Formation of Internet Contracts: An Analysis of the Contractual and Security Issues

• Jurisdiction: South Africa
• Published date: 25 May 2019
• Date: 25 May 2019
• Pages: 282-299
• Author: Tana Pistorius

Formation of Internet Contracts:

An Analysis of the Contractual

and Security Issues

TANA PISTORIUS

University of South Africa

1 Introduction to the Internet

The Internet is a global network of computers all speaking the same

language, a 'digital Esperanto' of zero's and ones (Clive Gringras

Nabarro Nathanson's The Laws of the Internet

(1997) at 1). The Internet

is made up of a shared infrastructure (namely a network of networks)

which all use the same protocols. Transmission Control Protocol/Internet

Protocol (TCP/IP) are used in the United States and Open System

Interconnection (OSI) protocol is used in Europe (see Olivier Hance &

Susan Dionne Balz

Business and Law on the Internet

(1996) at 41; Joseph

Migga Kizza

Ethical and Social Issues in the Information Age

(1998)

at 131).

The Internet is not only the trailblazer to the information superhigh-

way, but also a vehicle for tremendous economic growth (see Hance &

Balz op cit at 39). This giant network has given birth to a borderless

electronic frontier, namely a virtual world where cybercontracts are

entered into by cybercitizens.

The Internet had its humble beginnings in 1969 in the United States of

America for the attainment of strategic military objectives with the

development of Advanced Research Project Agency Network (ARPA-

net), the first inter-linked network of forty computers, which enabled the

American Defence Department to simultaneously dispatch orders to all

ballistic missile bases (see Hance & Balz op cit at 40). The basic principles

that guided the development of the first network in the 1960s are still

applicable today.

These networks link computers throughout the world by several means

of telecommunication, such as telephone and coaxial cables, fibre-optics

and satellites. Several communication applications are available to the

user, namely electronic mail or e-mail, the World Wide Web, Telnet, File

Transfer Protocol (FTP), Gopher, Mailing Lists, Discussion Groups

(such as Newsgroups), and Internet Relay Chat (see Hance & Balz op cit

at 42-46; Kizza op cit at 132).

2 The Legal Implications of Commerce via the Internet

The Internet has brought about fundamental changes to international

commerce by the fusion of borders that previously existed between

282

(1999) 11 SA Merc LJ 282

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FORMATION OF INTERNET CONTRACTS: CONTRACTUAL AND SECURITY ISSUES

283

companies and customers, sellers and purchasers, and service providers

and clients. All these parties to contracts now meet in virtual shopping

malls and virtual boardrooms.

Although a number of laws and international agreements govern

electronic commerce, definitive answers to several complex legal

questions remain elusive. The creators of web-site shopping malls are

faced with the challenge to design their sites as to contract effectively with

customers (see Clive Davies 'Electronic Commerce



Practical Implica-

tions of Internet Legislation' (1998) 3

Communications Law

82; John

Perry Barlow 'Selling Wine Without Bottles. The Economy of Mind on

the Global Net' in: Bernt Hugenholtz (ed)

The Future of Copyright in a

Digital Environment

(1995) at 169).

Law always redefines contemporary developments in its own terms.

Regardless of how revolutionary the Internet is, and how inappropriate

the application of current legal processes and laws may be (see Kathy

Bowrey 'Ethical Boundaries and Internet Cultures' in: Lionel Bentley &

Spyros Maniatis (eds)

Intellectual Property and Ethics

(1999) 3 at 6),

existing principles may be applied to this global networking of

communities. It has also been noted that commercial-law developments

has traditionally lagged behind new commercial practices (see John D

Muller 'Selected Developments in the Law of Cyberspace Payments'

(1998) 54

The Business Lawyer

403 at 413). Internet commerce is no

exception.

Some of the basic legal issues that I will attempt to address in this

analysis of electronic commerce include whether Internet contracts are

valid and enforceable, the enforceability of 'click-wrap' agreements,

Internet security concerns, and the legal parameters for transaction

security through digital signatures and digital certificates. Recent

initiatives taken by the United States of America and the European

Union to regulate electronic commerce are noted, and, lastly, recommen-

dations are made for legislative reform.

The scope of this paper is limited to contractual and security issues

surrounding the formation of Internet contracts. I will not consider other

aspects of Internet contracts, such as electronic payments, insurance and

liabilities, breach of contract and remedies (see in general Muller op cit at

403-411).

3 The Conclusion of an Internet Contract

3.1 Introduction

South African business enterprises are faced with a growing list of

goods and services that may be ordered via the Internet or e-mail.

Various opportunities present themselves for the conclusion of electronic

contracts. The law applicable to electronic commerce is in many respects

uncertain. These uncertainties have largely been brought about by the

shift from paper to electronic trading and as regards the practical steps

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