Contract Formation

Internet Contracts

Contracts made over the internet are legally binding in the same way as contracts made in writing or face to face.   The normal laws of contract apply to the making of the “on-line” contract, subject to certain additional requirements on the part of the supplier.

There must be an offer, acceptance and “consideration”.   An offer is where one party proposes certain terms and conditions and makes a particular proposal e.g. offers to buy goods. Acceptance is where the other person accepts the offer either verbally or by actions.  Consideration is where something of value is passed and exchanged.   That is there is a bargain – anything is given in exchange for another at the request of the other.

Under general contract law, an advertisement, including one on a website, would not generally be an offer to enter a contract. However, it is possible by careless wording to create a legally binding offer.  Care should be taken to ensure that it is not worded as such.  The contract is usually formed once a customer makes an offer by placing an order and then the supplier either by action or by automated response accepts.


Offer and Acceptance I

See the chapters on contract law on offer and acceptance and in particular, on the communication of acceptance in the formation of a contract.  The general principle is that acceptance should be communicated.  There is an old exception to the requirement to communicate acceptance, in the case of postal communications which is not applicable outside of this area.

In making a contract a person making an offer can specify the terms on which it might be accepted. In the absence of anything to the contrary, acceptance must be actually communicated to the person making the offer before a binding contract exists.

The E-Commerce Act requires that the parties consent to the use of information in electronic form.  There is nothing to compel one party to use an electronic communication if this is not desired.  If parties negotiate through e-mail but provide or contemplate that a final agreement will be in writing, electronic communications would not be sufficient to conclude a contract.


Overview of Electronic Contract Formation

E-Commerce legislation provides that where the e-mail enters the first information system outside that of the sender, it is deemed to be sent. Where the recipient designates a place for the purpose of receiving mail (e.g. a particular e-mail address or website), the electronic communication is deemed to be made where it enters that system.

Where it is not designated, it is deemed received when it comes to the attention of the recipient.  A communication can come to the attention of the addressee without being opened.

Electronic communications are deemed to be sent to the places of business of the recipient and sender.  This matters in the context of which country’s laws may apply under EU rules on applicable laws and jurisdictions.


Formation of Electronic Contract

The Electronic Commerce Act provides that where an electronic communication enters an information system or the first information system outside the control of the sender, that unless otherwise is agreed, it is taken to have been sent when it enters such information system or the first information system.

Equally, where an addressee has dsiginated an informations system for the purpose of receiving electronic communicaitons,  then unless otherwise agreed,  the electronic communication is deemed to be received when it enters the information system of the addressee.

These provisions apply where the parties have expressly or impliedly agreed to use specific systems to send electronic communications. Where no system has been designated, it is provided that unless otherwise agreed, the electronic communication is taken to have been received when it comes to the attention of the addressee.

The provisions apply notwithstanding that the place where the relevant information is located, may be different from the place where it is taken to have been sent or received under the above provisions


Place  of Formation of Electronic Contract

Unless otherwise agreed between the sender and recipient/addressee, the electronic communication is taken to have been sent from and received at respectively, the place where the sender and addressee have their places of business.  If the sender or recipient has more than one place of business, the relevant place of business is the place which has the closest relationship to the underlying transaction.

If either does not have a place of business, it is taken to be where he or she ordinarily resides.  Where the electronic communication is in connection with a notification or communication required or permitted under legislation to be given to a company’s registered office, the registered office is taken to be the place of business of the company in connection with that electronic communication.


Where Acknowledgement Required

Where the sender indicates that a receipt is to be acknowledged, but does not specify by what means, then unless the sender and recipient otherwise agree, the acknowledgment is to be given by way of electronic communication or any other communication sufficient to indicate to the sender, that the electronic communication has been received.

Where an acknowledgment is sought, the electronic communication for the purpose of establishing legal rights and obligations is deemed not to be sent unless and until an acknowledgment is received by the originator, unless the parties otherwise agree.

Where the sender indicates that receipt is required to be acknowledged but does not state that the electronic communication is conditional on receipt, then where the acknowledgment has not been received by the sender within the time specified or agreed (or within a reasonable time if none is agreed) it is treated as not sent for the purpose of establishing legal rights and obligations.

The sender or originator of an electronic communication is the person by whom, or on whose behalf it purports to have been sent or generated. It does not include a person or public body acting as a service provider in relation to the generation, processing, sending and storing of that electronic communication or providing services in relation to it.


General Considerations

Contracts for the sale of goods and the provision of services should describe the goods or service, sets out the price and payment structure, set out delivery provisions, provide for right of termination, deals with limitation of liability, provides for confidentiality and provides which countries laws apply.

Clauses limiting liability can be contentious but can be helpful to businesses in managing risks.  Generally, clauses which are reasonable are enforceable. There are stricter rules in the case of businesses dealing with consumers.


Consumer Protection

General consumer protection laws apply in relation to E-Commerce transactions.  See the separate sections and guides in relation to unfair contract terms, sale and supply of goods and the general consumer protection legislation, aimed at unfair trading practices.

