Validity of electronically concluded contracts. Chapter 6

• Author: Jason Mikellyn Charles Johnson
• DOI: 10.10520/EJC74030
• Date: 01 January 2005
• Published date: 01 January 2005
• Pages: 58-81

CHAPTER 6

VALIDITY OF ELECTRONICALLY CONCLUDED

CONTRACTS

6.1 Legality and validity of Internet contracts

The purpose of this chapter of the work is to examine each Common

Law requirement of a valid contract and investigate whether or not

it can be applied to agreements concluded electronically and if so,

how.

6.1.1 Consensus

With respect to contracts concluded online, there are two broad

categories into which these contracts may fall:

• cases where the customer reacts to an online advertisement, and

• cases where no advertisement is applicable.

6.1.1.1 Contracts concluded in reaction to online advertising

In contracts such as these, the starting point is to remember and

bear in mind throughout that South African Law does not recognize

an advertisement as a binding offer on the part of the supplier.

This is substantiated by Van der Merwe’s definition of an offer144 as

an expression of will, made with the intention of creating an

obligationary relationship on certain or ascertainable terms

with another (the addressee), and brought to the attention of

the addressee, so as to enable him to establish the contract

by accepting the offer as it was made.

Naturally, no supplier would have the intention to bind himself to

an advertisement because a number of circumstances may ensue

causing him not to wish to follow through on the advertisement

any longer. Examples of these circumstances may be that there is

a printing error on the advertisement or that the goods to be supplied

in terms thereof have run out or become otherwise unavailable.

In any event, it may be accepted that in South Africa, when a po-

tential client reacts to an advertisement, it is him or her that makes

the offer to conclude a contract. The offer is made to the supplier

of the goods or services in terms of the advertisement.

In the case of online shopping, a customer may use his web-

browser to visit any merchant web site and virtually browse around

for what he or she is looking for. Merchant web sites (often also

referred to as e-commerce sites) are often in the form of an online

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144 Van der Merwe ea 2003:54.

shopping mall145 — which is a single site containing a wide variety

of shopping possibilities from a variety of different sources. Some

sites may be found on shopping portal sites. A “portal” site is a site

that contains hyperlinks to other shopping sites and is the equivalent

of choosing between going shopping at mall A or B.146

There are many details with respect to online shopping that are

beyond the scope of this thesis as well as many advantages,147

disadvantages and interesting tips. This work is however more fo-

cussed on the actual conclusion of the contracts rather than the

different types of online media in which they may be presented.

As far as these forms of contracts are concerned, an e-commerce

site visited by a potential or interested customer will normally con-

tain numerous advertisements relating to the information on offer.

In terms of the Act, the process regarding the valid conclusion of

online contracts will be fairly clear and more, simple than the

position before the Act was in place. The reason for the clearer

approach is that the Act provides fantastic guidelines relating to

the minimum requirements for an e-commerce site, and also sets

out the circumstances under which ensuing contracts will be valid.

In the absence of the Act, the position otherwise is left to specu-

lation and debate — full of uncertainty and open to much argument.

The position with respect to the conclusion of online contracts as

envisaged by the Act may be summarized as follows:

1. The customer will visit the site and see the advertisement that

he or she wishes to react to.

2. The Act148 stipulates that the site must contain certain minimum

information, enabling the customer to openly and freely decide

whether or not to make use of the site.

3. Among the information required to be on the site, any and all

terms of agreement must be shown as well as any policies re-

lating to return or exchange as well as the site’s privacy policy.

4. The customer can peruse all this information at his leisure and

decide whether or not to make use of the site.

5. If the customer decides to react to the advertisement, he or she

will follow the procedures stipulated by the site in question to act.

6. Due to South African law specifying that an advertisement is

not an offer, the customer’s reaction will not be an acceptance

to the advertisement, but rather an offer to the supplier by the

customer.

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145 For example the gift shop to be found at www.celtic-corner.com.

146 For instance http://www.freeserve.com/shopping.

147 Gray 2001:9-22.

148 Section 43(1)(a)-(r).