Contacts Involved In Online Shopping

Curry House Ltd. has been operating restaurants selling Pakistani food. They have been sourcing spices for the food directly from Pakistan. Later they started ordering spices from an online store “spices.com.pak."

Two months ago, the company placed an order for the purchase of spices and the online store had accepted and promised to send the order within two weeks but the goods never arrived. Advise the Curry House on whether they can maintain an action for breach of contract.

Introduction

What is a contract?

A contract is an agreement between two or more parties that is legally binding. Basically, a contract is an exchange of promises either written formally or informally or can be entirely verbal. (The variations of contracts are almost unlimited.) If one side fails to live up to their part of the deal that is stated clearly in the contract, then there is a breach. Thereafter certain actions will be available for sorting out the differences between the two or more parties involved in the contract.

Seven Elements of a Contract

Offer

Acceptance

Consideration

Intention to be bound

Mutuality

Capacity

Legality

As previously mentioned, there are two main types of contracts – a written contract and an oral contract.

A written contract entails that any agreement between two or more parties be made on a printed document that carries the signatures of the parties involved. This type of a contract is legally binding and is much easier to apply as opposed to an oral contract.

An oral contract incorporates an agreement that is partially written or completely spoken. An oral contract is just as valid as a written contract; however, the only problem that precedes from administering such a contract is that proving its existence or the terms that the contract suggests.

Another significant difference between the two contracts is the length of the time it takes to sue for breach of an oral contract which is usually shorter.

Carlill v. Carbolic Smoke Ball Co. [1893] Q.B. 256 (C.A.).

Carbolic Smoke Ball Co. manufactured and sold The Carbolic Smoke Ball. Various ads were placed in many newspapers offering a reward of 100 Pounds to anyone who purchased the smoke ball and used it as directed to contract influenza and other diseased. Carlill (P) purchased the ball after seeing the advertisement and used it as directed. He then in turn contracted influenza and made a claim for the reward. However, Carbolic Smoke Ball Co. refused to pay the amount and Carlill then sued for damages that rose from breach of contract. Carbolic Smoke Ball Co. appealed.

The Court of Appeal held the necessary elements of a contract were all present, including offer and acceptance, consideration and an intention to create legal relations, hence the Carbolic Smoke Ball Co. lost its argument straight away.

The Court of Appeal unanimously rejected the company’s appeal and held that a fully binding contract for 100 Pounds with Mrs. Carlill was indeed present.

According to the case, a wagering contract was established and is defined as one by which two people agree to hold different opinions with regards to a future uncertain event and mutually agree that upon the determination of the event, one shall benefit from the other in payment and the other shall pay the amount. It is essential to a wagering contract that each party under it may either win or lose, depending on the issue of the event. Therefore it remains tentative until the issue of the future event is known.

What is Trade?

Trade is a business or occupation of profit, mostly in retail or wholesale sales or requiring special skills. It basically deals with the exchange of goods, favors, etc, for money or goods.

What is E-commerce?

Electronic commerce incorporates business by means of a computer, the internet, and other telecommunication means like electronic data interchange. (EDI)

What is an online contract?

Most e-commerce transactions involve contracts. The traditional terms and conditions of a contract will still be applied to these online contracts but with extra complications. To elaborate, the parties involved may have never met and may sometimes not even realize that they are contracting and they may reside in different countries as well. (Geo-identification assists to identify just where the internet user is located since the internet is borderless but a contract made online is sourced within a legal jurisdiction somewhere.)

Contract law does not usually incorporate any special form of communication and negotiations are often carried out electronically.

E-commerce Legislation

The electronic transactions Act 1999 provides a legal outline to support and encourage business and consumer confidence in electronic commerce by assuring that the law treats paper-based commerce and electronic commerce equally so that one is not given an advantage over the other.

It is based on the principles of:

Functional equivalence

Technological neutrality

The act supports electronic transactions so there will be business and community confidence in the use of electronic transactions.

Electronic Signatures

Electronic signatures identify a person who signs a contract online, which fulfills many legal requirements.

An electronic or digital signature authenticates an electronic transmission by identifying the signer an attributing the document to the signer.

Section 10 of the electronic transmission acts 1999 provides for electronic signatures:

An electronic signature is a technology neutral term which includes a pin, a password, a scanned manuscript signature and a typed name at the bottom of the email.

A digital signature is technologically specific mechanism based on public key cryptography involving two keys, a private key and a public key.

Formation of an E-contract

Intention to contract – normal contract rules apply to e-contracts so a person accessing an online supplier with intention to buy something is taken to intent to contract.

Agreement – A purchaser portrays his intentions to make an offer by clicking on a button or an icon. The click signifies an agreement by the acceptance of the terms and conditions.

Consideration – A promise for a promise to turn an agreement into a contract includes promises sent electronically.

