably well known to e-commerce businesses, and is likely

exploited by them. Common law courts should be alert to the circumstance that a click signatory, in the course of browsing the internet, may not reasonably know that a webpage is contractual in nature. An electronic offer via webpage must bring the terms of the offer to the notice of the offeree before the contract is formed. Sufficient notice is given if the terms of an electronic offer are displayed in reasonably sized text in a scroll box, even though only a portion of the electronic agreement may be immediately visible. The terms should be in an easily readable font. It is not necessary to highlight onerous terms as long as they are not buried in fine print. Although courts in the United States were initially reluctant to hold that hyperlinks gave sufficient notice of terms, United States and Canadian courts now accept that hyperlinks are capable of putting parties on notice of terms, even onerous terms, if the hyperlinks are functional and clearly visible. Online terms may be incorporated by a course of dealings, even where the course of dealings is entirely automated. Online terms may also be incorporated by reference if the reference, as a matter of construction, is clear and the online term is identifiable. [page 162]

Express and implied terms 7.27 Where a settlement is effected by remote means and time is of the essence, payment must be made in sufficient time to allow notification of the payment to be communicated before the contractual deadline. Where notification occurs after the deadline, the innocent party may have the right to terminate the contract. Finally, where an online sale involves an item that is tangible, moveable and available in the market place, such as software loaded onto a CD-ROM, the item is a good for the purposes of implying terms of merchantable quality and fitness for purpose under the relevant legislation. Where the item is an intangible, such as software downloaded

from the internet, it may fall outside the definition of goods attracting the statutory warranties, but terms of merchantability and fitness of purpose may be implied for business efficacy at common law. Where software is not downloaded but is retrievable via the internet, the software may be a service attracting statutory warranties for services.

1.

L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005, at 301–3.

2.

Section 211(3): ‘Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement’. This section typically applies to terms that are bizarre or oppressive: R A Hillman and J J Rachlinski, ‘Standard Form Contracting in the Electronic Age’ (2002) 77 NY Law Review 429 at 458.

3.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [10–15]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [10.26].

4.

eBay International AG v Creative Festival Entertainment Pty Limited (2006) 170 FCR 450.

5.

eBay International AG v Creative Festival Entertainment Pty Limited (2006) 170 FCR 450 at [49].

6.

Groff v America Online A 2d 1998 WL 307001 (RI Super).

7.

Groff v America Online A 2d 1998 WL 307001 (RI Super) at 2.

8.

Barnett v Network Solutions Inc (2001) 38 SW 3d 200.

9.

Bell v Hollywood 2006 LEXIS 3950.

10.

Bell v Hollywood 2006 LEXIS 3950 at [15].

11.

Treiber & Straub Inc v United Parcel Service Inc and UPS Capital Insurance Agency (2007) 474 F 3d 379 (7th Cir).

12.

Durrett v ACT, Inc 2011 Haw App LEXIS 767.

13.

Durrett v ACT, Inc 2011 Haw App LEXIS 767 at [17], [18] italics in original.

14.

In re H&R Block IRS Form 8863; Bullock v HRB Tax Group Inc, Master Case No 4:13-MD-02474FJG (11 July 2014).

15.

In re H&R Block IRS Form 8863; Bullock v HRB Tax Group Inc, Master Case No 4:13-MD-02474FJG (11 July 2014).

16.

Scarcella v America Online (2004) 798 NYS 2d 348; affirmed (2005) 811 NYS 2d 858.

17.

Scarcella v America Online (2004) 798 NYS 2d 348.

18.

Specht v Netscape Communications (2002) 306 F 3d 17 (2nd Cir).

19.

Specht v Netscape Communications (2002) 306 F 3d 17 (2nd Cir) at 30.

20.

The issue of a click signature has not been specifically considered in the United Kingdom.

However, see Datec Electronic Holdings Ltd v United Parcels Service Ltd [2007] 4 All ER 765 at 771. 21.

V Gautrais, ‘The Colour of E-Consent’ (2003–2004) University of Ottowa Law and Technology Journal 189 at 195.

22.

V Gautrais, ‘The Colour of E-Consent (2003–2004) University of Ottowa Law and Technology Journal 189 at 195, 196.

23.

R A Hillman and J J Rachlinski, ‘Standard Form Contracting in the Electronic Age’ (2002) 77 NY Law Review 429 at 467, 479.

24.

R A Hillman and J J Rachlinski, ‘Standard Form Contracting in the Electronic Age’ (2002) 77 NY Law Review 429 at 481.

25.

E Macdonald, ‘Incorporation of Standard Terms in Website Contracting-Clicking “I Agree”’ (2011) 27(3) Journal of Contract Law 198–221.

26.

V Gautrais, ‘The Colour of E-Consent’ (2003–2004) University of Ottowa Law and Technology Journal 189 at 206.

27.

Hugger Mugger LLC v Netsuite Inc 2005 US Dist LEXIS 33003.

28.

Ghaed v Telus Communications [2013] BCSC 1675

29.

Abramson v America Online Inc (2005) 393 F Supp 2d 438.

30.

BMMSoft Inc v White Oaks Technology Inc 2010 US Dist LEXIS 88010

31.

National Auto Lenders Inc v SysLocate Inc (2010) 686 F Supp 2d 1318.

32.

CSX Transportation Inc v Recovery Express Inc and d/b/a Interstate Demolition and Environmental Corp (2006) 415 F Supp 2d 6.

33.

CSX Transportation Inc v Recovery Express Inc and d/b/a Interstate Demolition and Environmental Corp (2006) 415 F Supp 2d 6 at 11.

34.

PanAmerican Operating Inc v Maud Smith Estate (2013) 409 SW 3d 168.

35.

Lachs v Fidelity & Casualty Co of New York (1954) 306 NY 357.

36.

Lachs v Fidelity & Casualty Co of New York (1954) 306 NY 357 at 362.

37.

Lachs v Fidelity & Casualty Co of New York (1954) 306 NY 357 at 362.

38.

Steven v Fidelity and Casualty Company of New York (1962) 58 Cal 2d 862.

39.

Steven v Fidelity and Casualty Company of New York (1962) 58 Cal 2d 862 at 877, 878.

40.

Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163.

41.

Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 at 169.

42.

Specht v Netscape Communications (2002) 306 F 3d 17 (2nd Cir).

43.

Specht v Netscape Communications (2002) 306 F 3d 17 (2nd Cir) at 23.

44.

Caspi v Microsoft Network LLC (1999) 732 A 2d 528.

45.

Novak d/b/a Pets Warehouse v Overture Services Inc (2004) 309 F Supp 2d 446.

46.

Novak d/b/a Pets Warehouse v Overture Services Inc (2004) 309 F Supp 2d 446 at 451, 452.

47.

Feldman v Google Inc (2007) 513 F Supp 2d 229.

48.

Feldman v Google Inc (2007) 513 F Supp 2d 229 at 233.

49.

Feldman v Google Inc (2007) 513 F Supp 2d 229 at 233.

50.

Scherrillo v Dunn & Bradstreet (2010) 684 F Supp 684 2d 313.

51.

Scherrillo v Dunn & Bradstreet (2010) 684 F Supp 684 2d 313 at 320, 321.

52.

Rudder v Microsoft (1999) 47 CCLT (2d) 168.

53.

Kanitz v Rogers Cable Inc (2002) 21 BLR (3d) 104.

54.

Kanitz v Rogers Cable Inc (2002) 21 BLR (3d) 104 at [7].

55.

Kanitz v Rogers Cable Inc (2002) 21 BLR (3d) 104.

56.

Douez v Facebook Inc [2014] Carswell BC 1487.

57.

Douez v Facebook Inc [2014] Carswell BC 1487 at [37], [38].

58.

Hancock v American Telephone and Telegraph Company (2012) 701 F 3d 1248 (10th Cir).

59.

Harold H Huggins Realty Inc v FNC Inc (2008) 575 F Supp 2d 696.

60.

Harold H Huggins Realty Inc v FNC Inc (2008) 575 F Supp 2d 696 at 706.

61.

Harold H Huggins Realty Inc v FNC Inc (2008) 575 F Supp 2d 696 at 708.

62.

Pollstar v Gigmania Ltd (2000) 170 F Supp 2d 974.

63.

Defontes v Dell Computers Corporation 2004 RI Super LEXIS 32.

64.

West Waters v Earthlink Inc and Onemain Inc (2003) 91 Fed Appx 697 (1st Cir).

65.

Net2Phone Inc v The Superior Court of Los Angeles County and Consumer Cause (2003) 109 Cal App 4th 583.

66.

Aral v Earthlink Inc (2005) 134 Cal App 4th 544.

67.

Hubbert v Dell Corp (2005) 359 Ill App 3d 976.

68.

Dell Computer Corp v Union des Consommateurs and Olivier Dumoulin (2007) 284 DLR 4th 577.

69.

Dell Computer Corp v Union des Consommateurs and Olivier Dumoulin (2007) 284 DLR 4th 577 at 673.

70.

Kanitz v Rogers Cable Inc (2002) 21 BLR (3d) 104.

71.

Dell Computer Corp v Union des Consommateurs and Olivier Dumoulin (2007) 284 DLR 4th 577 at 673.

72.

Forrest v Verizon (2002) 805 A 2d 1007.

73.

Forrest v Verizon (2002) 805 A 2d 1007 at 43.

74.

Liberty Syndicates at Lloyds v Walnut Advisory Corporation 2011 WL 5825777.

75.

Liberty Syndicates at Lloyds v Walnut Advisory Corporation 2011 WL 5825777 pp 9/12–10/12.

76.

Major v McAllister (2009) 302 SW3d 227.

77.

Motise v America Online (2004) 346 F Supp 2d 563.

78.

Burcham v Expedia Inc 2009 US Dist LEXIS 17104.

79.

Burcham v Expedia Inc 2009 US Dist LEXIS 17104 at 12.

80.

Hoffman v Supplements Togo Management LLC (2011) 419 NJ Super 596.

81.

Hoffman v Supplements Togo Management LLC (2011) 419 NJ Super 596 at 611.

82.

Jerez v JD Closeouts LLC (2012) 36 Misc 3d 161.

83.

Jerez v JD Closeouts LLC (2012) 36 Misc 3d 161 at 170.

84.

Campbell v General Dynamics Government Systems Corporation (2005) 407 F 3d 546 (1st Cir).

85.

Campbell v General Dynamics Government Systems Corporation (2005) 407 F 3d 546 (1st Cir) at 548.

86.

Campbell v General Dynamics Government Systems Corporation (2005) 407 F 3d 546 (1st Cir) at 555

87.

Campbell v General Dynamics Government Systems Corporation (2005) 407 F 3d 546 (1st Cir) at 558.

88.

Schnabel v Trilegiant Corporation (2012) 697 F 3d 110 (2nd Cir).

89.

Schnabel v Trilegiant Corporation (2012) 697 F 3d 110 (2nd Cir) at 115,116.

90.

Schnabel v Trilegiant Corporation (2012) 697 F 3d 110 (2nd Cir) at 123.

91.

AV v iParadigms (2008) LLC 544 F Supp 2d 437.

92.

AV v iParadigms (2008) LLC 544 F Supp 2d 437 at 478.

93.

PDC Laboratories Inc v Hach Company 2009 US Dist LEXIS 75378.

94.

Robet v Versus Brokerage Services Inc [2001] OJ 1431 (Ont Sup Ct) CanLII 28366.

95.

See also Zhu v Merrill Lynch HSBC [2002] BCJ No 2883 on similar facts. It is doubtful this principle holds good in Australia.

96.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [10–18]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [10.29].

97.

M A Mortenson Company Inc v Timberline Software Corporation (2000) 140 Wn 2d 568.

98.

Register.com Inc v Verio Inc (2004) 356 F 3d 393.

99.

Cairo Inc v Crossmedia Services Inc 2005 US Dist LEXIS 8450.

100. Fadal Machine Centres LLC v Compumachine Inc (2011) 461 Fed Appx 630. 101. Hugger Mugger LLC v Netsuite Inc 2005 US Dist LEXIS 33003. 102. Hugger Mugger LLC v Netsuite Inc 2005 US Dist LEXIS 33003 103. Manasher v NECC Telecom 2007 US Dist LEXIS 68795. 104. Manasher v NECC Telecom 2007 US Dist LEXIS 68795 at [4]. 105. Affinity Internet Inc, d/b/a SkyNetWeb v Consolidated Credit Counseling Services Inc (2006) 920 So 2d 1286. 106. Affinity Internet Inc, d/b/a SkyNetWeb v Consolidated Credit Counseling Services Inc (2006) 920 So 2d 1286 at 1287. 107. Crabb v GoDaddy.com Inc 2011 WL 4479043 108. State of West Virginia (Ex rel U-Haul Co) v Zakaib (2013) 752 SE 2d 586. 109. eBay International AG v Creative Festival Entertainment Pty Limited (2006) 170 FCR 450. 110. eBay International AG v Creative Festival Entertainment Pty Limited (2006) 170 FCR 450 at [41]. 111. eBay International AG v Creative Festival Entertainment Pty Limited (2006) 170 FCR 450 at [52], [54]. 112. One Beacon Insurance Company v Crowley Maritime Services Inc (2011) 648 F 3d 258 (5th Cir). 113. The United States approach to classification of terms, however, is quite different to other jurisdictions. See L Willmott, S Christensen, D Butler, Contract Law, 2nd ed, Oxford University

Press, Melbourne, 2005, at 344, 345. 114. J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [13–01]–[13–09]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008 at [10.36]–[10.39], [10.50]–[1052]. 115. Larson v Rick Dees Ltd [2007] NZSC 39. 116. BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266. 117. J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [11–12]–[11–14]; N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [10.36]–[10.39], [10.50]–[1052]. 118. Trumpet Software Pty Ltd v Ozemail Pty Ltd (1996) 34 IPR 481. 119. Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR 48. 120. Toby Constructions Products Pty Ltd v Computa Bar (Sales) Pty Ltd [1983] 2 NSWLR 48 at 54. 121. Chatlos Systems v National Cash Register Corp (1979) 479 F Supp 738. 122. Advent Systems Limited v Unisys Corporation (1991) 925 F Supp 2d 670. 123. St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481. 124. St Albans City and District Council v International Computers Ltd [1996] 4 All ER 481 at 494. 125. Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd (2010) 77 NSWLR 479. 126. Gammasonics Institute for Medical Research Pty Ltd v Comrad Medical Systems Pty Ltd (2010) 77 NSWLR 479 at [29]. 127. D Svantesson, ‘Angling Technology Pty Ltd v Australian Trade Commission [2005] AATA 359 — Software Finally Recognised as Goods’ (2005) 13(4) TPLJ 232; D Svantesson and L Bygrave, ‘Jurisdictional Issues and Consumer Protection in Cyberspace: The View from Down Under’, Paper presented at the Cyberspace Regulation: E-Commerce and Content Conference, 2001. 128. BP Refinery (Western Port) v Shire of Hastings (1977) 180 CLR 266 at 283. 129. eBay International AG v Creative Festival Entertainment Pty Limited (2006) 170 FCR 450.

[page 163]

Chapter 8 Vitiating Factors We do not hold that all class action waivers are necessarily unconscionable. But when the waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then … the waiver becomes in practice the exemption of the party from responsibility for its own fraud, or wilful injury to the person or property of another. Under these circumstances, such waivers are unconscionable and should not be enforced: Shroyer v New Cingular Wireless Services Inc (2007) 498 F 3d 976

Introduction 8.1 At general law, parties may be excused from performing their contractual obligations on a number of grounds including mistake, duress and unconscionability. The availability of rescission for a unilaterally mistaken party will depend on the knowledge and conduct of the nonmistaken party. Duress depends on the party seeking relief demonstrating that his or her assent was the consequence of unacceptable pressure, which may extend to unacceptable economic pressure.1 Unconscionability sufficient to avoid a contract is rooted in the law’s aversion to a stronger party taking knowing advantage of a weaker party in circumstances that are unconscionable.

Mistake 8.2 Chwee Kim Keong v Digilandmall.com Pte2 is an important decision of the Court of Appeal of Singapore considering unilateral mistake in an

electronic contract for sale. On 8 January 2003, the respondent erroneously advertised a laser printer worth $3,448 on its website for $66. Early in the morning of 13 January 2003, the appellants, all of them university graduates, bought over [page 164] 300 laser printers online at the low price. Later that morning the respondent, realising its error, removed the laser printer from its website and emailed the appellants that it would not honour the online orders. At first instance, the High Court found that the appellants, as a consequence of carrying out their own internet searches and emailing each other, either actually knew, or ought to have known, that the low price was a mistake. The High Court held that the mistake went to a fundamental term of the contracts for sale, and they were void at common law. On appeal, the court upheld the High Court’s factfinding supporting its judgment. The court also held in obiter remarks that constructive knowledge was not sufficient for a contract to be void for unilateral mistake at common law.3 Threading its way through the tangle of irreconcilable authority on the jurisdiction of the court to relieve for mistake in equity, the court held there may be a jurisdiction to relieve for unilateral mistake where the non-mistaken party has constructive knowledge of the mistake and it would be unconscionable to insist that the contract be performed.4

Duress 8.3 In AV v iParadigms LLC,5 students suing iParadigms for archiving their intellectual property on the ‘Turnitin’ website, sought to avoid iParadigm’s contract governing the use of the website by arguing that they had entered into it under the duress of their educational institutions requiring them to

submit work via Turnitin. However, the District Court for the Eastern District of Virginia held that the defence could not be raised on the basis of third party duress.6 Further, even if the defence had been maintainable, the duress would not have risen to the level of ‘an unlawful or wrongful act’ as schools had a right to decide how to deal with plagiarism and could employ third parties, such as iParadigms to assist them. Nancy Kim argues that the defence of situational duress should be available to consumers of the internet.7 In the wake of both Facebook and Google changing their user policies to allow them to use the names and likenesses of users for commercial purposes, Kim proposes an ‘expansion’ of the defence of duress to recognise the way in which owners of websites can force terms on users who have little reasonable choice except to accept them.8 Kim argues that online consumers may have a ‘vested interest’ in a website either because [page 165] terms of the contract arrive after the agreement has been entered into, or the website permits users to store personal or other information. A change of terms in these circumstances would be an improper threat because the website user is the weaker party to the bargain. The consumer is then faced with an unfair choice, to accept unpalatable terms or forfeit the contract triggering the loss of the vested interest. The key to Kim’s argument is that, in the circumstances she describes, the online user has no reasonable ability to reject the terms and no reasonable alternative to accepting the offer. 9 The common law courts, however, may not welcome an innovation relying on the principle that any vested interest in an existing contract is sufficient to support a plea of economic duress.

Unconscionability

8.4 Every agreement involves some disparity of bargaining power, but an unconscionable disparity of bargaining power may occur in circumstances where there is a knowing taking advantage of a party at a special disadvantage.10 The overarching inquiry made of special disadvantage is whether the stronger party had actual or constructive knowledge that the weaker party was unable to make a judgment in their own best interests.11 A decision to contract resulting from special disadvantage may be characterised as procedurally unconscionable, whereas a bad bargain may be merely substantively unconscionable. In common law courts outside the United States, a contract may be set aside for procedural unconscionability. Substantive unconscionability, of itself, is rarely considered sufficient, although a standard form contract containing harsh terms may attract relief.12 8.5 A broader approach is taken in the United States. Section 2–302 of the Uniform Commercial Code (UCC) provides that a court may refuse to enforce either the entire contract, or a term within it, where the contract or term is harsh, exorbitant or unconscionable: (1) If the court as a matter of law finds the contract or any term of the contract to have been unconscionable at the time it was made, the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable term, or it may so limit the application of the unconscionable term as to avoid any unconscionable result.

[page 166] (2) If it is claimed or appears to the court that the contract or any term thereof may be unconscionable, the parties shall be afforded an opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination.

United States courts apply the principles of the Code as a matter of common law, even where it is strictly inapplicable.13 The Ninth Circuit recently stated the principles: A contract provision is unenforceable due to unconscionability only if it is both procedurally and

substantively unconscionable … But the two types of unconscionability need not be present to the same degree … California courts apply a sliding scale so that the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa [citations omitted].14

8.6 In Comb v PayPal,15 the District Court of California declared an entire online contract, including an arbitration clause, unenforceable for procedural and substantive unconscionability. The defendant provided an online payment service that allowed businesses or private individuals to send and receive payments via the internet. The defendant generated revenue from transaction fees and from interest it derived from holding funds until they were paid out. The text of the agreement was available via a hyperlink, but the hyperlink did not have to be opened for an application to be processed. Under the terms, where funds were in dispute, the defendant at its sole discretion could restrict accounts, withhold funds, undertake its own investigation of customers’ financial records, close accounts and procure ownership of all funds unless and until it determined customers were entitled to the funds. The defendant could also change the agreement, without prior notice, by posting the amended agreement on its website. The court found the contract was procedurally unconscionable on the grounds that, although there were alternatives to the defendant’s services in the online market place, the plaintiffs were generally unsophisticated and, in reality, had little choice whether or not to enter into an agreement containing an arbitration clause because it was likely that the defendant’s competitors also required customers to enter into arbitration agreements. The court also found the contract was substantively unconscionable because the ability of the defendant to unilaterally act to the plaintiffs’ detriment displayed a want of mutuality between the parties. The court concluded that the user agreement was unenforceable in its entirety. In Bragg v Linden Research Inc,16 the District Court for the Eastern District of Pennsylvania also found an arbitration clause to be both procedurally and substantively unconscionable. Bragg invested in land in Second Life, induced

[page 167] by representations made by one Rosedale on behalf of Linden, that Linden, unlike the operators of other virtual worlds, would recognise members’ full property rights in Second Life. When Bragg acquired a parcel of virtual land named ‘Taessot’ for $300, Linden emailed Bragg that he had acquired the land improperly, took the land away and froze Bragg’s account, effectively confiscating all the virtual property and currency he had acquired in Second Life. It was common ground that, on becoming a member of Second Life, Bragg had entered into a clickwrap agreement, accepting Linden’s terms of service, including an arbitration clause: Any dispute or claim arising out of or in connection with this Agreement or the performance, breach or termination thereof, shall be finally settled by binding arbitration in San Francisco, California under the Rules of Arbitration of the International Chamber of Commerce by three arbitrators appointed in accordance with the said rules … Notwithstanding the foregoing, either party may apply to any court of competent jurisdiction for injunctive relief or enforcement of this arbitration provision without breach of this arbitration provision.17

The court, however, found the provision to be procedurally unconscionable. There was no reasonably available market alternative to defeat the claim of adhesion because Second Life was the only virtual world to offer its participants property rights over virtual land. Further, the arbitration provision was buried in a long paragraph under the bland heading ‘GENERAL PROVISIONS’.18 Finally, Linden failed to make available the costs of arbitration in the ICC. The court also concluded the provision was substantively unconscionable on similar grounds to Comb. Linden could determine, at its sole discretion, whether or not a customer had breached terms of the contract, and had the right: ‘… at any time for any reason or no reason to suspend or terminate your Account, terminate this Agreement, and/or refuse any and all current or future use of the Service without notice or liability to you.’19 The lack of mutuality supported a finding of substantive unconscionability. Further, where millions of customers had transactions of small amounts, it

was substantively unconscionable to expect customers from throughout the United States to travel to one locale to arbitrate small claims. In refusing to enforce the arbitration clause for procedural and substantive unconscionability, the court found that the arbitration clause: … [was] not designed to provide Second Life participants an effective means of resolving disputes with Linden. Rather … through the use of the arbitration clause Linden appear[ed] to be attempting to insulate itself contractually from any meaningful challenge to its alleged practices.20

[page 168] In the Ninth Circuit case of Shroyer v New Cingular Wireless Services Inc,21 the appellant complained of a decline in service after the merger of the respondents. The respondent informed him the service would improve if he signed a new contract with it. The appellant entered into a new agreement, containing an arbitration and class action waiver clause, by executing an electronic signature over the telephone. On appeal, the Ninth Circuit affirmed that where an agreement is: 1.

a contract of adhesion, drafted by a party with superior bargaining power;

2.

made in a setting where disputes predictably involved small amounts of damages; and

3.

there was an allegation that the party with superior bargaining power had carried out a scheme to deliberately cheat large numbers of consumers out of small sums of money,22

the agreement may be procedurally and substantively unconscionable. There was no dispute that the contract in question was a standardised contract. The first respondent had not offered the appellant the opportunity to negotiate the terms and the drafter of the agreement had, compared to individual class members, substantial bargaining power as a large,

sophisticated corporation. The monthly service fees for the accounts were small and the damages stemming from terminating the contracts and obtaining new agreements with other providers would be only a few hundred dollars for individuals. The appellant had alleged that the first respondent took the deliberate step of inducing thousands of the second respondent’s customers to enter into agreements with it by representing that services would be improved only if the customers entered into contracts with the first respondent. Not all class action waivers were necessarily unconscionable, but this one was.

