ELECTRONIC TRANSACTIONS AMENDMENT BILL 2011 Explanatory Memorandum
ELECTRONIC TRANSACTIONS AMENDMENT BILL 2011
2010-2011
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
THE HOUSE OF REPRESENTATIVES
ELECTRONIC TRANSACTIONS AMENDMENT BILL 2011
EXPLANATORY MEMORANDUM
(Circulated by authority of the Attorney-General,
the Hon Robert McClelland MP)
Abbreviations used in the Explanatory Memorandum
Act Electronic Transactions Act 1999
Bill Electronic Transactions Amendment Bill 2011
Convention United Nations Convention on the Use of Electronic
Communications in International Contracts 2005
Model Law The Model Law on Electronic Commerce 1996
Regulations Electronic Transactions Regulations 2000
UNCITRAL The United Nations Commission on International Trade Law
ELECTRONIC TRANSACTIONS AMENDMENT BILL 2011
OUTLINE
Electronic Transactions Act 1999
The Electronic Transactions Act 1999 (the Act) implements the United
Nations Commission on International Trade Law (UNCITRAL) Model Law on
Electronic Commerce 1996 (the Model Law). The Model Law provides a set of
internationally accepted rules to remove legal obstacles and provide a more
secure environment for electronic commerce. To achieve national
uniformity, the States and Territories also passed Electronic Transactions
Acts consistent with the Commonwealth Act.
The Act implements three key outcomes of the Model Law - legal validity of
electronic transactions, non-discriminatory treatment of different
electronic methods, and party autonomy to agree to alternative terms and
conditions. Essentially, the Act provides that transactions taking place
under a law of the jurisdiction will not be invalid simply because they are
completed electronically. The Act allows business and government to
fulfil, in electronic form, any of the following requirements: giving
information in writing, providing a handwritten signature, producing a
document in material form, and recording or retaining information.
However, the Electronic Transactions Regulations 2000 (the Regulations)
exclude certain documents and transactions from the application of the Act.
The Act is directed at removing impediments to the use of electronic
communications in general (whether in transactions with government,
business or consumers). Although the Act does recognise electronic
transactions principally for the purpose of an individual's dealings with
the Government, it also applies to private dealings.
Electronic Transactions Amendment Bill 2011
The Electronic Transactions Amendment Bill 2011 (the Bill) was developed
following consideration of the proposal to accede to the United Nations
Convention on the Use of Electronic Communications in International
Contracts 2005 (the Convention) by the Standing Committee of Attorneys-
General.
The Convention was adopted by the United Nations General Assembly on
23 November 2005. It builds on the Model Law, with the purpose of
facilitating international trade by offering practical solutions for issues
arising out of the use of electronic communications in the formation or
performance of contracts between parties located in different countries.
It aims to enhance legal certainty and commercial predictability but does
not otherwise purport to vary or create contract law. The Convention
updates the Model Law in light of the further knowledge and developments in
electronic commerce, and provides for contracts, to give legal certainty in
international trade, filling the gaps created since the Model Law was
developed in 1996.
Implementation of the Convention does not require significant changes to
Australia's electronic transactions laws.
The Bill presents the Commonwealth version of the model amendment
provisions developed by the Parliamentary Counsels' Committee. The
amendments to the Act will update the Commonwealth electronic transactions
regime to align with the Convention, with a view to accession once the
model amendment provisions are enacted in all jurisdictions. The Bill also
applies the changes proposed by the Convention in the context of
international contracts, to the general electronic transactions regime as
these changes serve to update the regime for all electronic transactions.
For example, the Convention provides default rules for determining the time
of dispatch and receipt of an electronic communication in connection with
the formation and performance of a contract. The Bill applies these same
default rules in determining the time of dispatch and receipt in relation
to all electronic communications.
The Bill clarifies the traditional rules on contract formation to address
the needs of electronic commerce, including the recognition of automated
message systems, clarification of an invitation to treat, rules to
determine the location of the parties, updating the electronic signature
provisions and default rules for time and place of dispatch and receipt.
The amendments are machinery in nature and intentionally do not unduly
disturb or affect settled contract law or domestic practice.
Departures from the Convention
Personal, family or household contracts are excluded from the Convention
rules. The rationale for this exclusion was that the Convention does not
address matters providing protection for consumers in contracts (for
example, specifying conditions under which a consumer will be presumed to
have agreed to terms and conditions).
However, in Australia there is legislative protection for consumers such as
the measures contained in the Competition and Consumer Act 2010. The Act
currently applies to all transactions, including private and consumer
transactions, and does not override consumer protection laws. Therefore it
is considered appropriate to depart from the Convention on this issue and
encompass personal, family and household contracts within the scope of the
Act.
Application of the amendments to personal, family and household contracts
despite the Convention's exclusion was discussed in a public consultation
paper and the Government specifically requested views on the issue.
However, no comments were offered, so Ministers agreed that the exclusion
was unnecessary in Australian law.
The Convention also provides for the exclusion of negotiable instruments,
documents of title and similar documents because the potential consequences
of unauthorised duplication make it necessary to develop mechanisms to
ensure the singularity of those instruments. Generally, any transferable
instrument that entitles the bearer or beneficiary to claim the delivery of
goods or the payment of a sum of money is a complex transaction and
warrants rules of specific application. The Regulations already provide
for the exclusion of these transactions from the application of the Act.
