e-business law chapter 02

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BAEB 301: BASIC LAW FOR E-BUSINESS

CHAPTER 2:TERMS AND FORMS OF CONTRACT

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Chapter 2: Terms and Form of Contract

Topic Outlines

2.1 The Form and Contents of Contract

2.1.1 The Form of an Electronic Contract

2.2 Certainty of Terms of Contract

2.2.1 Certainty of Terms in Electronic Contract

2.3 Distinction of Term and Representation

2.3.1 Express Terms in A Traditional Contract

2.3.2 Express Terms in An Electronic Contract

2.3.3 Implied Terms2.3.4 Condition and Warranty

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Learning Outcomes

At the end of this chapter, students should be able to:

Understand the fundamental principles regarding certainty of terms and the

meaning of terms as opposed to representation.

Understand the difference between express and implied terms and also

condition and warranty. Appreciate the implication of an exclusion clause and the importance of

incorporation of an exclusion clause into a contract before such a term is

treated as a term of a contract

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1. There is no requirement thata contract should be in aparticular form.

2. The general rule is that acontract can be made orally,in writing or by conduct.

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1. It is not stated in the Contracts Act 1950 whether electronic message can amount to writingrequirement.

2. The Contracts Act 1950 does not tell us how to

handle the problem of electronic signature.

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2.1.1 The Form of an Electronic Contract


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Under s.30 of the Contracts Act Agreements, themeaning of which is not certain, or capable of beingmade certain, are void.

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1. Under s.30 of the Contracts Act Agreements, themeaning of which is not certain, or capable of beingmade certain, are void.

2. This principle above applies to electronically concluded

contract as well. That means all terms and conditionsof online contracts whether in emails or web basedcontracts should be clearly and easily identified beforeparties contemplating contracts accept or make offers.

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2.2.1 Certainty of Terms in Electronic Contracts


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2.3 Distinction of Term and Representation

Terms are contractuallybinding and in the event of

breach, the injured party

can claim compensation

and may also terminate the

performance of the contract

A representation if untrue,

the party that is mislead

may only rescind the

contract, i.e. treat thecontract as if it never

existed.

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2.3 Express and Implied Terms

Express terms are termsspecifically agreed upon byboth parties and they can be

oral or written.

2.3.1 Express Terms in a traditional contract

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It is quite normal for termsand conditions to be found inseparate web pages only to

be accessible through ahypertext link.

2.3.2 Express Terms in an Electronic Contract

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1. An implied term is notexpressly decided but isread into the agreement.

2. Terms are implied by :

i. the courts to give effect tothe intention of the parties

ii. The courts to recognise a

local custom and usage.iii. The Parliament such as

the Sale of Goods Act1957.

2.3.3 Implied Terms

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1. A condition is a contractualterm, if breached gives theinjured party the right torescind the contract. He can

affirm instead of rescindingand he can also claimdamages whether heaffirms or rescinds.

2. A warranty is a term if breached gives the injuredparty only the right todamages and not a right toterminate the further performance of the contract.

2.3.4 Condition and Warranty

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2.4 Incorporating Terms Into A Written Contract

The general rule is a person

is bound by the terms of a

written contract that he

signs.

He is still bound by the termseven if he did not read them

before signing the contract.

L'Estrange v. Graucob Ltd

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2.4 Incorporating Terms Into A Written Contract

1. It is quite normal for terms and conditions of electroniccontract to be incorporated through hyperlink web pages.

2. It is not sufficient if parties are just given theopportunities to view and read the terms.

3. Steps must be taken to ensure that they cannot proceedfurther into the contract until they have read the termsand conditions and such terms have been accepted bythe purchaser when he clicks on the accept icon.

4. If the above measure is implemented, then it does notmatter whether the parties have chosen to read or not to

read the terms before the accept icon is clicked on.

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2.4.1 Incorporating Terms into an Electronic Contract


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2.5 Incorporating Terms Into An Unsigned Document

A term can be found in

unsigned documents:

(i) Tickets

(ii) Public notices

(iii) Receipts

A term in these documentsbinds the customer if:

(i) reasonable notice of the termis given to the customer before the contract is made.

(ii) The term must be in clear,precise and legible writings.

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2.6 Exclusion Clause

1. An exclusion clause is aterm of a contract which isincluded in the contract byone party of the contract toexclude or modify his

liability in the event of abreach of a term of contracton his part.

For example :

This car park excepts no

liability for any damage,theft, or loss suffered whenparking your car here.

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3. Exclusion clause can befound in:

Ticket

Receipt

Public notice

Signed writtendocument

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1. The general rule is if the

exclusion clause is in a

signed and written contract,

a person is bound by the

terms of the written contract

that he signs.

2. He is still bound by the

exclusion clause even if he

did not read them beforesigning the contract. See

Ls Estrange v Graucob

2.6.1 Incorporating An Exclusion Clause Into A Signed Contract

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3. The exclusion clause must be in clear and legible writings.

Under the Contra Proferentem rule unclear exclusion

clause will be construed in the least advantage way against

the person relying on such a clause.

2.6.1 Incorporation of Exclusion Clause In A Signed Contract

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1. The exclusion clause together with other terms andconditions of electronic contract can be incorporatedthrough hyperlink web pages.

2. It is not sufficient if parties are just given the opportunities

to view and read the terms.3. Steps must be taken to ensure that they cannot proceedfurther into the contract until they have read the terms andconditions and such terms have been accepted by thepurchaser when he clicks on the accept icon.

4. If the above measure is implemented, then it does notmatter whether the parties have chosen to read or not toread the terms before the accept icon is clicked on.

2.6.2 Incorporation of Exclusion Clause In An Electronic Contract

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1. General Rule: An exclusion clause inthese unsigned documents only binds thecustomer provided:

(i) The seller has given reasonable notice ofthe term to the customer before thecontract is made.

(ii) The term must be in clear, precise andlegible writings

2.6.3 Incorporation of Exclusion Clause In Unsigned Contract

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An exclusion clause,if it is incorporatedinto a contract, willbind the customer.

2.6.4 Legal Effect of an Exclusion Clause

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Example: Malaysian AirIines System Bhd v. Malini Nathan

Facts: A MAS flight was overbooked and Plaintiff was not

able to get on the plane. She sued MAS who relied on the

exclusion clause that MAS was not responsible if for some

reasons MAS was not able to make connection flights for

passengers which was printed in the air ticket. Held: this

exclusion clause contained in the air ticket is a term of the

contract and therefore MAS can rely on it. Plaintiffs claim

against MAS for breach of contract failed.

2.6.4 Legal Effect of an Exclusion Clause

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Class Discussion

Last Sunday, Ahmad drove into a parking complex ownedby EasyPark Sdn Bhd. There was a sign outside theparking complex, which stated, "All cars parked at owners'risk." Ahmad pushed a button; grabbed the parking ticketand saw that the ticket contained some words but he putthe ticket into his pocket without reading them.

Later when Ahmad came back to claim his car he wasknocked by another car and was injured. He suedEasyPark.

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Steps To Answer A Case Study

1. Identity the issue. (Ask yourself the nature of the legalissue)

2. If it is to do with an exclusion clause define the effect of anexclusion clause.

3. Next identify where the exclusion clause was located.

4. If the exclusion clause is contained in an unsigneddocument what are the rules of incorporation of anexclusion clause in an unsigned document?

5. Conclude if Ahmad is bound by the exclusion clause.

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