Consumer Protection legislation covers goods and services sold over the internet.  The legislation makes it an offence to give misleading information. Consumer protection legislation requires that a supplier must sell goods that comply with their description are of satisfactory quality, match the quality of samples and are fit for this purpose


Business Details Required

Companies must display certain information about themselves on their website and in e-mails. This includes the name of the company, the legal format, and place of registration.

Businesses which provide services at a distance by electronic means must give clear and comprehensive prior information to consumers.  The information must be easily, directly and permanently accessible to the recipient of the service.  The required Information includes:

  • name of service provider together with physical and electronic address;
  • where the service provider is registered, details of the public register in which it is registered;
  • where the service provided is subject to an authorisation scheme, the particulars of the relevant scheme;
  • where the services are provided by a member of a regulated profession, details of any professional body or other institution;
  • relevant codes of conduct to which the business is subject and information on how they can be consulted electronically;
  • VAT number;
  • details of how to opt out of unsolicited commercial e-mails.

Choice of Applicable Law

The general principle is that the service provider must comply with its own regulatory laws, in trading in the EU. Where they market to consumers in another EU state, traders must comply with the consumer protection laws of that state. Certain consumer protection rules cannot be avoided. The effect of this position is eased by the adoption of harmonised consumer protection laws under EU Directives.   Consumers must generally sue and be sued in their own jurisdiction.

In the European Economic Area (the EU and certain other European countries) the “Rome Convention” governs the law that will apply to contract disputes. Between businesses, the parties can usually choose the governing law for dispute resolution and insert it their contract.

There are certain mandatory rules which cannot be overridden by the terms of a contract. A consumer can usually be sued in his home country. His home country’s laws apply. Consumers may avail of all consumer protection laws, either in their home state or in the supplier’s state.


Distance Selling and Online Trading

The EU derived Distance Sales Regulations protect consumers who are not physically present with the seller at any time during the transaction.  They apply to transactions which make exclusive use of one or more means of distance communications such as internet sales, posted printed matter, mail order catalogues and telesales.

The Regulations apply to distance contracts for the supply of goods and services by business to consumers. A “consumer” is an individual acting in a private capacity outside of his trade or business.

The Regulations provide detailed requirements which have no counterpart in ordinary retail transactions.  If the specific requirements are not followed, the contract cannot be enforced by the supplier and the business is guilty of an offence.  Also, businesses have a g general duty to act in good faith in their dealings under distance contracts.


Distance Selling

The European Union derived Consumer Protection Regulations (formerly the Distance Sales Regulations) require that the following information be provided to consumers. The information must be provided to the customer either before the conclusion of contract or in good time afterwards and in any event during the performance of the contract or at the latest, at the time of delivery.

The customers must be provided with information about the procedures for cancelling, the address of supplier, information about after sale service and guarantees and conditions for exercising contractual right to cancel when the contract is of indefinite duration.

There are special provisions applicable to financial services.  Financial services refer to banking, insurance and investments.  A “cooling off” period of 30 days usually applies (but with certain necessary exceptions).


Required Disclosure of Information

Prior to the conclusion of a distance contract, a consumer must be provided with certain information, including the following, in a clear and comprehensible manner: –

  • the identity of the supplier and in the case of contracts requiring payment in advance, his address;
  • the main characteristics of the goods or services;
  • price of the goods including all taxes;
  • delivery costs;
  • arrangements for payment, delivery and performance;
  • the existence of the right of withdrawal;
  • the period for which the offer or price remains valid;
  • the minimum duration of the contract in the case of the supply of products or services to be performed recurrently or permanently;
  • details in writing about the terms and conditions of the transaction;
  • information on after sale service and guarantees

Entry into Contract

Where a contract is being concluded with a consumer, states must ensure that certain information is given clearly, comprehensively and unambiguously prior to the order being placed, including

  • the technical steps to follow to conclude the contract;
  • whether or not the concluded contract will be filed by the service provider and if so, where it will be accessible;
  • the technical means for identifying and correcting input errors prior to placing the order;
  • languages offered for the conclusion of the contract; and
  • whether the service provider is bound by codes of conduct.

The information must be confirmed in writing or in another durable medium, unless it has already been given to the consumer in this way prior to conclusion of the contract.  The required information and the terms of the contract must be capable of being permanently stored by the consumer.


Completion of Contract

The service provider must acknowledge receipt of the order without undue delay and by electronic means.  The order and acknowledgment of the receipt are deemed to be received by the parties to whom they are addressed when they are able to access them.  The consumer must have appropriate, effective and accessible technical means which allow correction of errors prior to the placing of the order.

Where a consumer orders goods on line, the order must generally be completed within 30 days.Unless the parties otherwise agree, the supplier must execute the order within a maximum of 30 days from the date following which the consumer forwarded his order to the supplier. Where the supplier fails to perform within this time limit on the grounds that goods or services are unavailable, the consumer must be informed. He must be able to obtain a refund of any sums he has paid as soon as possible and in any case within 30 days.

A supplier may provide the consumer with goods or services of equivalent quality or price provided that this possibility was provided for by the contract.  The cost of returning goods must be borne by the supplier and the consumer must be informed of this.