Legal Capacity – On the internet, it is an unclear whether a person is a minor or not. Computers and the world wide web is easily accessible by minors across the globe nowadays and the simplicity in making a contract by the clicking of a button is a reminder that even minors are bound by their actions of making a contract.

Consent – E-contracts give rise to the question of the reality of consent.

Digital certificates containing digital signatures.

Click-wrap contracts

Essential Elements of a Contract

Agreement (Offer and Acceptance)

An offer is the clear statement of the terms upon which an offeror is prepared to be contractually bound.

It takes the form of a promise to do or refrain from doing something, and usually upon condition.

Acceptance is a final and unqualified assent to the terms of the offer, made in the manner specified and indicated by the offeror – orally or written.

Case 1

R v Clarke 1927 – (Contract with no evident agreement losing)

Fact: The West Australian Government offered a reward for information leading to the arrests and conviction of the murderers of two police officers.

Clarke, who had heard of the reward had already been arrested gave the necessary information and evidence not intending to claim it but to save himself from the murder charge.

He then lodged a claim, and when it was rejected, sued.

Held: Clarke failed. He did not have the offer in mind at the time of his supposed acceptance and hence his actions were not a true acceptance.

Intention to Contract

The essence of a contract is a promise/promises made by the parties and the resulting creation of a legally enforceable obligation. An agreement is not sufficient by itself to constitute a contract without a legal obligation.

Case 2

Edmonds vs Lawson 2000 – (Contract with no evident intention losing)

Fact: Edmonds accepted a twelve month unfunded pupilage in Lawson’s Chambers. The agreement was regulated by the consolidated regulations of the Inns of Court and the Code of Conduct of the bar of England and Wales; to provide her with a period of practical training hence she was only entitled to be paid for work she did that “warranted payment".

She sued alleging that there was a contract between her and the members of the chambers entitling her to be paid the minimum wage under the national minimum wage act 1998.

Lawson argued that she was not entitled because the parties had not intended to create legal relations. It was a voluntary offer by the chambers to provide Edmonds with education and training in the practical aspects of legal practice.

Held: It had to be determined objectively whether the parties had intended to enter into legal relations. The court decided that the parties had intended to create legal relations which consequently ended up in a contract.

Consideration

A valuable consideration may consist either in some right, interest, profit or benefit accruing to one party or some for bearance, loss of responsibility given or undertaken by the other.

Case 3

Parastatidis v Kotaridis 1978 – (Contract with no consideration losing)

Fact: The plaintiff lent the defendant Nine Thousand Dollars, interest free and not to seek repayment for two years. Before that period was over, he claimed its return.

The defendant refused to pay, citing the agreement.

Held: The plaintiff was entitled to be repaid. The plaintiff was given nothing (consideration) in exchange for his promise and promise was therefore not enforceable.

International Business Law

Note: Since the case in hand, Curry House Limited vs www.spices.com.pak is a case that extends internationally, it is important to discuss international law.

International Law

International Law deals with three kinds of international relationships:

One state and another state

Those between states and people

Those between one person and another

When courts are required to decide on international disputes, they often rely on the general principles of law that are common to the legal systems of the world. Although there are many states, there are only two major legal systems – the Anglo American Common Law System and the Romano-Germanic Civil Law System.

Trade Practices Act 1974

The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection.

Under the trade practices act 1974 Unfair Trade practices are prohibited. It is aimed at those firms which conduct deterring practices and result to anti-competitiveness.

These Prohibitions Include –

Most Price Agreements

Primary Boycotts

Secondary Boycotts

Misuse Of Market Power

Exclusive Dealing

Third Line Forcing

Resale Price Maintenance

Mergers And Acquisitions

Breach of Contract

Breach of a Contract occurs when one party fails to perform his or her obligations under the contract or intimates that they will not perform them.

Breaches are categorized into

Actual Breach (An actual failure to perform, in whole or in part, when performance becomes due)

Anticipatory Breach (A clear statement or intimation that a party will not do whatever is required when it should be done )

Elements a Plaintiff Must Establish to Prevail on a Breach of Contract Claim :

Existence of a Valid Contract

Defendant Breached the Contract

Plaintiff performed all obligations to the contact prior to filing this lawsuit.

Plaintiff notified the defendant about the breach

Damages

Damages for Breach Of Contract

A Person can claim for damages to compensate for loss caused by a breach of contract.

To be liable for compensation on a breach of contract, there must have been a breach in the contract by the defendant. The loss to be compensated is the loss to the plaintiff, not the gain made by the defendant and, in particular the loss must not be too remote. The Law gives the injured party the right to sue but it expects the injured party to mitigate or minimize its losses or else he will be limited to nominal damages only.

Curry House Limited Versus www.spices.com.pak