Dissertation.The End.5.2013

100147 Law Research Project BU311 100147
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Retail Online Contracting – Are English contract law principles
transportable to internet retail transactions?
100147
Business Law Programme
School of Management and Social Sciences
St. Mary’s University College
22.04.2013

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1.0 Abstract
Why would a consumer in the United Kingdom, leave the comfort of their living room
to drag their weekly shopping home, when at the click of a few buttons, all the goods
could be delivered to their door. Online shopping has boomed over the last ten
years, with companies frequently offering cheaper deals on their websites, as well as
next day delivery options. However, shopping online still means a consumer is
entering into a contract. The contractual implications of internet transactions test the
boundaries of traditional contract law principles.
This dissertation will consider the issues that have arisen from online contracting and
will attempt to identify the need, if any, for reform of contract law. The first chapter
critically assesses the implications of the Electronic Commerce Directive on English
contract law and how effective the Distance Selling Directives are in protecting
consumers. Consideration is also given to the new Consumer Rights Directive
coming into force later this year. Chapter two looks extensively at the legal status of
advertisements found on a website. Chapter three is an in depth study of the
incorporation of the terms and conditions into an online contract and considers
issues concerning enforceability. This chapter also briefly explores the technology
involved in the creation of websites and exposes areas that may need greater
consideration from a legal point of view.

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1.1 Acknowledgements
I gratefully acknowledge the invaluable assistance of Vanessa Beever of St Mary’s
University College, who acted as my supervisor for this dissertation.
A special thank you must be given to Nabil Rafiq, my academic tutor, and to Sabina
Nardell, our course co-ordinator.

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1.2 Abbreviations
ADR...............................................................................Alternative Dispute Resolution
Art........................................................................................................................Article
B2B..............................................................................................Business to Business
B2C............................................................................................Business to Consumer
CA.........................................................................................................Court of Appeal
CA 2006.......................................................................................Companies Act 2006
CRD...........................................................................Consumer Rights Directive 2013
CUECIC...........Convention on the Use of Electronic Communications in International
Contracts
DSD.............................................................................Distance Selling Directive 2000
ECA.....................................................................Electronic Communications Act 2000
E-Commerce Directive........................................Electronic Commerce Directive 2000
EDI....................................................................................Electronic Data Interchange
EECD...........................................................European Electronic Commerce Directive
EU.......................................................................................................European Union
HL..........................................................................................................House of Lords
M&S..............................................................................................Marks and Spencers
MCA 2005.............................................................................Mental Capacity Act 2005
QBD.........................................................................................Queen’s Bench Division
r..............................................................................................................................Rule
Reg.............................................................................................................Regulations

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s.........................................................................................................................Section
SC.........................................................................................................Supreme Court
SoGA 1979............................................................................Sales of Goods Act 1979
UCTA 1977.................................................................Unfair Contract Terms Act 1977
UK........................................................................................................United Kingdom
UN..........................................................................................................United Nations
U.S.........................................................................................United States of America
W3C................................................................................World Wide Web Consortium

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1.3 Table of Contents
Page
1.0 Abstract 2
1.1 Acknowledgements 3
1.2 Abbreviations 4
1.3 Table of Contents 6
1.4 List of Figures and Table 8
1.5 Introduction 10
1.6 Research Hypothesis 11
1.7 Methodology 11
1.8 Literature Review 12
___________________________________________________________________
2.0 Chapter One – EU Directives 18
2.1 Electronic Commerce Directive 2000 18
2.2 Distance Selling Directive 2000 20
2.3 Consumer Rights Directive (To be introduced by 13th Dec 2013) 21
___________________________________________________________________
3.0 Chapter Two – Offer versus Invitation to Treat 24
3.1 Contract law principles for contract formation 24
3.2 Offer versus invitation to treat 25
3.3 Virtual shop 27
3.4 Risk of pricing errors 28
3.5The vending machine analogy 29
___________________________________________________________________
4.0 Chapter Three – The Terms and Conditions Incorporated 31
4.1Contract law principles for terms and conditions 31
4.2 Click-wrap agreements 33
4.3 Browse-wrap agreements 35
4.4 HTML files compatibility with browser types 37

