Online Contract

Online Contracts:

Concluding contracts online is dependant on the clarity of the offer and acceptance process, the nature of the contractual terms and how they are incorporated in the contract. The global nature of World Wide Web (WWW) requires that parties need to abide by international law issues.

General Principles: Under most jurisdictions, formation of a contract requires the following elements:

• An offer; • Unequivocal acceptance of the offer which should be communicated to the person making the offer; • Consideration; • An intention to create legal relations; and • Capacity in each party to be legally bound.

It is recommended that the parties have written contracts, signed and retain copies of all relevant correspondence and documents relating to that contract.

Under the Interpretation Act 1978 (UK), the word of “Writing” is defined as: “"Writing" includes typing, printing, lithography, photography and other modes of representing or reproducing words in a visible form, and expressions referring to writing are construed accordingly.”

Offer:

Offer is an expression of willingness to enter intro a contract on certain terms. It implies an intention that by acceptance of the terms, it will be converted into a binding contract. English law distinguishes between an offer and an "invitation to treat", such as advertisement promotes the sale. For more please see, Spencer V Harding (1870) L.R 5C.P 561

Under English traditional contract law, displaying a goods in a shop window is not an offer but it is an invitation to treat, however, it depends on the judge decision about the circumstances of offers and invitation to treat. See Argus case! In September 1999, due to software error, Argus displayed Sony Television set for sale on price of £3 rather than the correct retail price of 299.99. In 2002 Kodak faced a similar problem when it incorrectly advertised digital cameras for sale on its website for £100 instead of correct value of £329.

Acceptance: A contract is formed when the offer is unconditionally accepted. The acceptance of the terms of one party’s offer by the other party and communication of that acceptance, concludes the contract.

Two Rules for Acceptance:

The recipient rule: this states that a contract is formed at the time and place when the acceptance is received by the offeror. (Fax, phone)

The Postal Rule: this applies to communications by post, according to which acceptance is effective at the time of posting the communication. (UK Case: Entores Limited v Miles Far East Corp [1955] 2 Q.B. 327.)

If the corresponding parties are both online, their message can be received in a matter of seconds. In this circumstance it is argued that the postal rule should not apply as communication is instantaneous.

Accordingly, the time of communication is largely crucial as it determines when the contract is made and the time at which the offer may no longer be revoked. However, communication over the internet is not always instantaneous. Email message and place an order from a website can take from seconds to several days to arrive at the destination. Due to this uncertainly, there is a good argument that the postal rule applies to communication of acceptance via email.

Legal Capacity:

For a contract to be valid, the parties must intend to enter into the contract and have legal capacity to do so. Due to anonymous nature of the internet, the e-trader has limited means of checking the identity of other party

According to the Civil Law of Iran, in order to have legal capacity, the contracting parties should not belong to either of the following categories: minor, bankrupt, lunatic and insane.

Under English law, contract made with minors are generally voidable at the minor’s option, under the Minor’s Contract Act 1987. Under Iran Civil law article 212, it is stated that contract with minors are void.

Mistake: a mistake does not invalidate a contract unless it is fundamental.

Some jurisdiction requires that certain contracts muse be in writing. Pretty pictures v quixote films Ltd[2003] EWHC 311 (QBD) Accordingly, parties to a contract are advised to have a written copy of the contract for evidential purpose.