These transactions have been excluded because their complexity warranted
rules of specific application. It is preferable for these transactions to
be regulated by their existing legal frameworks. Transactions related to
certain financial service markets are governed by well-defined regulatory
and contractual rules and industry standards which address the issues
relating to electronic commerce, and provide for effective worldwide
functioning.
The Act is not intended to apply to international transactions and
specifically refers to transactions 'for the purposes of a law of the
Commonwealth'. However, the Bill contains a new Part 2A which is
applicable to international contracts. Other than Part 2A, the Act will
continue to apply to domestic transactions only.
Other Amendments
The Act makes provision for the exclusion of certain transactions from its
application. These exclusions are contained in the Regulations and provide
for documents such as passports and statutory declarations to be in paper-
based form only. The Act contains a number of separate provisions to
enable exclusions to individual sections of the Act to be provided for in
the Regulations. The Bill inserts one main regulation-making power for the
entire Act to provide a simplified structure for exceptions.
Financial impact statement
There is no direct financial impact on Government revenue from this Bill.
ELECTRONIC TRANSACTIONS AMENDMENT BILL 2011
NOTES ON CLAUSES
Clause 1: Short title
1. Clause 1 is a formal provision specifying the short title of the Bill.
It provides that when the Bill is enacted, it is to be cited as the
Electronic Transactions Amendment Act 2011.
Clause 2: Commencement
2. This clause provides that Schedule 1 commences on the 28th day after
it receives Royal Assent. Whilst the Act will be part of a national,
uniform legislative scheme, it also works independently. Therefore,
there is no requirement that the commencement coincide with the
commencement of the State and Territory amendments.
Clause 3: Schedules
3. This is a formal clause that enables the Schedules to amend the Act.
It provides that each Act that is specified in a Schedule is amended
or repealed as set out in the applicable items in the Schedule, and
that any other item in a Schedule has effect according to its terms.
The Bill contains only one Schedule.
SCHEDULE 1 - AMENDMENTS
Electronic Transactions Act 1999
Item 1: At the end of section 4
4. This item amends the simplified outline to insert a new bullet point
at the end of section 4 describing the provisions applying to the use
of electronic communications in contracts in Part 2A. The section
gives readers an overview of the content of the Act.
Item 2: Subsection 5(1)
5. This item inserts a definition of 'addressee' in subsection 5(1) of
the Act in accordance with the Convention. The definition of
'originator' and 'addressee' clarify that the Act deals with the
relationship between originator and addressee, but not the
relationship concerning any intermediary such as servers or web hosts.
6. The definition provides that an 'addressee' is the person with whom
the originator intends to communicate by transmitting the electronic
communication, as opposed to any person that may receive, forward or
copy the communication during the course of transmission. It is to be
interpreted to cover natural persons, corporate bodies and other legal
entities.
Item 3: Subsection 5(1)
7. This item inserts a definition of 'automated message system' in
subsection 5(1) of the Act consistent with the Convention, but with
slightly different wording.
8. The use of automated message systems forms part of present day
business practices. Item 21 (new section 15C) confirms that the
absence of human intervention does not preclude contract formation,
and whilst a number of reasons may otherwise render a contract
invalid, the sole fact that an automated message system formed the
contract will not deprive the contract of legal effectiveness,
validity or enforceability. Item 21 also contains a safeguard in
certain circumstances where there has been an 'input error'.
9. The definition clarifies that an automated message system differs from
an information system in that its primary use is to facilitate
exchanges leading to contract formation. The intention of the
definition is to cover transactions that lack human intervention on
either one, or both, sides of the transaction. For example, if a
party orders goods via a website, the order may be taken and confirmed
by the vendor's automated message service.
10. The definition differs slightly from the Convention. The Convention
provides that automated message systems 'initiate an action or respond
to data messages or performances...'. There was doubt raised during
consultation as to the meaning of 'or performances' and in the absence
of any practical examples, the Commonwealth, States and Territories
agreed that the definition should slightly depart from the Convention
and omit the words 'or performances'.
Item 4: Subsection 5(1)
11. This item inserts a definition of 'originator' in subsection 5(1) of
the Act in accordance with the Convention. The definition of
'originator' and 'addressee' clarify that the Act deals with the
relationship between originator and addressee, but not the
relationship concerning any intermediary such as servers or web hosts.
12. The definition provides that an 'originator' is the person that sent
or generated the communication, even if the communication was
transmitted by another person. The intention is to eliminate the
possibility that a recipient who merely stores a data message might be
regarded as an originator. This definition contrasts with the
definition of 'addressee' inserted at item 2, as it focuses on the
intent of the action. It is to be interpreted to cover both natural
persons, corporate bodies and other legal entities.
Item 5: Subsection 5(1)
13. This item inserts a definition of 'performance' in subsection 5(1) of
the Act to provide that the performance of a contract includes the non-
performance of a contract. The Act is intended to apply to
communications that are made at the time when no contract, and
possibly not even the negotiation of a contract, has come into being.