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___________________________________________________________________
5.0 Conclusion 39
___________________________________________________________________
6.0 Bibliography 42
___________________________________________________________________

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1.4 List of Figures and Table
Table of Statutes
Companies Act 2006
Consumer Protection (Distance Selling) Regulations 2000
Electronic Commerce (EC Directive) Regulations 2002
Electronic Communications Act 2000
Electronic Communications Privacy Act 1986
Pharmacy and Poisons Act 1933
Restriction of Offensive Weapons Act 1959
Sales of Goods Act 1979
Unfair Contract Terms Act 1977
Table of Cases
Carlill v Carbolic Smoke Ball Co [1893] 1 QB 256
Fisher v Bell [1961] 1 QB 394
Grainger and Son v Gough (Surveyor of Taxes) [1896] AC 325
Great Northern Railway Co v Witham (1873) LR 9 CP 16
Hartog v Colin and Shields [1939] 3 All ER 566
Hyde v Wrench [1840] 49 ER 132
McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125
Olley v Malborough Court Ltd [1949] 1 KB 532
Parker v South Eastern Railway (1877) 2 CPD 416

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Patridge v Crittenden [1968] I WLR 1204
Spurling (J) Ltd v Bradshaw [1956] 1 WLR 561
Tamplin v. James (1880) 15 Ch D 215, 211
Thornton v Shoe Lane Parking [1971] 2 QB 163
Table of EU Legislation
Consumer Rights Directive 2011/83/EU (Coming into force in13 December 2013)
Distance Selling Directive 97/7/EC
Electronic Commerce Directive 2000/31/EC
Electronic Signatures Directive 1999/93/EC
Table of International Cases
Capsi, Rudder v Microsoft Corp[1999] O.J. No. 3778
Chwee Kin Keorg v Digilandmall.com Pte Ltd [2004] SLR 594
Forrest v Verizon Communications 805 A.2d 1007 (D.C. App. 2002)
Hotmail Corp v Van Money Pie, Inc (1998) WL 388389 (N.D.Cal)
Lefkowitz v Great Minneapolis Surplus Stores Inc86 NW2d 689 (1957)
Reardon v Morley Ford Pty Ltd (1980)49 FLR 401

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1.5 Introduction
Although the process may be different, purchasing goods online still means that a
consumer is entering into a contract1. Electronic contracts have existed since the
early 1970’s in the form of Electronic Data Interchange2 (EDI)3. The 1990’s saw
many more one-off transactions between businesses and consumers concluded over
the internet, where online retailers could “dictate the method of contract formation
and impose their own standard terms and conditions”4. Today’s concern is that if
strict regulations are not implemented to standardise the way in which online
contracts are made and enforced, the implications would be disastrous for both seller
and buyer.
The European Union (EU) has been keen to promote the development of European
business over the internet.5 The European Electronic Commerce Directive was
passed with the intention of laying down the specific formalities6 which need to be
followed for an online contract to be binding.7 Article 9 of the Directive requires that
all member states ensure that their legal system include provisions for contracts to
be concluded by electronic means.8 The Directive was “brought into force in the
United Kingdom by the Electronic Commerce (EC Directive) Regulations 2002”9.
Under English law online contracts are currently governed by the general principles
of contract law. The new medium does not change the applicability of contract law
rules, but that is not to say that there are no limits to its application.10 There are three
ways a contract can be constructed: in writing, verbally or by conduct. However the
process to create a contract has moved from a dialogue with the seller to a series of
interactions with a website. With the use of a website however, there are several
1 A contract is a legally binding agreement between two or more parties.
2Typically used to handle the electronic exchange of documents between business entities where
there is a continuing relationship between the parties. EDIs were something of a legal success as the
details and explicit coverage of the contracts reduced the need for litigation.
3Deveci, H A., ‘Consent in online contracts: old wine in new bottles’, (2007) 13 Computer and
Telecommunications Law Review 223 p.223
4Ibid
5 Elliott, C., and Quinn, F., Contract Law, (2009), p.85
6 Article 10 - European Electronic Commerce Directive 2000 – Online retailers must give a clear
account of the steps that must be fulfilled before a contract online can be concluded.
8 Article 9 - European Electronic Commerce Directive 2000
10 Squires, A., ‘Some Contract Issues Arising from Online Business-Consumer Agreements’ (2000) 5
Deakin Law Review p.95