Procedural Unconscionability 8.7 Although electronic contracts of adhesion are prima facie procedurally unconscionable, most courts in the United States enforce them.23 In Person v Google Inc,24 the District Court for the Southern District of New York commented: Typical contracts of adhesion are standard-form contracts offered by large, economically powerful corporations to unrepresented, uneducated and needy individuals on a take-it-or-leave-it basis, with no opportunity to change the contract’s terms.25

[page 169] Concern about the unfairness of online standard form contracts has led to movements like Americans for Fair Electronic Commerce Transactions (‘AFFECT’)26 and the Software Engineering Ethics Research Institute (‘SEERI’) based at East Tennessee State University, promoting campaigns such as ‘Stop Before You Click’ alerting consumers to the pitfalls of entering into end user licence agreements. However, despite academic concern, United States courts adjudicating online standard form contracts have been slow to make use of the doctrine of unconscionability. As at 2005, ‘very few’ decisions resulted in electronic contracts being set aside.27 Since then, with the

exception of Shroyer v New Cingular Wireless Services Inc,28 there has not been a noticeable increase in courts holding electronic contracts unenforceable for unconscionability.29 This may be a reflection of the relatively small number of decisions dealing with electronic contracts,30 the jurisdictions in which the cases are decided,31 or the courts applying the orthodoxy of paper contracts to the internet. In DeJohn v The .TV Corporation International, Register.com Inc and Verisign Inc,32 DeJohn submitted applications to .TV via Register’s website to register six domain names and tendered the $50 advertised price for each. All but one of the applications were rejected because the registration price was actually much higher. Although Register notified DeJohn within 72 hours and refunded his money, DeJohn sued for breach of contract. On Register seeking to summarily dismiss the action in reliance on the forum selection clause in the clickwrap agreement, DeJohn argued, inter alia, that Register’s superior bargaining power left him with no choice but to agree to the terms of the contract without negotiation and the term was, consequently, unenforceable. The District Court for the Northern District of Illinois held DeJohn to the terms he had assented to. The mere fact that DeJohn was in a position of inferior bargaining power was, of itself, insufficient to prove a contract of adhesion. It was the [page 170] unfair use of, not the mere existence of, unequal bargaining power that was determinative. Similarly, in Barnett v Network Solutions Inc,33 the respondent was the exclusive registrar of certain internet domain names. The appellant entered into a clickwrap contract with the respondent which also included a forum selection clause. The appellant argued that the forum selection clause was procedurally unconscionable because the respondent was a monopoly registrant of particular domain names. The Court of Appeals of Texas

rejected this argument on the basis, again, that it was the unfair use of, not the mere existence of, unequal bargaining power that undermined a contract. The Supreme Court of Canada, in Dell Computer Corp v Union des Consommateurs and Dumoulin,34 also recently considered an electronic contract of adhesion. The appellant’s website indicated prices of $89 and $118 for two models of computers, rather than the correct retail prices of $379 and $549. The appellant blocked access to the webpages at the usual address, but Dumoulin used a deep link to gain access to the webpages and order one of the computers at the lower advertised price. The appellant refused to honour Dumoulin’s order at the lower price. At the bottom of every page of the website was a clearly visible hyperlink leading to the first paragraph of the appellant’s terms and conditions: PLEASE READ THIS DOCUMENT CAREFULLY! IT CONTAINS VERY IMPORTANT INFORMATION ABOUT YOUR RIGHTS AND OBLIGATIONS, AS WELL AS LIMITATIONS AND EXCLUSIONS THAT MAY APPLY TO YOU. THIS DOCUMENT CONTAINS A DISPUTE RESOLUTION CLAUSE.35

The respondents filed a motion to commence a class action against the appellant. The appellant sought referral of the dispute to arbitration, in reliance on the arbitration clause. On appeal, the weight of the Supreme Court’s judgment was concerned with the application of private international law to the arbitration clause under to the Civil Code of Quebec (CCQ). In this respect, the court was divided. However, the court unanimously found under §§1435–1437 of the CCQ, which laid down rules for the validity of clauses in contracts of adhesion and consumer contracts, that simply because the agreement was a contract of adhesion did not mean that the adhering party could not give true consent to it and be bound by one of its clauses.36

Market alternatives 8.8 Courts in California have had regard to whether realistic market alternatives exist to the contract of adhesion entered into by the party seeking to have it set aside. In Comb v PayPal Inc,37 the defendant argued that the fact

[page 171] that online market alternatives to the particular contract entered into by the plaintiff were available was enough to defeat the plaintiff’s claim of procedural unconscionability. However, the District Court for the Northern District of California held that a claim of procedural unconscionability could not be defeated by a simple showing of any competition in the market place. The Californian approach was most recently demonstrated in the Ninth Circuit decision of Shroyer v New Cingular Wireless Services Inc.38 The appellant subscribed to an AT&T service plan for his cellular phone. After the merger of the respondents, however, the appellant complained of a decline in service. The first respondent informed him the service would improve if he signed a new contract with it. The appellant entered into a new agreement, containing an arbitration and class action waiver clause, by executing an electronic signature over the telephone. On appeal, the Ninth Circuit found the clause was procedurally unconscionable. The Ninth Circuit rejected the respondent’s defence of available market alternatives. A contract could be procedurally unconscionable under California law when the party with substantially greater bargaining power presented a ‘take it or leave it’ contract to a customer, even where the customer had a meaningful choice of service providers. However, the Californian position has not been adopted in New York, where the existence of a market alternative shuts out any claim of procedural unconscionability on that basis.39 The Appellate Division of the Supreme Court of New York outlined its approach to procedural unconscionability in Brower v Gateway 2000 Inc.40 The appellants purchased computers and software products from the defendant by mail or telephone order. It was the defendant’s practice to include with the merchandise a copy of its standard terms and conditions, including an arbitration clause. The court found that although the clause was substantively unconscionable, it was not procedurally unconscionable. In determining procedural unconscionability, the court

looked at the contract formation process to determine whether the weaker party, in fact, lacked meaningful choice, taking into consideration: the setting of the transaction; the experience and education of the weaker party; whether the contract contained ‘fine print’; whether the seller used ‘high pressure tactics’; and any disparity in the parties’ bargaining power. Although none of these factors were present in Brower, they have been accepted as the indicia of procedural unconscionability for electronic contracts in New York. More recently, the District Court for the Eastern District of New York, in Universal Grading v eBay,41 rejected the plaintiff’s argument that a forum selection clause in eBay’s terms of service was unconscionable because it had no meaningful alternative to registering for eBay. The court accepted that eBay was the largest online auctioneer, but it was not the only one. [page 172] Other states have decided the issue of market alternatives on a case-by-case basis. In the Missouri decision of David & Associates Inc v Internet Gateway,42 the defendants were players of internet games who were dissatisfied with the functioning of the plaintiff’s internet service. The defendants developed a project called the ‘bnetd project’, a functional equivalent to the plaintiff’s internet service. In defence to the plaintiffs’ suit for breach of a clickwrap contract, the defendants argued, inter alia, that the contract was unenforceable for unconscionability. The District Court found that the contract was one of adhesion, but that it was enforceable because the defendants had the choice of selecting a different video game, or of disagreeing with the terms of the clickwrap agreement and returning the software for a full refund. In Pennsylvania, the District Court found in Feldman v Google Inc43 that the existence of market alternatives was inconsistent with the plaintiff’s claim of procedural unconscionability. The plaintiff had purchased advertising from Google and, on suing Google for clickfraud, alleged that he was not bound by the forum selection clause in the

clickwrap agreement. The court held that in determining procedural unconscionability, factors such as the buyer’s sophistication, the use of high pressure tactics or external pressure to induce acceptance and the availability of alternative sources of supply should be considered. However, the plaintiff, a solicitor, was a sophisticated purchaser who had had notice of the terms and who was capable of understanding and assenting to them. Other internet service providers such as MSN Search, AOL Search, Ask.com, Yahoo!, Excite, Infospace and HotBot offered similar services and the plaintiff could have chosen to contract with any of them. And in South Carolina, the District Court rejected the plaintiff’s plea of unconscionability in Kraft Real Estate Investments LLC v Homeway.com.44 The plaintiffs alleged breach of a click contract for advertising, and the defendants relied on limitation of liability and disclaimer of liability clauses which the plaintiff said were unconscionable. The court stated: Even assuming the provisions are more favourable to Defendants, Plaintiffs were not forced to enter into these contracts, and there were certainly other methods of advertising available. While Defendants might have offered a service that reached more travellers, that alone does not render the Plaintiff vulnerable and without options.45

Substantive Unconscionability 8.9 A great deal of litigation over electronic contracts in the United States has turned on whether mandatory terms of the contract are substantively unconscionable. Mandatory terms require a party to act in a certain manner in [page 173] the event of a dispute. They encompass forum selection, arbitration and class action waiver clauses and are considered to be onerous terms by the courts.46

Forum selection causes 8.10 Parties may agree to submit to a particular jurisdiction for adjudication of a dispute. A forum selection clause agreeing to jurisdiction is distinct from a choice of law clause, which nominates the proper law of the contract without subjecting the parties to the forum. In the United States, the Supreme Court decision of Carnival Cruise Lines v Shute47 is authority for the proposition that forum selection clauses in contracts of adhesion are enforceable, subject to reasonableness.48 The Supreme Court accepted that there may be valid business reasons why a vendor dealing with numerous customers in different jurisdictions should want to have disputes resolved in the jurisdiction where it had its principal place of business.49 Relying on this authority, United States courts have regularly upheld forum selection clauses in webpage contracts. In Caspi v The Microsoft Network, LLC,50 the Appellate Division of the Superior Court of New Jersey held that forum selection clauses were prima facie valid and enforceable, unless the clauses were the result of fraud or ‘overweening’ bargaining power.51 Examples of forum selection clauses being upheld are Woodruff v Anastasia International Inc52 and Krause v Chippas.53 In Woodruff, the defendant was in the business of helping men find brides from the former Soviet Union. It provided ‘Romance Tours’ to former Eastern Bloc countries and online facilities for clients to correspond with women interested in finding a Western husband. The plaintiff did not deny that he clicked on an ‘I accept’ button, agreeing to abide by the defendant’s terms of use agreement containing a forum selection clause: Disputes. If there is any dispute about or involving the Website and/or the Service … You agree that in the event you initiate litigation, such litigation may only be initiated in the state or federal courts of Frankfort, Kentucky …54

On the plaintiff suing for breach of contract in Tennessee, the defendant sought to have the proceedings dismissed for improper forum. The Court of Appeals of Tennessee held that although the contract was one of adhesion, that

[page 174] alone did not render it unenforceable and there was nothing in the contract beyond the reasonable expectations of an ordinary person. In dismissing the plaintiff’s claim, the court stated: The fact that a resident of Tennessee or any other state other than Kentucky … would prefer to sue in his home state rather than in Kentucky … does not, by itself, make the forum selection clause unconscionable or oppressive. Our acceptance of Plaintiff’s position would be to hold that every forum selection clause between a corporation and a Tennessee resident would be unenforceable, at the sole option of the Tennessee resident, if the forum selected is one other than Tennessee.55

In Krause,56 the defendant invited the plaintiff to invest in the defendant’s Day Trading System. The defendant took the plaintiff through the website by which the plaintiff could gain access to the account and observe its performance. The front page of the website stated in capital letters that use of the site or the services provided by the site signified agreement to the service agreement. The front page also displayed a forum selection clause nominating Florida for the arbitration or litigation of disputes arising out of use of the site. The plaintiff then invested $50,000 by credit card through the website. The plaintiff lost the entire amount and sued, inter alia, for breach of contract in Texas. The defendant sought to have the proceedings stayed, pursuant to the forum selection clause. The District Court for the Northern District of Texas held that the plaintiff had failed to meet the burden of showing that the clause was unreasonable. By reason of the forum selection clause appearing on the front page of the website, the court held the clause to be valid and enforceable. 8.11 The circumstance of fraud was considered by the Supreme Court of New York in DiLorenzo v America Online Inc.57 In that case, the plaintiffs subscribed to a service agreement which provided the first five hours of access to the defendant’s internet service for $9.95 and $2.95 for each additional hour. In December 1996, the defendant unilaterally changed its billing policy to charge subscribers a flat rate of $19.95 per month. The plaintiffs alleged,

inter alia, fraud, and sought to avoid the forum selection clause contained in the agreement. However, the court found that although the plaintiffs alleged fraud, the plaintiffs had failed to demonstrate that the forum selection clause was itself the product of fraud, and upheld the clause. 8.12 In California, some plaintiffs have successfully argued that forum selection clauses in webpage contracts were substantively unconscionable because the nominated venue lacked provision for class actions. In America Online Inc (AOL) v The Superior Court of Alameda County and Mendoza,58 the respondents were former subscribers to AOL’s internet service, making [page 175] monthly payments via automatic debiting of their credit cards. The respondents terminated their subscriptions to AOL but, without authorisation, AOL continued to debit their credit cards monthly. The terms of service contained a forum selection clause nominating Virginia, which did not allow class action consumer law suits. At first instance, the Superior Court of Alameda County held that the appellant could not enforce the forum selection clause because it was not negotiated, it was contained in a standard form contract, and was in a format that was not readily identifiable by Mendoza. The Court of Appeal of California upheld the first instance decision, finding that the forum selection clause was essentially a contractual waiver of consumer protections under Californian law. Virginia did not allow consumer lawsuits to be brought as class actions and the available remedies were more limited than those afforded by California law. As a consequence, the rights of the California class members were substantially diminished, violating an important public policy underlying California’s consumer protection law. A rather different result was reached in the decision of the Court of Appeal of Florida in America Online Inc v Booker,59 in which subscribers filed a class

action for breach of contract as a consequence of AOL charging for time spent reading ‘pop up’ advertisements. The court held that Floridian courts gave effect to forum selection clauses in order to recognise the legitimate expectations of contracting parties. The only exception was where enforcement would be unreasonable or unjust. The exception was not triggered by mere inconvenience or additional expense. The unavailability of a class action procedure under Virginian law was insufficient, standing alone, to render an otherwise valid forum selection clause unenforceable. The District of Columbia Court of Appeals ruled similarly in Forrest v Verizon Communications Inc.60 In response to Forrest’s argument that Virginia lacked a class action procedure, the court found that the absence of a class action procedure in the nominated venue did not, of itself, make the provision unenforceable. The appellant could still have his day in court by simply crossing the Potomac to prosecute his claim. Nevertheless, the decision in Mendoza appeared to influence a later decision of the District Court of Appeal of Florida in America Online Inc v Pasieka.61 The court held that Florida consumer protection laws were designed to protect all citizens of Florida, and that transfer to Virginia, pursuant to the forum selection clause, would undermine the effectiveness and purpose of the legislation. Further, the court found that it should not compel an action for a small monetary sum to be brought in a jurisdiction lacking a procedure for class actions. The Court of Appeal of Washington also adopted the position taken by California in Dix v ICT Group Inc.62 The plaintiffs were subscribers to the second defendant’s internet service. They did not elect to create new [page 176] accounts, but the second defendant, nonetheless, created secondary accounts from the plaintiffs’ original accounts, without their permission, and billed

them for the additional accounts. The complaint was handled by the first defendant which refused to believe that the plaintiffs did not give their permission for new accounts to be created and refused a full refund for the erroneous billing. On appeal, the plaintiffs argued that the forum selection clause, nominating Virginia, violated Washington public policy. The court ruled that requiring the plaintiffs to litigate their claims in Virginia, without the benefit of a class action procedure, undermined the purpose of the Washington Consumer Protection Act, which was to offer broad protection to the citizens of the state of Washington. 8.13 The Court of Appeal of California also made the point, in Aral v Earthlink Inc,63 that the Supreme Court in Carnival Cruise Lines v Shute64 required forum selection clauses in contracts of adhesion to be scrutinised for ‘fundamental fairness’. Aral alleged that Earthlink charged him, and others in the same situation, fees for the four- to five-week period between the time the appellant’s Digital Subscriber Line service was ordered online, and the time the plaintiffs could gain access to the service. Aral’s loss was in the range of $40–$50. The court found that Earthlink could not rely on the forum selection clause nominating Georgia. Although Carnival Cruise Lines v Shute was repeatedly cited to justify the enforcement of forum selection clauses in non-negotiated contracts, the decision was also authority for the proposition that forum selection clauses in non-negotiated contracts were subject to scrutiny for fairness. In the present case, the forum selection clause required a consumer to travel 2,000 miles to recover a small sum. In circumstances where there may have been a large number of California consumers who had suffered losses in the range of $40–$50, expecting all of them to travel to Georgia to obtain redress was unreasonable. Net2Phone Inc v The Superior Court of Los Angeles County and Consumer Cause,65 did not involve the absence of a class action procedure in the nominated forum, but the absence of a provision for a ‘private attorney’ to bring an action on behalf of the general public. The appellant provided an internet service allowing computer users to place telephone calls over the

internet. To utilise the service, customers had to download software from the appellant’s website. The software had links to agreements containing forum selection clauses nominating New Jersey as the forum for the resolution of disputes between the appellant and its customers. ‘Consumer Cause’, which was not a party to any agreement with the appellant, alleged that the appellant’s failure to disclose its billing practice of ‘rounding up’ to the nearest minute made its advertising false, misleading and fraudulent conduct. The appellant [page 177] brought a motion to stay or dismiss proceedings in reliance on the forum selection clause. On appeal, a majority of the Court of Appeal of California66 found obiter that the forum selection clause would have been enforceable had the appellant’s customers brought the action themselves. However, Mosk J dissented, finding that Californian legislation allowed, in effect, anyone to act as a private attorney to protect the public against commercial wrongs and deceptions. New Jersey legislation did not provide a similar procedure and enforcement of the forum selection clause would have allowed parties conducting business in California to exempt themselves from provisions enacted to protect Californian residents.

Forum selection clauses and small sums 8.14 In general, the courts have held forum selection clauses to be substantively unconscionable when the practical effect is that consumers must go to a remote jurisdiction to obtain a remedy for the loss of a small amount of money. In Williams v America Online Inc,67 the Massachusetts Superior Court held that Massachusetts consumers who, individually, had damages of only a few hundred dollars should not have to pursue AOL in Virginia where there were no provisions for class actions. Similarly, the

District Court of Appeal of Florida, in America Online Inc v Pasieka,68 held that actions for small monetary sums should not have to be brought in a jurisdiction lacking a procedure for class actions. Nevertheless, in Koch v AOL,69 where the plaintiff objected to a monthly fee of $5, the District Court of Maryland denied the plaintiff’s argument that his personal loss was so small it was impractical for him to bring an action in Virginia. The court found that, even though Virginia did not permit class actions, this did not prevent the plaintiff from crossing the Potomac and bringing his claim in Virginia individually.

Arbitration clauses 8.15 In the United States, courts regularly enforce arbitration clauses pursuant to the Federal Arbitration Act 1923 (US). The Act enables courts to enforce arbitration clauses by creating a general presumption in favour of arbitration.70 However, an arbitration clause remains unenforceable if it [page 178] is unconscionable at common law.71 In Briceno v Sprint Spectrum L P d/b/a Sprint PCS,72 the appellant had entered into a contract with Sprint for a mobile phone service. Sprint included the terms and conditions with its phones and also operated a website giving access to the terms and conditions as well as any amendments. Invoices to customers gave notice of changes to terms and conditions which were posted on the website. From 2000 to 2003, the appellant changed her telephone four times. On each occasion, Sprint included its terms and conditions, including a mandatory arbitration clause. In October 2003, the appellant brought her mobile phone to a Sprint store for repair. The appellant alleged that the employees had used the opportunity of using her password to obtain and disseminate electronic pictures of her body. On the respondent seeking to compel arbitration, the appellant claimed that,

even if she had read the arbitration clause, she would not have terminated the contract because she used her Sprint mobile number to derive income from babysitting. The Court of Appeal of Florida held that factors relevant to unconscionability included: the circumstances surrounding the execution of the contract; the concealing of clauses in fine print, or in places inconspicuous to the party signing the contract; the inclusion of penalty clauses; exploitation of the under-privileged, unsophisticated, uneducated and illiterate; and inequality of bargaining or economic power. The court found that none of these factors applied to the arbitration clause in question, and upheld the clause. 8.16 One factor that has held sway in the minds of judges when determining whether arbitration clauses are unconscionable, has been the costs of arbitration relative to the remedy being sought. In Brower v Gateway 2000 Inc,73 the appellants purchased computers and software products from the defendant pursuant to a shrinkwrap agreement containing the clause: Any dispute or controversy arising out of or relating to this agreement or its interpretation shall be settled exclusively and finally by arbitration. The arbitration shall be conducted in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC). The arbitration shall be conducted in Chicago, Illinois, USA before a sole arbitrator. Any award rendered in any such arbitration proceeding shall be final and binding on each of the parties, and judgment may be entered thereon in a court of competent jurisdiction.74

The appellants alleged that the arbitration clause was unconscionable. They claimed that the provision was obscure, that they could not reasonably appreciate or investigate its meaning and effect, that the ICC was not a forum commonly used for consumer matters, and, because ICC headquarters were in France, it was difficult to locate the organisation and its rules. In support of their arguments, the appellants produced evidence that, for a claim of less [page 179] than $50,000, the ICC required an advance fee of $4,000, of which half was

non-refundable. The appellants would incur expenses traveling to Chicago and would have to bear the respondent’s fees should they not succeed at arbitration. On appeal, the court found the excessive cost of arbitrating before the ICC was unreasonable and deterred the individual consumer from invoking the process. Barred from resorting to the courts, the effect of a financially prohibitive forum effectively prevented consumers from obtaining a remedy. The court determined that the part of the arbitration provision requiring arbitration before the ICC was unconscionable.