Item 6: Subsection 5(1) (definition of place of business)
14. This item repeals and replaces the definition of 'place of business'.
The new definition provides that a place of business includes business
entities, government, government authorities and non-profit bodies.
The revised definition clarifies that the Act is intended to apply to
transactions of a commercial and trade-related nature, rather than
only being directed at facilitating dealings with Government.
15. This amendment aligns the domestic electronic transactions regime with
the Convention.
Item 7: Subsection 5(1) (definition of transaction)
16. This item repeals and replaces the definition of 'transaction' in
subsection 5(1) of the Act to clarify that the scope of the Act
encapsulates a wide range of exchanges of information including
dealings connected to the formation and performance of a contract.
17. The Act is applicable to both requirements and permissions under a law
to give information in writing. Whilst the broad and inclusive
definition of 'transaction' is intended to include laws requiring a
contract to be in writing, this item confirms the intention by
reference to various exchanges of information relating to contract
formation, whether the exchanges occur at the stage of negotiations,
during the performance, or after a contract has been performed.
18. This amendment aligns the domestic electronic transactions regime with
the Convention.
Item 8: At the end of Part 1
19. The power to provide for exemptions to the operation of the Act has
existed since the Act was established. However, this item, along with
items 9, 10, 15, 16, 17, 18 and 20, transfer the numerous provisions
creating the powers to make the exemptions, into two simplified
sections. These items do not alter the policy or operation of the
Act.
20. In general, appropriate exemptions are made where the purpose or
intention of a requirement, permission or Commonwealth law cannot be
satisfied by the use of electronic communications. For example,
exemptions are made in circumstances where there is a high risk of
document fraud (visas, cheques), where a government agency does not
have the technology or procedures in place to ensure the secure
transmission of information, or where it is important to ensure that
there is only one, paper-based document (passports).
21. New section 7A provides that the Regulations may exempt specified
transactions, requirements, permissions, communications or other
matters, or specified Commonwealth laws, from any or all of the
provisions of the Act. The new section replaces the numerous,
separate provisions in Division 2 of Part 2 of the Act that provided
individual powers to make regulations to exempt certain dealings from
each specific section. New section 7A creates a simplified structure
by providing one regulation-making power in respect to exemptions from
any, or all, of the provisions contained in the Act.
22. New subsection 7B(1) provides an exemption from the operation of the
provisions in Part 2A and Division 2 of Part 2 of the Act for the
practice and procedure of a court or tribunal. The purpose of the new
section is to replicate the exclusion contained in subsection 13(4)
which is repealed by item 18 of the Bill. The exemption is maintained
to provide that the provisions in Part 2A and Division 2 of Part 2
cannot be relied upon to allow a person to use electronic
communications to satisfy any requirements or permissions solely in
relation to the practice and procedure of courts and tribunals. It is
more appropriate to provide for the use of electronic communications
as part of the practice and procedure of a court or tribunal
elsewhere, such as within the rules of court.
23. As provided in the repealed provision, this item clarifies that the
'practice and procedure' of courts and tribunals includes all matters
in relation to which rules of court may be made. This is intended to
cover actions taken in preparation for litigation in a court, even
though litigation may never actually commence.
24. New subsection 7B(2) provides that Part 2A and Division 2 of Part 2 do
not affect the operation of evidence laws. The purpose of the new
section is to replicate the exclusion contained in subsection 13(5)
which is repealed by item 18 of the Bill. This exemption is
maintained in its general nature to complement the policy of not
affecting the operation of litigation in courts and tribunals.
However, it is intended that the laws of evidence, including the
Evidence Act 1995, can be used to show that information or documents
were provided electronically in accordance with the provisions of the
Act.
25. It is important to note that the exemptions provided by new
sections 7A and 7B are not intended to apply to rules of substantive
law that a court or tribunal is considering when determining a matter.
The exemptions do not mean that a person is compelled to use paper
documents if they will need to evidence matters in court at some
future time, but are intended to apply solely to the practice and
procedural requirements of litigation in courts or tribunals.
Item 9: Subsections 8(3) and (4)
26. This item repeals subsections 8(3) and 8(4) of the Act. New section
7A inserted by item 8 of the Bill provides that the Regulations may
exempt specified transactions, requirements, permissions,
communications or other matters, or specified Commonwealth laws, from
any or all of the provisions of the Act. The new section replaces the
numerous, separate provisions in Division 2 of Part 2, such as
existing subsections 8(3) and 8(4), that provided individual powers to
make regulations to exempt certain dealings from each specific
section. Item 8 creates a simplified structure by providing one
regulation-making power in respect to exemptions from any, or all, of
the provisions contained in Part 2A and Division 2 of Part 2 of the
Act.
Item 10: Section 9 (note)
27. This item repeals a note stating that exemptions to section 9 of the
Act are contained in section 13 of the Act. This amendment is
consequential to items 8 and 18 which create a simplified structure
for exemptions, and repeal section 13 of the Act. Repealing the note
also corrects the inaccurate direction to section 13 alone, as
exemptions to section 9 are also contained in the Regulations.
