E commerce and E Contracts

The advent of new technologies such as the internet and other networks have changed the business world and provided the trading processes in e-business more efficiency. This technological Improvement has brought faster means of conducting business transactions, different from that of paper transactions as the steps that are necessary to conclude and form an e-contract is different and may be considered more technical than usual traditional contracts. [1]

E-contracts are contracts that are executed and enacted by a software system in the sense that they are not concluded by face to face communications i.e. the “seller and buyer” or “supplier and consumer” do not meet in person to form, negotiate and execute the terms of their contract. Distance contracts is a type of e-contract because they are contracts concerning goods or services concluded between a supplier and a consumer under an organised distance sales which for the purpose of the contract, makes use of one or more means of distance communications such as internet, e-mails, telephones and so on up to and including when the contract is concluded”. [2]

In this essay recourse will be made to the various steps that are necessary for the formation of a distance contract, the various prior information that is required to be given by the supplier to a consumer by various laws, the issue of domain names, the issue of whether the subject matter of the contract is one of goods or services and what the law provides, the issues of performance in a contract such as part- performance and the consequences of non performance by parties to the contract in relation to services that a consumer is entitled to such as delivery services, maintenance services, refund, the rights and duties of both parties to a contract, remedies that are available to the consumer in the case of disputes that may arise, different requirements of an information service provider in relation to distance contracts and the provisions of information society services.

It is also inevitable that in distance contracts, disputes are likely to arise as a result of the fact that such contracts are concluded by electronic means which are not completely efficient as they have their disadvantages, the issue of conflict of laws and jurisdiction tends to arise in the sense that either party will want to enforce the law that will give more redress to them.

Flowing from the above, it would be right to say that because a site has an ‘.uk’ domain name does not mean that it trades from within the UK, or that the company operating it is registered in the UK [3] . However, where the company has ‘.hk’ as its domain name, as in the present scenario, there is no guarantee that the undertaking is established in that country. Also, for security reasons most web servers are kept geographically separate from the physical undertaking. [4]

2.0 Formation of e-contracts

The issue of formation of e-contracts is one that is of great contention till date because there are different ways by which e-contracts are concluded and their principles are different from paper transactions. There are three common ways in which e-contracts are formed which are by exchange of emails and attachments, by ordering on-line for goods which were advertised in a website and by EDI network exchange. [5] For a contract to be said to have come into existence, an offer has to be made by the ‘offeror or supplier” to “offeree or consumer” and an acceptance has to communicated back to the offeror before a contract can be said to have come into place.

In e-contracts there is usually a dilemma sometimes as to when an offer is said to be made and when an acceptance has been communicated back to the offeror, there are also issues as to whether the website advertisement is an ‘invitation to treat” or an offer .In the case of online contracts is it when the supplier advertises their products on a website this is called an invitation to treat it when the consumer goes ahead to place an order that an offer is said to have been made to the supplier and if the supplier accepts the order having in mind that he can decide not to accept the order, There by showing that an intention to create a legal relation exist between the two parties to a contract, the supplier then goes ahead to provide the consumer with the necessary steps that are needed to conclude the contract such as the languages used to conclude the contract, the terms and conditions of the contract, the technical means the site uses to allow consumers to spot and correct errors made while imputing their details prior to the order being placed and so on [6] .

Another issue of great contemplation in relation to formation of e-contract especially online distance contracts is the issue of when a contract is actually formed, that is acceptance has been communicated and a contract has come into existence to the extent that it is binding on both parties thereby giving rights and duties with regards to performance and execution to both parties to the contract. To this effect Article 10(1) (a) [7] and Regulation 9(1) (a) [8] provide that the supplier should notify the service recipient prior to the placing the order of the various steps to be taken to conclude the contract as upheld by the courts in the case of Holwell Securities v. Huges [9] . The present practice in distance contract concluded by electronic means (internet) is that a contract is not formed until the goods are delivered to the consumer and payment has been received by the supplier and in the absence of any such provision an acknowledgment of an order will be construed as acceptance of same.