Arbitration clauses and small sums 8.17 Like forum selection clauses, courts have been willing to find arbitration clauses unconscionable when they are invoked in respect of claims for small sums. In Comb v PayPal Inc,75 as well as finding the entire agreement procedurally unconscionable, the District Court found the stipulation that customers submit to commercial arbitration, rather than consumer arbitration, when claims were worth only a few hundred dollars, was substantively unconscionable: By allowing prohibitive arbitration fees and precluding joinder of claims (which would make each individual customer’s participation in arbitration more economical) the defendant appears to be attempting to insulate itself contractually from any meaningful challenge to its alleged practices. Limiting venue to the defendant’s backyard appears to be yet one more means by which the arbitration clause serves to shield the defendant from liability instead of providing a neutral forum in which to arbitrate disputes.76

In Licitra v Gateway Inc,77 the claimant purchased a computer with a certificate for a ‘free’ computer, or a credit towards one, as part of a promotion. The shinkwrap contract contained a limited money back guarantee and an arbitration clause. The claimant commenced a small claims action against the defendant, alleging that the defendant failed to accept return of defective equipment and reimburse him for the purchase price. In denying the appellant’s application for arbitration pursuant to the agreement, the Civil Court of the City of New York held the arbitration clause was contrary to the public policy embodied in the small claims provisions of the

Civil Court. Arbitration denied the small claimant the benefits the legislature had intended of modest filing fees, convenient location, undemanding pleading requirements and an undemanding burden of proof. [page 180]

Waivers of class actions 8.18 Many arbitration clauses in electronic contracts made in the United States contain class action waivers.78 In Comb v PayPal Inc,79 the court held that a prohibition on consolidation of claims may, in combination with other provisions and circumstances, be substantively unconscionable. In Aral v Earthlink Inc,80 Aral alleged that he and others suffered losses of between $40 and $50 for charges incurred in the four- to five-week period between the time the service was ordered and the time the service could be accessed. The Court of Appeal of California said of the class action waiver clause: When the waiver is found in a consumer contract of adhesion in a setting in which disputes between the contracting parties predictably involve small amounts of damages, and when it is alleged that the party with the superior bargaining power has carried out a scheme to deliberately cheat large numbers of consumers out of individually small sums of money, then, at least to the extent the obligation at issue is governed by California law, the waiver becomes in practice an exemption of the party from responsibility for its own fraud, or willful injury to the person or property of another.81

Although the respondent had not alleged fraud, the court inferred that numerous consumers were cheated out of small sums of money through deliberate behaviour and held the class action waiver unenforceable. In Oestreicher v Alienware Corporation,82 the plaintiff paid $4,149 for a computer that overheated and ceased to function six months later. The plaintiff sued, alleging that the defendant had made misrepresentations and concealed material information about the computer which it knew was defective. The District Court of California found that the agreement was a contract of adhesion, indicating superior bargaining power on the part of the

defendant, that $4,149 could be considered a relatively small amount of money, and that the plaintiff alleged a deliberate scheme by the defendant to cheat customers. The court held the class action waiver was unconscionable. There is a suggestion that Alabama may consider class action waivers either substantively unconscionable, or at least against public policy. In Bellsouth Communications System, LLC v Thomas N West,83 the respondent, on behalf of a class, alleged that the respondent had overcharged him for using its internet service and had charged a set-up fee for installing the service. The applicant [page 181] sought arbitration under the agreement. The judge at first instance dismissed the motion saying: The arbitration agreement purported to bar the plaintiff from having a class action suit, joining with others in a dispute, and to bar punitive damages. Such provisions would take away the plaintiff’s rights authorized by law and effectively prohibit any class action …84

The Full Bench of the Supreme Court did not expressly decide the issue but affirmed the first instance judgment. Against this, the Supreme Judicial Court of Maine in Stenzel v Dell,85 the District Court for the Northern District of Illinois in In re Realnetworks Inc Privacy Litigation,86 the District Court for the Middle District of Louisiana in O’Quin v Verizon Wireless87 and the District Court for the District of New Jersey in Davis v Dell Inc88 have all declined, for different reasons, to hold that class action waivers are substantively unconscionable. Finally, in Kanitz v Rogers Cable Inc,89 the Ontario Superior Court of Justice considered whether an arbitration clause and a class action waiver in an electronic contract were unconscionable in terms that are more familiar to common lawyers outside the United States. The defendant amended its user agreement to add, among other things, a clause which stated that any claim

would be referred to and determined by arbitration, and that the subscriber waived any right to commence or participate in any class action. In considering whether the agreement as amended was unconscionable, the court stated the elements of unconscionability to be: an inequality of bargaining power; a taking advantage of the weaker party by the stronger party; and a resulting improvident agreement. The court found there was clearly an inequality of bargaining power between the individual plaintiffs and a corporation the size of the defendant. However, the arbitration clause of itself was not evidence of the defendant taking advantage of the plaintiffs, as it did not exempt the defendant from liability and it affected only the procedural avenue of redress available to the plaintiffs, rather than their substantive rights. Further, the arbitration clause was a mutual, rather than a unilateral, contractual obligation. In response to the plaintiff’s argument that the absence of a class action remedy was an improvident agreement, the court found there was no evidence to suggest that individuals would not arbitrate their small claims because of the costs involved. The court concluded that the arbitration clause was not ‘sufficiently divergent from community standards of commercial morality’ as to be unenforceable for unconscionability.90 [page 182]

Legislating for Substantive Unconscionability 8.19 Statutory provisions may assist courts outside of the United States to deal with substantive unconscionability in electronic contracts. In Jetstar Airways Pty Ltd v Free,91 the Supreme Court of Victoria considered the application of Part 2B of the Fair Trading Act 1999 (Vic) which allowed a court to avoid an unjust contract for substantive unconscionability without having to consider whether an element of procedural unconscionability also

existed. The respondent booked and paid for two return air tickets for her and her sister on the appellant’s website. The respondent bought special ‘Jet Saver’ fares for a very cheap introductory price. A more expensive kind of fare, the ‘Jet Flex’ fare, was also advertised side by side with the Jet Saver fare. To select the Jet Saver fare, the respondent had to click on a box stating: ‘I have read and accepted the airline’s fare rules and conditions of carriage.’92 The Jet Saver fare rules were set out in the body of the internet website. At the foot of the window displaying them there was a box marked ‘OK’ on which the prospective customer had to click in order to proceed to complete a booking. The last sentence of the Jet Saver fare rules indicated that a prospective customer could view the ‘Current Jetstar fees and a summary of fare types’ at a specified internet address. Had the respondent read the fare types she would have seen: Jet Saver International Flights to/from Australia … operated by Jetstar: Up to 24 hours prior to departure, $75AUD per passenger per flight plus any fare difference to re-book.93

In early March 2007 the respondent learnt that her sister could not travel with her and decided that she would take her young niece on the trip instead, using the ticket booked in the sister’s name. On contacting the appellant to make the change, the respondent was told that she could only change the name on the ticket if she were to pay a change fee of $75 per flight plus the difference between the fare previously paid and the fare applicable on the day the change was made. The total charges amounted to approximately $900. The respondent asked for the charges to be waived but the appellant refused. At first instance, the tribunal found the ‘fare types’ term was unfair on the ground that it was indiscriminate and caused a significant imbalance to the detriment of purchasers from the appellant. The term operated not only when the customer requested a change to a different flight on another date, but also when the customer requested only a change to a passenger name on the flight originally booked. Further, when the requested change was only to the name of a passenger, the terms operated irrespective of whether the transfer was

part of a commercial transaction for commercial gain or whether it was for personal reasons. [page 183] The Supreme Court of Victoria upheld the appellant’s appeal on two main grounds. First, the test of an unfair term is whether: (a) it is contrary to good faith;94 and (b) it results in a significant imbalance in the party’s rights and obligations. The court held the tribunal had treated the ‘good faith’ element as a mere factor or indicator in the assessment of ‘significant imbalance’, as distinct from an element in its own right of the statutory test for unfairness. Secondly, the appellant had given clear evidence that the more expensive ‘Jet Flex fare’, providing more flexibility, was displayed side by side with the cheaper, less flexible Jet Saver fare. The court held a special price reduction can justify what might otherwise appear to be a harsh or strict or unfair term,95 and found the tribunal had erred in failing to take into account the relevant circumstance of the contemporaneous availability of tickets for the same seats on the same flights with more flexible terms and conditions and higher prices. It followed the tribunal had disregarded at least one relevant term that tended to counterbalance the impugned term. The court also held the tribunal had failed to have regard to the relevant circumstance that the Jet Saver fare was extraordinarily cheap. The appellant routinely offered other more expensive kinds of fares with more flexible conditions and it should have been obvious that the cheaper the fare the less flexible it would be. It is significant that the tribunal went into some detail concerning the online presentation of the terms to the respondent, her navigation through those terms, and her acknowledgement of those terms by clicking on virtual boxes. The respondent could not have finalised her purchase of the tickets without first navigating her way through the terms under which she was purchasing them. Although the respondent asserted in the Supreme Court

that she was not on notice of the terms, the argument was not really open to her, and her only resort was to allege that the terms were substantively unfair.

Conclusion 8.20 Where an online user makes a mistake going to the root of the contract, and the non-mistaken party unconscionably takes advantage of the mistake, a court in equity may avoid the contract at the election of the mistaken party. It is less likely that a court will set aside an online contract for economic duress on the basis that an online consumer had no reasonable alternative to agreeing to terms. Even if the defence of economic duress is recognised, the idea that any vested interest in an existing contract is sufficient to support a plea of economic duress is unlikely to be welcomed by the courts. [page 184] 8.21 On a plea of unconscionability, a court will not set aside an electronic contract merely because it is a contract of adhesion. Californian courts have held electronic standard form contracts to be procedurally unconscionable where there have been no realistic market alternatives available to the consumer. But this position has not been adopted by all states, most importantly New York. Mandatory clauses, such as forum selection and arbitration clauses, may be substantively unconscionable if the costs of enforcing the terms are disproportionate to the claim. Class action waivers have been held to be substantively unconscionable in California in circumstances where there is prima facie evidence of a scheme by the stronger party to cheat large numbers of consumers out of small amounts of money. However, again, this position has not been widely adopted by other states. Common law courts outside of the United States faced with alleged

unconscionable conduct online will not be greatly assisted by these decisions. The ‘sliding scale’ test applied by United States courts is foreign to the jurisprudence of other common law jurisdictions. Although, where economic conditions are similar to those of the United States, courts may be open to arguments citing the reasoning of the Californian courts — that where a weaker party enters into a standard form contract online because of a lack of reasonable online alternatives, the decision is affected by special disadvantage. It follows that if the offeror is on actual or constructive notice of the lack of online alternatives, the contract may be procedurally unconscionable. Common law courts outside of the United States are more likely to be influenced by the decisions of the Canadian Courts. Dell Computer Corp v Union des Consommateurs and Dumoulin96 stands for the proposition that a webpage contract is not unconscionable merely because it is a standard form contract. This particular finding, however, relied on a construction by all members of the court of §§1435–1437 of the Civil Code of Quebec, so it is not a proposition of general law. Kanitz v Rogers Cable Inc97 does not suffer this defect. The court’s finding that an arbitration and class action waiver clause should not be set aside for unconscionability, because it was remedial rather than determinative, may well resonate with other common law courts deciding the same issue. Where the alleged unconscionability of an electronic contract affects a remedy, but not a right, equity may decline to set it aside. Legislation may assist setting aside provisions of an online contract that are substantively unconscionable. However, Clapperton and Corones warn that, although legislation may prescribe certain terms as being substantively unconscionable within a standard form contract, electronic standard form contracts, which are peculiar to each online vendor and are not drawn up for general use within an industry, may not meet the definition of standard form contracts under the legislation.98

1.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [20–38], [22–17]; N C Seddon and M P Ellinghaus, (2008) Cheshire and Fifoot’s

Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008, at [1.78], [13.7]. 2.

Chwee Kim Keong v Digilandmall.com Pte [2005] 1 SLR 502.

3.

Chwee Kim Keong v Digilandmall.com Pte [2005] 1 SLR 502 at [53].

4.

Chwee Kim Keong v Digilandmall.com Pte [2005] 1 SLR 502 at [80].

5.

AV v iParadigms (2008) LLC 544 F Supp 2d 437.

6.

Third party duress may be available in other common law jurisdictions where the party seeking relief can demonstrate the other contracting party knew of the duress: J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [22–24].

7.

N M Kim, ‘Situational Duress and the Aberrance of Electronic Contracts’ (2014) 89(1) ChicagoKent Law Review 265–287.

8.

N M Kim, ‘Situational Duress and the Aberrance of Electronic Contracts’ (2014) 89(1) ChicagoKent Law Review 265–287 at 278.

9.

N M Kim, ‘Situational Duress and the Aberrance of Electronic Contracts’ (2014) 89(1) ChicagoKent Law Review 265–287 at 280–3.

10.

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462 per Mason J.

11.

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 481 per Deane J and Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102.

12.

In George T Collings (Aust) Pty Ltd v H F Stevenson (Aust) Pty Ltd (1991) ATPR 41-104, a standard form agreement that stated it was a sole agency agreement actually contained clauses creating an obligation to pay commission after expiry of the sole agency period. The Supreme Court of Victoria held that it was unconscionable to embed in a contract a term transforming an exclusive agency agreement into a general agency of indeterminate duration.

13.

H G Beale (ed), Chitty on Contracts, 29th ed, Sweet and Maxwell, London, 2004, at 7–121.

14.

Shroyer v New Cingular Wireless Services Inc (2007) 498 F 3d 976 (9th Cir) per curiam at 981–2.

15.

Comb v PayPal Inc (2002) 218 F Supp 2d 1165.

16.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593.

17.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593 at 604.

18.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593 at 606.

19.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593 at 608.

20.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593 at 611.

21.

Shroyer v New Cingular Wireless Services Inc (2007) 498 F 3d 976 (9th Cir).

22.

Shroyer v New Cingular Wireless Services Inc (2007) 498 F 3d 976 at 983 (9th Cir).

23.

See, for instance, In re H & R Block IRS, Form 8863 Litigation 2014 Master Case No 4:13-MD02474-FJG.

24.

Person v Google Inc (2006) 456 F Supp 2d 488.

25.

Person v Google Inc (2006) 456 F Supp 2d 488 at 495.

26.

AFFECT lobbies against the introduction of the Uniform Computer Information Transactions Act (UCITA) in the United States. AFFECT proposes 12 principles for fair electronic commerce: see the Appendix to R L Oakley, ‘Fairness in Electronic Contracting: Minimum Standards for

Non-Negotiated Contracts’ (2005) 42(4) Houston Law Review 1041–1105. 27.

R L Oakley, ‘Fairness in Electronic Contracting: Minimum Standards for Non-Negotiated Contracts’ (2005) 42(4) Houston Law Review 1041–1105 at 1064. The author cites ‘some tens or hundreds’ as at 2005.

28.

Shroyer v New Cingular Wireless Services Inc (2007) 498 F 3d 976 (9th Cir).

29.

Gatton v T-Mobile USA Inc (2007) 61 Cal Rptr 3d 344 is an important decision of the Court of Appeal of California dealing with standard form terms, but the terms were not electronically entered into. See L Trakman, ‘The Boundaries of Contract Law in Cyberspace’ (2009) International Business Law Journal 159–197.

30.

Tasker and Pakcyk, writing in 2008, comment on the ‘amazingly few appellate decisions on point’: T Tasker and D Pakcyk, ‘Cyber-Surfing on the High Seas of Legalese: Law and Technology of Internet Agreements’ (2008) 18 Alb LJ Sci & Tech 79 at 82.

31.

Some states, like California are perceived to be more consumer friendly, whereas others, like New York are considered to be less so: L Trakman, ‘The Boundaries of Contract Law in Cyberspace’ (2009) International Business Law Journal 159–197 at 173.

32.

DeJohn v The .TV Corporation International, Register.com Inc and Verisign Inc (2003) 245 F Supp 2d 913.

33.

Barnett v Network Solutions Inc (2001) 38 S W 3d 200.

34.

Dell Computer Corp v Union des Consommateurs and Dumoulin (2007) 284 DLR 4th 577.

35.

Dell Computer Corp v Union des Consommateurs and Dumoulin (2007) 284 DLR 4th 577 at 673.

36.

Dell Computer Corp v Union des Consommateurs and Dumoulin (2007) 284 DLR 4th 577 at 669 per Bastararche, LeBel and Fish JJ.

37.

Comb v PayPal Inc (2002) 218 F Supp 2d 1165.

38.

Shroyer v New Cingular Wireless Services Inc (2007) 498 F 3d 976 (9th Cir).

39.

Douglas v United States District Court for the Central District of California (2007) 495 F 3d 1062 (9th Cir) at 1068.

40.

Brower v Gateway 2000 Inc (1998) 246 AD 2d 246.

41.

Universal Grading v eBay 2009 US Dist LEXIS 49841.

42.

David & Associates Inc v Internet Gateway (2004) 334 F Supp 2d 1164.

43.

Feldman v Google Inc (2007) 513 F Supp 2d 229.

44.

Kraft Real Estate Investments LLC v Homeway.com 2012 US Dist LEXIS 8282.

45.

Kraft Real Estate Investments LLC v Homeway.com 2012 US Dist LEXIS 8282 at 37.

46.

I A Rambarran and R Hunt, ‘Are Browsewrap Agreements All They Are Wrapped Up to Be?’, Berkeley Electronic Press, 2006, available at http://law.bepress.com/expresso/eps/1885.

47.

Carnival Cruise Lines v Shute (1991) 499 US 585.

48.

R Cormier Anderson, ‘Enforcement of Contractual Terms in Clickwrap Agreements’ (2007) 3 Shidler JL Com. & Tech 11, available at http://www.lctjournal.washington.edu/Vol3/a011Cormie‐ r.html.

49.

Carnival Cruise Lines v Shute (1991) 499 US 585 at 593–5.

50.

Caspi v The Microsoft Network, LLC (1999) 732 A 2d 528.

51.

See also Koch v America Online Inc (2000) 139 F Supp 2d 690 and Hughes v McMenamon (2002) 204 F Supp 2d 178.

52.

Woodruff v Anastasia International Inc 2007 Tenn App LEXIS 781.

53.

Krause v Chippas 2007 US Dist LEXIS 94989.

54.

Woodruff v Anastasia International Inc 2007 Tenn App LEXIS 781 at 11.

55.

Woodruff v Anastasia International Inc 2007 Tenn App LEXIS 781 at 14.

56.

Krause v Chippas 2007 US Dist LEXIS 94989.

57.

DiLorenzo v America Online Inc 605867/96 (NY Supreme Ct, 22 January 1999).

58.

America Online Inc v The Superior Court of Alameda County and Mendoza (2001) 90 Cal App 4th 1.

59.

America Online Inc v Booker (2001) 781 So 2d 423.

60.

Forrest v Verizon Communications Inc (2002) 805 A 2d 1007.

61.

America Online Inc v Pasieka (2004) 870 So 2d 170.

62.

Dix v ICT Group Inc (2005) 125 Wash App 929.

63.

Aral v Earthlink Inc (2005) 134 Cal App 4th 544.

64.

Carnival Cruise Lines v Shute (1991) 499 US 585.

65.

Net2Phone Inc v The Superior Court of Los Angeles County and Consumer Cause (2003) 109 Cal App 4th 583.

66.

Turner PJ and Armstrong J.

67.

Williams v America Online Inc 2001 WL 135825 (Mass Super).

68.

America Online Inc v Pasieka (2004) 870 So 2d 170.

69.

Koch v AOL (2000) 139 F Supp 2d 690.

70.

R Cormier Anderson, ‘Enforcement of Contractual Terms in Clickwrap Agreements’ (2007) 3 JL Com. & Tech 11, available at http://www.lctjournal.washington.edu/Vol3/a011Cormier.html at [8]. Australian jurisdictions also allow parties to agree to refer contractual disputes to arbitration: J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [25]–[26]. The Arbitration Act 1974 (Cth) provides for a stay of proceedings brought contrary to an international arbitration agreement: see P E Nygh and M Davies, Conflict of Laws in Australia, LexisNexis Butterworths, Sydney, 2002, at 220–43.

71.

Comb v PayPal Inc (2002) 218 F Supp 2d 1165 at 1170.

72.

Briceno v Sprint Spectrum LP d/b/a Sprint PCS (2005) 911 So 2d 176.

73.

Brower v Gateway 2000 Inc (1998) 246 AD 2d 246.

74.

Brower v Gateway 2000 Inc (1998) 246 AD 2d 246 at 248.

75.

Comb v PayPal Inc (2002) 218 F Supp 2d 1165.

76.

Comb v PayPal Inc (2002) 218 F Supp 2d 1165 at 1176, 1177.

77.

Licitra v Gateway Inc (2001) 734 NYS 2d 389.

78.

Class actions are less common in Australia. The Federal Court of Australia Act 1976 (Cth) and the Supreme Court Act 1986 (Vic) allow class actions, and the rules of the other Supreme Courts

allow for representative actions. However, the representative action generally remains a discretionary rule to which the courts have traditionally given a narrow interpretation: Carnie v Essanda Finance Corporation Ltd (1995) 182 CLR 398 at 429 per McHugh J. 79.

Comb v PayPal Inc (2002) 218 F Supp 2d 1165.

80.

Aral v Earthlink Inc (2005) 134 Cal App 4th 544.

81.

Aral v Earthlink Inc (2005) 134 Cal App 4th 544 at 556.

82.

Oestreicher v Alienware Corporation (2007) 502 F Supp 2d 1061.

83.

Bellsouth Communications System, LLC v Thomas N West (2004) 902 So 2d 653.

84.

Bellsouth Communications System, LLC v Thomas N West (2004) 902 So 2d 653 at 656.

85.

Stenzel v Dell (2005) 870 A 2d 133.

86.

Re Realnetworks Inc Privacy Litigation 2000 US Dist LEXIS 6584.

87.

O’Quin v Verizon Wireless (2003) 256 F Supp 2d 512.

88.

Davis v Dell Inc 2007 US Dist LEXIS 94767.

89.

Kanitz v Rogers Cable Inc (2002) 21 BLR (3d) 104.

90.

Kanitz v Rogers Cable Inc (2002) 21 BLR (3d) 104 at [56].

91.

Jetstar Airways Pty Ltd v Free [2008] VSC 539.

92.

Jetstar Airways Pty Ltd v Free [2008] VSC 539 at [10].

93.

Jetstar Airways Pty Ltd v Free [2008] VSC 539 at [10].

94.