A consumer has a right to cancel payment if a fraudulent use has been made of his payment card in connection with a distance contract.  This place the risk of fraud with the supplier.


Right to Cancel the Contract

Consumers have a right to withdraw from a distance contract.  This so called “cooling off” right may be exercised within 14 days without penalty and without any reason. This right must be set out. Failure to so extends the cancellation period. Consumers must inform the business in writing, either by fax, email or letter of the decision to cancel.

The only charge that may be made to the consumer is the direct cost of returning the goods. The supplier is obliged to reimburse the sums paid by the consumer free of charge, other than the direct cost of returning the goods, as soon as possible and in any event within 30 days.

The rights to prior information, written confirmation and the right to cancel do not apply to the contracts for the sale of foods, beverages and certain other sales of goods intended for everyday consumption. The requirements do not apply to certain contracts for accommodation, transport and leisure services.


Exception to Cancellation Right

There are certain exceptions to the right to cancel, including

  • where performance of a service has begun with the consumer’s agreement before the 14-day period expires;
  • where the price is dependent on fluctuations in a financial market which cannot be controlled by the supplier;
  • where goods have been made to the consumer’s specification or are clearly personalised
  • where goods, by reason of their nature, cannot be returned or are liable to deteriorate;
  • unsealed audio or video recordings or computer software;
  • newspapers, periodicals or magazines;
  • for gaming and lottery services;
  • contracts for the provision of accommodation, transport, catering and leisure services where services are provided on a specific date or a specific period;
  • sales by auction

References and Sources

Legislation

Electronic Commerce Act 2000

Electronic Commerce Act, 2000 (Commencement) Order 2000, S.I. No. 293 of 2000

European Communities (Distance Marketing of Consumer Financial Services) Regulations 2004,

European Communities (Distance Marketing of Consumer Financial Services) (Amendment)

Regulations 2005, S.I. No. 63 of 2005

European Communities (Protection of Consumers in Respect of Contracts Made by Means of

Distance Communication) (Amendment) Regulations 2005, S.I. No. 71 of 2005

European Communities (Protection of Consumers in Respect of Contracts made by Means of

Distance Communication) (Amendment) Regulations 2010, S.I. No. 370 of 2010

Electronic Commerce (Certification Service Providers Supervision Scheme) Regulations 2010, S.I. No. 233 of 2010

European Communities (Electronic Communications Networks and Services) (Privacy and Electronic Communications) Regulations 2011, S.I. No. 336 of 2011

European Union (Consumer Information, Cancellation and Other Rights) Regulations 2013, S.I. No. 484 of 2013

European Union (Consumer Information, Cancellation and Other Rights) (Amendment)

Regulations 2014, S.I. No. 250 of 2014

European Union (Consumer Information, Cancellation and Other Rights) (Amendment)

Regulations 2016, S.I. No. 336 of 2016

EU Legislation

Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’)

Regulation (EU) No 524/2013 of the European Parliament and of the Council of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Regulation on consumer ODR)

Directive 2013/11/EU of the European Parliament and of the Council of 21 May 2013 on alternative dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Directive on consumer ADR)

Regulation (EU) No 910/2014 of the European Parliament and of the Council of 23 July 2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC

Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights, amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European

Regulation (EU) 2017/2394 of the European Parliament and of the Council of 12 December 2017 on cooperation between national authorities responsible for the enforcement of consumer protection laws and repealing Regulation (EC) No 2006/2004

Irish Books

EU Data Protection Law Kelleher & Murray           2018

Information & Technology Communications Law Kennedy & Murphy         2017

Social Networking           Lambert               2014

Law Society PPG Hyland Technology & Intellectual Property Law                 2008

Information Technology Law in Ireland   2 Kelleher & Murray       2007

Data Protection Law in Ireland: Sources & Issues 2 Lambert 2016

Privacy & Data Protection Law in Ireland                Kelleher               2015

Data Protection: A Practical Guide to Irish & EU Law         Carey    2010

Practical Guide to Data Protection Law in Ireland A&L Goodbody 2003

Contract Law in an Electronic Age Haigh 2001

Contract law McDermott 2nd ed 2017

EU and UK Texts

Cover of Getting the Deal Through: e-Commerce 2018 Robert Bond 2017

EU Regulation of e-Commerce: A Commentary Edited by: Arno R. Lodder, Andrew D. Murray 2017

Butterworths E-Commerce and IT Law Handbook 6th ed Jeremy Phillips 2012

Internet & E-commerce Law, Business and Policy Internet & E-commerce Law, Business and Policy 2nd ed Brian Fitzgerald, Anne Fitzgerald, Gaye Middleton, Yee Fen Lim, Timothy B Beale 2011

E-Commerce and Convergence: A Guide to the Law of Digital Media E-Commerce and Convergence: 4th ed Edited by: Mike Butler 2011

Blackstone’s Statutes on IT and e-commerce Blackstone’s Statutes on IT and e-commerce 4th ed Edited by: Steve Hedley, Tanya Aplin 2008

E-Commerce Law E-Commerce Law Paul Todd 2005

A Practical Guide to E-Commerce and Internet Law 2nd ed Osborne Clarke 2005