Is the Electronic Transactions Act an Unnecessary Evil?

This 2500-word essay (including footnotes) was completed for the Contracts unit at Western Sydney University in early 2013. I believe it was the longest essay I’d ever written at the time and was worth 30% of the overall mark. I can’t remember how well it performed, but it probably received a credit (65–74%). It’s by no means my finest work, but it was my first semester of law.

Question

Eliza Mik, ‘Updating the Electronic Transactions Act? — Australia’s Accession to the UN Convention of the Use of Electronic Communications in International Contracts 2005’ (2010) 26 Journal of Contract Law 184, 207:

The combined effect of the … amendment [to the Electronic Transactions Acts] creates a separate regime for contracts formed by electronic means. It is debatable whether such duality promotes certainty and predictability. Contract law can absorb technological change without the need for special rules, presumptions or parallel regimes.

To what extent do you agree with Mik’s statement about the impact of the Electronic Transactions Act 2000 (NSW) on traditional common law principles? In answering this question, you must explain the rules of offer and acceptance under the Australian common law and the position under the Electronic Transactions Act 2000 (NSW) and examine at least one other area of contract law affected by the Act.

Introduction

The Electronic Transactions Act 2000 (NSW) (‘Electronic Transactions Act’) purports to encourage the use of electronic transactions in New South Wales, including by promoting confidence in their use.¹ However, Mik criticises the Act for creating a ‘separate regime for contracts formed by electronic means’, arguing that ‘[i]t is debatable whether such duality promotes certainty and predictability.’²

Yet proponents justified the equivalent federal legislation — the Electronic Transactions Act 1999 (Cth) — as bringing clarity necessary to overcome legal uncertainty as a basic impediment to the uptake of online commerce.³ In 1999, the then Commonwealth Attorney-General told Parliament that ‘current Australian law neither recognises nor denies the validity of electronic communications’ and that the federal legislation ‘establishes the basic rule that a transaction is not invalid because it took place by means of an electronic communication.’⁴

Contrary to Mik’s criticism, the Act clarifies the application of legal principles to electronic transactions without significantly deviating from prior common law and statutory principles or prescribing new rules for electronic contracts that constitute a ‘separate regime’. This essay argues that the Act is consistent with the common law relating to offers and acceptances, and with statutory formalities for land transactions.

Offers

An offer is an indication by one party that it is willing to enter into a contract. Offers must be sufficiently clear as to allow a contract to be formed without further negotiation, and indicate the offeror’s willingness to be bound by the terms.⁵ They do not need to be directed at a specific party and may instead be issued to the public at large.⁶ Purported offers that do not meet all of these criteria will typically be considered non-binding invitations to treat because they imply merely a willingness to negotiate terms; a contract cannot be formed upon acceptance of an invitation to negotiate.⁷

According to Christensen, the federal legislation ‘and its State equivalents do not have any effect on the application of the common law to the making of an offer.’⁸ Indeed, the Electronic Transactions Act codifies the existing common law position by providing that proposals to form contracts made electronically are considered invitations to treat unless clearly intended to be bound by acceptance.⁹ In this regard, the provisions of the Act reflect the common law position.

Mik emphasises that ‘[m]ost difficulties in transposing the offer and acceptance analysis to novel transacting scenarios result from the fact that it is a model’ rather than because it assumes any particular medium or method of forming contracts.¹⁰ Whether online or otherwise, distinguishing an offer relies upon establishing the intent of the alleged offeror, which Christensen considers:

In a paper environment the ultimate conclusion will depend upon the language used. Will this principle apply equally to an advertisement in the newspaper or on the Internet? Is the only difference the increased circulation offered by the Internet or does the nature of electronic advertisements add a layer of complexity to the question?¹¹

As Mik asserts, ‘It is the content of a statement, not the method of its communication that must be analysed to determine its legal effect.’¹²

In discussing the example of Argos, a company which displayed televisions on its website for sale at £2.99 rather than the intended £299.99, Christensen observes that a similar printed advertisement would normally be an invitation to treat, with the offer coming from the customer side.¹³ The same principle can be applied online:

If the website is worded and arranged in such a way as to encourage the formation of a contract, the crucial question is whether the seller intended to be bound by any response or whether the seller wanted to decide whether to enter a contract and with whom.¹⁴

The Electronic Transactions Act confirms that offers made by electronic means are subject to the same principles for differentiating offers from invitations to treat, providing legislative guidance to ensure courts consider the matter in a medium-neutral manner. Offers made electronically are to be considered no differently to those made by other means.