Since this decision, the Victorian legislation has been amended so that it is no longer necessary for an unfair term to be contrary to the requirements of good faith. See Y Ching, ‘Redefining Unfair Terms in Consumer Contracts’ (2009) 83(12) LIJ 50 and J Paterson ‘The Elements of a Prohibition on Unfair Terms in Consumer Contracts’ (2009) 37(3) ABLR 184 for further discussion of unfair terms.

95.

Director General of Fair Trading v First National Bank plc [2000] QB 672.

96.

Dell Computer Corp v Union des Consommateurs and Dumoulin (2007) 284 DLR 4th 577.

97.

Kanitz v Rogers Cable Inc (2000) 21 BLR (3d) 104.

98.

D Clapperton and S Corones, ‘Unfair Terms in Clickwrap and Other Electronic Contracts (2007) 35 ABLR 152 at 165.

[page 185]

Chapter 9 Misrepresentation, Misleading and Deceptive Conduct and Jurisdiction The fact that the provision of information via the internet will — because of the nature of the internet — necessarily involve a response to a request made by an internet user does not, without more, disturb the analogy between Google and other intermediaries. The Google search engine is only a means of communication between advertisers and consumers: Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435

Introduction 9.1 A pre-contractual representation may form a term of the contract and sound in damages for breach of contract. If the representation is of a past or existing fact and is false, it may provide the basis of an action to rescind the contract, or claim damages in tort. In some jurisdictions, remedies are governed by legislation.1 In the United States, for example, a pre-contractual statement is less likely to be a term of a concluded contract because of a substantive rule of law that an earlier, tentative agreement will be rejected in favour of a final agreement,2 and the Uniform Commercial Code (US) (UCC) permits actions for rescission and damages.3 Most jurisdictions have consumer protection legislation prohibiting misleading or deceptive conduct in commerce. This chapter discusses online conduct giving rise to allegations of misrepresentation or misleading and deceptive conduct including making false statements by [page 186]

Twitter or audio drop, creating a false email account, or creating a false profile on a social networking site such as LinkedIn.4

Representations Pre-contractual representations 9.2 When a pre-contractual representation is promissory in nature, it may be an express term of the agreement sounding in contractual damages for breach.5 In Scott v Bell Atlantic Corp,6 Bell Atlantic made the following statements on its website: Fast — High speed Internet access service up to 126x faster than your 56 modem Dedicated — You’re always connected — no dialling in and no busy signals, ever! Convenient — Allows you to talk on the phone and use the Internet simultaneously — on the same line! Simple — Works on your existing phone line and our self installation kit can be set up in minutes.7

However, the terms and conditions of Bell Atlantic’s service agreement stated: You understand and agree that [Bell Atlantic] does not warrant the service to be uninterrupted or error free. You further understand and agree that [Bell Atlantic] has no control over third party networks or websites that you may access in the course of your use of the service and that delays and disruptions of other network transmissions are completely beyond the control of [Bell Atlantic]. [Bell Atlantic] cannot and will not guarantee that the service will provide internet access that meets your needs … No warranty is given that the service is error free. [Bell Atlantic] makes no warranty regarding any transactions executed through the service.8

Scott, and the class he represented, alleged that the quality of Bell Atlantic’s service did not meet the standards of the website statements and sued, inter alia, for breach of warranty. The Appellate Division of the Supreme Court of New York, however, summarily dismissed the claim, on the basis that the plaintiffs were alleging a promise that was inconsistent with the terms of the written agreement: [It is] highly unlikely, upon a reading of [Bell South’s] representations along with the service

agreement that a reasonably prudent consumer would rely on the

[page 187] representations in the face of the service agreement’s conspicuous, unequivocal disclamations concerning any warranties as to, inter alia, disruptions or errors in service.9

The recent Canadian decision of Magill v Expedia10 also considered whether terms of a browsewrap contract were pre-contractual promises sounding in damages for breach of a later clickwrap agreement. Expedia provided online bookings for hotels and vacation packages. Magill sued Expedia for breach of contract arguing that a term providing for a ‘tax recovery’ charge contained in the browsewrap contract governing use of Expedia’s website was a promise in the clickwrap contract that he had entered into on finalising a booking. Expedia argued that, at most, the browsewrap term was a mere representation. Perell J found that the term became a promise incorporated into the clickwrap contract on a customer making a booking because the term could only be referrable to a finalised booking. For reasons of construction, however, Expedia was not in breach of the promise.

Misrepresentation inducing a contract 9.3 When a statement is not promissory it may nevertheless be a misrepresentation of past or present fact inducing the representee into a contract.11 Assurances of the future, statements of intention, expressions of opinion and ‘puffery’, even ‘mild reverse puffery’,12 are not usually actionable misrepresentations.13 In Deepstar Marine Inc v Xylem Dewatering Solutions,14 a representation made online and by email that the plaintiff could ‘count on’ the defendant was puffery because it was vague and imprecise. The representation was not an assurance of fact, but a broad overstatement praising the defendant.15 A representee may not be induced into a contract by a misrepresentation

where a subsequent representation reveals the true state of affairs. In Peekay Intermark Ltd v Australia and New Zealand Banking Group Limited,16 the Commercial Court at first instance found that the ANZ had misrepresented by telephone the nature of the financial instruments sold by it to Peekay. However, the Court of Appeal (Civil Division) had regard to the evidence that the true [page 188] nature of the instruments was revealed in the final terms and conditions attached to an email sent to Peekay, along with an Emerging Markets Risk Disclosure Statement, before the contract was made. It was uncontested that Peekay initialled the final terms and conditions without reading them and signed the disclosure in reliance on the telephone representation. The Court of Appeal held that the telephone conversation was informal, and only by reading the terms and conditions could Peekay satisfy itself of the true nature of the financial instrument. Peekay was not induced into entering into the contract by ANZ’s misrepresentation, but by its own assumption that the financial instrument conformed with its description. A straightforward example of rescission for an online misrepresentation is found in Skilling v Zenith Insurance Plc.17 Skilling made an offer for motor insurance by completing an online questionnaire through a car insurance comparison website, representing that the car he sought to insure was an Audi A4 2 litre. The car was in fact an Audi A4 DTM FSI quattro, a much higher performance car. On Skilling claiming for total loss of the car for its theft, the court held that the insurer had been induced to enter into the contract of insurance for a premium less than it would have agreed to because of Skilling’s material misrepresentation, and was entitled to void the contract. Where a plaintiff claims damages in the alternative to rescission, the critical determination is whether the plaintiff has suffered loss by entering into the

agreement. In Bagg v HighBeam Research Inc,18 the plaintiff as representative of a class alleged he was misrepresented into entering into a clickwrap agreement for a ‘free trial’ with the defendant and suffered loss as a result of monthly subscriptions being deducted from his credit card without his knowledge or consent. Because the plaintiff was affirming the contract and claiming damages, the defendant relied on a forum selection clause in the contract. The plaintiff sought to argue he was not bound by the forum selection clause because he gave his credit card details before clicking ‘I agree’. However, the court held that the critical issue was not whether the plaintiff had entered into the agreement, it was whether he could have suffered loss without entering into the agreement.19 The courts appear to take a reasonably robust approach to electronic representations made in pursuit of commerce. In Gentry v eBay Inc,20 sellers created fake autographed sports memorabilia for sale to consumers on eBay. eBay operated a ‘feedback forum’, allowing buyers and sellers to rate sales transactions. A seller who achieved a designated level of positive feedback was awarded a star symbol displayed next to the user’s name. eBay advertised: ‘A positive eBay rating is worth its weight in gold.’21 Disgruntled consumers sued eBay for misrepresenting the safety of purchasing the items from the sellers. In an obiter comment, the Court of [page 189] Appeal of California found that eBay’s representation could not support an action for negligent misrepresentation because it amounted to a general statement of opinion, not a positive assertion of fact.

Fraudulent misrepresentation 9.4 A fraudulent misrepresentation, sounding in damages for deceit, may be made where the maker does not honestly believe that the representation is

true, or is recklessly indifferent to its truth.22 Once dishonesty is established, it does not matter whether the representation is of fact, law, intention or opinion.23 In Hotmail Corp v Van Money Pie Inc,24 subscribers to the plaintiff’s free email site had to abide by a service agreement specifically prohibiting subscribers from using the plaintiff’s services to send spam or to send obscene or pornographic messages. The plaintiff alleged that the defendants had created a number of Hotmail accounts for the specific purpose of spamming. It also alleged it had discovered messages advertising pornography falsely designating a Hotmail address as the point of origin. In granting an injunction to the plaintiff, the court found that the plaintiff had an arguable case that the defendants, in entering into the service agreement without any intention of adhering to it, had acted fraudulently. Further, the defendants’ falsification of emails to make it appear that they were authorised to be transmitted and stored by Hotmail entailed misrepresentation and fraud. In Scarcella v America Online,25 the plaintiff entered into a membership agreement with the defendant by electronically ticking a virtual box indicating his assent to the terms of the agreement, comprising a ‘terms of service’ and ‘rules of the road’ which included a forum selection clause. The screen inviting users to agree to the terms appeared before the agreement itself appeared and it was possible to bypass the terms of the agreement by simply clicking on the ‘I agree’ button. If the user persisted and clicked on the ‘read now’ button, a message from the defendant encouraged the user to skip the terms: Because TOS and ROR are detailed, they are lengthy, and while we encourage you to take the time to read them now, we understand if you are eager to just explore the service.26

The user was then presented with a second opportunity to press an ‘OK I agree button’. The court indicated, without deciding, that the defendant may well have procured the plaintiff’s assent by deceit. [page 190]

Allegations of fraudulent electronic signatures often turn on the issue of authority to sign. A case on point is AET Inc Ltd v C5 Communications LLC27 in which the parties entered into an agreement for satellite communications equipment. The plaintiff denied the agreement, however, on the basis that the electronic signature of its employee, Ms Rooney, was a fraud. The evidence was that the defendant’s owner’s son was an employee of the plaintiff and it was common ground that the son put Rooney’s electronic signature into the agreement. There was also evidence of an email from Rooney to the son containing Rooney’s electronic signature. The court observed, without deciding, that the email could be evidence of authority to sign, or evidence of the son having access to Rooney’s signature enabling him to fraudulently sign the agreement. Fraud sounding in a statutory remedy is often pleaded in electronic contract actions. One of the more notorious is John Doe v Sexsearch.com,28 where the plaintiff sued an online dating service for introducing him to an underage girl with whom he allegedly had sex. The dating service encouraged members to meet with a view to having sex. In order to gain access, all potential members had to tick a virtual box appearing on a webpage stating: ‘I am over 18, I have read and agree to the terms and conditions and the privacy policy.’29 The terms and conditions provided that the dating service did not: ‘… assume any responsibility for verifying the accuracy of the information provided to other users of the service.’30 Shortly after becoming a member, the plaintiff located Jane Roe’s profile which contained the information: ‘Birthdate: June 15 1987; Age 18.’31 The profile also contained an authentic picture of Jane Roe. The plaintiff and Jane Roe arranged a rendezvous at her home where they allegedly had sex. It turned out that Jane Roe was, in fact, 14 years old. One month later, the plaintiff was arrested. At the time of filing the civil action, the plaintiff faced the possibility of 15 years’ imprisonment and lifetime registration as a sex offender. The plaintiff sued the defendants for, in effect, introducing him to an underage sexual partner, alleging breach of contract,

fraud, negligent misrepresentation, and misleading and deceptive conduct. The court found that the dating service was not liable by operation of the Communications Decency Act 1996 (US).32 However, it addressed the plaintiff’s claims obiter dicta. The plaintiff had argued that the defendant’s website fraudulently stated that all persons on its site were at least 18 years of age and that it verified all members’ profiles prior to posting. The court found that the plaintiff could not rely on these representations. He knew that membership registration did not involve an age-verification procedure and that the statements were contrary to the terms and conditions of the clickwrap agreement. [page 191]

Misleading and Deceptive Conduct 9.5 Statutory prohibitions on false, misleading and deceptive conduct have largely supplanted actions at general law. In Tiffany (NJ) Inc v eBay Inc,33 eBay purchased sponsored links on various search engines to advertise cheap Tiffany items for sale on the eBay site. Tiffany alleged that because eBay knew that many of the items may be counterfeit, the advertising was misleading and deceptive. On appeal, the United States Court of Appeals for the Second Circuit agreed, rejecting eBay’s argument that it was not reasonable for it to be able to confirm the authenticity of all the goods it advertised: An online advertiser such as eBay need not cease its advertisements for a kind of goods only because it knows that not all of those goods are authentic. A disclaimer might suffice. But the law prohibits an advertisement that implies that all of the goods offered on a defendant’s website are genuine when in fact, as here, a sizeable proportion of them are not.34

Recently, in Chapman v Skype,35 Chapman alleged that Skype advertised online a calling plan that was: ‘Unlimited1 US & Canada’. A numerical superscript appeared after the word ‘unlimited’. The superscript referenced a link to a statement at the bottom of the webpage in small blue font: ‘A fair

usage policy applies.’ The statement itself linked to the fair use policy on another page which limited the calling plan to six hours per day, 10,000 minutes per month and 50 numbers called per day. Calls outside of these limits incurred the normal usage rates and connection fees. Further, calls to mobile numbers in a large number of countries were not included in the plan. The plaintiff bought a subscription to the plan believing there was no limit to its use as advertised and ended up being charged for calls outside the limits. The Court of Appeal of California gave the opinion, without finally deciding, that consumers were likely to believe that Skype’s advertised plan gave unlimited calls within the United States and Canada for a fixed monthly fee, and consumers would likely fail to notice the numerical superscript referring to small blue text at the bottom of the webpage. As well, a reasonable interpretation of the title ‘fair use policy’ was that it suggested a policy to protect against misuse of the service, not a policy of limiting the advertised unlimited service.36 9.6 A range of online conduct, from misleading advertising to the deceptive use of sponsored links and domain names, has been caught under statutory prohibitions. In Australian Competition and Consumer Commission v Abel RentaCar Pty Ltd,37 for example, the respondent was found to have engaged in [page 192] misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) by omitting relevant information. The respondent failed to disclose on its website that excess was applied to insurance, that kilometres above a certain threshold attracted an additional charge, that some advertised prices were not available on certain days and that there may be a fee for vehicle delivery. Burying in fine print a qualification that goes to the root of an electronic

contract may also be deceptive conduct. For example, in Zurakov v Register. com Inc,38 the appellant paid the respondent $35 to register the domain name ‘Laborzionist.org’ in his name for one year. The online contract did not state that a newly-registered domain name forwarded users to a page that contained online banner advertisements for the respondent and other organisations, and that the online advertisements appeared as if they were provided and endorsed by the newly-registered domain name. The appellant asserted that the respondent had engaged in deceptive conduct. The respondent argued that its policy of forwarding users of newly-registered domain names to advertising pages was disclosed on its website; in particular, in the ‘frequently asked questions’ and ‘help’ sections of the site. On appeal, the Appellate Division of the Supreme Court of New York found it was arguable that, in the absence of any contractual stipulations, burying information detailing that users of newly-registered domain names would be forwarded to online advertising pages could be deceptive conduct, as well as a breach of an implied term of good faith. However, an arbitration clause signalled only by a blue hyperlink was not misleading. In Hubbert v Dell Corporation,39 for the plaintiffs to purchase their computers online through Dell’s website, each of the plaintiffs had to complete forms on five webpages. On each of the five webpages, the appellant’s terms and conditions, including an arbitration clause, were accessible by clicking on a blue hyperlink. The last three online forms indicated that all sales were subject to terms and conditions. The plaintiffs sued Dell, inter alia, for misleading and deceptive conduct. On appeal, however, the Appellate Court of Illinois found that the blue hyperlinks and partial capitalisation of the arbitration clause drew attention to the clause, suggesting it was not deceptively hidden. Creating a false profile may be misleading and deceptive conduct. Australian Competition and Consumer Commission v Jetplace Pty Limited40 concerned a socialising, dating and entertainment website operated by the defendants. Users of the website created profiles with the aim of socialising with and eventually meeting other members of the website. The defendants

represented that each profile was ‘placed by a person just like you’.41 But, in reality the operators of the website had created ‘administrative profiles’ which were automated to resemble profiles created by users. The defendants’ [page 193] representations that all profiles were created by visitors or members, and that every profile on the website created an opportunity to socialise with, and eventually meet a member of the website, were misleading and deceptive. There has also been recent litigation concerning ‘sponsored links’ on search engines. The High Court of New Zealand recently held in Intercity Group (NZ) Limited v Nakedbus Limited42 that the defendant engaged in misleading and deceptive conduct by buying the Google keyword ‘intercity’ so that when a Google search was carried out using the keyword, it triggered the defendant’s advertisement containing the words ‘inter city’. ‘Normally informed and reasonably attentive’ consumers would be deceived into thinking they were dealing with the plaintiff, rather than the defendant. Overall, the misleading and deceptive conduct was to: ‘[W]ord and publish the Google advertisement and the Nakedbus website, so as to suggest to internet users an association or affiliation between the Nakedbus network and the InterCity network’43 when there was none. 9.7 Finally, deceptively similar domain names continue to be litigated. In Mark Foys Pty Ltd v TVSN (Pacific) Ltd,44 the respondent made television shopping programs, promoting downmarket goods such as jewellery, skin care and fashion accessory merchandise. In an effort to upgrade its image and create an impression of tradition and quality, the respondent adopted the use of the words ‘Mark Foys’, a respected retail name, in its website and email addresses: ‘markfoys.com’ and ‘[email protected]’. The Full Court of the Federal Court found that the use of the words ‘Mark Foys’ by the respondent was deceptive because it conveyed the inference that there was an

association between the respondent and Mark Foys when, in fact, there was none. The court held: The words markfoys.com appear prominently at the top of the pages of the website as launched in November 1999. These words are emphasised in bold typeface which is two to three times the size of the typeface which refers to TVSN. The reference to the TVSN details and the mode of ordering through TVSN would not be likely, in our view, to disabuse a customer of a wrong belief in an association between the entities.45

In New Zealand Post v Leng,46 the High Court of New Zealand injuncted the defendant from using the domain name ‘nzpost.com’ because of its deceptive similarity to ‘all but experienced users of the internet’ to New Zealand Post’s domain name.47 However, in REA Group Ltd v Real Estate 1 Ltd (2013) 102 IPR 1,48 where the dispute was between the plaintiff’s domain [page 194] names ‘realestate.com.au’ and ‘realcommercial.com.au’ and the defendant’s ‘realestate1.com.au’ and ‘realcommercial1.com.au’, Bromberg J of the Federal Court of Australia held that consumers were unlikely to be misled or deceived into assuming an association between the plaintiff and the defendant: Where common descriptors are utilised by businesses, cues as to the identity of a particular business are likely to be less pronounced and less differentiated from those of many of their competitors. That circumstance will be recognised by consumers. Consumers can be expected to be more vigilant when searching for a particular online real estate business and small differences are less likely to lead to error.49

This reasoning was adopted in Vendor Advocacy Australia Pty Limited v Seitanidis50 in which the applicant alleged that the respondent’s domain names ‘vendoradvocacy.com’ and ‘vendoradvocacyaustralia.com’ were deceptively similar to its domain names ‘vendoradvocacy.com.au’ and ‘vendoradvocacyaustralia.com.au’. Middleton J found that because of the distinctiveness of the websites, the similar domain names would lead to no more than a transient period of being misled:

I have not needed to enter the debate as to the significance of the various accoutrements of domain names such as ‘.com.au’. I agree with the observations of various judges that consumers do not pay any real attention to such references. I do observe that, in the context of searching the internet, consumers will be vigilant … [citations omitted].51

Liability of Internet Service Providers 9.8 Outside of the United States, the courts have been slow to attach liability for misleading or deceptive content on operators of websites and search engines. In Google Inc v Australian Competition and Consumer Commission,52 the High Court of Australia considered Google’s liability for misleading and deceptive ‘sponsored links’ appearing in response to search terms consisting of or including the names of competitors to the advertiser sponsoring the link. The court accepted that it was always the advertiser, not Google, that specified the headline, the advertising text, the advertiser’s URL, and, most importantly, the keyword triggering the sponsored link. Google merely implemented the instructions.53 The plurality of the court held: The technology which lies behind the display of a sponsored link merely assembles information provided by others for the purpose of displaying advertisements … The fact that the provision of information via the internet

[page 195] will — because of the nature of the internet — necessarily involve a response to a request made by an internet user does not, without more, disturb the analogy between Google and other intermediaries. To the extent that it displays sponsored links, the Google search engine is only a means of communication between advertisers and consumers.54

9.9 In the United States, the Communications Decency Act protects internet service providers from liability for a third party’s misconduct. In Gentry v eBay Inc,55 the Court of Appeal of the Fourth District of California held that, where eBay advertised forged items for auction, §230 of the Communications Decency Act created a federal immunity to any cause of

action that would make the service provider liable for information originating with a third party user of the service. The courts are not unanimous, however, as to the extent of the protection afforded to internet service providers. For example, in Grace v eBay,56 Grace purchased several items from a seller and then posted negative comments about the seller on eBay. The seller responded by posting: ‘Complaint: SHOULD BE BANNED FROM EBAY!!! DISHONEST ALL THE WAY!!!’57 Grace notified eBay that the seller’s comments were defamatory, but eBay refused to remove them. The Court of Appeal of California distinguished Gentry v eBay reasoning that, in light of the common law distinction between liability as a primary publisher and liability as a distributor, §230 of the Act did not clearly and directly address distributor liability and therefore did not preclude the liability of eBay.58 Anthony v Yahoo! Inc59 concerned online dating services. Yahoo! represented that it reserved the right to remove deceptive profiles to: ‘[G]ive all subscribers and potential subscribers a sense of confidence in the authenticity of the images displayed on [its] website.’60 Anthony alleged that Yahoo! deliberately created false and non-existent profiles on its site to trick both potential subscribers into joining, and existing subscribers into renewing their subscriptions. Yahoo! raised the Communications Decency Act as a defence to Anthony’s allegations of misrepresentation and fraud. However, the court disagreed. Anthony was not merely alleging that Yahoo! failed to delete the misrepresentations, but that it actively created them. It followed that Yahoo! was itself an information content provider falling outside the Act.61 [page 196] The United States Court of Appeals, Ninth Circuit, sitting en banc gave the

same reasoning in Fair Housing Council of San Fernando Valley v Roommates. com LLC:62 In passing section 230, Congress sought to spare interactive computer services … by allowing them to perform some editing on user-generated content without thereby becoming liable for all defamatory or otherwise unlawful messages that they didn’t edit or delete. In other words, Congress sought to immunise the removal of user generated content not the creation of content.63

Jurisdiction Misrepresentations 9.10 The law governing misrepresentations made from outside the jurisdiction appears settled. The substance of the tort is committed where the misrepresentation is received and acted on. The line of cases leading to this conclusion begins with the Canadian case of Original Blouse Co Ltd v Bruck Mills Ltd.64 The plaintiff, a clothing manufacturer located in Vancouver, British Columbia, sent a sample of material to the defendant, located in Montreal, Quebec. In a series of letters and telephone calls between the parties, the defendant represented it could supply the plaintiff with the material, as well as with another fabric it manufactured that was ‘permanently pleatable’.65 Induced by these representations, the plaintiff entered into a contract for supply. The material supplied by the defendant was not of the same kind as the sample and was wholly unsuitable. Further, the pleats in the ‘permanently pleatable’ fabric were not permanent. The plaintiff sought leave from a court in British Columbia to serve a writ of summons on the defendant in Quebec. The defendant argued the court did not have jurisdiction because, if a tort had been committed, it had been committed in Quebec, not in British Columbia. The court held: The representation cannot be said to have been made until received. The representation was received in Vancouver; the defendant caused the representation to be received in Vancouver by the use of postal service and long-distance telephone. Assuming the plaintiff is able to prove its case, the plaintiff while in this province was induced to act, and did act, in this province, on the

fraudulent misrepresentations. It is alleged that thereby the plaintiff suffered damage and if it did in my opinion, the damage was suffered in British Columbia.66

[page 197] Original Blouse was cited with approval by the Court of Appeal in Diamond v Bank of London and Montreal.67 The plaintiff, a London commodity broker, entered into negotiations with an American company for the supply of one million metric tonnes of sugar. Each party provided to the other, as evidence of their bona fides and credit- worthiness, confirmation from two banks. The plaintiff provided a bank in London, and the American company provided the defendant bank, situated in Nassau in the Bahamas. The plaintiff alleged loss and damage against the defendant arising out of the defendant’s negligent misrepresentations made by telex and telephone messages from Nassau, and sought leave to serve notice of the writ on the defendant in Nassau. Parker J refused leave on the grounds that the action was not founded on a tort committed within the jurisdiction. The plaintiff did not appeal the decision, but commenced a fresh action for fraud relying on the same facts. The plaintiff was again refused leave to serve notice of the writ on the defendant by Donaldson J, the judge deciding that the substance of the tort had been committed outside the jurisdiction. On appeal, Lord Denning MR held that where fraudulent or negligent misrepresentations were made by telex or telephone communications originating outside the jurisdiction, the substance of the tort was committed in the place where they were received and acted on, and not the place from which they were sent. In the United States, the same principles appear to apply. In Keenan v Aguilar,68 Keenan, located in New Mexico, represented to Aguilar, resident in Texas, by advertisement on eBay and in emails and phone calls to Aguila personally, that a motor home was in ‘great condition, inside and out … no repairs needed’. Aguila subsequently spent over $12,000 making the vehicle roadworthy. The Court of Appeals of Texas had no difficulty in finding

Keenan’s statements by email and telephone to Aguila misrepresentations in Texas sufficient to enliven Texan jurisdiction.

were

Recently, in Bancroft Commercial Inc v Goroff,69 Bancroft, a publisher based in Maryland, alleged that Goroff, based in Massachusetts, misrepresented her qualifications as a book publicist on her website. In reliance on the alleged representations, Bancroft entered into a contract with Goroff to publicise two books, but then sued for damages for breach of contract and misrepresentation. Although, surprisingly, Maryland courts had not considered the principles applying to an out-of-jurisdiction misrepresentation, the District Court held that the location of the loss determined the law of the tort.

