Electronic Transactions (Victoria) Amendment Bill 2011

Introduction Print

EXPLANATORY MEMORANDUM

General

Background

The Electronic Transactions (Victoria) Act 2000

The Electronic Transactions (Victoria) Act 2000 (the Principal Act) implements the United Nations Commission on International Trade Law (UNCITRAL) Model Law of Electronic Commerce 1996 (the Model Law). The Model Law provides a set of internationally accepted rules to remove legal obstacles to provide a more secure environment for electronic commerce. To achieve national uniformity, the Commonwealth and the other States and Territories of the Commonwealth have also passed electronic transactions legislation that is consistent with the Principal Act.

The Principal Act implements three key outcomes of the Model Law: legal validity of electronic transactions, non-discriminatory treatment of different methods, and party autonomy to agree to alternative terms and conditions.

The Principal Act essentially provides that transactions taking place under a law of the jurisdiction will not be invalid simply because they are completed electronically. The Principal 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, certain transactions, and requirements and permissions relating to transactions, may be excluded from the application of the Principal Act if prescribed in the Electronic Transactions (Victoria) Regulations 2000 (the Regulations).

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The Principal Act is broadly directed at removing impediments to the use of electronic communications in general (whether in transactions with government, business or consumers). Although the Principal Act recognises electronic transactions principally for the purpose of an individual's dealings with Government, it also applies to private dealings. This includes cases where statutes regulate the form of a contract (e.g. sale of goods legislation) and where a contract is governed by the common law.

The Electronic Transactions (Victoria) Amendment Bill 2011

The Electronic Transactions Amendment Bill 2011 (the Bill) was developed following consideration by the Standing Committee of Attorneys-General of the proposal to accede to the United Nations Convention on the Use of Electronic Communications in International Contracts 2005 (the Convention).

The Convention was adopted by the UN General Assembly on 23 November 2005. The Convention 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. The objective of the Convention is to enhance legal certainty and commercial predictability. It does not otherwise purport to vary or create contract law. The Convention updates the Model Law in light of further knowledge and developments in electronic commerce, and provides for contracts to give legal certainty in international trade. The explanatory notes to the Convention discuss the Model Law in detail, specifically referring to the provisions to be updated following the consideration of common, accepted practices. The Convention addresses gaps arising since the Model Law was developed in 1996 and introduces some refinements in approach to the Model Law provisions.

Implementation of the Convention does not require significant changes to the electronic transactions laws. The Bill is the Victorian version of the model amendment provisions developed by the Parliamentary Counsel's Committee. The Bill amends the Principal Act to update the electronic transactions regime to align with the Convention, with a view to acceding to the Convention when the amendments are enacted in each jurisdiction.

Implementation of the Convention is intended to—

modernise Australia's law on e-commerce so that it reflects internationally recognised legal standards; and

enhance cross-border online commerce; and

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increase certainty for international trade by electronic means and thereby encourage further growth of electronic contracting; and

confirm Australia's commitment to facilitating electronic communications in international trade transactions as reflected in Free Trade Agreements.

The Bill 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 (Article 10). The Bill applies these same default rules in determining the time of dispatch and receipt in relation to all electronic transactions.

Similarly, the Convention provides default rules for determining the location of the parties (Article 6). The Bill applies theses same default rules in determining the location of the parties in relation to all electronic transactions.

Parties to a contract may, however, agree to contractual terms that vary the default rules, consistent with the preservation of party autonomy in respect of these matters under Article 3 of the Convention.

Departure from the Convention

The Convention does not apply to electronic communications relating to personal, family or household contracts. The rationale for this exclusion was that the Convention does not address matters providing protection for consumers in contracts (for example, by 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. This includes trade practices legislation (applicable to contracts for sale of goods and services to a "consumer" and concerned with unfair conduct), consumer credit legislation (providing relief from certain unjust contracts, mortgages or guarantees in respect of the provision of consumer credit) and financial services legislation. Other laws such as insurance contracts legislation include provisions which may have a protective effect for consumers, but also provide for enforcement of terms and conditions against consumers.

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The Principal Act currently applies to all transactions, including private and consumer transactions, entered into for the purposes of a law of Victoria. It does not override the protection provided by other 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 Principal Act.

The matter of applying the amendments to consumer contracts despite the Convention's exclusion was discussed in a public consultation paper and comments were requested on this issue. However, no comments were made on this issue and Ministers agreed that these contracts would not be excluded from the scope of the amendments.

