Online Contracts

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Online contracts are contracts that are entered into over the internet or through a technological medium.

• no different than traditional contracts
• law generally presumes that contracting parties at least know of one another
  • not necessarily true for online contracts
• Parties give up certain rights when they contract online:
  • may not know the identities of one another
  • may have no real opportunity to bargain for the terms of their agreements
  • may be difficult to determine the material terms of the contract if the parties exchanged multiple electronic communications
• online contracts has not changed fundamental contract law principles
  • still must be offer, acceptance, and consideration
  • must reach a meeting of the minds

Legal Capacity Online

• rules for contractual capacity do not change in cyberspace
• Courts do not enforce contracts against a person who lacks contractual capacity
• it is critical for organizations conducting business on the internet to know who their customers are
• Children’s Online Privacy Protection Act (COPPA) requires websites to get parental consent before collecting personal information from children

Form of Offer and Acceptance

• General contract law principles state:
  • when parties are communicating instantaneously, a contract forms when the offeror receives an offeree’s acceptance
    • Communications are instantaneous when there is no break in communications between offer and acceptance
      • E.g., fax and telephone
  • that where there is a delay in communication, the parties must follow the mailbox rule
    • acceptance is valid once it is mailed

Email Communications

• contain both instantaneous and delayed communication elements
• A chain of email messages can be used to demonstrate that the contracting parties achieved a meeting of the minds
  • can help determine the material terms of an offer and an acceptance
• mailbox rule applies to email communications

Text and Instant Messages

• These are considered instantaneous communications

Existence and Enforcement

• can be difficult for a party to prove the existence of a contract
  • because there is often no hard copy
• can be difficult to prove the terms of the contract
  • may have changed over time, such as through a long-running email conversation
• Contracting parties must keep a paper or electronic record of the transactions
  • necessary to prove the existence of a contract
  • prove its material terms and conditions
  • E.g., printing screen shots or email confirmations

Authenticity and Nonrepudiation

• Authenticity refers to the problem of attributing an electronic message to the person who allegedly sent it
• Nonrepudiation ensures that a party cannot dispute the validity of the message
• authenticity and nonrepudiation can be assured with technology processes
• repudiation vs. nonrepudiation
  • Repudiation
    • refers to a party’s ability to deny the existence of a contract
    • is a legal term
  • Nonrepudiation
    • refers to a process that is used to make sure that a party cannot repudiate, or deny the existence of, a contract
    • is a technical term
• Ensuring nonrepudiation:
  • using a witness
  • using cryptography and digital signatures to verify communication and identities
  • hashing to verify contract exists and is unmodified
• law recognizes that the use of digital signature technology adds a new element to contract law analysis
• Under the UETA, digital signature technology is considered a security procedure
  • is a procedure or process used to:
    • Verify that an electronic signature belongs to a specific person
    • Detect changes or errors in the information in an electronic record
• use of digital signature creates presumption that the signature is valid
  • burden of proof shifts from proving signature is valid (traditional contracts) to proving the signature is invalid (online contracts)