01 Feb Acceptance of Internet Contracts
Under Section 6(3) of the Sale of Goods Act, Cap 31 there is an acceptance of goods within the meaning of this section when the buyer does any act in relation to the goods which recognizes a pre-existing contract of sale whether there be an acceptance in performance of the contract or not. Generally speaking, acceptance is deemed to have occurred if the conditions in Section 36[1] are complied with. The ability to form contracts online has revolutionized the way business is conducted. In the UK and US as well as most , almost all types of contract can be made online, there are very few which the law requires are still made ‘in writing’ or are physically signed by the parties. However in Kenya, the concept of e-contracting and buying online is growing at a slow and steady pace owing to it being relatively new and the notion of its uncertainty and perceived unpredictability.
What is an e-contract?
A legally binding contract (electronic contract) made by buying goods or services through the internet between an electronic agent and the parties who have no personal contact or pre-existing business relationship. Some examples of e-contracts are:
- Online shopping (eBay), and
- Online auctions.
- Payment service providers (psp)
In such types of contracts, the standard legal principles of contract law apply to internet transactions such as online shopping and banking; thus, the principles of offer, acceptance, consideration and intention to create legal relations are applicable. The better view is thought to be expressed in the Australian case of R v Clarke (1927): there cannot be assent without knowledge of the offer; and ignorance of the offer is the same thing whether it is due to never hearing of it or forgetting it after hearing. Although performance of an act (or acts) specified in an offer as constituting acceptance may be presumed to be performed in response to an offer, this presumption may be rebutted. It was rebutted in this case by the evidence of Clarke himself. There was no agreement.
In an internet transaction as per the Sale of Goods Act,[3] Where under a contract of sale the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell.
With the online business process being automated there may be confusion as to when an offer is accepted. The basic rule is that for acceptance to be effective it must be communicated. Consider the case of Felthouse V. Brindley. It must also be unequivocal and unconditional. However, the question arises as to when communication is deemed to have been made. For instance, when a potential order is processed through a website but the seller acknowledges the acceptance through e-mail, is it communicated when the seller presses the ‘Send’ button, when it leaves the seller’s email system, when it leaves the seller’s ISP’s mail server, when it hits the buyer’s ISP’s mail server, when it enters the buyer’s email system or when the buyer reads it (or indeed any stage in between).
The vast majority of online agreements take the form of a “click-wrap agreement.”[5] Typical forms of online agreements include online terms of use for popular web services. In a “click-wrap” agreement the user typically manifests assent by clicking an “I accept” icon on a web-page or pop-up screen.
Courts addressing “click-wrap” agreements have uniformly held them to be valid and enforceable. As with any contract, a user’s failure to read a “click-wrap” agreement prior to accepting its terms, will not excuse compliance with its terms.
Browse-wrap agreements: those agreements which are formed not by clicking “I accept,” but through a user’s access or use of a website for which terms of use are in effect; browse-wrap agreements are more likely to be rejected by courts.
Courts, however, have enforced browse-wrap agreements based on the following reasoning:
- People often enter into service contracts without first seeing the terms.
- More enforceable against frequent visitors to sites.
- More enforceable against sophisticated commercial entities.
Acceptable methods of acceptance: Require the contracting parties to accept the terms by a method that affirmatively signals assent:[8]
- Click-through processes, such as checking an onscreen box or scrolling the agreement before clicking “I accept”.
- Typed signature at the end of an electronic document or email.
- Automated electronic signature processes that allow for verification by both parties.
- The contracting party expressly affirms that manifesting assent to the terms by the required method constitutes an “acceptance” and gives rise to a contractual relationship.
- The contracting party expressly acknowledges that using a website or online service after being provided sufficient notice of the terms and failing to reject them constitutes “acceptance”.
In other words, it’s not merely clicking the “I Agree” button that creates the legal contract. The issue turns on reasonable notice and opportunity to review[9]—whether the placement of the terms and click-button afforded the user a reasonable opportunity to find and read the terms without much effort. In practice, the enforceability of each TOS implementation often falls on a sliding scale, depending on the degree of notice it provides the user. [10]
At one end, presentations that require the user, before clicking, to scroll to the bottom of a set of terms, or through an adjacent scroll box, guarantees the entirety of the TOS appears at least once, even if the user chooses to ignore it, and has been held to be enforceable.
At the other end, by contrast, if a user must click on a hyperlink, or series of hyperlinks, to view the terms, the significance of clicking “I Agree” as showing assent diminishes, depending on the difficulty in actually finding the terms and whether a reasonable Internet User would have done so.[11]
Finally, in addition to the placement of terms, courts also consider the inclusion of conspicuous statements on websites that instruct users to read the TOS and inform them of the consequence of clicking “I Agree.”
A contract would be formed once a customer makes an offer by placing an order and the supplier accepts this offer. An advertisement on a website will not generally constitute a formal offer to contract (but take care designing the advertisement).
The terms and conditions about when the contract is formed should be clear – for example when the supplier sends back a confirmation email (this is important, and will help to avoid situations where you are unable to meet the customer’s expectations for any reason, if commercial circumstances change). But to avoid confusion about when the contract is formed ensure that you word them in such a way that they are not legally an acceptance of a customer’s offer.
There is no difference of principle between the process of offer and acceptance online and the process offline. The main practical points to take away from this post are these:
- traders should take care to ensure that they are not prematurely bound by contract;
- to avoid being prematurely bound, traders should specify the acts that constitute the offer and acceptance in their T&Cs, and ensure that those T&Cs are properly brought to the attention of users and accepted by customers;
- traders should also ensure that the structure of their checkout process (usually dictated by shopping cart software) and statements on their websites generally do not imply that a contract is formed before time; and
- where particular caution is needed (e.g. because a seller is also a manufacturer) then a clear an unambiguous statement that the advertisement of products on the website does not constitute a contractual offer should be included on the website.
Article by Ronnie Mutuma
Created: 21st March 2014
[1] Sale of Goods Act, Cap 31
[2] Crown v Clarke (1927) 40 CLR 22S
[3] Section 3(4) and (5), Cap 31
[4] (1863) 142 ER 1037
[5] Bluebird, LLC., No. 302920-V., 2009 WL 1498703.
[6] Costar Realty Information, Inc., v. Mark Field Alliance Valuation Group, 612 F. Supp. 2d 660, 669 (D. Md. 2009) See also Feldman, 513 F. Supp. 2d at 236
[7] Feldman v. Google, Inc., 513 F. Supp. 2d 229, 240-41 (E.D. Pa. 2007) (holding click-wrap agreement valid under CA law); contra America Online, Inc. v. Superior Court, 108 Cal. Rptr. 2d 699, 702 (Cal. Ct. App. 2001) (holding click-wrap agreement invalid because it violated public policy by restricting California citizen’s right to sue under a class action remedy)
[8] http://www.acc.com/legalresources/quickcounsel/gfceco.cfm
[9] Section 35, Sale of Goods Act, Cap 31
[10] Fteja v. Facebook, Inc. 2012 U.S. Dist. LEXIS 12991 (S.D.N.Y. 2012)
[11] Cvent, Inc. v. Eventbrite, Inc. 739 F. Supp. 2d 927 (E.D. Va. 2010)[/vc_column_text][/vc_column][/vc_row]