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Focus: Reforms to Australian e-commerce laws

18 May 2009

In brief: The Standing Committee of Attorneys-General recently agreed to amend the uniform Electronic Transactions Acts so that Australia can accede to the United Nations Convention on Electronic Communications in International Contracts. Partner Niranjan Arasaratnam (view CV) and Lawyers Valeska Bloch and Nicholas Tobias report.

How does it affect you?

  • Acceding to the United Nations Convention will provide greater clarity in relation to whether an electronic communication constitutes an offer or an invitation to treat.
  • Vendors providing goods or services online should ensure that a confirmation screen is displayed to allow users to confirm their inputted data before purchase.
  • Australia's rules on the time and place at which electronic communications are sent and received will be internationally aligned.

Background

Australia's Commonwealth, state and territory uniform Electronic Transactions Acts (the ETAs) are currently based on the 1996 Model Law on Electronic Commerce (the Model Law) developed by the UN Commission on International Trade Law. However, the UN has subsequently adopted the Convention on the Use of Electronic Communications in International Contracts (the Convention), as a means of updating some of the concepts contained in the Model Law.

On 10 November 2008, the Federal Attorney-General released a discussion paper making recommendations that Australia accede to the Convention and requested submissions from the public.

As the submissions showed 'overwhelming support' to the recommendations, the Standing Committee of Attorneys-General announced on 22 April 2009 that variations will in fact be made to the ETAs in order for Australia to accede to the Convention.

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The Convention

The Convention was adopted by the UN on 23 November 2005 as a means of increasing the 'legal certainty and commercial predictability' 1 of electronic communications in the context of international contracts. To date, 18 countries (including China, Singapore and the Republic of Korea) have signed the Convention.

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What is likely to change?

If Australia becomes a signatory to the Convention, the ETAs will not require significant changes. Although the Convention deals specifically with international contracts, the discussion paper notes that the changes suggested by the Convention 'should ideally flow through to the general electronic transactions regime in order to avoid a duality of regimes for international and domestic contracts.' 2 Similarly, while the Convention expressly excludes contracts for personal, family or household purposes from its scope, the ETAs will continue to apply to business and consumer contracts alike. The discussion paper indicates that the ETA regime will most likely be updated rather than replaced or supplemented, although it is unclear when such amendment will take place. The changes will have a relatively minor impact on the ETA regime as a whole, but will bring Australia in line with the Convention. The primary changes that are likely to be implemented are as follows.

Invitations to treat

Article 11 of the Convention clarifies that an electronically communicated proposal to the general public to conclude a contract is an invitation to treat (ie a request to others to make an offer or to engage in negotiations), rather than an actual offer (acceptance of which would form a binding contract), unless otherwise clearly indicated.

As a result, the display of a product on an online retailer's homepage will not constitute an offer to the world at large to enter into a binding agreement. However, if a customer elects to purchase a product (for example, by placing the product in a virtual shopping cart), the personalised 'check-out' screen may constitute an offer rather than a mere invitation to treat.

The discussion paper recommends that Article 11 of the Convention be incorporated into the ETAs.

Use of automated message systems for contract formation

Article 12 of the Convention clarifies that contracts may be validly formed through automated means by any number of parties. This provision recognises the pivotal role of e-commerce in business today, but will have little pragmatic effect. The discussion paper recommends that the ETAs be amended to incorporate such a provision.

Input errors in the use of automated message systems

Article 14 of the Convention considers the situation where a person makes an input error (eg. an unintentional keystroke error) in an electronic communication with another party's automated message system. If the system does not provide an opportunity for the person to correct the error, they may withdraw the erroneous portion of the communication if they notify the other party of the error as soon as possible after having learned of it, as long as they have obtained no material benefit or value from any goods or services received.

The discussion paper recommends that the ETAs incorporate Article 14 of the Convention. Consequently, vendors who do not wish to have their contracts varied or rescinded due to online users' mistakes will need to provide an opportunity to correct input errors before purchase, for example, through a confirmation screen that displays the inputted data immediately before checkout.

Place of dispatch and receipt

An inquiry into the place of dispatch and receipt of electronic communications is an essential step in any determination of the place of contract formation.

The ETAs3 and Article 10.3 of the Convention each provide that unless otherwise agreed, the place of dispatch of an electronic communication is the place of business of the originator, and the place of receipt of an electronic communication is the place of business of the addressee. Article 6 of the Convention provides rules for determining the parties' places of business that expand upon those in the ETAs. The discussion paper recommends adoption of the Convention's principles, namely:

  • A presumption that a party's place of business is the location indicated by that party (unless it is demonstrated that the party has no place of business at that location). A 'place of business' must be a place 'where a party maintains a non-transitory establishment to pursue an economic activity other than the temporary provision of goods or services out of a specific location'. This definition is considerably different to standard taxation and Corporations Act 2001 (Cth) definitions of the term.
  • A requirement that if a party has not indicated a place of business, any relevant 'circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract' be regarded in determining which of the party's places of business is the relevant 'place of business'; and
  • Clarifications regarding the limited importance of a party's country-coded domain names and email addresses, and the location of its servers and IT infrastructure, in determining its place of business.
Time of dispatch and receipt

While electronic communications often take a matter of milliseconds, emails can be lost or delayed due to server downtime, firewalls and filters. This can raise questions as to the precise time at which an offer was accepted.

As the discussion paper notes, the time of acceptance of an offer can be an important issue in contract formation, for example, if an offer is open for a certain period.

Under Article 10.1 of the Convention, dispatch occurs when a communication leaves an information system under the control of the originator or, if parties exchange communications through the same information system, the time when the electronic communication is received. Under Article 10.2, receipt occurs when a communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee, or when it becomes capable of being retrieved by the addressee at another electronic address and the addressee becomes aware that the electronic communication has been sent to that address. An electronic communication is presumed to be capable of being retrieved by the addressee when it reaches the addressee's electronic address.

The discussion paper recommends that the formulations in Articles 10.1 and 10.2 replace the present provisions in the ETAs.

Electronic signatures and other form requirements

Various types of contracts are required by statute to be signed. This requirement poses difficulty in the online arena, in which pixels and bytes replace pen and paper.

Article 9.3 of the Convention provides that the requirement for a communication or contract to be signed is met if a method is used to identify the party and 'to indicate that party's intention' in respect of the information contained in the electronic communication. The method used must be appropriately reliable or, alternatively, it must have in fact succeeded in identifying the party and indicating that party's intention.

The ETAs, however, currently use the language of 'approval' rather than 'intention',4 arguably necessitating an inquiry into whether the person approved or endorsed the contents of the communication rather than merely whether the person intended to sign. The discussion paper recommends that the Convention's language be adopted in this regard.

The discussion paper also recommends that the ETAs be amended to make clear that the provisions dealing with requirements to give information in writing include a requirement for a contract to be in writing.

If you have any queries, please contact one of the below.

Published 18 May 2009

Footnotes
  1. United Nations, United Nations Convention on the Use of Electronic Communications in International Contracts (New York), 2007, p 1.
  2. Attorney-General's Department, 'Australia's accession to the UN Convention on the Use of Electronic Communications in International Contracts 2005 – Proposed amendments to Australia's electronic transactions laws – consultation paper', November 2008, p 9, para 1.4.
  3. See eg. s14(5) Commonwealth ETA.
  4. See eg. s10(1)(a) Commonwealth ETA.

For further information, please contact:

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