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factors to take into consideration when applying general contract law principles.
Such factors include the way the website is displayed, how a consumer will interact
with the site, the nature of a standard set of terms and conditions and how they are
incorporated into the agreement. Contract law may neglect to address some of the
unique attributes created by online transactions. Both the increase in the use of
electronic contracts and the impact of their potential problems present a compelling
justification for the study of this relatively new area of law.
1.6 ResearchHypothesis
I hypothesise that English contract law principles can encompass internet
transactions. The application of the law, however, must be implemented in a
consistent manner and online retailers should be required to operate a standard set
of processes. For a contract to exist online it must be able to satisfy four key
elements: an offer, an acceptance, an intention to create legal relations and
consideration. If the agreement is to be enforceable, sufficient notice of the terms
and conditions must also be provided.
1.7 Methodology
The purpose of this dissertation is to expound and analyse current contract law by
the extensive investigation of primary and secondary sources. The project is based
solely on doctrinal research and will rigorously study the opinions of legal scholars as
expressed in the literature. The dissertation will assess the provisions under the:
Electronic Commerce (EC Directive) Regulations 2002, Distance Selling Directive
2000 and the Consumer Rights Directive 2013 (to be introduced later this year). The
document also explores arguments documented in legal journal articles. Finally,
references will be made to legal practitioner and academic text books to provide a
comprehensive understanding of the topic area.
The primary sources consist of English case law however, sources will also be taken
from international cases. The dependence on international case law is a result of the

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relative newness of e-commerce. It is believed that “the status of a website has so
far not been considered by the English courts.”11
1.8 LiteratureReview
The literature review is based on academic texts books, websites, journals and
articles. The research has been compiled from this literature to reiterate what has
been said by the different scholars and to put forward the various arguments.
Additionally, the literature review will highlight gaps in the research and show where
this dissertation fits in.
Chapter one
Roach12 focuses on the EU legislation which was created to “harmonise and facilitate
e-commerce”13. However, he stresses that e-commerce has created problems
regarding the formality of a contract which the Electronic Commerce Directive has
failed to address. In particular, he raises two critical issues with the legislation as it
currently stands. The first problem he identifies is that the legislation does not
indicate the point at which the online contract is actually made. Secondly, Roach14
argues that the Electronic Commerce Directive fails to specify the legal status of
display of goods on a website. Fundamentally these two issues are at the heart of e-
commerce contracting.
Contrary to Roach15, Jones et al16 argues that these directives were designed to
stimulate economic growth and to enhance the competitiveness of the EU
economy17, not to revise contract law. The text provides an overview of the three EU
Directives that govern online contracting and selling: the Electronic Commerce
Directive18 (E-Commerce Directive), the Distance Selling Directive19 (DSD) and the
11Kadir, R., ‘Rules of advertisement in an electronic age’, (2013) Interntational Journal of Law and
Management p.45
12 Roach, L., Business Law, (2009), Chapter 5 & 6
13Ibid
14Ibid
16 Jones, R., et al., ‘Online selling and contracting: An overview of EU rules’, (2011) 27 Computer Law
& Security Review 402 p.403-406
17Jones, R., et al., ‘Online selling and contracting: An overview of EU rules’, (2011) 27 Computer Law
& Security Review 402 p.402
18 2000/31/EC
19 97/9/EC