Acceptances

‘The general rule is that a contract is not completed until acceptance of an offer is actually communicated to the offeror.’¹⁵ An acceptance must correspond to the offer and not introduce any additional terms to the agreement.¹⁶ Common law does not dictate a specific form for acceptances: appropriateness of a method of acceptance depends on the circumstances.¹⁷ The terms of the offer ‘may dictate the form of acceptance’ but, where they do not, an acceptance may be given by the same or similar method as the offer.¹⁸

Although an offer may be revoked until acceptance is received by the offeror, the ‘postal acceptance rule’ is a narrow exception. The common law rule accepted in Australia is:

Where the circumstances are such that it must have been within the contemplation of the parties that, according to the ordinary usages of mankind, the post might be used as a means of communicating the acceptance of an offer, the acceptance is complete as soon as it is posted.¹⁹

In 1998, before the Electronic Transactions Act, it was ‘unclear whether the posting rule or the “normal” rule [applied] to acceptances sent by e-mail,’ however the postal rule ‘does not apply to instantaneous modes of communication such as the telephone or telex.’²⁰ The rule has not been applied beyond post and telegrams, and ‘there seems to be no reason why it should be extended to email.’²¹

Dickie argues that, because emails more closely resemble instantaneous communications such as telex and facsimile, the rule should not apply to electronic acceptances of offers.²² This view was taken by the Labour Court of South Africa, which has held that the ‘assumption that postal contracts are concluded when a letter or telegram of acceptance is handed at the post office cannot apply to acceptance by email or SMS because the forms of communication differ substantially.’²³

It could be argued that facility for electronic acceptance would already exist if electronic offers were considered valid. If common law permitted electronic offers, an acceptance of an electronic offer would, consistent with the principles described above, need to be in the form required by the offer or, if unspecified, the same or similar method.

The Labour Court of South Africa thus determined that an SMS was an appropriate means of communicating acceptance owing to the implied consent of the offerer and that, as it fell under the relevant legislative definition of electronic communications, it was legally enforceable.²⁴ Importantly, the South African legislation merely answered the question as to whether it could be considered valid, while the common principles discussed still applied. The Electronic Transactions Act similarly provides a definition of ‘electronic communications’ in order to confirm their validity.²⁵

The Electronic Transactions Act provides that, unless otherwise agreed, electronic communications are deemed received when they are ‘capable of being retrieved by the addressee’ at their designated electronic address.²⁶ This seems to presume, as Dickie suggests, that a business would regularly attempt to retrieve emails and that most email programs provide on-screen notifications.²⁷

In Bauen Constructions Pty Ltd v Sky Services Pty Ltd, Sackar J held that the Electronic Transactions Act does ‘not require an email to be opened, let alone read.’²⁸ Further, there is low-level English precedent

that an electronic transmission sent from a police station on a Friday … and printed out … on the following Monday, was effective as of the Friday. The court viewed this situation as analogous to the posting of a letter or the sending of a fax which arrives in the relevant office on time, even though it is not read until later.²⁹

Rather than leave the question to the courts, the Electronic Transactions Act provides preemptive guidance that the postal acceptance rule does not apply to electronic communications. Instead, it affirms that the ‘general’ rule applies that an acceptance received but not retrieved by the offeror is valid at the time of receipt.

Conveyances

The Conveyancing Act 1919 (NSW) (‘Conveyancing Act’) requires that contracts dealing in land must be in writing and signed.³⁰ The Electronic Transactions Act 2000 (NSW) provides that if, under a law of New South Wales, a person is required to give information in writing, that requirement may be met electronically if there is consent between the parties.³¹ This, again, merely points courts towards the logical conclusion that contracts formed electronically are valid. [This essay was written before 2018, when the cited section of the Conveyancing Act was amended to explicitly to validate electronic conveyances. — Ed]

Sneddon raises archival concerns, arguing that writing evidences a transaction and exists to create an authoritative historical record of that transaction.³² However, the experience in other common law jurisdictions indicates that electronic systems providing for independent archiving are as effective as hardcopy archives — if not more effective given the potential for near-instantaneous retrieval.³³

The requirement that a contract be signed can also be met electronically, and has been in other jurisdictions.³⁴ The common law does not clearly define what constitutes a signature, but courts have accepted a range of analogues to physical written signatures, including initials and rubber stamps.³⁵ As Christensen, Duncan and Low observe: ‘It is clear that modern authorities are more concerned with whether the particular signature fulfils the function of a signature as intended by the legislation rather than whether the signature is in a particular form.’³⁶

When compared to the Electronic Transactions Act, the implications are essentially the same. Under the Act, a signature is a proven method used to identify the person and indicate their intention (by itself or with further evidence) that must be as reliable as appropriate for the purpose, and consent must be given to the method by the person receiving the signature.³⁷ This is consistent with existing common law principles and the provisions of the Conveyancing Act regarding formalities in land dealings.

Conclusion

Contrary to Mik’s assertion that a separate regime has been introduced to govern electronic contracts in New South Wales, the Electronic Transactions Act merely complements and affirms the existing legal principles in order to apply them to electronic contracts. The combined effect does not create any uncertainty or unpredictability. Rather, it confirms that the requirements for offers and acceptances, and formalities in relation to land dealings, are to be applied to electronic contracts.

This removes any doubt over whether electronic offers and acceptances are valid, and avoids assumptions that all sales notices on websites must be either invitations to treat or offers without case-by-case differentiation. The Electronic Transactions Act has achieved the aims the former Commonwealth Attorney-General stated, namely ‘that a requirement or permission … for a person to provide information in writing, to sign or produce a document … can be satisfied in electronic form, subject to certain minimum criteria being satisfied.’³⁸ Those minimum criteria are derived from and reflect the antecedent common law and statutory rules.

Endnotes

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