E-contracts in Cyber Space

E-contracts in cyber space

By

S J TUBRAZY

Traditional concept of contract provides the foundations to all types of valid and enforceable contract, keeping in view the meanings of definition of contract as, ‘all agreements are contracts if they are made by the free assent of parties competent to contract, for a lawful consideration and with a lawful object and are not thereby expressly declared to be void’ the term contract would include invitation to tender and instruction to renderers, ‘tender, and acceptance thereof.

An electronic contract is an agreement created and "signed" in electronic form -- in other words, no paper or other hard copies are used. For example, you write a contract on your computer and email it to a business associate, and the business associate emails it back with an electronic signature indicating acceptance. An e-contract can also be in the form of a "Click to Agree" contract, commonly used with downloaded software. The user clicks an "I Agree" button on a page containing the terms of the software license before the transaction can be completed.

The United Nations General Assembly Resolution No. A/ RES/51/ 162, dated 30th January 1997, Chapter III and specifically Article 11 sets about the formation and validity of E-contract.

Article 11 states that in the context of the contract formation unless otherwise agreed by the parties, on offer and the acceptance of an offer may be expressed by means of data message. Where data message is used in the formation of a contract that contact shall not be denied validity or enforceability on the sole ground that a data message was used for that purpose.

Simultaneously, Article 12 states that as between the originator and the addressee of a data message, a declaration of will or other statement shall not be denied legal effect, validity or enforceability solely on the ground that it is in form of a data message.

According to UNCITRAL Model Law, Article 11 is not intended to interfere with the law on formation of contracts but rather to promote international trade by providing augmented legal certainty as to the conclusion of contracts by electronic means. In certain countries a provision along with the lines of provision of Articles 11 might be regarded as merely stating the obvious, namely that an offer and an acceptance, as any other expression of will, can be communicated by any means, including data message. However the considerable number of countries as to whether contracts can validly be concluded by electronic means. Such reservations may stem from the fact that, in certain cases, the data message expressing offer and acceptance are generated by computer without instantaneous human intervention, thus raising doubts as to be expression of intent by the parties. Another reason of such uncertainties is inherent in the modes of communication and results from the absence of a paper document.

As to the time and place of formation of contracts, in cases where an offer or the acceptance of an offer is expressed by means of a data message, no specific rule has been included in the Model Law in order not to interfere with national law applicable to contract formation. It was felt that such a provision might exceed the aim of the Model Law which should be limited to providing that electronic communication would achieve the same degree legal certainty as paper-based communication. The continuance of existing rules on the formation of contracts with the provisions contained in Article 15 is designed to drive out uncertainty as to the time and place of formation of contract in case where the offer or the acceptance are exchanged electronically.

During the preparation of provisions of Article 11, it was felt that the provision might have the harmful effect of overruling otherwise applicable provisions of national law, which might prescribe specific formalities for the formation of certain contracts. Such forms include notarization and other requirements for writings and might respond consideration of public policy, such as the need to protect certain parties or to warn them against specific risks. For that reason Article 12 provides that an enacting State can exclude the applicability of provisions of Article 11 in certain instances to be specified in the regulation enacting the Model Law. 

While much of the contract formation discussion revolves around the use of computer technology as a means of communication by contracting parties, a far more difficult issue is beginning to emerge with the automation of the contracting process itself. Traditional contract doctrine centers around the requirement of a `meeting of the minds'. The involvement of two or more people, negotiating either face-to-face or through some means of communication is an underlying assumption. However, modern technology is evolving with a goal of eliminating human involvement in transactions. How traditional contract doctrine will accommodate situations where the only `minds' that meet are programmed computer systems is uncertain.

For transactions caught by the International Sale of Goods Act, the "mailbox rule" does not apply. Instead, the Act sets out that the acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror.

To protect consumers from potential abuses, electronic versions of the following documents are invalid and unenforceable:

1. wills, codicils, and testamentary trusts


2. documents relating to adoption, divorce etc, 


3. court orders, notices, and other court documents such as pleadings or motions


4. notices of default, repossession, foreclosure, or eviction, etc

These documents must be provided in traditional paper and ink format.

Business-to-business contracts are an indispensable part of trading business relations

since many centuries. With the advent of information technology, companies

started using information technologies to support their trading relations. Consequently,

in trading relations supported by modern information technology, traditional paper

contracts become an inefficient and ineffective instrument to guarantee the rights and

specify the obligations of the trading parties and electronic contracts become a

necessity. Electronic contracts are the instrument to govern electronic trading relationships between business parties. A number of efforts exist in both the academic and industrial worlds to define an e-contract specification language.

(The author is Lawyer of cyber laws in Pakistan)