Trade Practices Act - Online Contracts
Click, click, click. Thanks to the internet, paying bills, doing your shopping and keeping in touch with friends and family has never been easier.
Online websites and internet auctions in particular, have exploded in popularity in recent years, as people embrace new ways of trading in cyberspace.
Yet the new commercial transactions available in today’s information era are not without their shortcomings.
One of the most common complaints by consumers that have bought goods in internet auctions is that the seller failed to deliver the relevant goods as promised. In other cases, the seller may fail to deliver the goods within a timely period, or may deliver something less valuable than they had advertised.
The Trade Practices Act 1974 (Cth) prohibits any conduct by business which is misleading or deceptive, or which is likely to deceive or mislead. It also contains other provisions regarding consumer protection and applies to all online transactions in Australia.
The major difference between an online auction and a traditional auction is that in a traditional auction, the auctioneer is the agent of the seller and has the authority to execute a contract on behalf of the seller and buyer. An online auction also differs in that it is completed when a nominated deadline has passed. At this deadline, the highest bidder “wins” the object and is deemed the buyer provided any reserve has been reached.
A recent case in the New South Wales Supreme Court, saw an Australian court, for the first time, rule on whether an arrangement between a buyer and seller in an online auction was binding.
In the eBay-Wirraway case (Smythe v Thomas [2007] NSWSC 844), the dispute centred on a rare, World War II Australian aircraft called a Wirraway.
The owner, Vincent Thomas, listed the aircraft on eBay, with an auction period of 10 days and a reserve of $150,000. Peter Smythe, after a phone call to Mr Thomas (the content of which was disputed), placed a bid for $150,000. At the end of the auction period, both men were advised by eBay that Mr Smythe had “won” the aircraft. There were no other bidders.
Mr Thomas was unhappy as he wanted $250,000 for the plane. He told Mr Smythe after the auction had ended that he had received an expression of interest for $220,000 outside the online auction. He refused to complete the transaction and Mr Smythe took legal action.
Mr Thomas’ defence argued that although there was a contract (the eBay User Agreement) between Mr Thomas and eBay, and between Mr Smythe and eBay, there was no contract or agreement between Thomas and Smythe; that the eBay listing was similar to a classified advertisement and no more than an invitation to buy (“invitation to treat” in legal terms); and that as the term relating to time and method of payment was not agreed between the parties at the end of the auction, there was no concluded agreement.
He also argued that Mr Smythe waived his right to bid on the auction, based on the content of the disputed phone call.
The Court rejected each of Mr Thomas’ defences and concluded that there was a valid and enforceable contract for the sale of the aircraft, and that it should be specifically performed.
The Court also provided some guidance to sellers on how to avoid problems due to uncertainty over the terms of agreements that are reached after an online auction.
The case pinpoints where growth in contract law and commercial law is likely to come from – those new trading relationships through e-commerce and the internet – and highlights how important it is for the law, and for lawyers, to keep pace with rapid changes in technology.
Disclaimer:The information in this article is not intended to be a complete statement of the law relating to the issues raised. Accordingly, no person should rely on this information without first obtaining specific advice from Brendan Kelly or Sam Marash of our office.
More information
See www.bookshop.liv.asn.au Technology Contracts – A Handbook for Law and Business in Australia by Calvert & Reid, $145.
To learn more about consumer rights in online transactions visit http://www.accc.gov.au/ |