Misleading and deceptive conduct 9.11 The same reasoning applies to statutory actions for misleading and deceptive conduct from outside of the jurisdiction. The Court of Appeal of New South Wales considered the Fair Trading Act 1987 (NSW) in [page 198] Ramsey v Vogler.70 The first and second appellants, resident in New South Wales, bought a greeting card service from the respondent. The appellants sought a declaration that the agreement for sale was void. In particular, the appellants claimed that one John Davies, who was resident in Queensland and acted for the respondent, had made false representations by letter and phone to the appellants. The Court of Appeal held that the telephone conversations of Davies, speaking from Queensland to the first appellant in New South Wales, and the dispatch of several letters by post from Queensland to the first appellant in New South Wales, constituted conduct in New South Wales for the purposes of the Fair Trading Act 1987 (NSW) as the communications were received, and were intended to be acted on, in New South Wales.

In Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (No 2),71 the Federal Court of Australia considered the Trade Practices Act 1974 (Cth). The applicant was incorporated in Western Australia to produce egg cartons on contract for the Western Australian Egg Marketing Board (the Board). Prior to its incorporation, the future managing director of the applicant engaged in negotiations with the respondent, a United Kingdom company. The respondent represented, by way of telephone and fax from the United Kingdom, that it could supply the applicant with equipment which would perform to the standard specified in the contract between the applicant and the Board. In reliance on these representations, the applicant was incorporated and entered into a contract with the respondent for the purchase of the equipment. The applicant alleged that, due to deficiencies in the equipment, it was not able to fulfil its contractual obligations to the Board and sued the respondent for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth). The Federal Court agreed that the making of representations by telephone and fax communications from the United Kingdom to the applicant in Australia constituted conduct by the respondent in Australia. In Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd,72 pursuant to the Trade Practices Act, the Full Court of the Federal Court of Australia considered misleading and deceptive conduct by silence. The Full Court held that Sydbank’s statement, which was not actionable, occurred in Australia because it was heard and acted on by Bannerton in Australia. The actionable silence assumed significance because of this earlier statement. Because the earlier statement occurred in Australia, the cause of complaint in relation to the omission also occurred in Australia. In Bray v F Hoffman-La Roche Ltd,73 Merkel J of the Federal Court of Australia considered whether emails initiated outside Australia and received within Australia could be regarded as conduct taking place within Australia for the purposes of s 45 of the Trade Practices Act. His Honour held the tort

[page 199] of negligent misstatement was committed where the statement was received and acted upon. Where a statement was received in one place and acted on in another, and the misstatement was directed to a place known or anticipated for receipt, the statement was, in substance, made at the place to which it was directed. Accordingly, the emails engaged the Trade Practices Act. Merkel J later extended the principle to statements made by internet in Ward v Brodie & Stone:74 When such publications or statements are made to the world at large, and not to persons or subscribers in a particular jurisdiction, there is some difficulty as regarding them as having been made by a website in a particular jurisdiction. However, where the publication or statement is directed or targeted at persons or subscribers in a particular jurisdiction there is no difficulty in treating them as having been made and received in that jurisdiction.75

Jurisdiction under legislation 9.12 Courts can also deal with misleading and deceptive conduct by electronic means from outside the jurisdiction by operation of statute. A summary of legislation giving common law courts extra-territorial jurisdiction over misleading and deceptive conduct is beyond the scope of this book. But examples from the author’s own jurisdiction suggest some of the issues that might arise. The Trade Practices Act has now been replaced by the Competition and Consumer Act 2010 (Cth) and the Australian Consumer Law. But the following discussion applies equally to the equivalent provisions of the new legislation.76 Section 5 of the Trade Practices Act extended its operation to include conduct outside Australia engaged in by bodies incorporated or carrying on business within Australia. A foreign corporation need not have a place of business within the jurisdiction in order to carry on a business within the jurisdiction.77 For example, members of an online gaming facility established their own websites as a means of recruiting new members and earned rewards

by introducing new members to the scheme in Australian Competition and Consumer Commission v Worldplay Services Pty Ltd.78 The Australian Competition and Consumer Commission alleged that the respondent was engaging in an online pyramid selling scheme, contrary to s 65AAC(1) of the Act. The court found that, even though the online scheme was not accessible to members of the Australian public and that access to it via an Australian internet service provider was blocked, the respondent was an Australian registered [page 200] company engaging in conduct at its offices within Australia and was caught by s 5 of the Act. Section 6 of the Trade Practices Act encompassed individuals engaging in conduct by postal, telegraphic or telephonic services.79 The phrase ‘telephonic services’ was broad enough to include misleading and deceptive conduct by means of the internet. In Australian Competition and Consumer Commission v Hughes,80 the respondent, trading as ‘Crowded Planet’, made representations on a United States-based website that Crowded Planet could supply newer oral contraceptives at lower prices resulting in consumers saving money, that consumers of a particular oral contraceptive product could ‘miss one’, and that another oral contraceptive product had ‘nil side effects’.81 Allsop J found that the respondent had engaged in misleading and deceptive conduct, and stated the basis of the court’s jurisdiction to grant relief under the Act: Mr Hughes makes the representations on the website available to consumers by the use of telephonic services in Australia and overseas. The evidence discloses that the website as at 30 August 2000 had an address ‘www.crowded.org’ indicating a United States based site or domain name. The site itself contains the representations which I have earlier dealt with. They are placed on the site using postal, telegraphic or telephonic services and are made available for people to see by those people visiting the site. People can visit the site from all States in Australia, the United States and elsewhere by the use of telephonic services. Thus, Mr Hughes places on a computer site overseas misleading or deceptive material with the intention that consumers in Australia, the

United States and elsewhere will use telephonic services to access that information and rely upon it. Thus relief is available under the Trade Practices Act by reason of s 5 and s 6 of the Act, notwithstanding the lack of presence of a corporation.82

The application of section 6 to the internet was also considered in Australian Competition and Consumer Commission v Chen.83 The respondent, who resided in the United States, maintained three imitation websites, purportedly selling tickets for events at the Sydney Opera House to members of the Australian public as well as overseas residents. The respondent falsely represented that the sites were affiliated with the Sydney Opera House Trust and that the sale of the tickets was approved or permitted by the trust. Ticket prices were double those of tickets offered on genuine sites and, in most cases, consumers found that no bookings were made. The court found that although the respondent was not a corporation, his conduct over the internet involved either the use [page 201] of telephonic services, or took place in trade or commerce between Australia and the United States.84 Section 6 was most recently considered in Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Limited (No 2).85 Sunland alleged that misrepresentations were made by telephone and email from persons located in Australia to persons located in Dubai. The court accepted that the ‘telegraphic or telephonic’ communications were sufficient to enliven the court’s jurisdiction, even though the communications had been made by a natural person. The question remained, however, whether the communications were in trade or commerce ‘within Australia or between Australia and places outside Australia’. The court held that, on the facts of the case, even though the representations emanated from Australia, they were not made in the course of trade and commerce between Australia and Dubai, but

were made in the course of trade or commerce in Dubai. The court reasoned that if Sunland’s position was accepted: Almost all commercial negotiations conducted outside Australia would be governed by the provisions of the TPA if one of the parties to those negotiations was an Australian citizen or corporation.86

A further limitation to the extra-territorial jurisdiction of the Trade Practices Act related to accessorial liability. In Showtime Touring Group Pty Limited v Mosely Touring Inc,87 the plaintiff alleged that the defendant had made misleading and deceptive statements by medium of an audio drop disseminated in Australia and that Mr Mosely, as the directing mind of the defendant, was knowingly involved in the contravention. The evidence emerged, however, that the instructions given by Mr Mosely to disseminate the audio drop had not been given in Australia. Although it was open for the plaintiff to plead that Mr Mosely had participated in the impugned conduct by making the representations in Australia through the medium of the audio drop, the plaintiff had not done this.88 As accessorial liability could only be alleged against conduct in Australia, the pleading was struck out with leave to replead.

Conclusion 9.13 Representations via electronic media are actionable if they are made negligently or deceitfully. Under statutory provisions for misleading and deceptive conduct, false representations by webpage, email, text, Twitter or audio drop, misleading email addresses, domain names and sponsored links, [page 202] and deceptive email accounts and online profiles may all constitute misleading and deceptive conduct. Operators of websites, however, are largely

immune from liability for content provided by third parties as long as they play no role in the creation of the content. Where the misrepresentation is made outside the jurisdiction, the substance of the tort is committed where the representation is received and acted on. Similarly, under statutory provisions for misleading and deceptive conduct, if the conduct is directed to a jurisdiction known or anticipated for receipt, the statement is, in substance, made in the jurisdiction to which it is directed and may be caught by the relevant legislation of the jurisdiction. 9.14 Superior courts of record have the jurisdiction to decide cross-border disputes, but they lack the practical means to enforce their decisions. Sackville J was referring to this problem when he said: While domestic courts can, to a limited extent, adapt their procedures and remedies to meet the challenges posed by cross-border transactions in the Internet age, an effective response requires international cooperation of a high order … some steps have been taken to secure that cooperation. … Clearly enough, much more needs to be done if Australian consumers are to be adequately protected against fraud or misleading conduct perpetrated over the internet.89

However, transnational borders are not the only borders confronting courts. In SEC v SG Ltd,90 online purchasers of virtual shares in virtual companies listed on a virtual stock exchange, who had paid real money, were found by the First Circuit to have entered into investment contracts within the reach of federal securities laws. And in Bragg v Linden Research Inc,91 the plaintiff, who had again paid real money, sued to enforce property rights over virtual land that he had been induced to purchase by a virtual person at a virtual town hall meeting in a virtual world. Courts must now cope with a dimensional border between the real world and a virtual world ‘limited only by the human imagination’,92 in which virtual representations of real people enter into virtual contracts for virtual land, virtual goods and virtual services. Fairfield93 argues persuasively that the legal needs of members of online communities cannot be satisfied solely by private contracts, which are typically the terms of end user licence agreements imposed on members by the operators of virtual worlds. As virtual property increasingly has real value,

Fairfield argues for the recognition of property and public rights as well as tortious remedies to supplement private contracts which are ill adapted to regulate the large and shifting populations of millions of people living online.

1.

H G Beale (ed), Chitty on Contracts, 29th ed, Sweet & Maxwell, London, 2004, at 6001; L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005, at 522–3.

2.

L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005 at 301.

3.

L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005 at 523–8. See also the Misrepresentation Act 1967 (UK).

4.

See, for example, the allegations in AvePoint Inc v Power Tools Inc (2013) 981 F Supp 2d 496.

5.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007, at [10–05]; J Paterson, A Robertson and P Heffey, Contract: Cases and Materials, Lawbook Co, Sydney, 2005 at [12.35].

6.

Scott v Bell Atlantic Corp (2001) 282 AD 2d 180.

7.

Scott v Bell Atlantic Corp (2001) 282 AD 2d 180 at 182.

8.

Scott v Bell Atlantic Corp (2001) 282 AD 2d 180 at 182.

9.

Scott v Bell Atlantic Corp (2001) 282 AD 2d 180 at 185.

10.

Magill v Expedia Inc [2014] ONSC 2073.

11.

For an important decision of the English Court of Appeal considering an online representation actionable for breach of duty, rather than inducement into a contract, see Patchett v Swimming Pool and Allied Trades Association Limited [2010] 2 All ER (Comm) 138.

12.

Abrahams v Biggs [2011] FCA 1475 at [79].

13.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007 at [18–06]; N C Seddon and M P Ellinghaus, (2008) Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008 at [11.11] but see also [11.12]–[11.16]. The same applies in the United States: L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005, at 524.

14.

Deepstar Marine Inc v Xylem Dewatering Solutions 2014 Dist LEXIS 104358.

15.

Deepstar Marine Inc v Xylem Dewatering Solutions 2014 Dist LEXIS 104358 at 24.

16.

Peekay Intermark Ltd v Australia and New Zealand Banking Group Limited [2006] 1 CLC 582.

17.

Skilling v Zenith Insurance Plc [2013] ScotSC 23.

18.

Bagg v HighBeam Research Inc (2012) 862 F Supp 2d 41.

19.

Bagg v HighBeam Research Inc (2012) 862 F Supp 2d 41 at 47.

20.

Gentry v eBay Inc (2000) 99 Cal App 4th 816.

21.

Gentry v eBay Inc (2000) 99 Cal App 4th 816 at 835.

22.

Similarly in the United States: L Willmott, S Christensen and D Butler, Contract Law, 2nd ed, Oxford University Press, Melbourne, 2005 at 526.

23.

J W Carter, E Peden and G J Tolhurst, Contract Law in Australia, 5th ed, LexisNexis Butterworths, Sydney, 2007 at [18–25]; N C Seddon and M P Ellinghaus, (2008) Cheshire and Fifoot’s Law of Contract, 9th ed, LexisNexis Butterworths, Sydney, 2008 at [11.12].

24.

Hotmail Corp v Van Money Pie Inc 1998 US Dist LEXIS 10729.

25.

Scarcella v America Online (2004) 798 NYS 2d 348; affirmed (2005) 811 NYS 2d 858.

26.

Scarcella v America Online (2004) 798 NYS 2d 348.

27.

AET Inc Ltd v C5 Communications LLC 2007 US Dist LEXIS 10279.

28.

John Doe v Sexsearch.com (2007) 502 F Supp 2d 719.

29.

John Doe v Sexsearch.com (2007) 502 F Supp 2d 719 at 729.

30.

John Doe v Sexsearch.com (2007) 502 F Supp 2d 719 at 729.

31.

John Doe v Sexsearch.com (2007) 502 F Supp 2d 719 at 722.

32.

See below at 9.9.

33.

Tiffany (NJ) Inc v eBay Inc (2010) 600 F 3rd 93 (2nd Cir).

34.

Tiffany (NJ) Inc v eBay Inc (2010) 600 F 3rd 93 (2nd Cir) at 114.

35.

Chapman v Skype (2013) 220 Cal App 4th 217.

36.

Chapman v Skype (2013) 220 Cal App 4th 217 at 227.

37.

Australian Competition and Consumer Commission v Abel Rent-a-Car Pty Ltd [1999] FCA 314.

38.

Zurakov v Register.com Inc (2003) 760 NYS 2d 13.

39.

Hubbert v Dell Corporation (2005) 359 Ill App 3d 976.

40.

Australian Competition and Consumer Commission v Jetplace Pty Limited [2010] FCA 759.

41.

Australian Competition and Consumer Commission v Jetplace Pty Limited [2010] FCA 759 at [30].

42.

Intercity Group (NZ) Limited v Naked Bus Limited [2014] NZHC 124.

43.

Intercity Group (NZ) Limited v Naked Bus Limited [2014] NZHC 124 at [227].

44.

Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 104 FCR 61.

45.

Mark Foys Pty Ltd v TVSN (Pacific) Ltd (2000) 104 FCR 61 at 78.

46.

New Zealand Post v Leng (1998) 45 IPR 263.

47.

New Zealand Post v Leng (1998) 45 IPR 263 at 268.

48.

REA Group Ltd v Real Estate 1 Ltd (2013) 102 IPR 1.

49.

REA Group Ltd v Real Estate 1 Ltd (2013) 102 IPR 1 at 134.

50.

Vendor Advocacy Australia Pty Limited v Seitanidis [2013] FCA 971.

51.

Vendor Advocacy Australia Pty Limited v Seitanidis [2013] FCA 971 at [262], [263].

52.

Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435.

53.

Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 at [66].

54.

Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 at [69].

55.

Gentry v eBay Inc (2002) 99 Cal App 4th 816.

56.

Grace v eBay (2004) 16 Cal Rptr 3d 192.

57.

Grace v eBay (2004) 16 Cal Rptr 3d 192 at 196.

58.

The court did find, however, that the broad terms of eBay’s release relieved it of liability for all claims within the scope of the release.

59.

Anthony v Yahoo! Inc (2006) F Supp 2d 1257 (2006).

60.

Anthony v Yahoo! Inc (2006) F Supp 2d 1257 (2006) at 1259.

61.

Anthony v Yahoo! Inc (2006) F Supp 2d 1257 (2006) at 1262–1263.

62.

Fair Housing Council of San Fernando Valley v Roommates.com LLC (2008) 521 F 3rd 1157.

63.

Fair Housing Council of San Fernando Valley v Roommates.com LLC (2008) 521 F 3rd 1157 at 1163.

64.

Original Blouse Co Ltd v Bruck Mills Ltd (1964) 42 DLR (2d) 174.

65.

Original Blouse Co Ltd v Bruck Mills Ltd (1964) 42 DLR (2d) 174 at 181.

66.

Original Blouse Co Ltd v Bruck Mills Ltd (1964) 42 DLR (2d) 174 at 182.

67.

Diamond v Bank of London and Montreal [1979] QB 333. The appeal was dismissed because the appellant had not demonstrated an arguable case.

68.

Keenan v Aguilar (2012) 391 SW 3rd 620.

69.

Bancroft Commercial Inc v Goroff 2014 US Dist LEXIS 178616.

70.

Ramsey v Vogler [2000] NSWCA 260.

71.

Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (No 2) (1993) 44 FCR 485.

72.

Sydbank Soenderjylland A/S v Bannerton Holdings Pty Ltd (1996) 149 ALR 134.

73.

Bray v F Hoffman-La Roche Ltd (2002) 190 ALR 1.

74.

Ward v Brodie & Stone (2005) 215 ALR 716.

75.

Ward v Brodie & Stone (2005) 215 ALR 716 at [40].

76.

See Australian Competition and Consumer Commission v Sensaslim Australia Pty Limited (In Liquidation) (No 1) [2011] FCA 1012; Australian Competition and Consumer Commission v Taxsmart Group Pty Limited [2014] FCA 487.

77.

Bray v F Hoffman-La Roche Ltd (2002) 190 ALR 1 at 16.

78.

Australian Competition and Consumer Commission v Worldplay Services Pty Ltd (2004) 210 ALR 562.

79.

Pursuant to the Commonwealth’s power under s 51(v) of the Constitution: R V Miller, Miller’s Annotated Trade Practices Act, Lawbook Co, Sydney, 2008, at [1.6.15]. See also C Brien and J Brien, Netlaw, LexisNexis Butterworths, Sydney, 2004, at 55–8 for a discussion of earlier cases involving misleading and deceptive conduct on the internet.

80.

Australian Competition and Consumer Commission v Hughes (2002) ATPR 41–863.

81.

Australian Competition and Consumer Commission v Hughes (2002) ATPR 41–863 at [15], [17] and [19].

82.

Australian Competition and Consumer Commission v Hughes (2002) ATPR 41–863 at [77]–[79].

83.

Australian Competition and Consumer Commission v Chen (2003) 201 ALR 40.

84.

Australian Competition and Consumer Commission v Chen (2003) 201 ALR 40 at 47.

85.

Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Limited (No 2) [2012] VSC 239.

86.

Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Limited (No 2) [2012] VSC 239 at [407] upheld on appeal in Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Limited (No 2) [2013] VSCA 237 at [417].

87.

Showtime Touring Group Pty Limited v Mosely Touring Inc (2013) 296 ALR 597.

88.

Showtime Touring Group Pty Limited v Mosely Touring Inc (2013) 296 ALR 597 at [25].

89.

Australian Competition and Consumer Commission v Chen (2003) 201 ALR 40 at 53, 54.

90.

SEC v SG Ltd (2001) 265 F 3d 42 (1st Cir).

91.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593.

92.

Bragg v Linden Research Inc (2007) 487 F Supp 2d 593 at 595.

93.

J Fairfield, ‘Anti-Social Contracts: The Contractual Governance of Virtual Worlds’ (2008) 53(3) McGill Law Journal 427–476.