Item 11: Paragraph 10(1)(a)
28. The Act provides for the legal recognition of electronic signatures
(irrespective of the method used) by establishing general conditions
under which an electronic signature is regarded as authenticated with
sufficient credibility and enforceability.
29. Signatures are used to perform a number of functions, such as
identifying a person's personal involvement in the act of signing a
document, associating a person with the content of a document,
associating a person with the content of a document written by someone
else, or endorsing authorship of a text. These basic functions of a
signature are achieved in electronic form by using a method that
identifies the originator of an electronic communication, and
indicates the originator's intention in respect of the information
contained therein.
30. Item 11 amends paragraph 10(1)(a) of the Act to provide that an
electronic signature must be capable of indicating the signatory's
'intention' in respect of the information contained in the electronic
communication, rather than the signatory's 'approval' of the
information contained in the electronic communication.
31. There are instances where the law requires a signature that does not
have the function of indicating the signatory's 'approval' of the
information contained in the electronic communication. For example,
the execution of a particular document may need to be witnessed. In
these circumstances, the witness' signature does not (and is not
intended to) indicate the signatory's approval of the contents of the
document. It merely identifies the signatory as a witness to the
execution of the document.
32. This item aligns the domestic electronic transactions regime with the
Convention by confirming that the notion of 'signature' does not
necessarily imply a party's approval of the entire content of the
communication to which the signature is attached.
33. Item 13 amends paragraph 10(2)(c) of the Act in similar terms.
Item 12: Paragraph 10(1)(b)
34. Paragraph 10(1)(b) of the Act provides a flexible approach to the
requirements of a valid electronic signature by providing that the
method used should be 'as reliable as was appropriate for the purpose
for which the information was communicated'. This enables a range of
legal, technical and commercial factors to be considered when
determining whether the method used is appropriate, including the
nature of the activity taking place, the frequency of activity between
the parties, the value and importance of the information contained in
the communication, and the availability and cost of using alternative
methods of identification.
35. Item 12 repeals paragraph 10(1)(b) of the Act and substitutes a new
paragraph to this 'reliability test' for determining whether the
method used was as 'reliable as was appropriate' by adding reference
to 'in light of all of the circumstances including any relevant
agreement'. This item also validates a signature method regardless of
its reliability in principle, in circumstances where the method used
is proven in fact to have identified the signatory, and indicated the
signatory's intention in respect of the information contained in the
electronic communication, by itself or together with further evidence.
36. This item is intended to ensure that a court considers a number of
factors in ascertaining whether the electronic signature used was
sufficient to identify the signatory. In accordance with the
principle of 'party autonomy', it is open to the parties to agree to
use simpler signature methods.
37. This item prevents a party from invoking the 'reliability test' to
repudiate a signature in circumstances where the identity of the party
and their intentions can be proved. Such a result would be
particularly unfortunate as it would allow a party to escape its
obligations by asserting that its signature, or the other party's
signature, was unreliable even if there is no dispute about the
identity of the person signing, or the fact of the signing.
38. This amendment aligns the domestic electronic transactions regime with
the Convention.
Item 13: Paragraph 10(2)(c)
39. Subsection 10(2) of the Act makes it clear that the signature
provisions do not affect the operation of any other Commonwealth
legislation.
40. Item 13 complements item 11 to provide that the Act does not affect
the operation of any other Commonwealth law that specifies the
particular method of electronic signature to be used to identify the
originator of a communication, and to indicate the originator's
'intention', rather than 'approval', of the information communicated.
41. This item aligns the domestic electronic transactions regime with the
Convention by confirming that the notion of 'signature' does not
necessarily imply a party's approval of the entire content of the
communication to which the signature is attached.
Item 14: After subsection 10(2)
42. This item inserts a new subsection 10(3) to align the domestic
electronic transactions regime with Article 9 of the Convention to
clarify that where the Act applies to a law requiring a signature, it
includes a law that provides a consequence for the absence of a
signature.
Item 15: Section 10 (note)
43. This item repeals a note stating that exemptions to section 10 of the
Act are contained in section 13 of the Act. This amendment is
consequential to items 8 and 18 which create a simplified structure
for exemptions, and repeal section 13 of the Act. Repealing the note
also corrects the inaccurate direction to section 13 alone, as
exemptions to section 10 are also contained in the Regulations.
Item 16: Section 11 (note)
44. This item repeals a note stating that exemptions to section 11 of the
Act are contained in section 13 of the Act. This amendment is
consequential to items 8 and 18 which create a simplified structure
for exemptions, and repeal section 13 of the Act. Repealing the note
also corrects the inaccurate direction to section 13 alone, as
exemptions to section 11 are also contained in the Regulations.
Item 17: Section 12 (note)
45. This item repeals a note stating that exemptions to section 12 of the
Act are contained in section 13 of the Act. This amendment is
consequential to items 8 and 18 which create a simplified structure
for exemptions, and repeal section 13 of the Act. Repealing the note
also corrects the inaccurate direction to section 13 alone, as
exemptions to section 12 are also contained in the Regulations.
Item 18: Section 13
46. This item repeals section 13 which is one of the regulation-making
powers contained in the Act. Item 8 replaces the current regulation-
making provisions to provide a simplified structure for making
exemptions to the application of the Act. This item does not alter
the policy or operation of the Act.