Therefore, the scope of the Principal Act will now extend the Convention rules to personal, family and household contracts.

The Principal Act is not intended to apply to international transactions and specifically refers to transactions "for the purposes of a law of this jurisdiction". However, the Bill contains a new Part 2A which is applicable to international contracts. Other than Part 2A, the Principal Act will continue to apply to domestic transactions only.

Clause Notes

Clause 1 sets out the purposes of the Bill which are to amend the Principal Act—

to clarify the circumstances in which a requirement for a signature will be taken to have been met in relation to an electronic communication; and

to substitute the provisions relating to the determination of time and place of dispatch and receipt of electronic communications; and

to provide for contracts that involve electronic communications; and

to make other miscellaneous amendments.

Clause 2 provides that the Bill is to commence operation on a day or days to be proclaimed or, if a provision does not come into operation before 11 October 2012, it comes into operation on that day.

Clause 3 provides that the Electronic Transactions (Victoria) Act 2000 is called the Principal Act.

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Clause 4 amends section 3 of the Principal Act by inserting a number of new definitions. The newly defined terms are—

addressee—The definitions of originator and addressee clarify that the Principal Act deals with the relationship between originator and addressee, but not the relationship concerning any intermediary such as servers or web hosts.

The definition of addressee provides that an addressee is the person with whom the originator intends to communicate by transmitting 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.

The definition is consistent with the definition of the term in the Convention.

automated message system—The use of automated message systems forms part of present day business practices. New section 14C (inserted by clause 12 of the Bill) 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. New section 14D (inserted by clause 12 of the Bill) also contains a safeguard where there has been an "input error".

The definition of automated message system 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.

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".

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originator—The definitions of originator and addressee are introduced to clarify that the Principal Act deals with the relationship between originator and addressee, but not the relationship concerning an intermediary such as servers or web hosts.

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 of the definition 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, 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.

performance—The new definition of performance provides that the performance of a contract also includes non-performance of the contract. The Principal 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.

Clause 4 also substitutes the following existing definitions—

place of business—The new definition of place of business provides that a place of business includes business entities, government, government authorities and non-profit bodies. The revised definition clarifies that the Principal Act is intended to apply to transactions of a commercial and trade-related nature, rather than only being directed at facilitating dealings with government.

This amendment aligns the domestic electronic transactions regime with the Convention.

transaction—The new definition of transaction clarifies that the scope of the Principal Act encapsulates a wider range of exchanges of information including dealings in connection with the formation and performance of a contract. The Principal 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, the new definition confirms the intention by reference to various exchanges of information relating to contract formation, whether the exchanges occur at

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the stage of negotiations, during the performance, or after a contract has been performed.

This amendment aligns the domestic electronic transactions regime with the Convention.

Clause 5 amends the outline in section 5 of the Principal Act to include a description of the provisions applying to the use of electronic communications in contracts in new Part 2A.

Subclause (2) makes a minor consequential amendment.

Clause 6 inserts new section 6A into the Principal Act.

The power to provide for exemptions to the operation of the Principal Act has existed since the Principal Act was established. These exemptions are contained in the Regulations.

In general, appropriate exemptions are made where the purpose or intention of a requirement, permission or Victorian law cannot be satisfied by the use of electronic communications.

New section 6A provides that Regulations may exempt specified transactions, requirements, permissions, communications or other matters, or specified Victorian laws, from any or all of the provisions of the Principal Act.

New section 6A replaces the numerous, separate provisions in Division 2 of Part 2 of the Principal Act that provided individual powers to make regulations to exempt certain dealings from each specific section.

This new section creates a simplified structure by providing one regulation-making power in respect of exemptions from any, or all, of the provisions contained in the Principal Act.

Clause 7 provides for the repeal of section 7(3) and 7(4) of the Principal Act. New section 6A (inserted by clause 6 of the Bill) provides that the Regulations may exempt specified transactions, requirements, permissions, communications or other matters, or specified Victorian laws, from any or all of the provisions of the Principal Act.

New section 6A replaces the numerous, separate provisions in Division 2 of Part 2 of the Principal Act, such as existing section 7(3) and (4), that provided individual powers to make regulations to exempt certain dealings from each specific section.

