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Posted on March 1st 2009 in Employment Law

Contracting in Cyberspace

Contracting in Cyberspace

How many times have you clicked the “I Agree” button when conducting transactions on the Internet? How many times have you actually read what you are agreeing to? If you are like most you probably pay scant attention to the details of these online contracts.

The Basics
A contract is a formal agreement between two parties. To ensure that a contract is enforceable three elements are necessary:

  • an offer,
  • an acceptance, and
  • consideration.

One party must intend to make an offer that is intended to be accepted by the other. In addition, something of value must be given in return for something else of value, this is the consideration.

Contracts can be made in writing or can be oral. Contracts can also be implied by the parties actions.

With electronic communication now a regular part of our everyday lives, it is equally important to understand how and when contracts are formed in this digital age. To help address this issue, the federal and provincial governments have, to varying degrees, adopted legislation to bring commercial certainty to e-contracts.

E-Information & Documents
In the province of Ontario, online contracts are governed by the Electronic Commerce Act (“ECA”). In essence, this law legally recognizes electronic information and documents and sets out a number of general rules. Those rules include the following:

  • Information or documents will not be invalid or unenforceable by reason only of it being in electronic form.
  • A legal requirement that information or a document be in writing will now be satisfied by its being in an electronic form that is accessible for subsequent reference.
  • A legal requirement that an original document be provided is satisfied by the provision of an electronic document, if there is a reliable assurance as to the integrity of the information contained in the electronic document from the time the document was first created in its final form, and that it is accessible so as to be usable for subsequent reference and retention by the person.
  • A legal requirement that a document be signed will be satisfied by an electronic signature, which is defined as the electronic information that a person creates or adopts in order to sign a document and that is in, attached to or associated with the document.
  • If the use of electronic information or an electronic document is otherwise permitted, a legal requirement that one or more copies be provided to the same person at the same time will be satisfied by the provision of a single version of electronic information or of an electronic document.

The ECA also sets out a number of rules with respect to the validity of electronic contracts.

The ECA states that an offer, the acceptance of an offer or any other matter that is material to the formation of a contract may be expressed in electronic form, which includes clicking on an appropriate icon such as “I Agree”.

The ECA also recognizes that a contract may be formed by the interaction of an electronic agent and an individual or by the interaction of two electronic agents. An electronic agent is defined as a computer program used to respond to electronic documents. In other words you as an individual entering into a contract may not be dealing with another individual but instead with automated software.

However, such a contract may not be enforceable if
a) the individual makes a material error in the electronic information or electronic document;
b) the individual is not given an opportunity to prevent or correct the error;
c) on becoming aware of the error, the individual promptly notifies the other person; and
d) in a case where consideration (e.g. the goods purchased) is received as a result of the error, the individual deals with the consideration in accordance with the other person’s instructions and does not benefit materially by receiving the consideration.

Electronic information or an electronic document is considered to be sent when it enters an information system outside the sender’s control. It will then be presumed to have been received by the intended recipient.

Despite the above rules, the parties to an electronic transaction can choose to put into place different rules that may better suit their needs.

Consumer Protection
The Consumer Protection Act sets out rules to govern consumer electronic agreements. Whether you are a consumer or a supplier it is important to understand those rules.

The first thing to remember is that the legislation only applies when the value of the internet agreement is for more than $50 and one of the parties is located in Ontario at the time the transaction takes place.

A supplier who is providing goods over the Internet must make certain information available to the consumer, including:

  • The supplier’s contact information.
  • A fair and accurate description of the goods.
  • An itemized list of all prices and charges.
  • The date, location and manner of delivery.
  • Any restrictions, limitations and conditions of the supplier.

A supplier must give the consumer an express opportunity to accept or decline the agreement and to correct any errors immediately before entering into it. In addition, the supplier must deliver to the consumer a copy of the agreement in writing by e-mail, fax, mail or delivery within 15 days. Failure to follow these rules may allow the consumer to cancel the agreement.

Although technology has impacted how we do business, the key to remember is that regardless of whether a contract is entered into face to face or in cyberspace, the main contract rules, as outlined above, remain the same. Therefore be sure to read the terms of a contract before entering into it and if necessary seek legal advice.

If you require assistance with your business practices please contact Howard Steinberg or Stan Landau.