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Electronic Signature Directive20 (E-Signature Directive). Most importantly however,
the authors introduce a principle known as ‘country of origin’, which has arguably
been very effective in boosting e-commerce.21 This principle states that e-businesses
only need to obey the laws of the member of which they are established and not by
the laws of the country in which their services are received.22
Chapter one also benefits from the works of Rowe, who looked broadly at the
proposed rules under the DSD in 1998. The author explains the effects and the aims
of the DSD, suggesting that the DSD would be very beneficial to consumers.
However, in 2002 Henderson and Poulter23 produced an article discussing the DSD
with an aim to identify areas for future revision. As the DSD does not directly link to
the question, the dissertation does not cover this area in great detail; instead it looks
at the newly proposed CRD.
Pinsent Masons24 and Greek25 draw comparisons between the DSD and the new
CRD. The authors both highlight that the originally proposed CRD was too “far-
reaching”26 and was too onerous on online retailers. The new CRD however, is
proven to make significant changes to the rights of the consumer, particularly with
rights to withdrawal. Though the two authors do list the differences between the
current DSD and the CRD, there are limitations in the literature because the
Directive has not yet been enacted. For this reason it is difficult to critically analyse
whether the CRD really is an improvement on the DSD.
20 1999/93/EC
23Henderson, K.., and Poulter, A., ‘The Distance Selling Directive: Points for Future Revision’, (2002)
16 International Review of Law Computers & Technology 289 p.289-300
24Pinsent Masons., The new Consumer Rights Directive (Apr. 2013) http://www.Pinsent
Masons.com/en/topics/commercial/consumer-protection/the-new-consumer-rights-directive/
25Greek, D., What the changes to the Consumer Rights Directive mean for shoppers (Sep. 2011)
http://www.computeractive.co.uk/ca/consumer-rights/2097709/changes-consumer-rights-directive-
mean-shoppers

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Chapter two
Chapter two looks extensively at the legal status of an advert on a website. This
chapter relies on the work of Furmston et al27 who explains there is no need for
major revision of contract law in order to accommodate the new medium of a
website. The text draws analogies between paper advertisements, vending
machines and self-service shop display to define the legal status of a website. The
writers conclude that an advert will be deemed either an invitation to treat or an offer
depending purely on the intent of the parties.28 The work also looks at the specific
technological implications when constructing a contract through a website. Most
significantly, Furmston et al29 unlike many other academics, does not see the need
to protect online retailer by deeming all websites as invitations to treat. Instead he
argues that websites have the technology to avoid entering into disadvantageous
contracts.30
Furmston et al31 claims that websites can often be more closely likened to a vending
machine as opposed to a shop display. Vending machines are typically considered
to be offers as it is the customer who makes the final decision to contract. If the
transaction can be executed in its entirety and the final choice rests with the
consumer, then clearly the website is similar to a vending machine and therefore will
constitute an offer.32Furmston et al disagrees with Article 11 under the United
Nations Convention on the Use of Electronic Communication in International
Contracts, which states that a universal rule should be made to determine the legal
status of an advert on a website.33 Instead Furmston et al puts great emphasis on
establishing whether the “maker of the statement intended it to be binding”34.
Woodroffe35argues against Furmston et al claiming that case law supports the notion
that distance contracts, including online contracts, between a supplier and a
consumer are invitations to treat rather than offers.36
27Furmston, M., et al., Contract Formation, (2010), Chapter 6
28Furmston, M., et al., Contract Formation, (2010), p.168-169
29 Furmston, M., et al., Contract Formation, (2010), Chapter 6
30Ibid
31 Ibid
32Furmston, M., et al., Contract Formation, (2010), p.169
33Furmston, M., et al., Contract Formation, (2010), p.168-169
35Woodroffe, G., and Lowe, R., Consumer Law and Practice, (2007)

