IT Law - Lecture 3

CSC4308- IT LAW
LECTURE 3
E-Contract
A.M.BADE
albad0007@ysu.edu.ng
What is a Contract?
A contract is an
agreement that is
enforceable by a
court of law or
equity.
CSC 4308 Information Technology Law

Introduction
 Contracts are the basis of many daily activities.
 They provide the means for individuals and businesses to
sell and otherwise transfer property, services, and other
rights.
 Without enforceable contracts, commerce would collapse.
 Contracts are voluntarily entered into by parties.
 The terms of the contract become private law between the
parties.

Legally Enforceable Contract
If one party fails to perform as promised, the

other party can use the court system to enforce
the contract and recover damages or other
property.

Parties to a Contract
Every contract involves at least two parties.
Offeror – the party who makes an offer to enter into a contract.
Offeree – the party to whom an offer to enter into a contract is

made.

To be an enforceable contract, four
basic requirements must be met:

Elements of a Contract
 Agreement
 There must be agreement between the parties.
 This requires an offer by the offeror and an acceptance of
the offer by the offeree.
 There must be mutual assent by the parties.

Elements of a Contract Cont. …
 Consideration
 The promise must be supported by a bargained-for
consideration that is legally sufficient.
 Gift promises and moral obligations are not considered
supported by valid consideration.

 Contractual Capacity
 The parties to a contract must have contractual capacity.
 Certain parties, such as persons adjudged to be insane, do
not have contractual capacity.

 Lawful Object
 The object of the contract must be lawful.
 Contracts to accomplish illegal objects or contracts that
are against public policy are void.

Defenses to the Enforcement of a
Contract
 Genuineness of Assent
 The consent of the parties to create a contract must be
genuine.
 There is no real consent if the consent is obtained by:

 Duress
 Undue influence
 Fraud

Defenses to the Enforcement of a
Contract Cont. …
 Writing and Form
 The law requires that certain contracts be in writing or in
a certain form.
 Failure of these contracts to be in writing or be in proper
form may be raised against the enforcement of the
contract.

Sources of Contract Law
 The Common Law of Contracts
 Contract law developed primarily by state courts.
 The Uniform Commercial Code (UCC)

 Comprehensive statutory scheme that includes laws
that cover aspects of commercial transactions.

Classifications of Contracts
• Bilateral Contract
A contract entered into by way of exchange of promises of
the parties.
“A promise for a promise.”
• Unilateral Contract
•A contract in which the offeror’s offer can be accepted only
by the performance of an act by the offeree.
•“A promise for an act.”

Classifications of Contracts Cont. …
• Express Contract
•An agreement that is expressed in written or oral words.
• Implied-in-fact Contract
•A contract where agreement between parties has been
concluded from their conduct.

Objective Theory of Contracts
 The intent to enter into an express or implied-in-fact contract is
judged by the reasonable person standard.
 The subjective intent of a party to enter into a contract is
irrelevant.
Quasi-Contracts (Implied-in-Law Contracts)

 Allows a court to award monetary damages to a plaintiff for
providing work or services to a defendant even though no actual
contract existed between the parties.
 Intended to prevent unjust enrichment and unjust detriment.

Formal Contracts
Contracts that require a special form or method of creation.
- Contracts Under Seal
- Recognizances
- Negotiable Instruments
- Letters of Credit
Informal Contracts
1. No special form or method is required for their creation.
2. Fully enforceable and may be sued upon if breached.
- Leases
- Sales Contracts
- Service Contracts

Valid (voidable) Contract
1. Contract that meets all of the essential elements to establish
a contract.
2. Enforceable by at least one of the parties.
Void Contract
1. A contract that has no legal effect.
2. Neither party is obligated to perform.
3. Neither party can enforce the contract.

Unenforceable Contract
1. A contract where the essential elements to create a valid
contract are not met.
2. However, there is some legal defense to the enforcement of
the contract.
Example: Prostitution is not actually a crime under English law, although
both soliciting a prostitute and living off the earnings of a prostitute are
criminal offences but so long as the contract is fully performed, it remains
valid. However, if either refuses to complete the bargain (either the
prostitute after being paid, or the payor after receiving the service) then
the court will not assist the disappointed party.

Terminology
 "Offer" ("proposal") = when one person signifies to another
his willingness to do or to abstain from doing anything, with
a view to obtaining the assent of that other to the act or
abstinence This person is called the "promisor" ("offeror")
 When the person to whom the proposal is made

“promisee” (“offeree”)] signifies his assent thereto, the
proposal is said to be accepted, and the proposal when
accepted constitute a promise.

