Problems relating to the formation of online contracts: A South African perspective

• Published date: 19 May 2021
• DOI: https://doi.org/10.47348/SALJ/v138/i2a1
• Date: 19 May 2021
• Author: van Deventer, S.
• Pages: 219-257
• Citation: (2021) 138 SALJ 219

219

VOL 13 8

(Part 2)

2021

THE

SOUTH AFRICAN

L AW JO U R N A L

PROBLEMS RELATING TO THE

FORMATION OF ONLINE CONTR ACTS:

A SOUTH AFRICAN PERSPECTIVE*

SANMARIE VAN DEVENTER†

Consolidoc Fellow in Pr ivate Law, Stellenbosch University

This arti cle analyses the forma tion of online contract s, or standard-form co ntracts

appearing in e lectronic form, in the South Afr ican context. The unique ch aracteristics

of online contrac ts — such as their len gth and ubiquity — render it mo re dicult to

establish assen t to these contracts than in the c ase of traditional standard-for m contracts.

In general, it is simply n ot reasonable to expect of con sumers to study online contracts,

because the cost of re ading (in the form of time spe nt) outweighs the potenti al benet.

Furtherm ore, evidence shows t hat consumers do not pe rceive online contra cts in

the same manner a s their paper-ba sed equivalent. The ar ticle investigates w hether

contractual lia bility to online contrac ts can be establish ed in terms of the relian ce

theory, and conside rs how and when notic e of contractual ter ms should be given.

It further ar gues that the unexp ected terms doc trine potentially pro vides important

protection to onli ne consumers’ reason able expectation s, and may encourage

suppliers to iden tify surprisin g terms and brin g them to the attention o f consumers.

This approa ch requires of court s to recognise that it may b e quite reasonable for

consumers to de cide not to read online con tracts, and that cons umers’ mistakes about

surprisin g terms in online con tracts must almost always be rea sonable.

Contract – for mation – onl ine contract s – standard-form contracts –

unexpected terms

I IN TRODUCT ION

The internet for ms an integral part of modern life. As technology ad-

vances, more activities move to the dig ital environ ment, and consumer s

* Thi s article is base d on research undert aken in ful lment of the requir ements

for the LLD degree at the Facult y of Law, Stellenbosch Un iversity. I am gr ate-

ful for the  nancial a ssistance received in this regard from the Stellenbosch

Law Facult y. I further extend my gratit ude to Professor J E du Ple ssis for his

insight s and guidance in completion of this article, and to Dr F E Myburg h for

her valued input.

† BCom LLB LLM LLD (Stel lenbosch).

https://doi.org/10.47348/SALJ/v138/i2a1

(2021) 138 SALJ 219

© Juta and Company (Pty) Ltd

220 (2021) 138 THE SOUT H AFRICAN LAW JOUR NAL

https://doi.org/10.47348/SALJ/v138/i2a1

increasingly use the internet for commercia l, social and i nformational

reasons. Suppliers have recognised a need to regulate these online

interactions through the use of online contracts.1 Consequently, both the

number of stand ard-form contr acts that face the average consumer,2 and

the general contract length,3 have greatly increased. A study published in

2008 ind icated that the average American would have to spend 201 hours

per year to read the pr ivacy policies of the websites visited by him or her4

— a gure which does not even include the other terms and conditions

of the various on line transactions. A lthough no similar studies exist with

regard to South A frican consumers, there is no reason to suspect that

these gures should be drastically d ierent for the local internet user. The

volume of online contracts presented to consumers on a daily basis makes

it irrat ion al and impractical for t hem to read each one, and renders readi ng

too co stly. 5

The core dicu lty regarding the formation of online contracts is to

establi sh the legal basis for thei r enforcement. Because consumer s generally

do not read or underst and the terms of the contract,6 there cannot be a

true meeti ng of the minds (except perhaps for some core terms), which

1 See the den ition of ‘online contract s’ as used in this ar ticle in part II below.

2 Nancy S Kim Wrap Contracts: Foundations and Ramications (2013) 59.

3 Cheryl B Preston & El i W McCann ‘Unwrapping sh rinkw raps, clickwraps,

and browsewr aps: How the law went wrong f rom horse tra ders to the law of

the horse’ (2011) 26 BYU J Pub L 1 at 27. Also se e David A Homan ‘From

promise to for m: How contract ing onli ne changes consumers’ (2016) 91 NYU

LR 1595 at 1604–5 and Juliet M Mor ingiel lo ‘Notice, assent, a nd form in a 140

characte r world’ (2014) 44 Southwestern LR 275 at 276, both of whom discuss

the increa se in the length of online contracts. See also part III below for a more

detaile d analysi s on the dierence s between traditional st andard-form contract s

and online contracts.