As much as inconsistencies may arise in the issues revolving around the formation of e-contracts the above concerns have propelled the need to examine consumer rights related legislations, since in most cases, it is believed that consumers are the disadvantaged parties in a distance selling contract.

3.0 Analysis of issues and the provisions of different E-Contract Laws in relation to distance selling/contracts and Consumer Protection.

The question of issues does not arise without a dispute being present in regards to e-contract and in this case distance selling contracts. It is also a known fact that where there are disputes, there must be certain laws that provide solutions to these problems.

Article 2 s.s (2) [10] defined a ‘distance contract’’ as any contract concerning goods or services concluded between a supplier and a consumer under an organized distance sales or service –provision scheme run by the supplier, who, for the purpose of the contract, makes exclusive use of one or more means of distance communication up to and including the moment at which the contract is concluded”

The dispute between John (‘consumer”) and e-Toys4U.hk (“supplier”) is without a doubt a distance contract which was concluded online because there was the placement of an order for some goods and services and an acceptance of the order because there was part performance on the side of the supplier which involved the delivery of some of the goods to John and the non-delivery of some goods which is the subject matter of the contract and the issue in contemplation in this scenario.

There are different laws or legislations that govern e-contract most of which provide certain forms of redress and protection for parties to a contract most especially the consumer and they include;

(1)The consumer protection (Distance Selling) Regulations 2000

(2)The Electronic Commerce (EC Directive) Regulation 2002

(3)Directive 2000/31/EC on electronic commerce

(4)Directive 97/7/EC on consumer protection and distance contracts

(5)Rome 1 convention on (contractual obligations)

There are also other laws which protect consumer rights with regards to distance selling contracts such as Unfair contract terms Act (1977) and the Unfair terms in consumer contracts regulations which applies in situations where the terms and conditions of the contract are not fair to the consumer and also to prevent significant imbalance in the rights and obligations of the parties to a contract, Sales of goods Act (1979) which gives the consumer the right to return the goods if there are not fit for their purpose and must be carried out within a reasonable time, Brussels 1 which protects the consumer when conflict of laws and jurisdiction issues arise and provides that ‘where there is a dispute as to whose law will apply with regards a dispute between both parties, the applicable law will be the law of the consumers “habitual residence” if the supplier directs his activities to that country by any means and even if the parties choose a different law, it should not deprive the consumer of their mandatory laws” [11] because they are of the opinion that the consumer is the weaker party, Uncitral model law and so on.

Notwithstanding these other laws that were mentioned above which also provide consumers with certain protections in a distance selling contract, more emphasis will be made on the four laws which were first highlighted and their provisions in relation to our scenario in other to help John (‘consumer’) get redress from the (supplier) (e-Toys4U.hk) and also as regards the position of the subject matter of the contract in relation to them being either goods or services and what the law provides concerning them.

3.1 The Consumer Protection (Distance Selling) Regulations 2000

The consumer protection regulations like other regulations is a law that aims to protect consumers contracting at a distance from the supplier, where the consumer does not have the benefit of meeting face to face with the supplier and inspecting the goods or services offered for sale and it covers businesses that sell to consumers by mail order, phone, fax, internet many others. [12]

It has similar requirements as to certain rights that a consumer in a distance selling contract is entitled to from the supplier with other consumer protection regulations which includes;

Provision of comprehensive information before the purchase of the goods or service for example(e-mail address, Telephone number, geographical address of the company)

Confirmation of that information in a durable medium(written confirmation)

Consumer right to cancel the contract within a minimum of 7 working days without giving any reason and without penalty with the exception of certain category of goods and services

Right to a refund within 30days of cancellation

Performance as regards delivery of the goods or the service within 30days of the day after the consumer placed his order

Protection from unsolicited selling

Protection from fraudulent use of payment cards [13]

The supplier (e-Toys4U.hk) in our present scenario was in breach of a few of his statutory obligations to John the consumer as regards the distance contract by virtue of certain provisions of this DSR regulation in the following areas

Regulation 7 (1) (a )and (b) provides that the supplier is suppose to provide the consumer with certain prior information to the conclusion of the contract such as identity of the supplier, the suppliers address, description of goods and services, delivery of performance, geographic address, price of goods and services including taxes ,inform the consumer of if he proposes if the goods or services being ordered was unavailable to provide substitute goods or services of equal quality and price [14] .

