In a global economy where buyers and sellers do not have to meet to conclude a contract, the validity of online contracting has gained immense importance.
All the elements of a contract are sought to be effected in the circumstances of online contracting as well. Therefore the presence of
- a. Intention to create a lawful contract
- b. Lawful object
- c. Agreement not expressly declared void
- d. Offer and its acceptance
- e. Free consent
- f. Ability of parties to contract
- g. Inevitability of meaning
- h. Possibility of performance
- i. For a lawful consideration
Is essential even for an online contract. The business methods of online transactions, however, make it mandatory to define clearly the terms under which an offer and an acceptance would be termed as acceptable to the definition of a contract. To create a valid contract, there must be two or more parties. One who makes the offer and the other who accepts the offer. One person cannot make an offer and accept it. There must be at least two persons. Also the offer must be clear and properly communicated to the other party. Similarly acceptance must be communicated to the other party and the proper and unconditional acceptance must be communicated to the offerer. Proper offer and proper acceptance should be there to treat the agreement as a contract which is enforceable by law.
For an online contract, the consensus ad idem is a contested topic. Meeting of minds on the contracted issues are not mandatory. Therefore there must be evidence that the parties had each, from an objective perspective, engaged in conduct manifesting their assent, and a contract will be formed when the parties have met such a requirement.
Essential components of an online contract are: 1) an offer of service, 2).acceptance of the offer, 3) consideration (which are the services or money you agree to provide) and 4) an intention to enter legal relations. Digital signatures, or even measures such as confirmation emails, provide sufficient evidence of an intention to enter into a contract.
Applying this rule to electronic commerce, for example, if HPs advertises a PC for sale on its web page, no contract will be concluded by placing an order. The contract will be concluded when such order is received and accepted. The acceptance of the order will often be manifested merely by the dispatch of the goods to the purchaser. No legal relationship exists between the parties before the acceptance, and an offer may be revoked at any time before then. For Software Downloads, Shrink Wrap/ Click Wrap Agreements are offer and acceptance. When the user agrees to download the software by clicking on “ I agree” or “ I accept” that is deemed acceptance.
Offer : An offer is the communication by a person (the offeror) of the terms on which he/she is prepared to be bound by the acceptance of the terms by the person to whom the communication is addressed (the offeree), who on his/her signification of the acceptance of the terms becomes the acceptor, with a contract emerging. For an offer to be valid the following rules apply:
- . Only the offeree may accept and only by acting knowingly on the offer. The offeree must know of the offer and performs the act with the intention of accepting the offer.
- 2. An offer must produce certain, definite and unambiguous terms.
- 3. The essentialia and incidentalia which the offeror is prepared to contract on must be in the offer.
- 4. The offer may be made by conduct or words.
- 5. Acceptance is an unqualified declaration of will from the offeree that the terms of contract, as set out in the offer, are accepted without them being subject to any reservations, so that consensus is reached.
Acceptance: For an acceptance to be valid the following rules apply:
- 1. As a general rule the acceptance must be communicated to the offeror. The acceptance must reach the mind of the offeror to have legal effect.
- 2. Acceptance must be certain, definite and in unambiguous terms.
- 3. Acceptance must be absolute, unconditional and must correspond with the terms of the offer.
- 4. The acceptance may be made by conduct or words.
- 5. The offeree must have the intention to create a legal obligation through the acceptance.
Sometimes the offeror will prescribe the mandatory means of acceptance. For example he/she tells the offeree: “If you want to buy these goods, you must place an order via registered mail”. The offeree is obliged to use this means of communication, even if there are other quicker means available.
The general rule is that a contract is not formed until the acceptance is communicated by the offeree to the offeror. The acceptance must come to the mind of the offeror. This is known as the information theory. The contract will be formed where and when the parties have reached consensus. The same theory applies to determine where and when a contract is concluded.
The information theory does not apply where a true postal contract is concluded. Where an offer and acceptance is made by post, acceptance is deemed effective at the moment the communication is sent. In the case of a letter it is deemed that the offeror indicates that the acceptance shall be communicated by letter. Where a letter is delivered to the post office and it is correctly addressed the existence of consensus between the parties is assumed. Thus if a letter never reaches the offeror, the contract still comes into existence.
Contracting online must be measured against the general principles of offer and acceptance as briefly expounded supra. An online contract would be defined as a contract created wholly or in part through communications over computer networks, by e-mail, through web sites, via electronic data interchange and other electronic combinations.