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Though Roach37 and Woodroffe concluded that many websites will be deemed
merely as an invitation to treat, such clarification is now a legal requirement under
the Electronic Commerce (EC Directive) Regulations 2002, reg. 9 (1). A website’s
status should be clearly expressed in the terms and conditions or in another
noticeable place on the site.
Roach38 argues that where a retailer may be subject to overexposure, for example in
a pricing error, the court will not assist buyers who are aware of such errors and who
attempt to achieve a bargain. This argument proposed by Roach is in accordance
with the Convention on the Use of Electronic Communications in International
Contracts (CUECIC) Article 11.
Pinsent Masons illustrates that online contracting is the same as offline contracting
by looking at the requirements that must be fulfilled for a contract to exist. Similarly to
Poole39, Roach40, and Pinsent Masons believe that websites are merely invitations to
treat. Though Koffman and MacDonald41 appreciate the need to protect online
sellers, the writers seem hesitant to suggest website adverts are invitations to treat.
They do however, explain that it is “unlikely that suppliers would intend to be
contractually bound to any potential customer”42.
Poole looks at several case studies in which consumers have tried to purchase
goods at the incorrect price. The author insists that, even if a consumer has received
an electronic confirmation email and their card has been accepted, there are still two
key legal hurdles remaining before the consumer can claim a breach of contract.
Firstly, the customer needs to prove that the pricing error was not one that a
reasonable person would have obviously considered to be a mistake. Secondly, the
consumer needs to prove valid acceptance.43 Therefore Poole explores the role of
an electronic confirmation email. With these two hurdles in mind case law has
announced, that where a customer is seeking to snap up a bargain, no contract
exists.
36Woodroffe, G., and Lowe, R., Consumer Law and Practice, (2007), p.85
38 Ibid
39 Poole, J., Textbook on Contract Law, (2010), Chapter 2
41Koffman, L., and Macdonald,E., The Law of Contract, (2010), Chapter 2
42Koffman, L., and Macdonald,E., The Law of Contract, (2010), p.22
43 Poole, J., Textbook on Contract Law, (2010), p.40-41

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Chapter three
In chapter three we look at the way terms and conditions are included in online
contracts and the issues around this area. The chapter explores the ways in which
terms and conditions should be incorporated into electronic contracts, with particular
consideration of the guidance given by the Office of Fair Trading (OTF). Pinsent
Masons strongly argues that simply having the terms and conditions on a website is
not enough. Site providers must also ensure customers read and agree to the
seller’s terms. Without clicking an “I agree” button, customers should not be able to
proceed with the transaction.
Robertson44 talks at length about the way in which terms and conditions are
incorporated into websites. Robertson describes and distinguishes between click-
wrap and browse-wrap agreements45. In the case of browse-wrap agreements
consumers can enter a website and by downloading software will automatically be
bound by the terms and conditions of the site. The problem here is that many
customers are not given sufficient notice of such terms. Robertson expresses that
the courts are now beginning to accept browse-wrap agreements in some
jurisdictions. She accepts that courts must be flexible to accommodate freedom of
contract, but believes “browse-wrap agreements stray too far from the basic
contractual notice and assent”46.
Woodroffe47 also writes about and criticises the way online terms and conditions are
displayed. He particularly draws attention to the challenges and difficulties customers
face when trying to access and understand such terms.48
Furthermore consideration is given to issues caused by the consumer’s browser type
and how the technology may hinder the validity of an electronic contract. Furmston et
al proclaim that normally the author of a traditional contract can control the layout of
the document and shop owners control the display of goods. However, on a web
page customers can view and jump from page to page without following any pre-
44As discussed in Robertson, M., ‘Is assent still a prerequisite for contract formation in today’s e-
conomy?’, (2003) 78 Washington Law Review
45 Discussed in Chapter Two – The Four Key Elements to Online Contracting
46 Robertson, M., ‘Is assent still a prerequisite for contract formation in today’s e-conomy?’, (2003) 78
Washington Law Review p. 265
47Woodroffe, G., and Robert, L., Consumer Law and Practice, (2007) Chapter 6
48Woodroffe, G., and Robert, L., Consumer Law and Practice, (2007) p. 85

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defined order. Consumers could therefore neglect to, or miss reading the agreement
and continue to conclude the contract.49 Moreover he considers the problem with
using different browsers and even comments on the nature of smartphones and their
screen sizes. In the case of smartphones “the displayed content is even more
limited”50 potentially causing customers to miss critical information. The arguments
created in the text are supported heavily by Niederst51.
Finally Elliott and Quinn52provide a clear understanding of the basic contractual
principles throughout all three chapters.
This literature review has highlighted that where statute has offered guidance on this
new method of contracting, many critics still feel there is ambiguity and a lack of
clarity in key areas. Particularly when trying to establish whether a website should be
deemed as an offer or a merely invitation to treat. Furthermore, there is ongoing
debate over how acceptance should be made and what should constitute
acceptance. There are additional matters that require greater consideration such as
the terms and conditions and what is considered to be fair incorporation.
51Niederst, J., Web Design in a Nutshell, (2006), p.5-22
52 Elliott, C., and Quinn, F., Contract Law, (2009), Chapters 1, 6 and 7.