These requirements were not met by the supplier in this scenario because as regards prior information, John was only provided with an e-mail address to contact the supplier, which turned out to be ineffective because upon john not receiving some of his goods, he sent e-mails to the supplier but didn’t get a response from the supplier informing him as to the non delivery of his other goods or even letting him know if they were un available and providing him with an alternative of substituting the goods with others of the same price and quality and also not providing him with another direct and effective manner in which John can communicate with him.

Regarding the issue of a “Telephone number” not being provided by the supplier (e-Toys4U.hk) to John in other to be able to reach them in case of any problem, the law provides that the availability of other easy and accessible mediums of communication such as e-mail addresses will suffice by virtue of Article 5(1)(c) [15] which states that as long as the other medium of communications provided by the supplier to the consumer makes it possible for him to be contacted rapidly and communicated with in a direct and effective manner the has been breach of any right as was further supported in the case of by The European Court of justice(ECJ) in the case of Bundesverband der Ver-braucherzetralen und Verbraucherverbande – Ver- braucherzetrale Bundesverband eV v Deutsche internet versicherung [16] .

The consumer protection regulation also provides for “Performance” with regards to the delivery of the goods and services to the consumer by the supplier by virtue of regulation 19 (1) and states that;

‘Unless the parties agree otherwise, supplier shall perform the contract within a maximum of 30 days beginning from the day after the consumer sent his other to the supplier” [17]

The supplier was also provided with the option in section (2) paragraph (a) & (b) of regulation 19 of in the event of their not being able to perform the contract within the period stated in paragraph 1 or due to non availability of the goods or services he shall;

‘Inform the consumer of this or reimburse the sum paid by the consumer or on behalf of the consumer in relation to the contract to the person by whom it was made” [18]

The supplier in (7) paragraph (a) & (b) [19] was also given the option of in case of his not being able to supply the goods or services ordered by the consumer to substitute them with ones of equivalent quality and price provided this option was stated in the terms of their contract and prior to the information that is required by the supplier to give the consumer in regulation 7(1)(b) and (c) in the manner required by regulation 7(2).

Based on these provision of the law, the supplier (e-Toys4U.hk) did not perform his duty as regards delivery and performance of the goods or services to John because judging from the scenario, the minimum days for performance of the contract which is 30days had lapsed and no further action was carried out in relation to the non delivery of John’s remaining items.

The regulation also provides consumers with the right of cancellation, cancellation period in regards to good and services and also exceptions to the right of cancellation as stated in Regulation 10,11,12 and 13 of the regulations but this right will be discussed in details alongside the goods and services that John ordered, due to the fact that although consumers are entitled to the right of cancellation in a distance contract, such a right is not exercisable on all types of goods or services as will be discussed in the course of this essay.

3.2 The Electronic Commerce (EC Directive) Regulation 2002

This regulation provides for businesses that sell or advertise products or services to business using the internet, email, interactive digital television or mobile phone sms text messages and its aim is to clarify and harmonise the rules of on-line business throughout Europe with the focus of boosting consumer confidence.

