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Validity of Electronic Signatures

Describe about the Business Law for Electronics Contracts using Email.

Several of the rules that are applicable in case of 'paper' contracts are also applicable in case of the electronic contracts that have been created by the parties using e-mail, online or other electronic means. At the same time, more and more businesses and supplies are moving towards electronic and online credit applications including with the customers were not present in Australia, the effect of these rules have become even more significant. A number of these rules have been recently considered by the courts which included the Supreme Court of Queensland that had to go through the issue of electronic signing by e-mail to contract to which an interest in land was created.

Therefore the issue of electronic contracts can be divided into three parts regarding the ways in which the issues related with electronic contracts have an impact on consumers. In the first part, the issue is if an e-mail can be considered as a signature; when the credit applications and the terms and conditions of trade and the guarantees should be signed and if the foreign laws can be considered as relevant. In this second part, the issue that needs to be considered is who has the sufficient authority for signing the contract on behalf of a customer or guarantor and what will happen if such a person does not have the required authority. Similarly in partly the issue is related with the time when the parties are considered to be found during the negotiations even if it has been said by them that it is subject to contract?

First of all, it has to be seen if an e-mail can be considered as a signature in case of an electronic contract. Generally if the contract or any clause of the contract creates an interest in land or is a guarantee, the law in Australia provides that there should be a memorandum or a note present in writing that has been signed by the relevant party or its agent. This condition is particularly relevant in case of the creditors who have relied on charging clause for lodging caveats on the interests over land or guarantees. For example in Stellard’s Case, Stellard was willing to buy land off NQF and after a series of e-mails, it sent an e-mail to NQF in which it has mentioned the amount that the company was offering to pay and also the general terms of the offer or in other words the 'offer e-mail'.

Requirements for Valid Electronic Contracts

There was no formal contract document that has been hand written or electronically encrypted signatures that were placed on it. In this regard, the agent of NQF (the director's son) sent an acceptance e-mail in which it had accepted the offer e-mail sent by Stellard and at the end of this e-mail, intentionally, the name Drew has been typed at the end of the e-mail. It was agreed by NQF that the e-mail getting the acceptance has been sent by Drew but it was a memorandum or a note in writing. At the same time, it was also alleged by NQF that the e-mail containing the acceptance has not created an enforceable contract between the parties regarding the land as it was not 'signed'.

Therefore the issue arose if the acceptance e-mail can be considered as a signed memorandum or writing. In this regard, a national scheme is present in Australia regarding the electronic transactions law. This is present in the form of Electronic Transactions Act (Vic) 2000. At the same time, similar legislations also present in other countries. Therefore according to the court in Stellard's case, it was stated that in view of the trail of the e-mails between the parties, the acceptance e-mail had a signature and the result was that an enforceable contract regarding land was present between the parties as it was a memorandum or a writing that has been signed by the registered owner or an agent thereof. The result was that the court stated that under the circumstances, where the parties have been involved in negotiations by using e-mail and particularly when an offer has been made e-mail, it is available to the court to infer that consent regarding the use of e-mail has been given by the conduct of the relevant party (Burns and Hutchinson, 2009). Therefore the court noted that in communicating negotiations through e-mail, an implied consent has been present on part of Drew on behalf of NQF regarding the method of signing through the e-mail.

It also needs to be mentioned that which relevant electronic transaction log will be applicable to the terms and conditions of the supplier will rely on the words used in these terms and conditions and also on the effective and online system, e-mails or other electronic communications are used by business for credit applications and guarantees, particularly in case an e-mail trail is not present. Therefore if it is done correctly, it is possible to sign the documents by using electronic means apart from the e-mails, provided that a supplier has strictly complied with the provisions of the relevant electronic transactions law.