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The note at the foot of section 8(5) of the Principal Act referring the reader to section 12 has been removed administratively. This administrative amendment is made as a consequence of clause 6 of the Bill, which inserts a new regulation making power (new section 6A of the Principal Act), and clauses 7, 9 and 11 of the Bill, which repeal sections 7(3) and (4), 12 and 14(3) and (4) of the Principal Act. The notes do not form part of the Principal Act because of the application of section 3(2) of the Principal Act and further, because they were inserted before the commencement of section 36(3A) of the Interpretation of Legislation Act 2000.

Clause 8 amends section 9 of the Principal Act.

The Principal 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.

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.

Clause 8 amends section 9(1)(a) of the Principal 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.

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 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.

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This item aligns the Principal Act 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.

Section 9(1)(b) of the Principal Act currently 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.

Clause 8 substitutes section 9(1)(b) of the Principal Act with a new paragraph to this "reliability test" for determining whether the method used was as "reliable as was appropriate" by adding reference to "in the light of all of the circumstances, including any relevant agreement". This new paragraph also validates a signature method regardless of its reliability 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.

This new paragraph 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.

This new paragraph 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 the party's obligations by asserting that the party's 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.

This amendment aligns the domestic electronic transactions regime with the Convention.

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The amendment to section 9(2)(c) of the Principal Act complements the amendment to section 9(1)(a) to provide that the Principal Act does not affect the operation of any other Victorian law that specifies the particular method of electronic signature to be used to identify the original of a communication, and to indicate the originator's "intention" rather than "approval" if the information communicated.

Furthermore clause 8 inserts a new section 9(3) into the Principal Act to align the domestic electronic transactions regime with Article 9 of the Convention to clarify that where the Principal Act applies to a law requiring a signature, it includes a law that provides a consequence for the absence of a signature.

The note at the foot of sections 9(2), 10(4) and 11(5) of the Principal Act referring the reader to section 12 has been removed administratively. This administrative amendment is made as a consequence of clause 6 of the Bill, which inserts a new regulation making power (new section 6A of the Principal Act), and clauses 7, 9 and 11 of the Bill, which repeal sections 7(3) and (4), 12 and 14(3) and (4) of the Principal Act. The notes do not form part of the Principal Act because of the application of section 3(2) of the Principal Act and further, because they were inserted before the commencement of section 36(3A) of the Interpretation of Legislation Act 2000.

Clause 9 repeals section 12 of the Principal Act which is one of the regulation-making powers contained in the Principal Act. Clause 6 replaces the current regulation-making provisions to provide a simplified structure for making exemptions to the application of the Principal Act. This clause does not alter the policy or operation of the Principal Act.

Clause 10 substitutes section 13 of the Principal Act and inserts new sections 13A and 13B into the Principal Act.

Section 13 of the Principal 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.

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Clause 10 repeals existing section 13 of the Principal Act and substitutes new sections providing the default rules with minor changes 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.

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 the proposed new sections do not intend to provide a rule on the time of contract formation when using electronic communications, but refine 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.

New section 13—Time of dispatch

New section 13 replaces provisions concerning the default rules establishing the time of dispatch of an electronic communication to align the Principal Act with Article 10 of the Convention. 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.

New section 13(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.

New section 13(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

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anticipates the exchange of electronic communications within the same information system.

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 Softward as a Service (SAAS) models.

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 in 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.

New section 13(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.

New section 13A—Time of receipt

New section 13A replaces the provisions concerning the default rules establishing the time of receipt of an electronic communication to align the Principal Act with Article 10 of the Convention.

New subsection 13A(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.

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.

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The Convention introduces the concept of an electronic communication being "capable of being retrieved". New section 13A(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.

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 to the Convention 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.

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.

New section 13A(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

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could be in a different location or jurisdiction. This is consistent with new section 13B(3) concerning the determination of the place of dispatch or receipt of an electronic communication.

New section 13B—Place of dispatch and place of receipt

New section 13B replaces the provisions concerning the default rules establishing the place of dispatch and receipt of an electronic communication to align the Principal Act with Articles 6 and 10 of the Convention.

New section 13B(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.

As a result of business 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 receive 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 effected in yet another location.

New section 13B 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.

It is important to note that section 13B 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.

New section 13B(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, section 13B(2)(b) provides that if there is one place of business, that will be assumed to be the place of business.

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In circumstances where a party has made no indication and there are multiple places of business, new subsection 13B(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.

New section 13B(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".

New section 13B(3) and (4) clarify that the location of an information system can be one, 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 section 13B(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.

