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Challenges of E Commerce to Traditional Contracts

As Information Communication Technologies progresses so do new media technologies such as the internet. Many individuals and businesses have moved towards such means as an opportunity for expansion in commerce. [1] This new path of business has been referred to as E-Commerce. It is defined as any business transaction that has been negotiated over an online system and where the parties interact electronically rather than by physical exchange or contact. [2] Due to this ICT revolution, information held by businesses can now be accessed by a wider group of people due to the availability of the internet. The principles of Contract law that governs online transactions continues to progress as businesses that are based online change and grow. Agreements can be as simple as clicking on a box to agree to purchase terms, or complex contracts covering intellectual property or consumer privacy. [3] As it continues to grow, e-commerce maintains its roots in traditional contract law however, as a result of the old and new complexity there are some challenges that e-commerce poses to the traditional model such as issues regarding offer and acceptance, jurisprudence and globilisation, state of mind and enforceability of electronic contracts as opposed to the traditional model of contract.


The basic concept of effective communication in contract formation is the concept of offer and acceptance. [4] E-commerce poses a major problem in relation to this issue. It is important to identify the offer and acceptance because they fix the precise time and place of the agreement, thus determining which jurisdiction is relevant. [5] 

Often in e-commerce transactions between parties never meet each other face to face. This is an immediate issue and challenge to the traditional form of contract as it makes it difficult to ensure the parties act lawfully and that the transaction itself is legal and has undergone the steps necessary to regard it a contract. [6] When speaking of bilateral contracts, an offer is a clear statement of the terms in which a person (the offeror) promises to be bound and the other party (offeree) accepts the offer and it is through acceptance of this offer that a contract is created. [7] On the internet, it is difficult to determine whether a webpage is considered an offer or an invitation to treat. However, The Electronic Transaction Act however, in s14 states that a message is deemed sent under s14(1) when it ‘enters a single information system outside the control of the originator’ thus is deemed sent. [8] 

The words used in an online offer can often be considered misleading, and different legal systems may have different approaches to these problems. An acceptance is a final unqualified agreement to the terms of the offer. [9] Generally, it must be communicated to the offeror and the parties are free to vary by agreement. [10] E-mail is a common method of acceptance in ecommerce environment. Acceptance of an offer becomes effective at the moment the indication of assent by the offeree reaches the offeror. [11] Whilst E-mail is a common method of acceptance in the e-commerce it proves to be problematic. The ‘Postal Acceptance Rule’ states that when parties have agreed to transact a deal by post, the contract is deemed concluded when the letter of acceptance to the offeror is posted by the offere whether the offeree gets it or not. This rule does not apply to e-commerce. The Electronic Transactions Act 1999 (Cth) deems a message received under s14(3) when ‘the electronic communication enters [the addressee’s] information system’ [12] 

E-Commerce and Jurisdiction

The Old Complexity which occurred during the Industrial Revolution in the 17th Century was there so as to establish the boundaries and scope of the sovereign state’s powers to govern. [13] However, the new complexity has brought about assumptions regarding three inter-related ‘revolutions’ one of them being Information Communication Technology Revolution that has brought about challenges to E-Commerce that has produced challenges to contract. In broad terms, jurisdiction refers to the power and authority of a government to legislate, adjudicate and enforce its laws. [14] Jurisdiction is dependent on the sovereignty of the government and therefore is usually territorial and is bound by territorial limits and usually does not extend beyond the territory. [15] In order for a court to adjudicate in a case, the court must have authority over the subject matter in dispute (subject matter jurisdiction) and authority over parties before the court (personal jurisdiction). [16] This in turn makes it difficult to be sure that the offer has been ‘accepted’ as you are unsure if the acceptance has reached the information.

Jurisdiction is often subject to territorial limits whereby, activities that occur on the Internet, by their very nature, are worldwide. [17] It is not a matter of where the website is hosted from or built as it may be accessed from anywhere in the world. This could indicate that the individual or business who constructed the website may be subject to a personal jurisdiction anywhere in the world. Because Bilateral contracts are face-to-face it is simple to determine what jurisdiction the exchange took place and what laws apply.

The question of Internet jurisdiction can be simplified into a debate between those who support the jurisdiction being the residence of the consumer, and those who support it being the location of the business. [18] However, Jurisdiction is an issue to e-commerce as it is difficult to identify what juristictive laws need to be enforced. This can be problematic since unlike traditional contracts, the person being contracted with is not physically present, and so their identity may be uncertain. [19] 


As discussed in relation to Jurisdiction, e-commerce extends the online market and across the world which results in the globalisation of businesses.

There is a requirement in the law of Contracts that parties be ‘of the same mind’ and that the terms be certain raises the question of how terms are incorporated into an electronic contract however, this does not happen. [20] The involvement of two or more people, negotiating either face-to-face (ie. Bilateral contract) or through some means of communication is an underlying assumption. [21] It is difficult to ascertain whether a contract can be considered valid and accommodate where the only ‘minds’ are computerised.

For transactions caught by the International Sale of Goods Act, the "Postal Acceptance Rule" does not apply. [22] Instead, the Act sets out that the acceptance of an offer becomes effective at the moment the indication of assent reaches the offeror. [23] 

Contract law requires a meeting of the minds however; many electronic contracts are formed by machine. [24] It now so happens that the typical website-based contract has no active human mind on the vendor side which indicates there has been no meeting of the mind. And even some e-contracts are made by software on both sides A contract involving an automated messaging system at one or both ends is not invalid solely because of the lack of human intervention at the time it was made however, this is still a challenge to the traditional model of E-commerce as people are not in the same place, at the same time to accept or agree to the offer. As the world continues to progress in e-commerce businesses are buying/selling from people who are unknown thus not being able to know or determine whether the person the transaction is occurring with is a legal person or has the capacity to make the contract.


Written contracts which have been signed and accepted are considered to be binding however enforceability of internet contracts is questionable. Although the internet is just emerging, the contracts formed over the internet are generally well-governed by the principles set out for written contracts. [25] As previously discussed, two or more parties must mutually assent to the terms of the contract and the contract itself must be supported by some consideration. [26] 

Often, the user of a commercial website is asked to read a set of terms and conditions governing the activities and then asked to agree to those terms and conditions before making a purchase or obtaining the service offered by the website. [27] Agreements entered into in this fashion are referred to as "click-wrap" agreements because the user typically indicates his or her agreement to the terms and conditions by clicking a button or hyperlink marked "I agree." [28] Such contracts are generally binding, subject to traditional contract law principles.

Subject to traditional contract principles, click-wrap agreements are generally enforceable and browse-wrap agreements are very difficult to enforce.  Shrink-wrap agreements lie somewhere in between, though recent case law supports their enforceability. In the case of Hotmail Corporation v Van$ Money Pie Inc., [29] the court found from this case that click wrap agreements were enforceable [30] , it goes to show the difficulties associated with online agreements and not all people who click ‘I agree’ on to terms and conditions online entailed.




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