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2.0 EU Directives
The EU has been keen to promote e-commerce and for this reason, there are now
three EU Directives that currently govern online contracting and selling: the
Electronic Commerce Directive53 (E-Commerce Directive), the Distance Selling
Directive54 (DSD) and the Electronic Signature Directive55 (E-Signature Directive). A
signature is not normally required when a consumer buys goods from a website thus
the E-Signature Directive goes beyond the scope of this project. This dissertation will
cover in detail the E-Commerce Directive and the DSD. Additionally, consideration is
given to the newly proposed Consumer Rights Directive56 (CRD).
Within the European Union (EU) the basic rules regulating contract formation are
subject to the laws of the individual member states.57 However, for an online contract
to be binding, it must comply with the specific formalities imposed by the E-
Commerce Directive.58To understand the extent to which traditional contract law
principles are transportable to internet transactions, consideration must first be given
to the EU Directives that govern online contracting and selling.
2.1 Electronic Commerce Directive 2002
The E-Commerce Directive was introduced into the UK by the Electronic Commerce
(EC Directive) Regulations 2002. The Directive was designed with two main
purposes, firstly to “clarify and harmonise the rules of online business”59, secondly, to
“ensure free movement of information society services”60. Under Article 2(a)
information society services are defined as “services normally provided for
remuneration, at a distance, by means of electronic equipment for the processing
53 2000/31/EC
54 97/9/EC
55 1999/93/EC
56 2011/83/EU
57 Jones, R., et al., Chance, C., ‘Online selling and contracting: An overview of EU rules’, (2011) 27
Computer Law & Security Review 402 p.402
59Pinsent Masons., The UK’s E-Commerce Regulations (Apr. 2013) http://www.Pinsent
Masons.com/page-431
60 Department of Trade and Industry, Industries and sectors eCommunications: The Electronic
Commerce Directive (00/31/EC) & The Electronic Commerce (EC Directive) Regulations 2002 (SI
2002 No. 2013) (Apr. 2013)
http://webarchive.nationalarchives.gov.uk/+/http://www.dti.gov.uk/industries/ecommunications/electron
ic_commerce_directive_0031ec.html

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and storage of data, and at the individual request of a recipient of a service”61. The
definition includes services giving rise to online contracting. Jones et al62 argue that
the definition is so broad it suggests that “all commercial website offerings will fall
under the E-Commerce Directive”63.
The E-Commerce Directive was never designed to provide specific rules for online
contract formation and was not intended to replace member states contract law
principles. The three provisions under the E-Commerce Directive which relate to
contract formation are Articles 9,10 and11. Article 9(1) of the E-Commerce Directive
demands that all member states should ensure their legal systems allow for contacts
to be concluded by electronic means. Additionally, the legal requirements enabling
the formation of a contract should not create obstacles to the creation of electronic
contracts.64 Article 10 establishes that service providers must give clear and
unambiguous prior information, regarding the steps that need to be followed before a
contract can be concluded. Article 11(1)(a) states that where a consumer has
placed an order electronically the seller must acknowledge the receipt of the order
electronically without undue delay.65
Several critics, most notably Roach66, have argued that in its attempt to harmonise
the rules of online business, the E-Commerce Directive failed to provide sufficient
guidance with relation to online contract formation. However, Kadir67 stresses the
purpose of the E-Commerce Directive was not to define the legal position on
electronic offer and acceptance, but only to provide a general framework to assist
electronic commerce. Therefore the Directive “[does] not elaborate on substantive
principles of contract formations”68.
For business to business (B2B) transactions, instead of creating specific laws to
harmonize the general contract law principles of all the Member States, the E-
61 Article 2(a) – Electronic Commerce Directive 2000/31/EC
& Security Review 402p.402-406
64 Article 9(1) – Electronic Commerce Directive 2000/37/EC
65 Article 11(1)(a) – Electronic Commerce Directive 2000/37/EC
66 Roach, L., Business Law, (2009), Chapter 6
67Kadir, R., ‘Rules of advertisement in an electronic age’, (2013) 55 International Journal of Law and
Management p.42-50
68Kadir, R., ‘Rules of advertisement in an electronic age’, (2013) 55 International Journal of Law and
Management p.47