Clause 11 repeals section 14(3) and (4) of the Principal Act. New section 6A of the Principal Act (inserted by clause 6) provides that the Regulations may exempt specified transactions, requirements, permissions, communications or other matters, or specified Victorian laws, from any or all of the provisions of the Principal Act. The new section replaces numerous, separate provisions in Division 2 of Part 2, such as the existing section 14(3) and (4), that provided individual powers to make regulations to exempt certain dealings from each specific section.

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Clause 12 inserts a new Part 2A into the Principal Act which provides additional provisions applying to contracts involving electronic communications.

New Part 2A operates in general terms, whereas the provisions contained in Part 2 of the Principal Act apply by reference to the expression "for the purposes of a law of Victoria". 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 Principal Act will remain applicable to transactions undertaken pursuant to a law of Victoria.

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.

New section 14A—Application and operation of this part

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.

Subsection 14A(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.

The explicit intention to extend the provisions to international contracts is embodied in section 14A(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

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the contract given the preservation of the principle of "party autonomy".

New section 14A(b) clarifies the intent to depart from the Convention by including personal and household contracts within the scope of new Part 2A. The Principal 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 Principal Act.

New section 14B—Invitation to treat regarding contracts

New section 14B 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.

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.

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.

The Internet enables information to be sent or viewed by virtually an unlimited number of people. Section 14B(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.

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New section 14C—Use of automated message system for contract formation—non-intervention of natural person

The use of automated message systems forms part of present day business practices. New section 14C 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.

A definition of automated message system has been inserted. 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.

New section 14D—Error in electronic communications regarding contracts

Unlike transactions involving human intervention, transacting with an automated message system reduces the opportunity to detect or correct an error.

New section 14D 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.

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

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of the error and he or she has not used or received any material benefit or value from the goods or services.

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, section 14D(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.

The safeguard is noted as an example as to why personal, family or household contracts are excluded from the scope of the Convention. 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, section 14D is intended to apply to personal, family or household dealings, including contracts, and would not override, but merely supplement, other existing consumer protection measures.

New section 14D(4) clarifies 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 of withdrawal or avoidance of electronic communications affected by the errors that occur in any other context than those provided for in section 14D are to be determined by other applicable legislation and the common law.

New section 14E—Application of Act in relation to contracts

New section 14E(1) clarifies that the provisions contained in Part 2 of the Principal 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 this jurisdiction". In order to remove any doubt as to whether "a law of this jurisdiction" would extend to the common law, subsection 14E(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.

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This subsection complements the new definition of transaction that clarifies that a transaction under Part 2 includes electronic communications related to a contract.

New section 14E(2) is intended to clarify the applicable law in circumstances where different provisions or jurisdictions (or both) could potentially operate in the same field.

New section 14E(2)(a) provides that Part 2A of the Principal Act does not apply to a contract if Part 2 is applicable. The intention of this is to provide that an electronic communication related to a contract that is communication "for the purposes of a law of Victoria", 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 Victorian law. This is intended to provide for a singular provision to be applicable.

New section 14E(2)(b) provides that Part 2A of the Principal Act does not apply where the law of another State or Territory of the Commonwealth, 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.

The intention of this paragraph is to provide that an electronic communication related to a contract that is established under the law of another State or Territory, that is, any contract governed by State or Territory legislation (including the common law), will not be governed by provisions in Part 2A of the Principal 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 the circumstances where that State has not enacted provisions similar to Part 2A to provide for contracts. The intention is to preserve the co-operative nature of the electronic transactions scheme.

Clause 13 supports the transition to new provisions.

New section 16(1) preserves the Regulations made under the Principal Act before the commencement of the amending Bill as if the new regulation-making power (new section 6A) had been in force at the time the Regulations were made, and as if the Regulations had been made under that section. This does not prevent the amendment or revocation of the Regulations in the future.

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New section 16(2) to the Principal Act provides that new sections 14B, 14C and 14D extend to proposals, actions, statements, declarations, demands, notices or requests, including offers and the acceptance of offers, that are made, carried out or given before the commencement of the amending Bill. However, subsection (3) provides that new section 16(2) and Part 2A of the Principal Act do not have retrospective application in respect of a contract formed prior to the commencement of the provisions. The intention of new section 16(3) is to provide for consistent rules and procedures to apply to an entire contract.

Clause 14 provides for the repeal of the amending Act on 11 October 2013.

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