Considerations for Signing Terms and Conditions

In order to be valid, the basic elements that have been prescribed by the contract law are also applicable in case of electronic contracts. In this way, the requirements of offer and acceptance, consideration and the capacity of the parties to create a valid contract are still regarding case of electronic contracts. However a question may arise as to when the terms and conditions and the guarantees have to be signed in order to be enforceable regarding certain rights. Therefore generally the terms and conditions and guarantees contained express terms for the purpose of securing any payment that is owed towards the supply. Some of the common examples of such a situation include the case where supply will retain the ownership of the goods in the time they have been paid for in full. Similarly, a charge can be granted to the supply regarding any interest in land that the customer may have, either at present or in future. This is also known as a charging clause. The effect of a charging clause is that it allows the supplier to lodge a caveat regarding any interest in land that has been registered in the name of the customer. This has proved to be a significant tool for the purpose of debt recovery. In order to lodge a caveat under the law of Australia, the terms and conditions (as was the case in Stellard's case) have to be signed by the customer. In most of the other countries there is a similar requirement related with the caveat lodgment systems. Similarly in case of guarantees, a charge is generally granted regarding any interest in real or personal property that the guarantor has, or is capable of granting an interest in. This is known as a general charging clause. According to the law of Australia, a guarantee has to be signed by the guarantor on the agent of the guarantor in order to be made enforceable. The test regarding any mail has been signed by guarantor or its agent can be the test that was mentioned by the court in Stellard's case. In the same way, the requirement according to which the guarantee should be signed is also present in the law of most of the countries.

Under these circumstances, it can be said that under the Australian as well as according to the Australian law, the electronic signatures are considered as being valid for the purpose of executing agreements. However, a difficulty may arise in case of electronic signatures when evidence is needed for confirming the identity of the person signing the contract or the intention of the party to be bound by the contents of the agreement. Although these risks may be mitigated by using digital signature tools that incorporated the context of the identity verification and methods of authentication like public-key cryptography but still there are certain significant issues that need to be considered. As a result it can be said that although the electronic signatures are legally enforceable but still they are difficult to prove. As mentioned above, in order to be created validly, there are certain elements that have to be present in an agreement. These elements include the intention of the parties to create contractual relationships, accepting the offer made by a party in providing consideration under the agreement. Generally in case of commercial transactions, the creation and the execution of a valid agreement through electronic means has to satisfy these elements under the international law and also under the Australian law as is the case with the paper contracts. However apart from the usual requirements that are present in case of a labor contract, a contract that has been created using electronic means is considered as legally valid if the contract has been appropriately stored and it can be accessed after its execution. At the same time, it is also required that they should be consent present between the parties either express or implied that the information will be received electronically. At this point, it is also worth mentioning that according to the law, the purported originator is considered to be bound by the communication if such a communication has been sent by the purported originator or with its consent. However this results in a problem that deals with establishing that this element is present, especially in the cases where the parties to the transaction have not been dealing with each other face-to-face and as a result, they cannot verify the identity of each other by using traditional means.

Enforcement of Guarantees



Under these circumstances, it can be said that e-mail has outnumbered the traditional letters and faxes and has become the preferred communication method for businesses which include the negotiations for contracts. Although generally the courts are considered as being behind the times but in this case, the courts have responded towards this shift in communication and consequently, e-mail has been accepted by the courts as the means of creating a binding in between the parties. On the other hand, all the businesses are not conversant with this fact. In fact there are a number of businesses that are still under a mistaken belief that anything said or agreed to the e-mail is not binding for the parties and the also believe that a legally enforceable contract can only be created when a formal written document has been signed by the parties. But the law provides that if the parties are negotiating through e-mail but they do not want the e-mails to be binding contracts, this fact should be clearly mentioned in the e-mail that no binding contract will be created between the parties unless a formal contract is executed by the parties. On the other hand, if this condition has not been expressly mentioned, it is not likely that such a condition will be implied in the e-mails by the court. The result was that, for example, in Stellard, the court arrived at the conclusion that a binding contract related with the sale of land has been created between the parties through e-mail. More significantly, it needs to be noted that in both the offer e-mail as well as in the acceptance e-mail, it has been mentioned that the offer is subject to contract and also mentioned that it was subject to execution. After the exchange of e-mail between the parties, a contract was sent by the buyer to the seller for executive, but the same was not signed. Later on, the seller withdrew from the deal and had made a contract with another party. Therefore, it was the decision of the court that by the context of the e-mails, it can be said that it was the intention of the parties to be bound by it immediately. This was the case even if the party is expected that the agreement will be substituted by a formal contract which will also contain additional terms. In this regard, the court also stated that the e-mails fulfill the requirement according to which a contract related with the sale of land should be in writing and signed, in view of the provisions of the Electronic Transactions Act, 2001.