Terminology Cont. …
 Every promise and every set of promises forming the
consideration for each other is an "agreement", and
every agreement enforceable by law is therefore a
"contract“
 3 most fundamental requirements of a cyber contract:

 Offer
 Acceptance
 Consideration
 Other: intention to create legal relation

Contracting parties
 Online contract present two problems in respect of contract
with minor;
1.Sale of certain goods to a minor is unlawful; alcohol,

tobacco, pornography materials, etc.
2.Contract made with a minor other than for necessities is

voidable (Mercantile Union Guarantee Co. v. Ball (1937)3 All
ER, 1)

Sale of Illegal Goods to Minors
 Common remedy/solution available to companies to avoid dealing with
minors online is the Content Advisor found on most web browsers.
 The software is based on rating created by the Recreational Software
Advisory Council (RSAC)to limit the degree of sex, violence, and
language accessible to children.
 Providers of digitalized services can acquire a rating that will restrict
children access and online sellers of goods could use a similar tactics to
ensure that only adult customers made purchase
 Suppliers may classify their sites as containing nudity, sex & other
unlawful objects for children to get RSAC system to impose its current
restriction
 Parent should play a role.

Sale of Illegal Goods to Minors
Cont. …
 Authentication process - digital signature
 Capacity of minors
 S.69 - necessity agreement Electronic agents
 Thornton v Shoe Lane Parking Ltd – a machine can act as agents

for contacting parties

Postal rule - acceptance by post or
telegram
 General rule: acceptance must be communicated before
the promise can take effect
 Exception: notification of acceptance by post or telegram
 Adams v Lindsell
 Facts:
 2/9/1817: D offered to sell to P by a letter a certain
quantity of wool, and added "receiving your answer in
course of posy If the letter had been properly directed, an
answer might be received by 7th

Postal rule - acceptance by post or
telegram Cont. …
• 5th: P received and posted their acceptance but was not
received by D until 9th,
• 8th: D sold to another.
• P sued for breach.
• The postal rule in Adams v. Lindsell places unfair burden
on the offeror as he is bound to a contract before being
notified.

Receipt Rule
 Where two parties have continuous communication e.g.
telephone conversation, in-person communication, the
courts will use the receipt rule
 Thus the offeror must hear acceptance and only then is

the contract created
 The receipt rule also applies to modern methods like telex

(instantaneous effect).

Uniform Computer Information
Transactions Act
 A model state law that provides uniform and comprehensive rules for
contracts involving:
 computer information transactions
 software licenses
 information licenses
 The UCITA covers the following aspects of licensing information rights:

 Formation of a contract
 Authenticating the record
 Attribution procedure
 Performance
 Warranties
 Breach of license agreements
 Limitations of remedies

The Internet
 Collection of millions of computers that provide a network
of electronic connections.
 Originally funded by the Department of Defense.
 National Science Foundation continued system to facilitate

high-speed communications.

The World Wide Web
 Millions of computers supporting HTTP.
 Web sites and pages are stored on servers operated by

Internet service providers.
 Pages are viewed through web browsers.
 Extremely attractive to commercial activities.

Electronic Mail
 E-mail is a widely used application for communication over
the Internet.
 Electronic writing
 Unique identifying address
 Allows for instantaneous communication around the world

Domain Name
 Domain name – a unique name that identifies an
individual’s or company’s Web site.
 Domain names may be registered by filing the appropriate

form with the domain name registration service and
paying the appropriate fee.

Anticybersquatting Consumer
Protection Act
 Aimed at cybersquatters who register Internet domain
names of famous companies and people and hold them
hostage by demanding ransom payments from the famous
company or person.
 The name must be famous.
 The domain name was registered in bad faith.

E-Contracts
 E-mail is sometimes the method used to negotiate and
agree on contract terms and to send and agree to the final
contract.
 Assuming that all of the elements to establish a contract

are present, an e-mail contract is valid and enforceable.

E-Contracts Writing Requirements
 Generally contract can be formed informally
 Some contract by statutes need to be in writing form, e.g.

contract for disposition of land or interest in land,
insurance, wills, transfer of shares.
 Most e-contract will not be affected
 Writing contacts includes digital documents.

E-Contracts Writing Requirements
Cont. …
 Electronic Signature in Global and National Commerce Act
 Electronic contracts meet the writing requirements of
the Statute of Frauds.
 Electronically signed contracts cannot be denied effect
because they are in electronic form and are stored and
delivered electronically.

