Consequences of and problems with electronic contracts. Chapter 8

• Date: 01 January 2005
• Published date: 01 January 2005
• Author: Jason Mikellyn Charles Johnson
• Pages: 89-129
• DOI: 10.10520/EJC74028

CHAPTER 8

CONSEQUENCES OF AND PROBLEMS WITH

ELECTRONIC CONTRACTS

8.1 Consequences of online contracts

Now that the requirements for the valid conclusion of a contract

have been investigated and compared to the situation as it would

normally occur in relation to contracts concluded online, the question

is — what are the consequences of online contracts? What rights

and duties ensue and when do these accrue?

8.1.1. Establishment of rights and duties

It should be borne in mind that rights and their corresponding duties

only ensue once a valid and legally binding contract is concluded.

These are rights and duties flowing from the contract proper and not

rights and obligations that may arise from external means such as

claims for restitution or those based on enrichment following the

invalidity of a contract.

At the risk of simplifying matters to an extent that may be greater

than necessary, rights and obligations in terms of contracts con-

cluded over the Internet are little different from those in respect of

normal contracts.

The same general rules apply to rights and obligations online as

they do in the normal course of events.

8.1.1.1 Rights in terms of online agreements

In the same way as with contracts concluded online, certain rights

may flow from the conclusion of a valid contract. Before rights can

be attributed to the parties, the contract must be valid in the sense

that the essential elements for the conclusion thereof must be in

place.

The content of the contract and the terms and conditions will nor-

mally be the best source of knowing what the exact rights of a con-

tractant party are. One marvelous advantage of online contracts in

this sense, is that there will normally not be any oral portion to the

contract, nor will the other party be able to rely on appearances

created by action or omission (in a fair number of cases anyway).

This is very useful, because the rights and entitlements will be

clear and concrete. Once determined, a party has the right to en-

force performance with the rights that he or she is entitled to via

the law.

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Unfortunately, this is where the whole process becomes slightly

more complicated, because enforcing an online contract is by no

means as straightforward as determining the validity thereof.This

will be discussed below. Sometimes the contract may create a se-

ries of complex rights and duties, sometimes even intermingled.

An example of this is a contract of sale. The buyer has a right to

receive the goods, but only after he has complied with his obliga-

tion to make payment in the amount and manner agreed. Similarly,

the seller has a right to receive the purchase price at the agreed

time and a duty to deliver the sold merx according to the agreement.

In cases such as this with reciprocal obligations, the principle of

reciprocity comes into play. In terms of this principle, the seller of

goods (in the above example) may refuse to deliver them to the

buyer until the buyer has complied with his portion of the obligation

(to pay the purchase price) first.180

The case of BK Tooling Bpk v Scope Precision Engineering (Edms)

Bpk181 set out the requirements for the right to withhold performance,

where the other party has failed to comply with theirs. The party

will have to plead that he has already performed properly or that

he is ready and able to perform properly.The requirements in terms

of the case are:

• That the obligations in terms of the contract are reciprocal, and

•That the parties are bound to perform simultaneously, or

• That the party claiming performance is bound to perform before

the defendant.

This right, also called the exceptio non adempleti contractus may

be relaxed under certain circumstances to prevent injustice.In these

cases the courts have allowed a limited counter-performance in

certain cases. If the contractant is able to prove that the other party

has not performed in terms of the agreement, then according to a

strict implementation of the above rule, no obligation at all would

be due.

Obviously this could produce unfair consequences and if a party

can prove the following requirements, a court may exercise its dis-

cretion to reduce the counter-performance due:182

(1) That the defendant utilised the incomplete performance to his

advantage,

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180 Van der Merwe ea 2003:361-362.

181 BK Tooling Bpk v Scope Precision Engineering (Edms) Bpk 1979 1 SA

391 A: 415.

182 Van der Merwe ea 2003:362-368.

(2) That there are reasons of equity for the court to assist the

plaintiff and

(3) What the cost would be to bring the defective performance up

to scratch.

8.1.1.2 Ex Lege rights

In addition to rights flowing from the agreement itself, there may

be statutory rights in favour of a party to an agreement that ope-

rate automatically and without the need for specific consensus.

A good example of these rights in relation to online agreements

will be the Consumer Protection Rights contained in Chapter VII

of the Electronic Communications and Transactions Act. Although

these rights were already mentioned in Chapter 5 (under paragraph

5.2.2. dealing with the various types of online agreements), it is

apt to deal with them in more detail here.

Chapter VII Consumer Protection rights are far-reaching.

Section 42 of the Bill provides that the protection only extends to

electronic transactions. The section specifically excludes certain

types of transactions, such as financial services,183 goods purchased

by way of auction,184 foodstuffs and perishables,185 where the goods

are personalised186 or made to specification and audio or video

products unsealed by the client.187

Section 43 places a duty on the supplier of goods on via an Inter-

net web site to keep certain information available to users visiting

the site.The information required is set out in subsections (a) to (r)

of section 43 and comprises:

•its full name and legal status of the supplier

• its physical address and telephone number

• its web site address and e-mail address

•membership to any self-regulatory or accreditation bodies to

which that supplier belongs and the contact details of that body

• any code of conduct to which that supplier subscribes and how

that code of conduct may be accessed electronically by the

consumer

• in the case of a legal person, its registration number, the names

of its office bearers and its place of registration

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183 Section 42(2)(a).

184 Section 42(2)(b).

185 Section 42(2)(c).

186 Section 42(2)(f).

187 Section 42(2)(g).