Electronic transactions and business records

Amendments to the Electronic Transactions Act 2000 were passed by the NSW Parliament on 28 September 2010 and commenced operation in NSW on 15 October 2010.

Certainty in electronic commerce

The laws recognise international standards consistent with the United Nations Convention on the Use of Electronic Communications in International Contracts, and to apply and recognise that the use of automatic message systems is increasingly prevalent in contract formation, particularly for internet transactions, and to apply those principles for domestic commercial transactions where the law of NSW applies to such contracts.

The purpose of the amendments is to facilitate international and domestic trade and to enhance legal certainty and commercial predictability where electronic communications are used. NSW is the first Australian jurisdiction to introduce these changes, and it proposed, through the Standing Committee of Attorneys General, that Australia will accede to the Convention when model legislation is enacted in each Australian jurisdiction.

Key statutory changes for electronic transactions

The Act does not purport to vary or create a new law of contract. Rather, it includes amendments to recognise the growth of electronic communications and to improve the existing current electronic transactions regime. Parties are still free to agree on their own contractual obligations, including the formation and performance of a contract between them. There are provisions which provide some protection for consumers who are the purchasers of goods by way of an electronic contract (on the internet), providing them with an opportunity to rectify a contract or to notify the seller of an error in an order so the error may be rectified or a potential purchase arrangement be ended.

The amendments deal with:

• new rules that recognise the use of automated message systems;
• a new rule about what is an 'invitation to treat' in the electronic context by an internet trader;
• minor amendments to the electronic signature provisions and other formal requirements of any electronic based transaction;
• clarification of the location of the parties rule; and
• minor amendments to the default rules for the time and place of the dispatch and receipt of electronic communications.

Where a proposal to enter into a contract is made by electronic means to the world at large, the Act treats that as an invitation to make an offer, unless there is a clear indication by the trader of an intention to be bound.

Errors in an 'automated message system'

The amendments recognise that transactions in an internet era are handled by a computer program, and that an 'automated message system' operates between the parties. Such a system recognises that an electronic transaction lacks human intervention on one or both sides of the transaction and that the absence of human intervention does not preclude the creation of an enforceable contract.

If a website does not provide an opportunity for correction of a purchase arrangement where an individual makes an input error, the person making the error may withdraw that portion of the electronic communication in certain circumstances so long as the error is notified to the trader as soon as possible and that the relevant potential purchaser has not received any material benefit or value from the goods or services the subject of the transaction.

The 'time' of 'dispatch' and 'receipt' of electronic communications

In relation to the time and receipt of communications, they are now defined as follows:

• the time of dispatch is when the electronic communication leaves an information system under the control of the sender or a party who sent it; and
• the time of receipt is when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee.

A party's place of business is to be determined as follows:

• It is assumed to be the location indicated by a party (in the electronic communication) unless another party demonstrates no such place of business at that location.
• If a party has only one place of business and remains silent on the point, its place of business is assumed to be that place from where in fact business is conducted.
• If a party has more than one place of business, the relevant place is that which has the 'closest relationship to the underlying transaction'.
• If a party is a natural person and does not have a place of business, it is assumed that the place of business is the place of that party's habitual residence.

These statutory assumptions should avoid strange and unexpected arguments that parties may be forced to advance where, for example, servers and computer facilities are based in unknown locations which may have unexpected choice of law consequences that neither party intended.

What NSW businesses should do

All Australian businesses which operate in whole or in part in NSW or which are subject to NSW law, and who engage in or who offer goods or services through electronic-based offers to customers, should review their electronic terms and conditions and any relevant internet-based contracts to ensure they reflect these amendments.