E-contract and Signature
Requirement
 Signature means the writing of some names, or identifying
mark in a document
 Use of rubber stamp as a signature is allowed see

Goodman v. J. Eban Ltd (1954)1 QB 550
 Re a Debtor (No. 2021, 1995), held that a faxed copy of a

signature satisfied a relevant statutory signature
requirement

How Will Parties Sign Online
Contract
 Mere typing of name at the end of e-mail message with
the intention to authenticate suffices
 Note that admissibility and weight of evidence to be

attached will differs to other superior special e-signature
or codes as a form of authentication

Standard Bank London Ltd v. Bank of
Tokyo Ltd (1996)
Facts: the banks involved authenticated money transfers by
using telexes with a secret code. A fraudster forged three
telexes from Bank of Tokyo, each a letter of credit for
several million dollars.
Held : a validated telex recipient was entirely entitled to rely
on it unless otherwise notified or there was reason to
believe that dishonesty was involved.
This decision placed responsibility on the sending party to
ensure that the codes or keys are secured

E-Signatures
 Electronic Signature in Global and National Commerce Act
 Recognizes electronic signatures
 Same force and effect as pen-inscribed signature on
paper
 Allows for verification of digital signatures

E-Licensing
 The Uniform Computer Information Transactions Act
(UCITA) governs the creation, performance, and
enforcement of computer information transactions.
 Some states have adopted UCITA.
 Other states are applying state law and equity principals.

Licensing
 Intellectual property and information rights are valuable
assets of individuals and businesses.
 License – a contract that transfers limited rights in
intellectual property and informational rights.
 Licensor – The owner of intellectual property or
informational rights who transfers rights in the property or
information to the licensee.
 Licensee – The party who is granted limited rights in or
access to intellectual property or informational rights
owned by the licensor.

Exclusive License
A license that grants the licensee exclusive
rights to use informational rights for a
specified duration.

Licensing Agreement
 Detailed and
comprehensive written
agreement between the
licensor and licensee.
 It sets forth the express

terms of their agreement.

Breach of Licensing Agreements
• The parties to a contract for the licensing of information
owe a duty to perform the obligations stated in the
contract.
• If a party fails to perform as required, there is a breach of
the contract.
• Licensee’s refusal of defective tender
• Licensee’s revocation of acceptance
• Adequate assurance of performance

Remedies
 The UCITA provides various remedies that injured parties
can obtain against breaching parties.
 Cancellation
 Licensor’s damages
 Licensor’s right to cure
 Licensee’s damages
 Specific performance

Limitations to Remedies
 The UCITA provides that the parties to an agreement may
limit the remedies available for breach of the contract.
 Limitation of remedies in licenses subject to the UCITA are

enforceable unless they are unconscionable.

Digital Signature
 The number of transactions require a signature in order to be legally
effective.
 Clearly, however a traditional manuscript signature is not feasible
where the parties communicate trough the internet. Digital
communication technology requires methods of signature which are
very different from the manuscript signature.
There are two possibilities of signatures:
a)The incorporation of a scanned image of a manuscript signature into a
word processing file, followed by the sending of that of that document
as an e-mail attachment.
b)The signature of an electronic document by means of a mathematical
process. This ‘electronic document’ is a set of number or code which
represents text or other information. This is what we call digital
signature.

What is a Digital Signature for?
1. For identification
• Signature shown the identity of the signatory
• That the signatory intended the signature to be his signature
• That the signatory approves of and adopt the contents of the
document.
2. For security and privacy purposes

• The sender of the message will be ensured that the recipient is
intended person and nobody can read the message or change it.
• For privacy purposes-whereby many people do not want others to
read the message
• The integrity and privacy of information protected

What is a Digital Signature for?
Cont. …
3. For Legality
 The enforce the signatory’s legal obligations, the recipient of the
document needs to prove that the signatory has signed the document
 The signature can prove that the signatory approves and adopt the
document and it can create legal obligation on him.
 Therefore, in order to encourage electronic transactions and curb

forgeries and computer-generated fraud, digital signature Act has
been legislated in a number of country.
 The law provides the legal infrastructure and make digital signature
effective and it gives a recognition to digital signature.

Term of Contracts
 Business to consumer transaction
 Business to business transaction
 Contract is defined as "an agreement enforceable by law"
which is legally binding between the parties.
 No provisions which deal specifically with contents of
contract in Contracts Act 1950.
 Contractual terms: express or implied
 Conditions or warranties.

Incorporating terms and conditions into
contracts made over the internet
 Q: How to present the terms and conditions to the users,
where the users must be given the opportunity to read
and agree to these terms and conditions?
 Giving user opportunity to find the terms
 Well marked and prominent link to terms and conditions
 Giving user opportunity to read terms and conditions
before he can go on to accept or make an offer and to
ensure that he cannot proceed without acknowledging
that he has read the terms

Validity of terms of an online
contract
• Terms unseen - bound?
• ProCD v Zeidenberg (US): shrinkwrap licence contract - so

long as the person purchasing the software had noticed at
the time of purchasing, that such purchase was subject to
certain terms of contract that were contained on the
inside of the carton containing the software, such person
was bound by the terms of the unseen contract.

Clickwrap agreement
• Hotmail Corporation v Van Money Pie Inc
• Validity of clickwrap contract - by clicking the "I agree"

button after being presented with an opportunity to view
the terms of service on the page where the details of the
contract are listed, the parties bind themselves to a
contract under the terms contained in that webpage.