Item 19: Section 14
47. Section 14 of the Act contains default rules to determine the time and
place of dispatch and receipt of an electronic communication that
apply in the absence of any alternative agreement on these matters.
48. This item repeals existing section 14 and substitutes a new section
providing the default rules with minor changes to the provisions to
accord with the Convention. These minor changes update the Model Law
based on a greater knowledge of the internet and the use of electronic
communications obtained since the Model Law was finalised in 1996.
All amendments retain the proviso that in all cases, parties can agree
to alternative terms to determine the time and place of dispatch and
receipt of electronic communications.
49. For the purposes of contract law, the time of the dispatch and the
receipt of an electronic communication are significant to the issue of
contractual acceptance. It is important to note that proposed section
14 does not intend to provide a rule on the time of contract formation
when using electronic communications, but refines the default rules
for determining the time of dispatch and receipt only. This then
enables the application of well-established common law rules to
determine the issues concerning contract formation.
50. To determine the precise time of dispatch and receipt of an electronic
communication with sufficient reliability and integrity, consideration
may be given to Australia's realisation of the Coordinated Universal
Time (UTC (AUS)) maintained by the National Measurement Institute, as
required by the National Measurement Act 1960. The UTC (AUS) is
Australia's ultimate legal reference for the time of day.
Proposed section 14 - Time of dispatch
51. The proposed new section replaces the provisions concerning the
default rules establishing the time of dispatch of an electronic
communication to align the Act with Article 10 of the Convention.
52. Both the Model Law and the Convention contain a formula to determine
the time of dispatch of an electronic communication which involves the
notion of a communication leaving the control of the originator's
information system. The Model Law is directed at the time an
electronic communication enters the information system of an
addressee, whereas the Convention is directed at the time it leaves
the information system of the originator. There is likely to be
little difference in practice, but for example, an e-mail
communication whilst often virtually instantaneous, can be lost or
delayed by security measures such as firewalls and filters.
53. The new paragraph 14(1)(a) adopts the Convention rule to be clear that
dispatch occurs at the time an electronic communication leaves the
information system of the originator.
54. The new paragraph 14(1)(b) provides that where an electronic
communication does not leave the information system of the originator,
the time of dispatch is deemed to be when the communication is
received by the addressee. This provision anticipates the exchange of
electronic communications within the same information system.
55. The provision does not make a distinction between an information
system that is, or is not, under the control of the user such as where
the parties are using web-based e-mail or Software as a Service (SAAS)
models.
56. In relation to contracts, the general rule under the common law is
that, unless an offer stipulates a particular mode of acceptance, a
contract is formed when acceptance is communicated to the offeror. An
exception to this general rule is the 'postal acceptance' rule, where
acceptance is effective immediately after a properly pre-paid and
addressed letter is posted. However, the application of the postal
acceptance rule to electronic communications may be confined to
situations where it can be inferred an offeror intended acceptance to
be communicated upon dispatch of an electronic communication.
57. Lastly, new subsection 14(2) confirms that the default rules for
determining the time of dispatch are not affected if the information
system supporting an electronic address is in a different location
from where the electronic communication is sent, which could be in a
different location or jurisdiction. This is consistent with new
subsection 14B(3) concerning the determination of the place of
dispatch or receipt of an electronic communication.
Proposed section 14A - Time of receipt
58. New section 14A replaces the provisions concerning the default rules
establishing the time of receipt of an electronic communication to
align the Act with Article 10 of the Convention.
59. New subsection 14A(1) provides that the time of receipt of an
electronic communication is the time when it becomes 'capable of being
retrieved' by the addressee at a designated electronic address, or
when sent to another electronic address, the time of receipt is the
time when the electronic communication is both 'capable of being
retrieved', and the addressee has become aware that the electronic
communication has been sent to that electronic address.
60. Whether or not an electronic communication has been sent to a non-
designated address is a factual matter that could be proven by
objective evidence, such as a record of notice, or an automatic
delivery message.
61. The Convention introduces the concept of an electronic communication
being 'capable of being retrieved'. New subsection 14A(2) clarifies
that an electronic communication is presumed to be capable of being
retrieved by the addressee when it reaches the addressee's electronic
address. However, it is important to note that this is a presumption
only. It does not go so far as to say that the presumption equates to
knowledge. The question of whether an electronic communication has
been 'communicated' would remain to be determined under the common
law, depending on the particular facts.
62. The rule determining receipt of an electronic communication is stated
as an example as to why personal, family or household contracts are
excluded from the scope of the Convention. The explanatory notes
provide that the presumption of receipt occurring upon an electronic
communication reaching an addressee's electronic address is not
appropriate in the context of consumers. Receipt of an electronic
communication often communicates acceptance for the purpose of
contract formation, and the rationale for the exclusion in this
context is that it requires private individuals to conform to the same
standards of diligence as entities or persons engaged in commercial
activities. Consumers may not regularly check their e-mail, or could
be unable to distinguish readily between legitimate commercial
messages and unsolicited mail or spam and as such, the Convention
states that the rule is not appropriate for personal, family or
household contracts.