This regulation like the consumer protection (distance selling) regulation is also out to protect the interest of consumers like john and as such made certain provisions as to the enforceability of this rights notwithstanding the duties imposed on the supplier in a distance contract but also went ahead to provide for the general information which ought to be provided by a person providing an information society service. [20]

Regulation 3 ‘Information society services’ defined as ‘any service normally provided for remuneration, at a distance, by means of electronic equipment for the processing(including digital compression) and storage of data, and at the individual request of a recipient of a service” [21]

Regulation 6 (1) & (2) provided for certain general information that should be provided by an information service provide such as provision of relevant authorities in a manner which is easily and directly accessible for example;

The name of the service provider

The geographic address at which the service provider is established

The details of the service provider including his electronic mail address which makes it possible to contact him in a direct and effective manner, likewise the provision of s.s 2 which refers to the information service provider providing information as to clear and unambiguous nature of prices of goods also stating if they are inclusive of tax and delivery cost [22]

This regulation also when further to make provisions in regulations 8,9,10 & 11 as to other issues in relation to commercial communications, unsolicited commercial communications ,placing of the order, information to be provided where contract are concluded by electronic means as provided by regulation 9 which is relevant in our present scenario because this contract was concluded by electronic means specifically (1) paragraph (a),( b),( c), & (d) which imposes a duty on the service provider to provide certain information in a clear and unambiguous manner which includes;

The different technical steps to follow to conclude the contract

Whether or not they concluded contract will be filled by the service provider and whether it will be accessible

The technical means for identifying and accessing input errors prior to the placing of the order and

The languages offered for the conclusion of the contract

Regulation 1 proceeded to impose a duty on the service provider (e-Toys4U.hk) to provide a service recipient in this case ( John) with the above mentioned provisions and failure to do so will serve as tool to institute an action against the service provider for damages for breach of statutory duty. Hence making this an enforceability clause for John to claim his rights because the supplier in this case is in breach of his duty imposed by this regulation. [23]

3.3 Directive 97/7/EC on consumer protection and distance contracts

This Directive applies to most contracts where the a consumer and a supplier running an organised distance selling scheme do not meet face to face at any stage until after the contract has been concluded and it s aim is to provide a number of fundamental legal rights for consumers in order to ensure a high level of consumer protection throughout the EU [24] .

It also makes provisions for certain duties and rights on suppliers and consumers as regards distance selling contracts which includes;

Duty to provide ‘prior information’ such as identity of the supplier, means of communicating information to the consumer must be done in good faith and in a clear and comprehensible manner, information as to prices of goods and services including all taxes, the existence of a consumers right of withdrawal, details of telephone conversations and so on by virtue of Article 4 (1), (2) & (3). [25]

Right of withdrawal and its exceptions as regards certain goods or services and right to reimbursement of sums paid by a supplier by virtue of Article 6 (1) (2) & (3). [26]

Duty with regards to ‘Performance’ of the contract in Article 7 (1) (2) in issues relating to maximum days(30days) of performance of a contract, information as to failure to perform a contracts due to unavailability of goods ordered before the within the time frame of imposed for performance of the contract to the consumer by the supplier [27] .

3.4 Directive 2000/31/EC on certain as of (Information society services) on Electronic Commerce

This Directive just like other protection laws aims at providing consumers in a contract with certain protections and it also seeks to make sure that there is a proper functioning of the internal market by ensuring free movement of information society services between the member states.

It applies to various issues in relation establishment of certain information, commercial principles, contracts concluded by electronic means, implementation of certain codes of conduct and the liability of intermediary service providers but our focus is on provisions pertaining to contracts concluded by electronic means as it of importance to this essay.

Article 10, provides for certain information to be provided by a service provider prior to the order being placed by the recipient of the service in a clear and unambiguous manner as to the technical steps to conclude a contract, technical means for identifying input errors, offered for the conclusion of a contract, terms and conditions of a contract and its availability, information as to any codes of conduct which he subscribes to [28] .

Article 11 (1) the directive further went ahead to provide for certain principles that a recipient of a service is entitled to pursuant to placing his order through technological means and these principles include

(a)The service provider has to acknowledge the receipt of the offer without undue delay and by electronic mean

(b)The order and the acknowledgement of receipt are deemed to be received when the parties to whom they are addressed are able to access them [29] .

