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The requirements for creating a valid e-commerce contract

  • Commercial and Business Law, Corporate Advisory
  • Christian Tager
  • No Comments
  • November 1, 2011

The requirements for creating a valid e-commerce contract

The requirements for creating a valid e-commerce contract

In recent years, online shopping has exploded in popularity, with many Australians taking advantage of the strong local dollar and the ease of making purchases online. As a result of consumers doing more shopping on the internet, small businesses may have begun to consider the viability of establishing an e-commerce presence. And as new technologies change the way people purchase products, it is essential that the law adapts to the changing environment by enacting legislation that both encourages businesses to adopt an e-commerce strategy, whilst still protecting consumers. As a result, a uniform legislative regime operates across all Australian states and territories, which applies to both electronic and face-to-face commercial transactions, equally.

Internet contracts and consent

Transactions performed via the internet are only applicable in instances where a person has communicated their consent, through either an expressed or implied contractual agreement. But how are electronic contracts formed? Are the traditional contractual elements still applicable in e-commerce transactions?

Small businesses must still consider the implications when conducting business online, and should turn their minds to the fact that the law still applies – even in the cyber world.

How does an internet transaction become valid?

It’s important to be aware, that just because a transaction has been performed online, still does not not change the fact that all of the required elements of contract law are still applicable, such as:

  • offer and acceptance;
  • consideration; and,
  • capacity to enter into a contract.

What forms can e-commerce contracts take?

Online transactions usually fall into three types of e-commerce contracts, and they are:

  • click-through;
  • shrink-wrap; or,
  • browse-wrap agreements.

Each form of e-commerce contract requires that a customer undergo different steps in order to validate a transaction. However, it is perhaps the click-through version of the electronic contract in which would be most familiar to online shoppers.

The click-through contract generally requires a person to scroll through the terms and conditions of the agreement, and to then validate their acceptance of their wish to be bound by the enforceable contract, by clicking on a button or ticking a box at the end of the agreement.

What are the necessary elements for creating an e-commerce contract?

If a small business owner wishes to create an enforceable contract, the following elements must be met:

  • unambiguous notice to the customer that the online transaction is governed by the terms of contract law
  • an opportunity for the customer to review the terms and conditions of the agreement before being bound by the contract
  • a clear statement of what constitutes acceptance of the agreement.

The required evidence of the contract in an online transaction

When establishing the validity of a transaction performed online, a requirement of either producing a document or record in writing, or recording or retaining of all the necessary information in electronic form, are the two ways in which a documentary record can be established that a transaction has taken place between the consumer and the business.
Additionally, a digital signature may also be used, in which the user will possess a ‘private key’, which is only known to them, and a ‘public key’, which is the type of identification known to others using the internet. These digital forms of identification can usually be gathered from certificate authorities, or from the Australian government, which has developed their own ‘Australian Business Number Digital Signature Certificates’, and can also be used for online identification purposes.


It’s important to be aware, that businesses that conduct transactions online are still bound by the relevant industry codes of practice, along with Australian and international laws that govern internet transactions.
Both businesses and consumers should always keep in mind, that just because a transaction has been initiated electronically, it does not mean that the agreement is not enforceable.
Anyone who is interested in creating or conversely, is experiencing any problems associated with an e-commerce transaction, should contact a lawyer who will be able to assist you with your individual matter.