63. However, the rules of dispatch and receipt were not previously
excluded from application to personal, family or household dealings,
including contracts. In the absence of these rules, the question of
how the time of dispatch and receipt are to be determined in relation
to consumer contracts would be left open. This would be a significant
omission as consumers are increasingly undertaking transactions online
over the internet. Therefore, this new section is also intended to
apply to personal, family or household dealings, including contracts,
and would not override, but merely supplement, other existing laws
offering protection to consumers.
64. Lastly, new subsection 14A(3) confirms that the default rules for
determining the time of receipt are not affected if the information
system supporting an electronic address is in a different location
from where the electronic communication is received, which could be in
a different location or jurisdiction. This is consistent with new
subsection 14B(3) concerning the determination of the place of
dispatch or receipt of an electronic communication.
Proposed section 14B - Place of dispatch and receipt
65. This new section replaces the provisions concerning the default rules
establishing the place of dispatch and receipt of an electronic
communication to align the Act with Articles 6 and 10 of the
Convention. New subsection 14B(1) replicates the existing provision
to provide that the place of dispatch and receipt of electronic
communications is the place where the originator or addressee has its
place of business.
66. As a result of businesses adopting technological advances, business
practices may involve various parts of a transaction taking place in
different locations and possibly different jurisdictions.
Consequently, it can be difficult to define the 'place of business'.
For example, the global reach of electronic commerce means that an
order could be placed from a person's home or work, and received by a
salesperson at an office location. The vendor may maintain several
warehouses at different locations and different goods might be shipped
to fulfil the single purchase order. The transaction may also involve
direct debit from a credit card, and the payment is likely to be
affected in yet another location.
67. New section 14B aligns the domestic electronic transactions regime
with the Convention to provide default rules to enable parties to
ascertain the place of business of their counterpart. This
facilitates a determination as to the international or domestic
character of a transaction, including the jurisdiction of contract
formation.
68. It is important to note that the new section 14B does not impose a
duty on parties to disclose their place of business, but establishes a
set of rebuttable presumptions in favour of a party's indication of
its place of business.
69. New paragraph 14B(2)(a) provides that a party's place of business is
assumed to be the location indicated by the party, unless another
party demonstrates that they do not in fact have a place of business
at that location. Where a party has not indicated a place of
business, new paragraph 14B(2)(b) provides that if there is one place
of business, that will be assumed to be the place of business. In
circumstances where a party has made no indication and there are
multiple places of business, new paragraphs 14B(2)(c) and (d) provide
that the place of business will be either the place that has the
closest relationship to the transaction, or the principle place of
business. In determining the place of business with the closest
relationship to the transaction, this provision provides that
consideration is to be given to the circumstances known, or
contemplated, by the parties at any time before or after the
transaction.
70. New paragraph 14B(2)(e) provides that if a party does not have a place
of business, for the purposes of determining the place of dispatch and
receipt of an electronic communication, the place of business is
assumed to be their habitual residence. This provision does not apply
to legal entities since it is generally understood that only natural
persons are capable of having a 'habitual residence'.
71. New subsections 14B(3) and (4) clarify that the location of an
information system can be one, but not necessarily the most
significant, factor to consider in determining the place of business.
Further, peripheral information related to electronic messages such as
Internet Protocol addresses and domain names provide little conclusive
value for determining the physical location of the parties and as
such, the intention of new subsections 14B(3) and (4) is to require
cautious consideration of these elements. The provisions recognise
that there should be a reasonable connection between a party and what
is deemed to be their place of business.
72. Item 6 repeals and replaces the definition of 'place of business' to
clarify that the Act is intended to apply to transactions of a
commercial and trade-related nature, rather than only being directed
at facilitating dealings with Government.
Item 20: Subsections 15(3) and (4)
73. This item repeals subsections 15(3) and 15(4) of the Act. New section
7A inserted at item 8 provides that the Regulations may exempt
specified transactions, requirements, permissions, communications or
other matters, or specified Commonwealth laws, from any or all of the
provisions of the Act. The new section replaces the numerous,
separate provisions in Division 2 of Part 2, such as the existing
subsections 15(3) and 15(4), that provided individual powers to make
regulations to exempt certain dealings from each specific section.
Item 8 creates a simplified structure by providing one regulation-
making power in respect to exemptions from any, or all, of the
provisions contained in Part 2A and Division 2 of Part 2.
Item 21: After Part 2
74. This item inserts a new Part 2A into the Act which provides additional
provisions applying to contracts involving electronic communications.
75. New Part 2A operates in general terms, whereas the provisions
contained in Part 2 of the Act apply by reference to the expression
'for the purposes of a law of the Commonwealth'. The intention is
that the new Part 2A is applicable to both domestic contracts and
contracts with an international aspect. However, Part 2 of the Act
will remain applicable to transactions undertaken pursuant to a law of
the Commonwealth.
76. This item relies on paragraph 51(v) of the Constitution (the postal,
telegraphic, telephonic, and other like services power) to give effect
to the Convention on a national basis. Other heads of power may,
subject to the application of relevant limitations on the Commonwealth
legislative power, provide complete or partial support for the
Commonwealth to give effect to the Convention.