Article 5 (1) paragraph (a) (b) & (c) of the regulation provides for similar terms as regards general information to be provided with other regulations as to the name of the service provider, geographic address at which the service provider is established, the details of the service provider including his email address which allows him to be contacted rapidly and communicated with in a direct and effective manner [30] .

As earlier mentioned in the Consumer Protection Distance Selling Regulation above in relation to the email address of e-Toys4U.hk not being effective is a means of communication provided for John the recipient of the service and also Article 5(2) which made provision for prices of goods or services to be clearly stated by information society service and if it is inclusive of tax and delivery costs to be provided a service recipient [31] .

4.0 Rights available to a consumer by distance selling protection laws in relations to goods and services and their exceptions.

Consumers in a distance selling contract for goods or services are entitled to certain rights which they can enforce in the advent of a dispute that may evolve in the contract and these rights which are provided by different laws includes;

Right of withdrawal

Right of cancellation

Right to refund and reimbursement of sums paid

Right to rescind the contract

It is also important to understand that these consumer rights are subject to some exceptions because it is not all types of goods these rights applies to and such goods will be considered in relation to the goods that were ordered by John (consumer) from the e-Toys4U.hk (supplier)

The goods ordered by john in this scenario comprised of a games console together with several games, a tricycle, music CDs, an e-book compatible with his e-book reader, an iPod engraved with his child’s name and a selection box of chocolates. These goods been the subject matter of the contract are classified into goods whereby the right of cancellation can be exercised upon and the goods whereby the right cannot be exercised on

The consumer protection (Distance selling ) Regulations makes provisions for the right to cancel pursuant to Regulation 10 and Regulation 11(1) provided for cancellation period in the case of supply for goods as in our present case and it states

‘For the purpose of regulation 10, the cancellation period in the case of contracts for the supply of goods begins with the day the contract is concluded and ends as provided in paragraph (2) to (5) [32]

Regulation 11 (4) which applies John’s case provides that;

‘Where neither paragraph (2) nor (3) which applies for different days and requirements in regards to the expiry of the right of cancellation as to the supply of goods and services, the cancellation period ends on the expiry of the period of three months and seven working days beginning with the day after the day on which the consumer receives the goods’ [33] .

In view of the above mentioned provision, John can exercise his right of cancellation over the goods which he ordered which does not fall under the exceptions to this right over goods like the tricycle and the game console but not the several games because if the games come in form of CDs or cartages they can only be cancelled if the they were not unsealed by him by virtue of Regulation 13 (1) (d) [34] which provides for the supply of audio or video recordings or computer software. He can exercise this right over these two goods pursuant to Regulation 11 (2) which states;

‘Where the supplier complies with regulation 8,the cancellation period ends on the expiry of the period of seven working days beginning with the day after the day on which the consumer receives his goods’ [35]

Judging from our scenario, the supplier did not comply with the provisions of regulation 8 which provides for written additional information and (2) paragraph (a) which makes reference to Regulation (7) (1) (a) [36] that provides for information that should be provided prior to the conclusion of the contract with specific notice of (7) (1) (a) (v) [37] that provides for payments and delivery or performance of a contract and Regulation 8 (2) (c) which provides that the supplier is to provide a consumer with information as to the geographical address of the place of business to which the consumer may address any complaints.

Therefore e-Toys4U.hk was in breach of this duty and as such John can exercise his right of cancellation over these two goods.

With regards to the other goods that John ordered from e-Toys4U.hk, such a, music CDs, an e-book compatible with his e-book reader, an iPod engraved with his child’s name and a selection box of chocolates, these goods all fall under the exceptions to johns right of cancellation and as such cannot be cancelled by virtue of Regulation 13 (1) (a-f) with specific notice of paragraph (c)&(d) which relates to the iPod and e-book which were made with johns(consumers) Specifications and was clearly personalised’ [38] and in the case of the music CD being a supply for audio or video or computer software and Article (6) (3) of the Directive 97/7/EC which also provides for exceptions to the right of withdrawal which has similar requirements and unless the parties agree otherwise, the consumer will not have the right to cancel the contact by giving notice of ca