The UK Unfair Terms in Consumer
Contracts Regulations 1999
• Unfair Terms in Consumer Contracts Regulations 1999 (SI 1999
No 2083) provide that a term which has not been individually
negotiated in a consumer contract is unfair (and hence non-
binding on the consumer) if, contrary to the requirement of
good faith, it causes a significant imbalance in the rights and
obligations of the parties to the detriment of the consumer.
• Under the Regulations, the Office of Fair Trading (OFT) has an
obligation to consider any complaint made to it about the
fairness of any contract term drawn up for general use. OFT
may seek assurances and, if necessary, injunctions against
those using terms which it considers to be unfair. Certain
other named bodies are also empowered to seek injunctions
against unfair terms.

Distance Contracts
 A contract concluded by a means of communication and if there
is no personal contact between the trader and the consumer, is
a long distance contract. In particular, this means a purchase
made by the use of telephone, radio, computer, facsimile, or
television or the delivery of addressed or unaddressed printed
matter, including a catalogue or a standard letter, to a
consumer, or press advertising with an order form.

What should one know when
making a purchase?
 the following information (as a minimum) must be made
available to the consumer before entering into distance
contracts:
 the name and address of the supplier;
 the main characteristics of the goods or services;
 the price of the goods or services, including taxes and other
components of the price and the amount thereof;
 the amount of the postal charges, transport costs, and taxes
which are not included in the price;
 the procedure for payment for the goods or services, the
circumstances relating to delivery of the goods or provision of
the services, and the performance of the contract;
 the consumer's rights of withdrawal according to the law.
Withdrawal from contract
 A consumer may withdraw from a distance contract within
fourteen days. In the case of goods, the term shall
commence as of the day on which the consumer receives
the goods, and in the case of services, the term shall
commence as of the date of entry into the contract. The
consumer is not required to provide any justification
whatsoever when returning the goods.
 If the trader has failed to inform the consumer of his right
of withdrawal (for example this information was not
presented in ordering terms), the consumer may return the
ordered item to the trader within 3 months as of the date
on which the consumer receives the goods.
Withdrawal from contract Cont. …
14-day right of return does not apply to:
goods which have been manufactured according to the personal needs
of the consumer (for example, made to measure provided by the
consumer);
highly perishable goods or goods with an expired ‘best before’;
periodically published materials (for example, magazines);
audio or video recordings or computer software, if the consumer has
opened the package;
items that can’t be returned due to their nature.
A consumer may withdraw from a distance life and pension insurance
contract within 30 days. The term commences as of the date the
consumer is notified of the conclusion of the contract.

Withdrawal from contract Cont. …
 If a consumer withdraws from a contract, the amounts
paid by the consumer shall be refunded to him or her
immediately, but no later than within thirty days (as from
the date the supplier has received the notice of
withdrawal). The consumer must return the items received
from the trader immediately, but no later than within
thirty days as of the submission of the notice of
withdrawal

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CSC4308- IT LAW

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

If one party fails to perform as promised, the

CSC 4308 Information Technology Law

Offeror – the party who makes an offer to enter into a contract.

Offeree – the party to whom an offer to enter into a contract is

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

 There is no real consent if the consent is obtained by:

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

 The Uniform Commercial Code (UCC)

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

Quasi-Contracts (Implied-in-Law Contracts)

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

 When the person to whom the proposal is made

CSC 4308 Information Technology Law

 3 most fundamental requirements of a cyber contract:

CSC 4308 Information Technology Law

1.Sale of certain goods to a minor is unlawful; alcohol,

2.Contract made with a minor other than for necessities is

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

 S.69 - necessity agreement Electronic agents

 Thornton v Shoe Lane Parking Ltd – a machine can act as agents

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

 Thus the offeror must hear acceptance and only then is

 The receipt rule also applies to modern methods like telex

CSC 4308 Information Technology Law

 The UCITA covers the following aspects of licensing information rights:

CSC 4308 Information Technology Law

 Originally funded by the Department of Defense.

 National Science Foundation continued system to facilitate

CSC 4308 Information Technology Law

 Web sites and pages are stored on servers operated by

 Pages are viewed through web browsers.

 Extremely attractive to commercial activities.

CSC 4308 Information Technology Law

 Unique identifying address

 Allows for instantaneous communication around the world

CSC 4308 Information Technology Law

 Domain names may be registered by filing the appropriate

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law

 Assuming that all of the elements to establish a contract

CSC 4308 Information Technology Law

 Some contract by statutes need to be in writing form, e.g.

 Most e-contract will not be affected

 Writing contacts includes digital documents.

CSC 4308 Information Technology Law

CSC 4308 Information Technology Law