77. These amendments align the electronic transactions regime with the
Convention, preserving the rights of parties to agree to their own
alternative arrangements. The Convention acknowledges that in
practice, solutions to the legal difficulties raised by the use of
electronic communications are often the subject of contractual terms.
Proposed section 15A - Application and operation of this Part
78. The Convention is directed at clarifying uncertainties in the use of
electronic communications in connection to the formation and
performance of contracts involving parties in different jurisdictions.
As such, the Convention rules are only concerned with, and applicable
to, international contracts. However, the proposed new provisions
contained in new Part 2A also apply the Convention rules to the use of
electronic communications related to the formation and performance of
domestic contracts to avoid having different regimes under the
domestic law.
79. New subsection 15A(1) provides that the new Part 2A applies to
contracts where either some, or all, parties are located within
Australia or elsewhere, and whether the contract is for business
purposes, for personal or household purposes, or for other purposes.
80. The explicit intention to extend the provisions to international
contracts is embodied in paragraph 15A(1)(a) which applies the new
Part 2A in circumstances where the location of the parties may be
outside Australia. It is not the intention to extend the provisions
so far as to purport to cover contracts involving all parties being
outside Australia and having no connection to Australia. However, in
such circumstances there is nothing to prevent parties agreeing that
the law of another jurisdiction should govern the contract given the
preservation of the principle of 'party autonomy'.
81. New paragraph 15A(1)(b) clarifies the intent to depart from the
Convention by including personal and household contracts within the
scope of new Part 2A. As discussed at item 19 (new section 14A) and
new section 15D below, the Act does not override the protection
provided by other consumer protection laws and therefore, it is not
necessary to exclude such contracts from the scope of the Act.
82. New subsection 15A(2) confirms that the new Part 2A is not intended to
cover the field for the purposes of section 109 of the Commonwealth of
Australia Constitution Act as it is not intended that the Commonwealth
provisions override State and Territory legislation if an equivalent
provision is contained in the relevant State or Territory's
legislation. This provision preserves the co-operative nature of the
electronic transactions scheme, but does enable the Commonwealth
provisions to apply to a contract where the proper law of the contract
is (or on formation would be) the law of a State or Territory, and
that State or Territory does not have a law in conformity with the
Commonwealth provisions. This subsection ensures Australia's
compliance with the Convention in circumstances where a State or
Territory either has not enacted the new provisions, or for some
reason amends them in an inconsistent manner in the future.
Proposed section 15B - Invitation to treat regarding contracts
83. New section 15B provides that a proposal to form a contract, other
than a proposal addressed to specific persons, is considered to be
merely an invitation to make offers, unless the contrary intention is
clearly indicated by the person making the proposal.
84. This provision reflects the common law distinction between an offer,
where the offeror has indicated a willingness to be bound, and an
invitation to treat, where a statement invites the making of offers or
further negotiations. The distinction turns on the intent of the
invitor. In the absence of a clear intention to be bound by an offer,
the invitor is not bound until the price offered by a customer is
accepted.
85. The intention of this provision is to transpose the common law notion
of an invitation to treat into an electronic environment to confirm
that a trader who advertises goods or services on the internet, or
through other generally accessible communication systems or open
networks, is considered to be inviting those who access the site to
make offers, unless there is a clear indication by the trader of an
intention to be bound.
86. The internet enables information to be sent, or viewed, by virtually
an unlimited number of people. Subsection 15B(2) provides that
proposals using interactive applications for the placement of orders
may also be considered an invitation to treat. Although interactive
applications appear to provide for contracts to be concluded almost
instantaneously, an advertisement or proposal to the world at large
does not indicate the invitor's intention to be bound, given the
unlikelihood of fulfilling purchase orders received by an unlimited
amount of people.
Proposed section 15C - Use of automated message system for contract
formation - non-intervention of natural person
87. The use of automated message systems forms part of present day
business practices. New section 15C confirms that the absence of
human intervention on behalf of one, or all, parties to a contract
does not itself preclude valid contract formation. This provision
does not enable an automated message system to interfere with
agreement to terms of a contract, it merely confirms that an automated
message system can agree to form a contract.
88. Item 3 of the Bill inserts a definition of 'automated message system'
in subsection 5(1) of the Act. The intention of this provision is to
acknowledge that whilst a number of reasons may otherwise render a
contract invalid, the sole fact that automated message systems were
used in the contract formation and no natural person reviewed or
intervened, does not deny the resulting contract legal effectiveness,
validity or enforceability. However, the person or entity using the
automated message system is ultimately responsible for the actions of
the automated message system.
Proposed section 15D - Error in electronic communications regarding
contracts
89. Unlike transactions involving human intervention, transacting with an
automated message system reduces the opportunity to detect or correct
an error. New section 15D contains a safeguard providing a right to
withdraw the portion of an electronic communication containing an
error in certain circumstances. The particular circumstances that
must apply in order to give rise to the right to withdraw the error
are intended to address the notion of 'unjust enrichment' and limit
abuses by parties acting in bad faith.
