Internet shopping: How a contractual agreement is formed

by The FindLaw Team

Many Australian shoppers have cottoned on to the fact that looking for Christmas presents online from an overseas vendor or an online auction site, is in some cases the more cost effective option. With the strong local dollar and the ease in which a consumer is able to make a purchase online, buying items off the internet has become an attractive proposition to some. As a consequence, rules pertaining to purchases made from sites such as eBay, and how contracts are formed online are relevant lines of inquiry for Australians who may be shopping online.

An online ‘auction’ site may not be an ‘auctioneer’

One of the interesting aspects of online auction sites such as eBay, is that although eBay is popularly referred to as an ‘auction’ website; it is not an auctioneer in the traditional sense of the term, and clause 3.1 of the company’s user agreement outlines the demarcation between the site and that of an auctioneer:

3.1 Online Auctions. Although we are commonly referred to as an online auction web site, it is important to realise that we are not a traditional "auctioneer". Instead, our Site acts as a venue to allow members to offer, sell, and buy just about anything, at anytime, from anywhere, in a variety of formats, including a fixed price format and an auction-style format commonly referred to as an "online auction". We are not involved in the actual transaction between buyers and sellers. As a result, we have no control over the quality, safety or legality of the items or content posted by users on the Site, the truth or accuracy of the listings, the ability of sellers to sell items or the ability of buyers to buy items. We cannot ensure and do not guarantee that a buyer or seller will actually complete a transaction or act lawfully in using our Site.”

So what does the effect of clause 3.1 on eBay’s user agreement have on a purchaser? Well, in Smythe v Thomas [2007] NSWSC 844, Rein AJ observed that because eBay does not have a human agent in the form of an auctioneer, the manner in which transactions are conducted in a physical auction, will differ from transactions conducted via the site – with one such example being that a seller is able to withdraw their goods from sale before the hammer is lowered. His Honour noted: “There is no human agent and eBay by its terms and conditions eschews any role as auctioneer: see clause 3.1 of the eBay terms and conditions, nor does eBay have authority to execute a contract. There does not appear to be any provision for withdrawal of the goods from sale at the auction.”

How are online contracts created?

For the most part, the general principles in the formation of a contractual relationship regarding online purchases can be applied after the following general actions between a vendor, and the purchaser:

• invitation to treat: the displaying of goods for sale on an e-commerce site is generally seen as an invitation to treat, rather than an offer, which is similar in vain to a traditional brick and mortar store. The offer, is instead fulfilled by the actions of the customer visiting the site, rather than the seller;
• customer communicates their offer: because the advertising of goods or services on a website is not an offer, the impetus is then on the purchaser to make an offer, and a customer will communicate an offer electronically – which can be done within the website – offering to purchase the advertised product;
• the vendor accepts the offer: once an offer has been made by a customer, it is then up to the vendor to accept the offer unequivocally and unconditionally by communicating their acceptance to the customer.

Upon the acceptance from the vendor of a customer’s offer, a contractual relationship has now been established.

This article is only a general introduction on the area of online contracts. If you have any issues in regards to a matter relating to an online transaction or any other related consumer inquiry, please seek the help of a lawyer who will be able to assist with any questions you may have.


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