[page 203]

Chapter 10 International Conventions and Model Laws Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the form of a data message: Article 5, Model Law on Electronic Commerce

Introduction 10.1 The internet originally allowed military communications in the event that ordinary terrestrial telephone lines failed. The Advanced Research Projects Agency Network (ARPANET) enabled different computers to communicate with each other by dividing up messages into electronic packets sent at different times by different routes to different computers in order to reach their end destination. In 1985, the National Science Foundation established the National Science Foundation Network (NSFNet), a version of ARPANET, to create an academic research network linking researchers to new super-computing centres at Princeton, Cornell, California San Diego, Illinois, Urbana-Champaign and Carnegie Mellon, and Pittsburgh universities. In 1995, the global commercial computer network, the World Wide Web1 opened for business, enabling parties to electronically negotiate and contract with each other for goods and services. The increasing global market for goods and services bought and sold on the web has led to increasing possibilities for commercial conflict, including disputes over electronic contracts.2 Well before the invention of the internet, the United Nations had already

established the United Nations Commission on International Trade Law (UNCITRAL) as a subsidiary body of the General Assembly of the United Nations to harmonise and unify the laws of international trade. UNCITRAL was [page 204] originally composed of 29 states, but its membership was expanded in 1973 to 36 states, and again in 2004 to 60 states. The membership is representative of the various geographic regions and the principal economic and legal systems of the world. Members of the commission, observer states, and interested intergovernmental and non-governmental organisations participate in UNCITRAL processes. UNCITRAL initiates, drafts and adopts conventions, model laws and other instruments dealing with the substantive law governing international trade as well as aspects of business law that have an impact on international trade. 10.2 The principal instruments relevant to electronic contracts are the United Nations Convention on Contracts for the International Sale of Goods (the Vienna Convention), the Model Law on Electronic Commerce (MLEC), the Model Law on Electronic Signatures (MLES), and the Convention on the Use of Electronic Communications in International Contracts (CUECIC). The Vienna Convention came into force before modern means of electronic contracting came into existence. However, Article 13 expressly recognises that contracts by telegram or telex may be contracts in writing for its purposes. It is likely that contracts by modern means of electronic communication are also contracts in writing under the Vienna Convention. The MLEC provides the key proposition, underpinning all the conventions and model laws regulating electronic transactions, that an electronic communication is not to be invalidated solely because it took place wholly or partly by means of one or more electronic communications.3 The MLES

addresses the requirements of technical reliability and legal effectiveness for digital signatures using cryptography and other technologies. The CUECIC expressly deals with problems of electronic contracting, but the problems may be more apparent than real.

The Vienna Convention 10.3 The United Nations Convention on Contracts for the International Sale of Goods was signed in Vienna on 11 April 1980 and came into force on 1 January 1988. Currently, 83 states have ratified it, although of the jurisdictions considered in this book, India, Ireland, South Africa and the United Kingdom still have not. The Vienna Convention has been described as an international legal code designed to overcome differences between laws of the member states of the United Nations.4 The Vienna Convention governs contracts for the international sale of goods between parties in signatory states whose place of business are in different states.5 It applies only to international transactions and avoids recourse to rules of private international law for contracts falling within [page 205] its scope. The Vienna Convention may apply to a contract for international sale of goods when the rules of private international law point to the law of a signatory state as the applicable law, or by virtue of the choice of the contracting parties, regardless of whether their places of business are located in a signatory state.6 International contracts falling outside the scope of the Vienna Convention,7 as well as contracts subject to a valid choice of law clause and purely domestic contracts for the sale of goods, are not affected. Parties that otherwise may fall within the Vienna Convention may contract out of it.8

Article 13 of the Vienna Convention is directly relevant to electronic contracts for the international sale of goods: Article 13 For the purposes of this Convention ‘writing’ includes telegram and telex.

10.4 The Article is silent on email and text messages, as well as on clickwrap and browsewrap contracts, as these means of contracting did not exist at the time of the adoption of the Vienna Convention. The question arises whether there is a ‘vital gap’ in the Vienna Convention, or whether these additional modes of electronic contracting are contemplated by it.9 Hill10 cogently argues that Article 13 also extends to modern means of electronic contracting. First, Article 11 of the Vienna Convention11 does not require a contract falling within its scope to be in writing and makes no requirement as to form, allowing parties flexibility to contract, taking into account modern means of communication.12 Second, Article 13 is a supplementary definition validating telexes and telegrams for any writing requirement under the Vienna Convention.13 Third, the wording of Article 13 is inclusive of electronic means of contracting, rather than exclusive.14 Fourth, [page 206] telex and telegrams were newly available means of written communication at the time of drafting the Vienna Convention. Construing the Vienna Convention as recognising contracting by rapid communications, ultimately provable by paper records, is consistent with recognising agreement made by fax, email and online.15 Fifth, Article 2016 of the Vienna Convention expressly contemplates ‘other means of instantaneous communication’ in articulating time for acceptance of offers by instantaneous means.17 Sixth, reading the Vienna Convention in conjunction with the model laws on electronic commerce and signature suggests that the purpose of the Vienna Convention

is to permit modern means of electronic contracting.18 This last observation is supported by the explanatory note to the Vienna Convention, which cites the Convention on the Use of Electronic Communications in International Contracts as a complementary text promoting the construction of the Vienna Convention as permitting electronic agreements.19 10.5 Olivaylle Pty Ltd v Flottweg Gmbh and Co KGAA (No 4)20 dealt with an electronic contract made between places of business located in Victoria and Germany for the supply by Flottweg of an olive oil production line to Olivaylle. The contract provided: Flottweg will retain ownership and title to the delivered goods and equipment until Flottweg has received payment of all amounts owned by the buyer under the contract. Australian law applicable under exclusion of UNCITRAL law.21

Flottweg argued that the final sentence referred to a permissible exclusion under clause 6 of the Vienna Convention. Olivaylle, however, took a different view. It submitted that only UNCITRAL law so far as it affected issues of title, was excluded because of the immediately preceding sentence. In considering the issue, Logan J stated: UNCITRAL is an agency of the United Nations established by the General Assembly in 1966. It has as its mandate from the General Assembly the progressive harmonisation and unification of the law of international trade. It has fostered

[page 207] the development of a number of international conventions and model laws which range in subject from the international sale of goods through to cross-border insolvency and, … electronic commerce. When this fact and that the Vienna Convention ‘governs only the formation of the contract of sale and the rights and obligations of the seller and buyer arising from such contract; in particular [the Vienna Convention] is not concerned with the effect that the contract may have on the property to the goods sold’ … are taken into account, it is an unlikely construction of the contract that the sentence referring to ‘UNCITRAL law’ is to take its meaning from the sentence which precedes it. Given the nature of the contract, the fact that a party to it, Flottweg, was and was known by Olivaylle to be a company which sold its wares internationally and the reference to the exclusion of ‘UNCITRAL law’ appearing at its conclusion … the more likely construction of

UNCITRAL law is that it was intended to be a reference to the particular UNCITRAL convention that governed the international sale of goods, that is the Vienna Convention.22

Olivaylle v Flottweg never canvassed whether the Vienna Convention extended to electronic contracts for the international sale of goods. The parties and the court appear to have proceeded on the assumption that, but for the exclusion clause, it would have applied. This assumption must be right.

Model Law on Electronic Commerce 10.6 In 1996, UNCITRAL released the Model Law on Electronic Commerce. It provided a template for internationally acceptable rules removing legal obstacles to, and creating a secure legal environment for, electronic commerce. The MLEC is not limited to contracts. Instead it seeks to create functional equivalence of electronic media to paper media in commercial transactions so that where an electronic form is equivalent to a paper form, the electronic form should be legally equal to the paper form.23 It also seeks to be technology neutral by preferring general expressions such as ‘data message’ to technology-specific expressions such as ‘electronic mail’. The MLEC deals with legal recognition of data messages, writing, signatures, originals, admissibility and evidentiary weight of data messages as well as their retention, formation and validity of contracts, recognition by parties of data messages and their attribution, acknowledgement of receipt, and time and place of dispatch and receipt of data messages.24 The MLEC was considered in detail in Jafta v Ezemvelo KZN Wildlife25 where it was suggested that the MLEC is intended to unify electronic communications law by triggering national legislation in conformity with it. The result is an international law of electronic communications that is both multilateral and [page 208]

complete,26 and in furtherance of this intention, the courts should use technical language in a way that is deliberate, consistent and devoid of confusion.27 The MLEC defines concepts such as ‘writing’, ‘signature’ and ‘original’ in ways that include electronic records and signatures, and a data message is in writing if it is accessible or usable for subsequent reference.28 The MLEC adopts the receipt theory for electronic acceptances.29 The offeror, however, does not have to actually retrieve or acknowledge the acceptance; it is sufficient if the acceptance is capable of retrieval.30 10.7

The central articles of the Model Law are:

Article 1. Sphere of application This Law applies to any kind of information in the form of a data message used in the context of commercial activities. Article 5. Legal recognition of data messages Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is in the form of a data message. Article 5 bis. Incorporation by reference31 Information shall not be denied legal effect, validity or enforceability solely on the grounds that it is not contained in the data message purporting to give rise to such legal effect, but is merely referred to in that data message. Article 6. Writing (1) Where the law requires information to be in writing, that requirement is met by a data message or the information contained therein is accessible so as to be usable for subsequent reference. (2) Paragraph (1) applies whether the requirement therein is in the form of an obligation or whether the law simply provides consequences for the information not being in writing. … Article 7. Signature (1) Where the law requires the signature of a person that requirement is met in relation to a data message if: (a) a method is used to identify that person and to indicate that person’s approval of the information contained in the data message; and (b) that method is as reliable as was appropriate for the purpose for which the data message was generated or communicated, in the light of all the circumstances, including any relevant agreement.

[page 209] (2) Paragraph (1) applies whether the requirement therein is in the form of an obligation or whether the law simply provides consequences for the absence of a signature. … Article 11 Formation and validity of contracts (1) In the context of contract formation, unless otherwise agreed by the parties, an offer and the acceptance of an offer may be expressed by means of data messages. Where a data message is used in the formation of a contract, that contract shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose.

10.8 Legislation based on the MLEC has been enacted in Australia (2011),32 India (2000), Ireland (2000), New Zealand (2002), Singapore (2010)33 and South Africa (2002). The MLEC influenced the Uniform Electronic Transactions Act (UETA) adopted in the United States by the National Conference of Commissioners on Uniform State Law in 1999, and the Uniform Electronic Commerce Act (UECA) adopted by the Uniform Law Conference of Canada in the same year. The UETA and the UECA were enacted into state and provincial law respectively. The United Kingdom has not adopted the MLEC, but has instead enacted the Electronic Transactions Act 2000.34 Article 1 carries with it the note that the term ‘commercial’: ‘… should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not …’ The Alberta Court of Queens Bench recently considered the commercial scope of the Electronic Transactions Act in Anterra Sunridge Power Centre Ltd v Calgary (City).35 Anterra sought an administrative decision from the City of Calgary in respect of a property assessment. Anterra claimed that it had ‘disclosed’ its evidence to the City and the Calgary Composite Assessment Review Board (CARB), which was to hear the matter, by email as required by the regulation governing the hearing. It relied on the Electronic Transactions Act to provide a statutory presumption that its evidence had been received by the City and CARB on proof that the electronic transmission

was sent. The City and CARB, however, argued that the provision of the Electronic Transactions Act relied on by Anterra applied to formation of contracts, not to disclosure requirements in administrative law. The court agreed: I am of the view s 30 of the ETA does not extend to the obligation to disclose in s 8 of the NRAC. Section 30 must be read in context and, in particular, within the scheme of the Act in which it appears … Section 30 falls under

[page 210] the heading ‘Electronic Transactions and Electronic Agents’ which addresses contracts formed by electronic communications. All of the other sections under this heading refer to formation or operation of contracts. Section 30 of the ETA is based on s 23 found in Part 2 of the Uniform Electronic Commerce Act (UECA), a statute developed by the Uniform Law Conference of Canada. The intent behind s 23 can be drawn from the Uniform Electronic Commerce Act annotated 1999 which provides that Part 2 ‘…does not deal with specific requirements of the law. It applies to common law rules of contracts, and supplements them with a few rules that appear useful to resolve difficulties in using such communication’.36

Although the substance of an appeal against a property assessment is undoubtedly commercial in character, legislation derived from the Model Law will be read according to the ordinary rules of statutory construction. The consequence may be that the intention of the Model Law will not survive its translation into domestic legislation. 10.9 Article 5 is technology neutral. It refers to ‘data messages’ rather than any particular form of electronic communication, such as electronic mail.37 Article 5 bis expressly allows the use of embedded uniform resource locators directing a reader to a reference document by hypertext link.38 Articles 6 and 7 begin with the words ‘where the law requires’. Absent legal compulsion, there is no obligation for a party to accept documents and signatures in electronic form. DWC Pain Free Medical P C v Progressive North Eastern Ins Co39 considered the United States Electronic Signatures in Global and National Commerce Act (ESIGN) and the New York State Electronic

Signatures and Records Act (ESRA). The plaintiff argued that both statutes required the defendant insurance company to accept an electronic signature because both laws gave electronic signatures the same validity and effect as handwritten ones. The District Court of New York held that neither law obliged any person, including an insurer, to accept the use of electronic records and signatures. An insurer is not required to accept electronic records and signatures, and could require that any such records and signatures be submitted in hard copy.40 Wording similar to Article 6, providing electronic satisfaction of a requirement for writing, was considered in Barwick v Government Employee Insurance Co.41 The Supreme Court of Arkansas considered whether the UETA was in conflict with, and did not apply to, specific legislation requiring that a rejection of coverage for medical benefits must be in writing. The court held: [page 211] In our view the meaning of [the UETA] could not be more straightforward when it states that ‘if the law requires a record to be in writing an electronic record satisfies the law’. We perceive no conflict between these two statutory provisions and they can be read harmoniously to mean that an electronic record fulfils the requirement of a written rejection of coverage.42

The wording of Article 7 was closely followed by s 9 of the Electronic Transactions (Victoria) Act 2000 (Vic). In Russells v McCardel,43 the Supreme Court of Victoria recently considered whether an exchange of emails constituted a conditional costs agreement in writing signed by the client as required under the Legal Profession Act 2004 (Vic). The court agreed that if the conditions in s 9(1) of the Electronic Transactions (Victoria) Act were satisfied, the requirement for signing under the Legal Profession Act would also be met. The solicitor argued that the method of signing by the client, by typing his first name at the bottom of the email containing the agreement, identified the client and indicated his approval of the information contained

in the email. The court agreed that in the circumstances the client’s typed first name was ‘as reliable as appropriate’ for the purpose of signing the conditional costs agreement, satisfying s 9(1)(b).44 The court was also prepared to accept that, in the circumstances, there was an irresistible inference that the solicitor would have consented to the clients signing the agreement by means of email if the clients had in fact indicated their intention to use this method, satisfying the additional Victorian condition that the person to whom the signature was given consented to the method.45 However, as a matter of construction, the signed email was not an agreement, but a representation by the client that he would sign the agreement after it had been amended.

Model Law on Electronic Signatures 10.10 On 5 July 2001, the General Assembly adopted the Model Law on Electronic Signatures (MLES) as a framework for national electronic signature legislation. The MLES builds on the principle established by Article 7 of the MLEC.46 Of the jurisdictions considered in this book, only India (2009) has enacted legislation influenced by it. The MLES recognises both digital signatures using cryptography and electronic signatures using other technologies. The MLES systematically enables the signatory, certification and reliance functions of a paper signature to be met by a digital signature. The MLES is designed to deal with technical reliability and legal effectiveness of digital signatures at a [page 212] level of generality less than that of the MLEC, but greater than considering particular electronic signature techniques. 47 The MLES contains two distinct regimes. The first, a broader regime,

following on from Article 7 of the MLEC, recognises that any method that is ‘reliable’ may be used to fulfil a legal requirement for a signature. The second, a narrower regime created by the MLES itself, allows for methods of electronic signing to be recognised as meeting minimum requirements of technical reliability by governments, private accredited entities and private parties. This second regime gives users of electronic signatures a degree of certainty as to the legal effectiveness of the electronic signature technique they propose to rely on.48 10.11

The central provisions of the MLES are:

Article 2. Definitions For the purposes of this Law (a) ‘Electronic signature’ means data in electronic form in, affixed to or logically associated with, a data message, which may be used to identify the signatory in relation to the data message and to indicate the signatory’s approval of the information contained in the data message. … Article 6. Compliance with a requirement for a signature 1.

Where the law requires a signature of a person, that requirement is met in relation to a data message if an electronic signature is used that is as reliable as was appropriate for the purpose for which the data message was generated or communicated, in the light of all the circumstances, including any relevant agreement.

… 3.

An electronic signature is considered to be reliable for the purposes of satisfying the requirement referred to in paragraph 1 if: (a) The signature creation data are, within the context in which they are used, linked to the signatory and to no other person (b) The signature creation data were, at the time of signing, under the control of the signatory and of no other person (c) Any alteration to the electronic signature, made after the time of the signing is detectable

… Article 8 1.

Where signature creation data can be used to create a signature that has legal effect, each signatory shall: (a) exercise reasonable care to avoid unauthorized use of its signature creation data.

[page 213] These provisions make it clear that the purpose of the MLES is to deal with the fraudulent creation and use of digital and other electronic signatures: In an electronic environment, the original of a message is indistinguishable from a copy, bears no handwritten signature, and is not on paper. The potential for fraud is considerable, due to the ease of intercepting and altering information in electronic form without detection, and the speed of processing multiple transactions. The purpose of various techniques currently available on the market or still under development is to offer the technical means by which some or all of the functions identified as characteristic of handwritten signatures can be performed in an electronic environment. Such techniques may be referred to broadly as ‘electronic signatures’.49

10.12 Get Up Ltd v Electoral Commissioner50 considered the reliability of a signature under s 10(1)(b) of the Australian Electronic Transactions Act 1999 (Cth). An Australian citizen sought to register to vote by website. The site allowed her to make an electronic signature using a digital pen, her finger or a mouse. She used the digital pen to create her signature. The Electoral Commissioner denied the electronic signature was sufficient to complete the process of registration because the Commissioner had formed the view that the method used was not reliable. The court held that subs 10(1)(b) did not require the Commissioner to form an opinion about the reliability of the signature. The subsection set a standard for reliability to be determined by a court. It followed that for applications submitted via a website and signed using a digital pen, the only requirements were that it be in approved form, signed, and that evidence of identity was provided.

Convention on the Use of Electronic Communications in International Contracts 10.13 On 23 November 2005, the General Assembly adopted the Convention on the Use of Electronic Communications in International Contracts (CUECIC). The CUECIC extends to persons and companies in the

course of business and provides for electronic contracts between entities whose places of business are in different jurisdictions, excluding contracts for personal, family or household purposes. Parties may contract out of application of the CUECIC. The objective of the CUECIC is equating the legal consequences of electronic contracting with the previous international conventions requiring physical documents.51 Of the [page 214] common law jurisdictions considered in this book, only Singapore (2013) has given force to the CUECIC.52 It is questionable whether the latest Convention meets a real need. Wang,53 citing quantitative research, argues that the CUECIC is about trust in electronic contracting. Consumers perceive the risks of transacting online as being high. They are particularly concerned about the validity of e-contracts, misuse of credit cards, and the difficulties of dispute resolution. Businesses also hesitate to engage in e-market activities because they feel unsafe about: whether new businesses introduced online at a distance are trustworthy; the potential problems of transacting; the extent to which the IT platform is secure; and lack of effective remedies should the business relationship go awry.54 However, Mik55 doubts the need for the CUECIC: Doubts about the legal viability of electronic transactions might have existed in 1995, when the National Science Foundation removed the prohibition to use the internet for commercial traffic and network transactions became a mainstream phenomenon. It is questionable whether any doubts exist in 2008, when the volume of online retail transactions is counted in hundreds of billions … It is therefore questionable whether — from a contract law perspective — there is need for any further clarifications.56

Some, if not many, of the ‘problems’ addressed by the CUECIC are, in practice, non-existent because contract law has always taken a flexible approach to the formation of a simple contract. Because there is no requirement for a contract to be in writing, anything beyond a simple

prohibition of discrimination against electronic form is stating the obvious, and is redundant.57 10.14

The key provisions of the CUECIC are:

Article 8. Legal recognition of electronic communications 1.

A communication or a contract shall not be denied validity or enforceability on the sole ground that it is in the form of an electronic communication

[page 215] 2.

Nothing in this convention requires a party to use or accept electronic communications, but a party’s agreement to do so may be inferred from conduct.

Article 9. Form requirements 1.

Nothing in this convention requires a communication or a contract to be made or evidenced in any particular form

2.

Where the law requires that a communication or contract should be in writing, or provides consequences for the absence of writing, that requirement is met by an electronic communication if the information contained therein is accessible so as to be usable for a subsequent reference

3.

Where the law requires that a communication or contract should be signed by a party, or provides consequences for the absence of a signature, that requirement is met in relation to an electronic communication if (a) a method is used to identify the party and to indicate the party’s intention in respect of the information contained in the electronic communication and (b) the method used is either: (i)

as reliable as appropriate for the purposes for which the electronic communication was generated or communicated in the light of all the circumstances, including any relevant agreement; or

(ii) proven in fact to have fulfilled the functions described in subparagraph (a) above, by itself or together with further evidence. Article 10 Time and place of dispatch and receipt of electronic communications 1.

The time of dispatch of an electronic communication is the time when it leaves an information system under the control of the originator …

2.

The time of receipt of an electronic communication is the time when it becomes capable of being retrieved by the addressee at an electronic address designated by the addressee …

3.

An electronic communication is deemed to be dispatched at the place where the originator

has its place of business and is deemed to be received at the place where the addressee has its place of business … Article 11 Invitations to make offers A proposal to conclude a contract through one or more electronic communications which is not addressed to one or more specific parties, but is generally accessible to parties making use of information systems, including proposals that make use of interactive applications for the placement of orders through such information systems, is to be considered as an invitation to make offers, unless it clearly indicates the intention of the party making the proposal to be bound in case of acceptance. Article 12 Use of automated message systems for contract formation A contract formed by the interaction of an automated message system and a natural person, or by the interaction of automated message systems, shall not be denied validity or enforceability on the sole ground that no natural

[page 216] person reviewed or intervened in each of the individual actions carried out by the automated message systems or the resulting contract. … Article 14 Error in electronic communications 1.

Where a natural person makes an input error in an electronic communication exchanged with the automated message system of another party and the automated message system does not provide the person with an opportunity to correct the error, that person … has the right to withdraw the portion of the electronic communication in which the input error was made if: (a) The person … notifies the other party of the error as soon as possible after having learned of the error and indicates that he or she made an error in the electronic communication; and (b) The person … has not used or received any material benefit or value from the goods or services, if any, received from the other party.