90. Where an 'input error' is made (e.g. where a person enters the wrong
quantity of goods on an order form) the safeguard enables the
withdrawal of the portion of the electronic communication containing
the error, only where the error is made by a natural person in an
exchange with an automated message system, and an opportunity to
correct the error is not provided. Further, the right to withdraw the
portion of the electronic communication containing the error is only
available if the person notifies the other party of the error as soon
as possible after having learned of the error and, he/she has not used
or received any material benefit or value from the goods or services.
91. The intention of the safeguard is to encourage parties to build in an
opportunity to correct input errors when using automated message
systems, such as including a confirmation screen that provides an
opportunity to correct any information before the electronic
communication is sent. In addition, subsection 15D(3) clarifies that
the safeguard is not intended to give parties an opportunity to
repudiate disadvantageous contracts or to avoid what would otherwise
be valid legal commitments.
92. This safeguard is noted as an example as to why personal, family or
household contracts are excluded from the scope of the Convention.
The explanatory notes provide that the rationale for the exclusion is
because the Convention does not address matters providing protection
for consumers. However, in Australia there is adequate legislative
protection for consumers and given the protective policy underlying
the safeguard, the new section 15D is intended to apply to personal,
family or household dealings, including contracts, and would not
override, but merely supplement, other existing consumer protection
measures such as the Electronic Funds Transfer Code of Conduct.
93. New subsection 15D(4) and the note below it clarify that while the
safeguard intends to preserve the effects of the contract as much as
possible, it does not intend to assert any undue influence with well-
established notions of contract law. The conditions for withdrawal or
avoidance of electronic communications affected by errors that occur
in any other context than those provided for in section 15D are to be
determined by other applicable legislation and the common law.
Proposed section 15E - Application of Act in relation to contracts
94. New subsection 15E(1) clarifies that the provisions contained in Part
2 of the Act are also applicable to contracts involving the use of
electronic communications. Part 2 contains provisions that are
relevant to contracts, but are prefaced with the words 'for the
purposes of a law of the Commonwealth'. In order to remove any doubt
as to whether 'a law of the Commonwealth' would extend to the common
law, subsection 15E(1) specifies that the provisions of Part 2 also
apply to contracts. This confirms that, for example, the default
rules concerning the time of dispatch and receipt are applicable in
determining the time of dispatch and receipt of an electronic
communication relating to a contract. This subsection complements the
new definition of 'transaction' inserted by item 7, that clarifies
that a transaction under Part 2 includes electronic communications
related to a contract.
95. New subsection 15E(2) is intended to clarify the applicable law in
circumstances where different provisions and/or jurisdictions could
potentially operate in the same field.
96. Paragraph 15E(2)(a) provides that Part 2A does not apply to a contract
if Part 2 is applicable. The intention of this paragraph is to
provide that an electronic communication related to a contract that is
communicated 'for the purposes of a law of the Commonwealth', that is,
within the scope of Part 2, will not be governed by the provisions in
Part 2A. For example, the relevant provisions of Part 2 will apply to
an electronic communication related to a contract governed by a
Commonwealth law. This is intended to provide for only a singular
provision to be applicable.
97. Paragraph 15E(2)(b) provides that Part 2A does not apply where the law
of a State or Territory is the proper law of the relevant contract,
and that State or Territory has provisions in place that are
substantially the same as Part 2 of the Act.
98. The intention of this paragraph is to provide that an electronic
communication related to a contract that is established under the law
of a State or Territory, that is, any contract governed by State or
Territory legislation (including the common law), will not be governed
by the provisions in Part 2A of the Act. For example, a contract for
the sale of goods in a particular State will be governed by the Part 2
equivalent of that State's electronic transactions legislation even in
circumstances where that State has not enacted provisions similar to
Part 2A to provide for contracts. In these circumstances, the
Commonwealth does not intend to override the State's legislation. The
intention is to preserve the co-operative nature of the electronic
transactions scheme.
Proposed section 15F - No interference with powers and functions of another
jurisdiction
99. New section 15F is intended to address the constitutional limitations
of the Commonwealth's power to deal with the States and Territories
and the interpretation of their legislation.
100. This section confirms that the new Part 2A will not apply to the
extent that it may interfere with the exercise of the powers or the
functions or duties of the States and Territories. Should any of the
provisions in Part 2A be applicable to a State or Territory contract
as a consequence of the application of new section 15E, the
Commonwealth provisions will not apply to the extent that they would
purport to satisfy a certain requirement under a State or Territory's
law. For example, if section 15E is invoked, the requirements for a
valid contract for the sale of goods in a particular State cannot be
fulfilled by relying on the Commonwealth's provisions.
Item 22: At the end of Part 3
101. This is a machinery item to support the transition to new provisions.
102. Subsection 17(1) preserves the Regulations in place as if the new
regulation-making power provided by item 8, had been in force at the
time the Regulations were made. This does not prevent the amendment
or repeal of any of the Regulations in the future.
103. Subsection 17(2) provides that the new provisions inserted by item 21
(proposed new sections 15B, 15C and 15D) extend to proposals, actions,
statements, declarations, demands, notices or requests, including
offers and the acceptance of offers made before the provisions
commence. However, these provisions do not have retrospective
application in respect of a contract formed prior to the commencement
of the provisions. The intention of subsection 17(3) is to provide
for consistent rules and procedures to apply to an entire contract.