4 Aleecia M McDonald & Lorrie Faith Cranor ‘T he cost of readin g privacy

policies’ (2008) 4 I/S: A Journal of Law and Poli cy for the Informati on Society 540 at

562. The time l ost would, according to t heir estimate s, result in annu al loss to the

America n economy of about $781 billion.

5 Tess Wilki nson-Ryan ‘The per verse consequences of disclosi ng standa rd

terms’ (2017) 103 Cornell L R 117 at 123. Al so see Heather Daiza ‘Wrap cont racts:

How they can work bet ter for business es and consumer s’ (2018) 54 Cal W LR

202 at 208–9.

6 See e g Yannis Bako s, Florencia Marott a-Wurg ler & David R Trossen ‘Does

anyone read the ne print? Consu mer attention to st andard-form contract s’

(2014) 43 J Leg Stud 1 at 10–33 (who studie d 92 411 American households, and

found that fewer than 0.2 per cent of consumers purcha sing software online

access the elec tronic End User License Agreement , and more than 90 per cent

of those access it for an insucient period of time t o read the term s); Ian Ayres

& Alan Schwa rtz ‘The no reading problem in consumer contra ct law’ (2014) 66

Stanford LR 545 at 5 47–8. Two other stud ies regarding con sumers’ reading habit s

of online con tracts retur ned slightly hi gher results, wit h one indicating 7 per ce nt

of adults read the terms a nd the other, 4 per cent (see Dasuni Wijayasr iwardena

‘Consent in on line contrac ts — Mindle ss or mindf ul?’ (2016) Queen Mar y

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PROBLEMS RE LATING TO THE FORM ATION OF ONLINE CONT RACTS 221

https://doi.org/10.47348/SALJ/v138/i2a1

classically is required for liability under the ‘subjective’ will theor y of

contract for mation.7 It is therefore only by applying ‘objective’ theor ies

of contract form ation, which enquire into the appeara nce of or reliance

on consent, that liability could nonetheless be imposed for terms that h ave

not actual ly been agreed upon. The primary focus of this article is to

determi ne whether online cont racts meet the requ irements for contract

conclusion in terms of these theories, and to analyse the application of

rules relating to standard terms in the online environment.

To this end, the article commences by dening online cont racts and

describing the dierences between tradit ional standard-form contracts

and online contracts. Thereafter, specic practical problems that might

arise in the context of the conclusion of onl ine contracts a re identied,

which aims to highlight the reasons why establishing consent to online

contracts i s often fraught wit h diculty.8 Fina lly, the application of general

principles reg arding contract for mation in South Afr ican law is considered

in the context of online contract s.9

II DEFINITION OF ON LINE CONTRACTS

There is no universally accepted denition of the ter m ‘online contract’.

In this article it refers to a non-negotiated or standard-form contract10

which a supplier present s to a consumer in electronic for m on the internet,

for example on its website or t hrough a mobile application.11 A more

accurate description would therefore be ‘online stand ard-form contr acts’,

but for convenience the briefer ter m ‘on line contracts’ wil l be used. There

are thus two criteria for classifying a contract as a n online contr act as the

term is used i n this article: (i) it only refers to contracts which are not

negotiated bet ween the parties (the ‘standard-form’ part of t he denition);

Universit y of London, School of Law Legal St udies Research Paper no 234/2016

at 26, avail able at https://ssrn .com/ab stra ct=2783793 , accessed on 12 Augu st 2020.

7 For a discus sion regardi ng objective and subjective theories of contract

formation, see Susann a Maria va n Deventer Regulating th e Form and Substanc e of

Online Contrac ts: South African a nd Foreign Perspec tives (unpublished LLD thesis,

Stellenbos ch University, 2020) 66–9. The thesis i s available elec tronical ly at

http://scholar.sun.ac.za/handle/10019.1/108022, accessed on 12 August 2020.

8 In part IV below.

9 In part V below.

10 See Van Deventer op cit note 7 at 34 –5 for a denit ion of standar d-form

contracts.

11 For use of the term ‘onli ne contract’ in t his context , see Cheryl B

Preston ‘“Plea se note: you have waived ever ything”: Can not ice redeem onl ine

contracts?’ (2015) 64 Am U LR 535 at 537 (‘[c]onsumer onl ine adhesion

contracts’); Aaron E Ghira rdelli ‘Ru les of engagement in the conic t between

businesses and consumer s in online contracts’ (2015) 98 Ore gon LR 719 at 722;

Berkson v G ogo LLC 97 F Supp 3d 359 (EDN Y 2015) at 388 (‘onli ne contracts

of ad hesion’).

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