10.15 Articles 8 and 9 have obvious application to contracts for an interest in land. However, Singapore expressly prevented the CUECIC from applying to contracts for the sale and disposition of immovable property. Article 9, emphasising the reliability of the method used or, in the alternative, whether the method actually fulfilled the function, extends the approach to electronic signature taken in the MLEC. It allows for any form of electronic signature to

be used in keeping with judicial decisions in both common law and civil jurisdictions.58 Article 10 solves what otherwise may be complex problems of jurisdiction. It does not determine whether the receipt or postal acceptance rule applies to the making of a contract. Once the antecedent question has been decided, however, the Article assists the determination of the time and place of contract. Article 11 establishes a presumption that websites, including interactive websites, are invitations to treat. There are three principal objections to this innovation. First, although there may be a marginal benefit accruing to consumers of an acceptance occurring on receipt of a communication in the consumers’ jurisdiction, website agreements have detailed choice of law, forum selection and arbitration clauses making any such benefit illusory. Second, the argument that offers to an unlimited number of persons should not be binding on the offeror because demand may outstrip supply does not make sense where the offered supply is for infinitely replicable digital services and property. Third, interactive websites display a clear intention to be bound because ‘the intention to be bound derives from the immediate ability to execute the transaction’.59 10.16 Article 12 is probably also redundant. There is no need to validate the formation of contracts via interactive websites any more than contracts [page 217] concluded with insurance vending machines in American airports in the mid1950s and early 1960s.60 Such contracts are formed on the basis of accepted principle: Websites do not self-initiate. There is a human person who sets up, controls and operates a website. Technological complexity aside, automation does not change the fact that it is the human

user who creates and controls the website. The latter is nothing but a booking clerk in disguise. It is pre-programmed and executes a set of instructions given by a human person.61

Article 14 encourages operators of interactive websites to include confirmation screens.62 If an automated program provides such an opportunity to correct errors, the right of withdrawal does not exist and errors are governed by the usual principles of contract.63

Conclusion 10.17 The central idea of the model laws is that an electronic communication should not be invalid solely because it took place wholly or partly by means of an electronic communication. Whether there is any need for legislation beyond this straightforward proposition is doubtful. Benson64 argues that the internet cannot be effectively governed by geographically defined legal systems and that the most effective regulation will be selfregulation similar to the emergence of the lex mercatoria of medieval Europe.65 The vast majority of internet transactions are not one-off trades, but repeated dealings. Repeated dealings are valuable, and parties live under the ‘implicit threat’ of their reputations being tarnished if they do not perform their contractual obligations.66 Even if national governments could agree on a common set of rules, and cede sufficient [page 218] sovereignty to enact them, there is insufficient will and too few resources to enforce them. It follows the only effective rules will be customary, and the only effective enforcement voluntary.67 Although Benson assumes a perfectly competitive online market with perfect information to make his point, there is force in what he says. Contract law has the ability to adapt to the new technologies without the need for

‘special rules, presumptions or parallel regimes’.68 Today’s model laws are catching up with yesterday’s popular use of technology. The talent of the common law is its ability to adapt familiar principles to novel circumstances. The virtual universe is nothing if not novel.

1.

‘HyperText is a way to link and access information of various kinds as a web of nodes in which the user can browse at will. It provides a single user-interface to large classes of information …’: T Berners-Lee and R Caillau, WorldWideWeb: Proposal for a HyperText Project, 12 November 1990, http://www.w3.org/Proposal.html, accessed 27 April 2015.

2.

See L E Gillies, Electronic Commerce & International Private Law: A Study of Electronic Consumer Contracts, Ashgate, Hampshire, 2008 at 23, 24.

3.

A Davidson, The Law of Electronic Commerce, Cambridge University Press, Melbourne, 2009, at 26.

4.

T McNamara, ‘United Nations Convention on Contracts for the International Sale of Goods’, National Association of Purchasing Management Denver Affiliate, 16 November 2000, http://ww‐ w.dgslaw.com/images/materials/334336.PDF, accessed 5 February 2015.

5.

See Article 1.

6.

Explanatory Note by the UNCITRAL Secretariat on the, United Nations Convention on Contracts for the International Sale of Goods, (2010) at [7].

7.

See Article 2.

8.

See Article 6.

9.

J Hill, ‘The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods’ (2003) 2(1) Northwestern Journal of Technology and Intellectual Property at 3.

10.

J Hill, ‘The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods’ (2003) 2(1) Northwestern Journal of Technology and Intellectual Property at 3.

11.

Article 11 provides: ‘A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form …’.

12.

J Hill, ‘The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods’ Property (2003) 2(1) Northwestern Journal of Technology and Intellectual at 15.

13.

J Hill, ‘The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods’ Property (2003) 2(1) Northwestern Journal of Technology and Intellectual at 3.

14.

J Hill, ‘The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods’ Property (2003) 2(1) Northwestern Journal of Technology and Intellectual at 23.

15.

J Hill, ‘The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods’ Property (2003) 2(1) Northwestern Journal of Technology and Intellectual at 15, 16, 21, 22.

16.

Article 20 provides: ‘… A period of time for acceptance fixed by the offeror by telephone, telex or other means of instantaneous communication, begins to run from the moment the offer reaches the offeree’.

17.

J Hill, ‘The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods’ (2003) 2(1) Northwestern Journal of Technology and Intellectual Property at 15, 24.

18.

J Hill, ‘The Future of Electronic Contracts in International Sales: Gaps and Natural Remedies under the United Nations Convention on Contracts for the International Sale of Goods’ (2003) 2(1) Northwestern Journal of Technology and Intellectual Property at 27, 28, 29, 34.

19.

Explanatory Note by the UNCITRAL Secretariat on the United Nations Convention on Contracts for the International Sale of Goods, (2010), at 41,42.

20.

Olivaylle Pty Ltd v Flottweg Gmbh and Co KGAA (No 4) (2009) 255 ALR 632.

21.

Olivaylle Pty Ltd v Flottweg Gmbh and Co KGAA (No 4) (2009) 255 ALR 632 at [28]–[29].

22.

Olivaylle Pty Ltd v Flottweg Gmbh and Co KGAA (No 4) (2009) 255 ALR 632 at [30].

23.

E McDonald, ‘Incorporation of Standard terms in Website Contracting — Clicking I Agree’ (2011) 27(3) Journal of Contract Law at 200.

24.

A Davidson, The Law of Electronic Commerce, Cambridge University Press, Melbourne, 2009, at 26.

25.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84.

26.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84 at [64].

27.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84 at [70].

28.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84 at [71].

29.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84 at [79], [80].

30.

Jafta v Ezemvelo KZN Wildlife [2008] ZALC 84 at [91].

31.

As adopted by the Commission at its 31st session, in June 1998.

32.

Amending previous legislation based on the MLEC by including substantive provisions of the Convention on the Use of Electronic Communications in International Contracts. The amended legislation has also been enacted in each Australian state and territory.

33.

Amending previous legislation based on the MLEC by including substantive provisions of the Convention on the Use of Electronic Communications in International Contracts.

34.

See also Bassano v Toft [2014] Business LR D9, at [40]–[44].

35.

Anterra Sunreach Power Centre Ltd v Calgary (City) [2014] ABQB 223.

36.

Anterra Sunreach Power Centre Ltd v Calgary (City) [2014] ABQB 223 at [34]–[36].

37.

A Davidson, The Law of Electronic Commerce, Cambridge University Press, Melbourne, 2009 at 26.

38.

S Mason, Electronic Signatures and Law, 3rd ed, Cambridge University Press, 2012 at 89.

39.

DWC Pain Free Medical P C v Progressive North Eastern Ins Co (2006) 831 NYS 2d 849.

40.

DWC Pain Free Medical P C v Progressive North Eastern Ins Co (2006) 831 NYS 2d 849 at 852.

41.

Barwick v Government Employee Insurance Co 2011 Ark LEXIS 111.

42.

Barwick v Government Employee Insurance Co 2011 Ark LEXIS 111 at [9].

43.

Russells v McCardel [2014] VSC 287.

44.

Russells v McCardel [2014] VSC 287 at [58].

45.

For a decision turning on s 9(1)(c) of the Electronic Transactions (Victoria) Act 2000 (Vic), see Legal Services Board v Forster (2010) 29 VR 277.

46.

Article 7 is reproduced above at 10.7.

47.

S Mason, Electronic Signatures in Law, 3rd ed, Cambridge University Press, 2012 at 92.

48.

Part Two: Guide to Enactment of the UNCITRAL Model Law on Electronic Signatures 2001, at 36.

49.

Part Two: Guide to Enactment of the UNCITRAL Model Law on Electronic Signatures 2001, at 20.

50.

Get Up Ltd v Electoral Commissioner (2010) 189 FCR 165.

51.

R Rosas, ‘Comparative Study of the Formation of Electronic Contracts in American Law with References to International Law’, (2006) 46(5) Indian Society of International Law at 332.

52.

Australia has incorporated amendments to its Electronic Transactions Acts based on provisions of the Convention. See Pt 2A of the Electronic Transactions Act 1999 (Cth).

53.

F F Wang, ‘E-Confidence: Offer and Acceptance in Online Contracting’ (2008) 22(3) International Review of Law Computers and Technology at 271.

54.

F F Wang, ‘E-Confidence: Offer and Acceptance in Online Contracting’ (2008) 22(3) International Review of Law Computers and Technology at 272.

55.

E K 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(2) Journal of Contract Law 1 at 19.

56.

E K 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(2) Journal of Contract Law 1 at 3.

57.

E K 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(2) Journal of Contract Law 1 at 4.

58.

S Mason, Electronic Signatures in Law, Cambridge University Press, Cambridge, 2012 at 102.

59.

E K Mik, ‘Updating the Electronic Transactions Act? Australia’s Accession to the UN Convention on the Use of Electronic Communications in International Contract 2005’ (2010) 26(2) Journal of Contract Law 1 at 11.

60.

Lachs v Fidelity & Casualty Company of New York (1954) 306 NY 357; Steven v Fidelity and Casualty Company of New York (1962) 58 Cal 2d 862.

61.

E K 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(2) Journal of Contract Law 1 at 6. 62.

E K 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(2) Journal of Contract Law 1 at 7.

63.

E K 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(2) Journal of Contract Law at 8.

64.

B L Benson, ‘The Spontaneous Evolution of Cyberlaw: Norms, Property Rights, Contracting Dispute Resolution and Enforcement Without the State’ (2005) 1(2) The Journal of Law, Economics & Policy at 269.

65.

B L Benson, ‘The Spontaneous Evolution of Cyberlaw: Norms, Property Rights, Contracting Dispute Resolution and Enforcement Without the State’ (2005) 1(2) The Journal of Law, Economics & Policy at 270.

66.

B L Benson, ‘The Spontaneous Evolution of Cyberlaw: Norms, Property Rights, Contracting Dispute Resolution and Enforcement Without the State’ (2005) 1(2) The Journal of Law, Economics & Policy at 282.

67.

B L Benson, ‘The Spontaneous Evolution of Cyberlaw: Norms, Property Rights, Contracting Dispute Resolution and Enforcement Without the State’ (2005) 1(2) The Journal of Law, Economics & Policy at 291.

68.

E K 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(2) Journal of Contract Law 1 at 19.

Index References are to paragraph numbers

A Acceptance of offers artificiality of device …. 3.1 Australia, in communication to offeror …. 3.14 emails …. 3.14 counter-offers …. 3.18 electronic …. 1.9 Australia …. 3.10 Canada …. 3.10 emails, by …. 3.1, 3.3, 3.12 enforcement …. 3.3 intent …. 3.3 fax transmissions see Fax transmissions intention to be bound …. 3.3 interactive website …. 3.1, 3.8, 3.9, 3.21, 10.16 jurisdiction …. 3.8 unilateral acceptance …. 3.1, 3.9 international conventions and model laws …. 1.13 mere silence, and …. 3.16 postal acceptance rules see Postal acceptance rules reasonable time for acceptance …. 3.17 receipt rules see Receipt rules

SMS text …. 3.12, 3.15 standard form terms …. 3.4, 3.5 telex see Telex unequivocal acceptance …. 3.3, 3.12, 3.15 webpages, on …. 3.1 withdrawal of offer …. 3.11 acceptance, before …. 3.11 communication to offeree …. 3.11 effective …. 3.11 email, by …. 3.11 Adhesion, contracts of class action waivers …. 8.6 forum selection clauses and …. 8.12–8.13 unconscionability …. 8.6, 8.7, 8.10 fundamental fairness, scrutiny …. 8.13 Advanced Research Projects Agency Network (ARPANET) military communications …. 10.1 Advertisements breach of contract …. 6.13 bundled spyware …. 6.7 mere puffs …. 9.3 misleading and deceptive conduct …. 9.5 online auction with reserve …. 5.4 ‘pop-ups’ …. 6.7, 8.12 targeted by spyware …. 6.7 Agency electronic auctions and …. 5.1–5.2 electronic signatures …. 7.5

‘I agree’ button …. 7.5 incorporation of terms …. 7.5 actual or ostensible authority …. 7.5 authority to sign …. 7.5 email address, use …. 7.6 Amendments to terms arbitration clauses …. 3.10, 3.20 Arbitration clauses amendments to terms …. 3.10, 3.20 clickwrap agreements …. 3.20 computer sales contracts …. 2.1 eBay …. 5.3 electronic agreements …. 3.10 hyperlinks to …. 6.13 incorporation of terms …. 7.2 hyperlinked terms and conditions …. 7.15 incorporated by reference …. 7.20 ‘layered contracting’ and …. 6.6 stay of proceedings …. 3.20 unconscionability …. 8.6, 8.8, 8.15 contrary to public policy …. 8.17, 8.18 costs of arbitration …. 8.16 inequality of bargaining power …. 8.18 mandatory …. 8.15 mobile phone service …. 8.15 shrinkwrap agreement …. 8.15, 8.17 small sums …. 8.17

waivers of class actions …. 8.18 Auctions see Electronic auctions Australia acceptance by fax …. 4.5, 4.10, 4.16 acceptance by telex …. 4.4, 4.16 choice of law …. 4.16 conflict of law rule …. 4.16 electronic contracts …. 4.17 electronic offer and acceptance …. 3.10 electronic signatures, validity …. 2.19, 2.21 click signature …. 7.4 electronic transactions legislation …. 10.8 incorporation of terms by reference …. 7.20 jurisdiction of court …. 4.17 misleading and deceptive conduct …. 9.6 misrepresentations law …. 9.3 offer of standard form terms …. 3.5 postal acceptance rules …. 4.6 receipt rule …. 4.2 requirement of writing …. 2.1, 2.28 sale of goods legislation …. 6.5 substantive unconscionability …. 8.19 terms displayed on websites …. 3.10 terms implied for business efficacy …. 7.23 Vienna Convention …. 6.5 Automatic vending machines see Machines, offers via

B

Browsewrap contracts acceptance of terms …. 6.1 arbitration agreement …. 6.19 characteristics …. 6.18 clickwrap contract, distinction …. 6.12, 6.17 domain name registration …. 6.18 enforceability …. 1.10, 6.1 Facebook …. 6.19 notice of terms and conditions actual or constructive …. 6.17, 6.18, 6.20 hyperlink …. 6.17, 6.19, 6.20 licence agreement …. 6.17 reasonably conspicuous notice test …. 6.21 sufficiency …. 6.1 overview …. 6.22 ticket purchases …. 6.17 unenforceable …. 6.12, 6.17 Uniform Commercial Code (US) …. 1.10, 6.1, 6.2, 6.21 additional terms in acceptance or confirmation …. 6.4 formation of contract …. 6.2 offer and acceptance …. 6.3 Business efficacy terms implied …. 7.22, 7.23 shareware licence …. 7.23

C Canada electronic acceptance of offers …. 3.10

interactive websites …. 3.10 jurisdiction of court …. 4.18 service of process outside jurisdiction …. 4.18 standard form agreements …. 3.10 Statute of Frauds sale of land …. 2.9 CD-ROMs clickwrap contracts …. 6.1, 6.10 end user licence agreement (EULA) …. 6.10, 6.12 ‘I agree’ virtual box …. 6.10, 6.16 UCC, under …. 6.10 fitness for purpose …. 7.25 implied terms …. 7.5, 7.25 shrinkwrap contracts …. 6.5 Cellular phone contracts arbitration clause …. 8.15 unconscionability …. 8.15 Choice of law clauses …. 4.26 Class actions waiver clauses …. 8.6 Clickwrap contracts acceptance of terms …. 6.1 arbitration clauses …. 3.20, 6.12, 6.13 browsewrap contract, distinction …. 6.12, 6.17 CD-ROMs, for …. 6.1, 6.10 end user licence agreement (EULA) …. 6.10, 6.12 ‘I agree’ virtual box …. 6.10, 6.16 definition …. 6.1

electronic contracts …. 1.10 enforceable …. 6.12 express terms in …. 6.13 forum selection clause …. 6.11, 6.15 modified clickwrap contracts …. 6.15 Facebook …. 6.15 hyperlinked terms …. 6.15 incorporation of terms …. 6.15 notice of terms …. 6.15 online games …. 6.15 online clickwrap contracts …. 6.11 domain names, registration …. 6.11, 6.13 forum selection clause …. 6.11, 6.13, 6.15 ‘I agree’ buttons …. 6.11, 6.13, 6.14, 7.8 reasonably conspicuous notice test …. 6.21, 7.8 subscriber agreements …. 6.11 terms of service …. 6.13–6.15 unambiguous manifestation of assent …. 7.8 overview …. 6.22 unconscionability see Unconscionability Uniform Commercial Code (US) …. 1.10, 6.1, 6.2, 6.10, 6.16, 6.22 additional terms in acceptance or confirmation …. 6.4 formation of contract …. 6.2 offer and acceptance …. 6.3 United Kingdom approach …. 6.16 validity of …. 6.13 vitiation of terms …. 6.1

Convention on the Use of Electronic Communications in International Contracts (CUECIC) automated message systems for contract formation …. 10.14 electronic contracts, and …. 10.13 error in electronic communications …. 10.14 form requirements …. 10.14 interactive websites …. 10.16 invitations to make offers …. 10.4 land, interests …. 10.15 legal recognition of electronic communications …. 10.14 purpose …. 10.13 time and place of dispatch …. 10.14 ‘cookies’ …. 6.12 Counter-offers identifying …. 3.18 shrinkwrap contracts …. 6.1, 6.5

D Deceptive conduct see Misleading and deceptive conduct Denning, Lord telex acceptances …. 4.4 ticket cases …. 3.7, 3.9, 7.7 vending machines …. 3.7, 3.9 Digital signatures see Electronic signatures Domain names browsewrap contracts …. 6.18 incorporation of terms by reference …. 7.20 misleading and deceptive …. 9.6

online clickwrap contracts …. 6.11 domain names, registration …. 6.11, 6.13 registration fees …. 8.7 sales of …. 6.18 similar …. 9.7 sponsored links, and …. 9.6 Downloads of software browsewrap contracts …. 6.17 clickwrap contract …. 6.1 express terms …. 6.13 fitness for purpose …. 1.11 free …. 6.12 licence terms …. 6.12 minimum contacts test …. 4.22 notice of terms …. 6.18 shrinkwrap contracts …. 6.7 standard terms on website …. 3.10, 6.7 Duress online users change of terms on website …. 8.3 Facebook and Google user policies …. 8.3 situational duress …. 8.3 third party …. 8.3 unlawful and wrongful act …. 8.3

E E-auctions see Electronic auctions eBay

arbitration clause …. 5.3 auction style listing …. 5.2 fixed price listing …. 5.2 highest bid above reserve …. 5.4–5.5 online auctions and agency …. 5.2–5.5 person-to-person operation …. 5.2 Electronic acceptances see also Acceptance of offers common law …. 3.12 communication to offeror …. 3.14 counter-offers …. 3.18 email …. 3.12, 3.21 incorporation of terms see Incorporation of terms instantaneous means …. 4.2 international conventions and model laws …. 1.13 mere silence …. 3.16 recall of acceptance …. 4.8 email …. 4.8–4.9 receipt rule …. 4.9 receipt rule …. 4.2 SMS text …. 3.12, 3.15, 3.21 time and place of receipt …. 4.10, 10.14 time for acceptance …. 3.17 unequivocal acceptance …. 3.12, 3.15 Electronic agreements see Electronic contracts Electronic auctions agency, and …. 5.1–5.2 auctioneers …. 5.1, 5.7 binding contracts …. 1.1

business-to-person …. 5.2 eBay see eBay person-to-person …. 5.2 without reserve …. 5.6 Electronic contracts acceptance see also Electronic acceptance email, by …. 3.1 installation, via automated message systems …. 10.14 browsewrap contracts see Browsewrap contracts choice of law …. 4.16 Australia …. 4.16 clickwrap contracts see Clickwrap contracts common law, at …. 1.1 conflict of law rule …. 4.16 duress see Duress emails, by see Emails express terms see Express terms formalities …. 1.8, 10.14 ‘I agree’ button …. 3.4, 3.13, 3.21 illusory contracts …. 3.20 implied terms see Implied terms incorporation of terms see Incorporation of terms interactive websites …. 10.14 electronic offers …. 3.1, 3.8–3.9 Hyper Text Transfer Protocol (HTTP) …. 4.7

international conventions and model laws see International conventions and model laws misleading and deceptive conduct see Misleading and deceptive conduct misrepresentation see Misrepresentation mistake see Mistake Model Law on Electronic Commerce (MLEC) see Model Law on Electronic Commerce (MLEC) non-web based …. 1.4 overview …. 1.2–1.6 pop-ups containing terms …. 1.4 promissory estoppel …. 3.19 setting aside …. 1.12 shrinkwrap contracts see Shrinkwrap contracts signatures see Electronic signatures standard forms of agreement …. 1.9, 3.4–3.5 see also Standard forms of agreement vitiating factors …. 1.12 statutory requirements for writing see Statutory requirements for writing unconscionability see Unconscionability unenforceable …. 3.20 vitiating factors …. 1.12 webpage, on …. 3.4 4.7 hyperlinks …. 3.4, 6.17 notice of terms …. 7.8 Electronic offers see also Acceptance of offers interactive website …. 1.9, 3.1, 3.8–3.9 machines see Machines, via

standard form terms …. 3.4–3.5 unilateral acceptance …. 3.1 withdrawal of offer …. 3.11 acceptance, before …. 3.11 communication to offeree …. 3.11 effective …. 3.11 email, by …. 3.11 Electronic signatures advantages …. 2.17 agency …. 7.5 family members …. 7.5 secretary …. 7.5 authority to sign …. 7.5 digital …. 1.13 emails, in …. 2.22 see also Emails senders name on email …. 2.22 UCC …. 2.21 validity …. 2.15, 2.19 form of signatures …. 2.16 fraud …. 7.3 hackers, and …. 2.19 ‘I accept’ button …. 2.16, 7.2, 7.3, 7.4 incorporation of terms …. 7.2–7.5, 7.26 indicia of electronic intent …. 2.23, 2.28, 2.29, 7.4 click signature …. 7.4 initials and first names of parties’ lawyers …. 2.24 insufficient writing …. 2.30

intention to approve and adopt contents …. 2.18, 2.29 question of fact …. 2.27 written word, approximation …. 2.28 Model Law on Electronic Signatures (MLES) see Model Law on Electronic Signatures (MLES) New Zealand, in …. 2.27 option to skip terms of agreement …. 7.3 Personal Identification Number (PIN) …. 2.16 public key cryptography …. 2.17 Singapore …. 2.26 land, dispositions …. 2.26 SMS text …. 2.28 Statute of Frauds …. 2.22 telephone, by …. 8.6 terms of offer in …. 1.11 types …. 2.16 United States …. 2.26 validity …. 2.19 vitiated by fraud …. 7.3 Electronic transactions legislation France …. 4.15 jurisdiction …. 4.15 New Zealand …. 2.27 Singapore …. 2.26 land, dispositions …. 2.26 Statute of Frauds, and …. 1.8, 2.26–2.30 time of dispatch …. 4.13 time of receipt …. 4.13