Charging Clauses and Caveats

Therefore, it can be stated that the decision given in this case follows an earlier decision of Western Australian Court of Appeal that was delivered by the court in Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd. (2015). In this case, it was stated that a contract has been created between the parties regarding the lease of commercial premises by using a series of e-mails although it was mentioned in these e-mails that the offer was subject to formal approval. While delivering this decision, the court was not affected by the fact that the parties failed to agree regarding a reinstatement clause and it also ignored the fact that no formal lease was later on signed by the parties although it was the intention of the parties to do so. The trend related with binding e-mail also extends to the settlement negotiations that take place between the lawyers through e-mail. For example in Universal Music Australia Pty Limited v Pavlovic (2015), the NSW Supreme Court arrived at the decision that a binding settlement agreement was created through the e-mails that were exchanged between the lawyers. In this case, the court stated that the e-mail of the lawyer in which it was mentioned that the settlement deal will be signed by the client along with the rest of the communications and the conduct of the parties, it was considered that a binding contract has been created. Although the parties had the intention that a deal will be signed later on and it was never signed but a Court refused to find the presence of an implied condition according to which, a binding contract will not be created unless the deed has been actually signed.

Therefore in the end, it can be said that as a result of the expansion of Internet and e-commerce, there has been a significant increase throughout the world regarding the formation of electronic contracts. New laws are also being developed for accommodating electronic contracts. However, despite the development of new legal framework for accommodating electronic contracts, still there are certain uncertainties related with the formation of electronic contracts.

References

Australian Government, Commonwealth Treasury (2006) The Australian Guidelines For Electronic Commerce. Available:https://www.treasury.gov.au/documents/1083/PDF/australian_guidelines_for_electronic_commerce.pdf    (September 18, 2008).

Benkler, Y. (2000), Net Regulation: Taking Stock and Looking Forward. University of Colorado Law Review, 71 (4), pp.1203 – 1252

Burns, K. and Hutchinson, T. (2009) The Impact of ‘Empirical Facts’ on Legal Scholarship and Legal Research Training. The Law Teacher, 42 (3) pp. 153-179

Carter, J. W. and Harland, D. J. (1993) Cases and Material on Contract Law in Australia, pp. 339-40

Cornwilaw (2006), Electronic signatures and Electronic Contracts, Available: https://www.corwinlaw ( 22 May 2011).

Forder, J. and Svantesson, D. (2008) Internet and Ecommerce Law, pp. 52-53

Gatt, C. (1998) Comparative Issues in the Formation of Electronic Contracts. International Low and Information Technology, 6 (1), pp. 34 -57

Graw, S. (2005) An Introduction to the Law of Contract, pp. 461-464

Optus, (2009), Buying Online is Easy: A Few Things to Note. Available: https://personal.optus.com.au (December 26, 2009)

Perry, D. (2002) Electronic Enforcement Environment and Capability, Internet Law Bulletin, 5 (7), pp. 73- 74

Rahukar, S., (2010), Electronic Contracts (Part-1) Club Hack Mag. Available: https://chmag.in/article/nov2010 (May 22, 2011)

Schiano, W. T. (2004) CyberLaw: Text and Cases, pp. 158-159

Starke, J. G., Seddon, N. C. and Ellinghaus, M. P. (1992) Cheshire and Fitfoot’s Law of Contract pp. 663- 773

Case Law

(Stellard Pty Ltd & Anor (‘Stellard’) v North Queensland Fuel Pty Ltd [2015] QSC 119

Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21

Universal Music Australia Pty Limited v Pavlovic, [2015] NSWSC 791

Statute

Electronic Transactions Act (Vic) 2000

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