In our previous article ‘Proposed New Developments in Electronic Contracts: Web Page Advertisements and E-mails’  we dealt with a number of updates to Australia’s electronic transaction regime including default rules to determine the time that the law will deem an email to be sent and received.

In addition to these changes, a safeguard providing a right to withdraw an email or online communication (where an input error occurs in a portion of an electronic communication) has been implemented, the recognition as to when an electronic signature will be legally effective has been broadened and the relationship concerning intermediaries such as web hosts has been clarified, along with default rules that have been formally passed into law to determine the place of dispatch and receipt of electronic communications.

What if customers make an error in an electronic contract?

A safeguard now provides a right to withdraw the portion of an electronic communication regarding contracts in certain circumstances, particularly circumstances that address the notion of ‘unjust enrichment’ and limit abuses by parties acting in bad faith.

Where an ‘input error’ is made, for example, where a person enters the wrong quantity of goods in an electronic order form, the safeguard enables the withdrawal of that portion of the electronic communication containing the error, but only when the error is made by a natural person in an exchange with an automated message system, an opportunity to correct the error is not given and the person notifies the other party of the error as soon as possible after having learned of the error and he/she has not used or received any material benefit or value from the goods or services.

We would recommend businesses in the e-com space build in an opportunity for consumers to correct input errors when using automated message systems, such as including a confirmation screen that enables a consumer to correct any information before the electronic communication is sent.

When are electronic signatures regarded as genuine?

The legislation has made provision for the legal recognition of electronic signatures (whether by insertion of electronic versions of a handwritten signatures, or inclusion of a typed name or signature block) by establishing general conditions under which an electronic signature is regarded as authenticated thus giving it sufficient integrity and enforceability.

The basic function of a signature, is to identify an individual’s personal involvement in the act of signing a document. The law now provides that, in order to be a genuine signature, the method used must be capable of indicating the signatory’s ‘intention’ in respect of the information contained in the electronic communication.

The court will consider the method used with a view to determining if it is ‘reliable’. They will take all factors into account in making this determination. This allows a range of legal, technical and commercial factors to be considered when determining whether the method used was appropriate.

A party will not be able to invoke the ‘reliability test’ to repudiate a signature in circumstances where the party’s identity is not in doubt and their intentions can be proved. This prevents a party from evading its responsibilities by asserting that its or, the other party’s, signature was unreliable even if there is no dispute about the identity of the person signing, or the fact of the signing.

Web hosts and servers: party to the contract?

The intention of the new changes is to exclude the possibility that a recipient who merely stores a data message – such as servers and web hosts – might be regarded as an originator or contracting party in any online transaction.

The changes clarify that an ‘addressee’ is the natural person, corporate body or other legal entity with whom the originator tends to communicate by transmitting the electronic communication, as opposed to any person that may simply receive, forward or copy the communication during the course of transmission.

The ‘originator’ is the natural person, corporate body or other legal entity that sent or generated the communication, even if the communication was transmitted by another person.

Where are business electronic communications sent and received?

Because of technological advances increasingly adopted by businesses, business practices may involve various parts of a transaction taking place in different locations and possibly different jurisdictions. It can therefore be difficult to define ‘the place of business’. For example, the global reach of e-commerce means orders may be placed from an office or home location, at sea or in the air, and may be received at servers located within different jurisdictions and with sales delivered at another site. Vendors may have several warehouses in different places and diverse goods may be shipped to fulfil a single purchase order. The same transaction may involve direct debit from a credit card, and the payment is likely to be effected in yet another location.

There are now a number of default rules to determine the place of dispatch and receipt of an electronic communication that apply in the absence of any alternative agreements. In all cases, parties can agree to alternative terms to determine the place of dispatch and receipt of electronic communications.

There is no distinction between an information system that is, or is not, under the control of the user such as where the parties are using web-based e-mail or Software as a Service (SAAS) models.

There are numerous rebuttable presumptions in favour of a party's indication of its place of business:

• A party’s place of business is assumed to be the location indicated by the party, unless another party demonstrates that they do not, in fact, have a place of business at that location;
• Where a party has not indicated a place of business, if there is only one place of business, that will be assumed to be the place of business; 
• If a party has made no indication and there are multiple places of business, the place of business will be either the place that has the closest relationship to the transaction, or the principal place of business. In determining the place of business with the closest relationship to the transaction, consideration is given to the circumstances known, or contemplated, by the parties at any time before or after the transaction; 
• If a party does not have a place of business, for the purposes of determining the place of dispatch and receipt of an electronic communication, the place of business is assumed to be their habitual residence (this presumption doesn’t apply to corporate  entities); and 
• The location of an information system can be a factor in determining the place of business. There should be a reasonable connection between a party and what is deemed to be their place of business.

Legal Background

The Electronic Transactions Amendment Act 2011 (the Amendment Act), which amends the Electronic Transactions Act 1999 (Cth) (the Act), has now passed in view of Australia considering accession to the United Nations Convention on the Use of Electronic Communications in International Contracts 2005 (the Convention) in order to enhance the legal certainty and commercial predictability surrounding electronic commerce without intending to alter settled contract law or domestic practice. Please contact us if you have any questions about any of the above or if you need advice on your business.