United Kingdom …. 10.8 United States …. 2.26, 4.15 Electronic writing Statute of Frauds, under …. 2.1–2.4 Emails acceptance of offers see also Electronic acceptance communication to offeror …. 3.14 recall of acceptance …. 4.8–4.9 agreements via …. 3.3 enforcement …. 3.3 intent …. 3.3 electronic contracts, acceptance …. 3.1 lease of land …. 2.10 offers via …. 3.3 option to purchase land …. 2.11 place of receipt …. 4.12, 4.14 electronic transactions legislation …. 4.13 postal acceptance rule, and …. 4.6–4.7, 4.14 promissory estoppel …. 3.19 revocation of offer acceptance, before …. 3.11 communication to offeree …. 3.11 effective …. 3.11 sale of goods contract …. 2.13–2.15 concluded contract, evidence …. 2.14 sale of land via …. 2.8

signatures …. 2.22 see also Electronic signatures senders name on email …. 2.20 UCC …. 2.21 validity …. 2.15, 2.19 Simple Mail Transfer Protocol (SMPT) …. 4.7 Statute of Frauds, under …. 2.2, 2.8 indicia of electronic intent …. 2.23–2.25 insufficient writing …. 2.30 lease of land …. 2.10 option to purchase land …. 2.11 sale of land …. 2.8 senders name on email …. 2.20 settlement agreements relating to land …. 2.12 signatures …. 2.22 termination of contract for supply of goods …. 2.21 typing of name …. 2.22 time of receipt …. 4.11 electronic transactions legislation …. 4.13, 4.14 withdrawal of offers …. 3.11 End user licence agreements (EULA) …. 6.10 see also Standard forms of agreement Enforceability clickwrap contracts see Clickwrap contracts hyperlinked terms, of …. 1.10, 3.4, 6.17 unconscionable contracts see Unconscionability EULAs see End user licence agreements Evaluation disks

shrinkwrap contracts …. 6.5 Express terms electronic contracts …. 7.21 overview …. 7.1

F Facebook browsewrap contract …. 6.19 modified clickwrap contract …. 6.15 ‘sign up’ button …. 6.15 terms of service …. 6.15 user policies …. 8.3 Fax transmissions acceptance of offers via …. 4.5 receipt rule …. 4.5 agreements made by …. 1.1 choice of law …. 4.16 signatures …. 2.19 time and place of receipt …. 4.10 under Statute of Frauds …. 2.5, 2.6 Fitness for purpose implied terms …. 7.24 software …. 1.11 Forum non conveniens factors acceptance by fax …. 4.5 Canada …. 4.18 jurisdiction …. 4.17 Forum selection clauses

attempts to avoid …. 7.14 clickwrap contracts, …. 6.11, 6.15 online …. 6.11, 6.13, 6.15 hyperlinks to …. 6.13 incorporation of term …. 7.14 buried and submerged …. 7.14 clear and unambiguous …. 7.14 click agreement …. 7.14 clickwrap and browsewrap contracts …. 7.14 notice in hyperlinks …. 7.14 online user agreement …. 7.14 statutory requirement of writing …. 2.2 unconscionability …. 8.7, 8.10 adjudication of dispute …. 8.10 class action procedure …. 8.12, 8.13 fraud …. 8.10, 8.11 Google Inc …. 8.7 internet service agreement …. 8.11, 8.12 non-negotiated contracts …. 8.12 overweening bargaining power …. 8.10 small sums …. 8.14 unreasonable …. 8.10 webpage contracts …. 8.10, 8.12 United Kingdom …. 2.2 Fraudulent misrepresentation assent by deceit …. 9.4 damages for deceit …. 9.4 dating service, online …. 9.4

electronic signature …. 9.4 email as evidence of authority to sign …. 9.4 false email addresses and spam …. 9.4

G Google forum selection clause …. 8.7 misleading and deceptive conduct …. 9.8 user policies …. 8.3

H Hidden terms forum selection clauses …. 7.14 misleading and deceptive conduct …. 9.6 Hyper Text Transfer Protocol (HTTP) …. 4.7 Hyperlinks arbitration clauses, to …. 6.13, 7.15 conspicuous notice by hyperlink …. 7.11–7.12 forum selection clauses, to …. 6.13 incorporation of terms …. 1.11, 7.14 limitation of liability …. 7.16 standard form agreements …. 1.10, 3.4 terms of agreement …. 1.10, 3.4, 6.17 terms of offer to …. 3.4, 6.17

I ‘I Agree’ buttons agency, and …. 7.5 CD-ROMs …. 6.10, 6.16

clickwrap contracts, in …. 6.10, 6.11 online …. 6.11, 6.13, 6.14, 7.8 electronic contracts …. 3.4, 3.13, 3.21 electronic signatures …. 7.5 licence agreements, in …. 6.10, 6.16 ‘OK’ buttons and …. 3.21 status of …. 2.16 terms of service …. 3.13 Illusory contracts …. 3.20 Implied terms business efficacy …. 7.22, 7.23 shareware licence …. 7.23 fact, implied …. 7.22 fit for purpose …. 7.24 CD-ROM …. 7.25 computer hardware …. 7.25 software …. 7.24 UCC …. 7.24 law, implied …. 7.22, 7.24 merchantable quality …. 7.25 Incorporation of terms agency, by …. 7.5 actual or ostensible authority …. 7.5 authority to sign …. 7.5 email address, use …. 7.6 arbitration clause …. 7.2 hyperlinked terms and conditions …. 7.15 incorporated by reference …. 7.20

click signature …. 7.4 constructive notice …. 7.15 clickwrap contracts reasonably conspicuous notice …. 7.8 unambiguous manifestation of assent …. 7.8 course of dealings …. 7.18 repeated automated use of website …. 7.19 software licence agreement …. 7.18 electronic signature …. 7.1–7.4 intention …. 7.4 express terms …. 7.21 forum selection clause …. 7.2, 7.3 buried and submerged …. 7.14 clear and unambiguous …. 7.14 click agreement …. 7.14 clickwrap and browsewrap contracts …. 7.14 notice in hyperlinks …. 7.14 online user agreement …. 7.14 referenced in terms of service agreement …. 7.20 implied terms see Implied terms indemnification clause …. 7.16 limitation of liability …. 7.16 electronic contract …. 7.17 hyperlinked …. 7.16 notice …. 7.16 signature …. 7.17 notice of terms …. 7.7

conspicuous notice by hyperlink …. 7.11–7.12 conspicuous notice by scrollbox …. 7.9–7.10 constructive …. 7.8 onerous terms …. 7.13 reasonable communication to offeree …. 7.13 online offers …. 7.8 option to skip terms of agreement …. 7.3 reference, by arbitration clause …. 7.2 domain name registration …. 7.20 forum selection clause …. 7.20 online terms …. 7.20 terms of service agreement …. 7.20 unsigned paper addendum …. 7.20 signature and notice …. 7.26 time is of the essence …. 7.27 unambiguous manifestation of assent …. 7.8 United States …. 7.1 webpage contracts …. 7.2 Instantaneous communications receipt …. 4.2 Insurance machine, provided via …. 3.6 material misrepresentations …. 9.3 Intellectual property rights breach …. 7.16 goods, as …. 7.24 online auction and agency …. 5.2–5.3

situational duress …. 8.3 Intention acceptance of offers …. 3.3 emails …. 3.3 electronic signatures see Electronic signatures indicia of electronic intent …. 2.23, 2.28, 2.29, 7.4 click signature …. 7.4 initials and first names of parties’ lawyers …. 2.24 insufficient writing …. 2.30 intention to approve and adopt contents …. 2.18, 2.29 question of fact …. 2.27 written word, approximation …. 2.28 Interactive website acceptance of offers …. 3.1, 3.8, 3.9, 3.21 jurisdiction …. 3.8 offers via …. 1.9 standard forms on …. 1.9, 3.5 unilateral acceptance …. 3.1, 3.9 International conventions and model laws overview …. 10.1, 10.17 principal instruments …. 10.2–10.17 Internet Advanced Research Projects Agency Network (ARPANET) …. 10.1 contracting over …. 1.1 shrinkwrap contract 6.7 historical background …. 10.1 standard forms of agreement …. 3.4

Internet service providers (ISP) Communications Decency Act (US) …. 9.9 misleading and deceptive conduct eBay advertised forged items …. 9.9 Google Inc …. 9.8 sponsoring links …. 9.8 Yahoo! …. 9.9 Invitations to treat CUECIC, under …. 10.4 electronic auctions see Electronic auctions offer of standard form terms …. 3.4 passive websites …. 3.8

J Jurisdiction of court Australia, in …. 4.17, 9.12 choice of law …. 4.16 Australian Consumer Law …. 9.12 Canada …. 4.18 Competition and Consumer Act 2010 (Cth), under …. 9.12 minimum contacts test …. 4.20 application …. 4.21–4.22 internet transactions …. 4.21–4.22 ‘sliding scale’ …. 4.21, 4.23, 8.21 misleading and deceptive conduct …. 9.8 misrepresentations …. 9.10 outside of jurisdiction …. 9.10–9.12 service of process outside jurisdiction …. 4.18

United States …. 4.19

L Land sales see Sale of land and property

M Machines, offers via English cases …. 3.7 incorporation of terms …. 7.7 insurance …. 3.6 interactive displays …. 3.6, 3.21 notice of terms …. 3.6, 3.7, 3.21 offers of standard terms …. 3.6 ticket cases …. 3.7, 3.21 US cases …. 3.6 Mailbox rule see Postal acceptance rules Mandatory terms arbitration clauses …. 8.15 unconscionability …. 8.9 Mere puffs misrepresentations inducing contract …. 9.3 Minimum contacts test application …. 4.21–4.22 personal jurisdiction of court …. 4.20 internet transactions …. 4.21–4.22 ‘sliding scale’ …. 4.21, 4.23 unauthorised software installation …. 4.22 website sales …. 4.22

Misleading and deceptive conduct counterfeit goods …. 9.5 eBay sponsored links …. 9.5 extra-territorial jurisdiction …. 9.12 Australian Consumer Law …. 9.12 Competition and Consumer Act …. 9.12 imitation websites …. 9.12 limitations …. 9.12 false online profile …. 9.6 internet service providers (ISP), liability …. 9.8 eBay advertised forged items …. 9.9 Google Inc …. 9.8 sponsoring links …. 9.8 Yahoo! …. 9.9 omitting relevant information …. 9.6 outside of jurisdiction courts, powers …. 9.10 similar domain names …. 9.7 Skype fair usage policy …. 9.5 sponsored links and domain names …. 9.6 statutory prohibitions …. 9.5 submerging and concealing terms and conditions …. 9.6 ‘unlimited’ online calling plan …. 9.5 Misrepresentations browsewrap contracts …. 9.2 Expedia online hotel bookings …. 9.2 clickwrap contract damages, claim …. 9.3

‘free trial’ …. 9.3 fraudulent misrepresentation …. 9.4 assent by deceit …. 9.4 damages for deceit …. 9.4 dating service, online …. 9.4 electronic signature …. 9.4 email as evidence of authority to sign …. 9.4 false email addresses and spam …. 9.4 inducement of contract …. 9.3 email …. 9.3 online …. 9.3 past or present fact …. 9.3 material misrepresentation in insurance contracts …. 9.3 online fake memorabilia on eBay …. 9.3 rescission of contract …. 9.3 outside of jurisdiction courts, powers …. 9.9 pre-contractual …. 9.1 breach of warranty …. 9.2 High speed internet access …. 9.2 promissory in nature …. 9.2 rescission and damages …. 9.1 Uniform Commercial Code (UCC) …. 9.1 Mistake avoidance of contract …. 8.20 court in equity …. 8.20

electronic contract of sale …. 8.2 online users …. 8.20 unilateral …. 8.2 constructive knowledge …. 8.2 Mobile phone contracts arbitration clause …. 8.15 unconscionability …. 8.15 Model Law on Electronic Commerce (MLEC) …. 1.13 domestic legislation based on …. 10.8 formation and validity of contracts …. 10.7 legal recognition of data messages …. 10.6, 10.9 purpose …. 10.6 signature …. 10.7 sphere of application …. 10.7 UNCITRAL …. 10.6 writing …. 10.7 Model Law on Electronic Signatures (MLES) …. 1.13 cryptography, recognition …. 10.10 digital signatures, recognition …. 10.10 legal requirement for signature …. 10.10, 10.12 compliance …. 10.11 national electronic signature legislation …. 10.10 Modification of terms …. 2.3 arbitration clause …. 7.10 limitation of liability …. 7.16 shrinkwrap contracts …. 6.5 silence does not amount to acceptance …. 3.16 Modified clickwrap contracts

Facebook …. 6.15 hyperlinked terms …. 6.15 incorporation of terms …. 6.15 notice of terms …. 6.15 online games …. 6.15 ‘Money now, terms later’ purchases shrinkwrap contracts …. 6.5, 6.8

N Netscape software …. 3.10, 7.8 New South Wales electronic documents signatures, validity …. 2.20 New Zealand electronic signatures …. 2.27 electronic transactions legislation …. 2.27 Statute of Frauds, and …. 2.27 Notice of terms browsewrap agreements …. 1.10 conspicuous notice by hyperlink …. 7.11–7.12 conspicuous notice by scrollbox …. 7.9–7.10 constructive …. 7.8 incorporation by …. 1.11 online contracts, in …. 1.11

O Offer and acceptance see Acceptance of offers; Electronic offers ‘OK’ buttons, acceptance via …. 3.21

see also ‘I Agree’ buttons Online auctions see Electronic auctions Online contracts see Electronic contracts; Standard forms of agreement Online dating fraudulent misrepresentation …. 9.4

P Parking lot use conditions ticket cases …. 3.7, 3.21 Passive websites invitation to treat …. 3.21 United States …. 3.8 Postal acceptance rules Australia, in …. 4.3 electronic contracts, application …. 4.6 emails and …. 4.6 non-instantaneous communication …. 4.6 telegrams …. 4.3, 4.4 Pre-contractual representations breach of warranty …. 9.2 High speed internet access …. 9.2 promissory in nature …. 9.1–9.2 Promissory estoppel …. 3.19 Property sales see Sale of land and property

R RealNetworks …. 2.2 Receipt rules

Australia, in …. 4.2 electronic transactions legislation …. 4.13 emails place of receipt …. 4.12 time of receipt …. 4.11 instantaneous communications …. 4.2 recall of acceptance …. 4.8 email …. 4.8–4.9 telephone conversations …. 4.2 website communications and Revocation of offer acceptance, before …. 3.11 communication to offeree …. 3.11 effective …. 3.11 email, by …. 3.11

S Sale of land and property CUECIC, under …. 10.15 electronic transactions legislation …. 2.26 Singapore, in …. 2.26 emails, via …. 2.8 Service of process outside jurisdiction Canada …. 4.18 Shrinkwrap contracts acceptance or counter-offer …. 6.1, 6.5 arbitration clause …. 6.6, 6.7 battle of the forms …. 6.6

CD-ROMs …. 6.5 definition …. 6.1 layered contracting …. 6.6 online purchases …. 6.7 ‘pay now, terms later’ decisions …. 6.5, 6.8 software downloads …. 6.7 standard terms and conditions …. 6.7 Uniform Commercial Code (US) …. 1.10, 6.2, 6.22 additional terms in acceptance or confirmation …. 6.4 formation of contract …. 6.2 offer and acceptance …. 6.3 Signatures electronic contracts see Electronic contracts electronic signatures see Electronic signatures Silence acceptance of offers, …. 3.16 Simple Mail Transfer Protocol (SMPT) …. 4.7 Software see Downloads of software Standard forms of agreement amendments to terms …. 3.20 electronic contracts …. 1.9 hyperlinks to …. 1.10, 3.4 interactive displays of …. 3.8 interactive websites …. 3.8, 3.21, 4.7 Australia …. 3.10 Canada …. 3.10 CUECIC, under …. 10.16 jurisdiction …. 3.8

offers …. 3.9–3.9 United States …. 3.10 offer by interactive webpage …. 3.10 online contracts, in …. 3.4 unconscionability see Unconscionability webpages …. 3.8 Statute of Frauds electronic contracts, and …. 1.1, 1.14 formalities …. 1.8 electronic transactions legislation see Electronic transactions legislation statutory requirement of writing see Statutory requirement of writing Statutory requirements for writing construction …. 2.3 content and form of communication …. 2.2 copyright interest, assignment …. 2.2 electronic media …. 1.1, 1.4, 2.2 email see Emails essential elements of agreement …. 2.4 formalities …. 1.8 forum selection clause …. 2.2 memorandum …. 2.4 sale of goods …. 2.13 Statute of Frauds …. 2.1, 2.2, 2.4 insufficient writing …. 2.1 Uniform Commercial Code …. 2.4 voice recordings …. 2.3, 2.7 Storage media

CD-ROMs see CD-ROMs digital signature …. 2.16 evaluation disk …. 6.5

T Telegrams agreements made by …. 1.1 international conventions and model laws …. 1.13 counter-offers by …. 3.18 postal acceptance rules …. 4.4 Statute of Frauds, under …. 2.5 Telephone agreements made over …. 1.1, 2.5, 2.9 receipt rules …. 4.2 recorded conversation as evidence of notice …. 2.3 Telexes agreements made by …. 1.1 international conventions and Model laws …. 1.13 time and place of receipt …. 4.10, 10.14 choice of law …. 4.16 postal acceptance rules …. 4.4 technically non-instantaneous …. 4.4 under Statute of Frauds …. 2.5 Terminations of agreement breach of express and implied terms …. 7.21 email, via …. 2.10 Terms and Conditions see Electronic contracts; Standard forms of agreement

Tickets formation of a contract via …. 3.7 machine sales of …. 3.6

U Unconscionability airline tickets booked online …. 8.19 unfair terms …. 8.19 Americans for Fair Electronic Commerce Transactions (AFFECT) …. 8.7 arbitration clause …. 8.6, 8.8, 8.15 contrary to public policy …. 8.17, 8.18 costs of arbitration …. 8.16 inequality of bargaining power …. 8.18 mandatory …. 8.15 mobile phone service …. 8.15 shrinkwrap agreement …. 8.15, 8.17 small sums …. 8.17 waivers of class actions …. 8.18 class action waive clause …. 8.6 concealing clauses in fine print …. 8.15 contract of adhesion …. 8.6, 8.7, 8.10 fundamental fairness, scrutiny …. 8.13 dispute resolution clause …. 8.7 domain name registration fees …. 8.7 exploitation of under-privileged …. 8.15 unfair terms …. 8.19 forum selection clause …. 8.7, 8.10 adjudication of dispute …. 8.10

class action procedure …. 8.12, 8.13 fraud …. 8.10, 8.11 Google Inc …. 8.7 internet service agreement …. 8.11, 8.12 non-negotiated contracts …. 8.12 overweening bargaining power …. 8.10 small sums …. 8.14 unreasonable …. 8.10 webpage contracts …. 8.10, 8.12 high pressure tactics …. 8.8 lack of mutuality …. 8.6 mandatory terms …. 8.9 market alternatives, defence …. 8.6, 8.8 eBay …. 8.8 mail or telephone orders …. 8.8 misrepresentations …. 8.18 online payment services …. 8.6 unilateral acts …. 8.6 online standard form contracts …. 8.4, 8.7, 8.12, 8.21 take-it-or-leave-it basis …. 8.7 PayPal …. 8.6 waiver of class actions …. 8.18 penalty clauses …. 8.15 plea of …. 8.21 procedural …. 8.4, 8.6 Software Engineering Ethics Research Institute (SEERI) …. 8.7 special disadvantage …. 8.4 actual or constructive knowledge …. 8.4

statutory …. 8.19 Victoria, in …. 8.19 substantial …. 8.4, 8.6 Uniform Commercial Code …. 8.5 unilateral changes to billing policy …. 8.11 virtual property, confiscation …. 8.6 waivers of class actions …. 8.18 Unenforceable contracts browsewrap contracts see Browsewrap contracts unconscionability see Unconscionability United Kingdom clickwrap agreement …. 6.16 electronic transactions legislation …. 10.8 forum selection clauses …. 2.2 minimum contacts test …. 4.21 misleading and deceptive conduct …. 9.10 Statute of Frauds 1677 …. 2.4 United Nations Commission on International Trade Law (UNCITRAL) …. 10.1 United Nations Convention on Contracts for the International Sale of Goods (the Vienna Convention) click wrap and browsewrap contracts, …. 10.4 electronic contracts, application …. 10.3 email and test messages …. 10.4 exclusion clauses …. 10.5 purpose …. 10.3 United States domain name sales …. 6.18

eBay arbitration clause …. 5.3 electronic signatures, validity …. 2.18 senders name on email …. 2.20 email agreements …. 2.8 forum selection clauses …. 1.12 incorporation of terms …. 7.1 interactive websites …. 3.8 classification …. 3.21 jurisdiction …. 3.8 offers …. 3.9 jurisdiction decisions …. 4.20–4.23 machine offers …. 3.8–3.10 minimum contacts test see Minimum contacts test passive websites …. 3.8 invitation to treat …. 3.21 Statute of Frauds …. 2.2, 2.4 electronic transactions legislation, and …. 2.26 lease of land by email …. 2.10 option to purchase land by email …. 2.11 sale of land by email …. 2.8 settlement agreements relating to land …. 2.12 unconscionability …. 1.12 Uniform Commercial Code …. 1.10, 2.4 website offers ‘wrap’ contracts …. 1.10 writing, requirement …. 2.2–2.4 Uniform Commercial Code …. 2.4 User agreements see Electronic contracts; Standard forms of agreement

V Validity clickwrap agreements …. 1.10, 2.1 electronic signatures see Electronic signatures Vending machines see Machines, offers via Vitiating factors duress see Duress misleading and deceptive conduct see Misleading and deceptive conduct misrepresentation see Misrepresentation mistake see Mistake overview …. 8.1 unconscionability see Unconscionability

W Web hosting agreements …. 3.16 Webpages acceptance of offer …. 3.1 interactive website …. 3.1, 3.8, 3.9, 3.21, 10.16 jurisdiction …. 3.8 unilateral acceptance …. 3.1, 3.9 electronic contracts …. 1.4, 3.1. 3.4, 4.7 hyperlinks …. 3.4, 6.17 incorporation of terms …. 7.2 notice of terms …. 7.8 electronic offers …. 3.1, 3.8–3.9 Hyper Text Transfer Protocol (HTTP) …. 4.7 imitative …. 9.7

interactive websites …. 3.8, 3.21, 4.7, 10.16 standard form agreement …. 3.8 Australia …. 3.10 Canada …. 3.10 jurisdiction …. 3.8 offers …. 3.9–3.9 United States …. 3.10 Withdrawal of offer acceptance, before …. 3.11 communication to offeree …. 3.11 effective …. 3.11 email, by …. 3.11 Writing requirements see Statutory requirement of writing

Y Yahoo! Inc illegal content hosting …. 4.15 misleading and deceptive conduct …. 9.9