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Commerce Directive establishes the principle of ‘country of origin’. This principle
insists that the member states apply their own laws when regulating the formation
and enforceability of electronic contracts. The principle means that service providers
need only to comply with the laws of the member state in which they are established.
Where the service providers are operating within other member states, the service
provider does not have to concern himself with the laws of the country in which their
services are received.69
The ‘country of origin’ principle is inappropriate when online contracts are concluded
between business entities and consumers. Consumers are considered to be the
weaker party and as a result service providers have to follow the laws of the member
state in which they are established, as well as the laws of the member state their
services are received. For example, a service provider based in France, providing
services for a Spanish consumer, would need to comply with French and Spanish
consumer laws.70
2.2 Distance Selling Directive 2000
Historically consumers have been slow to engage in online contracts due to
concerns regarding the security of the transaction and supplier reliability.71 As a
result, the Distance Selling Directive was brought into UK law in the form of the
Consumer Protection (Distance Selling) Regulations 2000. The primarily role of the
DSD is to provide guidelines for the protection of consumers undertaking distance
transactions, with the aim of reducing consumer concerns. DSD uses four
mechanisms to protect consumers, provision of adequate information, rights to
withdrawal, protection against fraudulent card misuse and prohibiting sellers from
certain activities.72
Article 2 did not provide a definition or an exhaustive list for distance
communications. The Article instead defines distance communication by their
70Ibid
71 Henderson, K.., and Poulter, A., ‘The Distance Selling Directive: Points for Future Revision’, (2002)
16 International Review of Law Computers & Technology 289 p.289
72 Donnelly, M., et al., ‘The Distance Selling Directives – A Time For Review’, (2005) 56 Northern
Ireland Legal Quarterly 200 p.200

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general principles73 as “any means which, without the simultaneous physical
presence of the supplier and the consumer, may be used for the conclusion of a
contract between those parties”74. Due to the nature of technology a complete list
cannot be assembled. However, it appears that the DSD is no longer sufficient in
protecting consumers who contract over the internet. Therefore a new Directive is
now being introduced later this year to offer a greater range of protection for internet
transactions.
2.3 Consumer Rights Directive
The new CRD to be implemented by the end of this year, expands on the current
DSD by providing additional protection to consumers when shopping online.75 The
CRD is more than a mere expansion on the DSD and Greek76 argues the changes
that are being made will provide significant benefit to consumers in the UK.
Greek77 explains that the first draft of the CRD in 2008 that was designed to
standardise consumer protection laws across Europe was deficient. However, in
countries with little or no protection for consumers, the CRD did in fact strengthen
the laws in this area. Whereas, in countries such as the UK and Finland which
already had strong laws, the CRD offered less protection and conflicted with these
countries’ existing laws.78 In the UK the draft CRD “effectively broke the Sales of
Goods Act”79 and subsequently was discarded by the end of 2009. 80
The new CRD provides further protection in addition to the DSD by giving consumer
new rights where refunds are concerned, providing greater cost transparency, and
further reducing unnecessary costs.
Regulations around refunds will be changing to enhance consumer rights. Where the
seller does not specify that the consumer will bear the costs of shipping the refund,
73 Henderson, K.., and Poulter, A., ‘The Distance Selling Directive: Points for Future Revision’, (2002)
16 International Review of Law Computers & Technology 289 p.290
74 Article 2(4) - Distance Selling Directive 97/9/EC
76 Greek, D., What the changes to the Consumer Rights Directive mean for shoppers (Sep. 2011)
mean-shoppers
77Ibid
78Ibid
79Ibid
80Ibid

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then the seller will be expected to cover the cost.81 Therefore it is advised that online
retailer explain who will bear the cost of shipping the goods back in the terms and
conditions of their website. Additionally, before the conclusion of the online contract
the seller will be under a new duty to provide customers with a ‘model form’ to be
used by the customer when cancelling the contract.82
The CRD aims to ensure there is complete transparency where costs are concerned.
Online retailers will no longer be able to inflict unnecessary charges on consumers.83
The online retailer will need to disclose the total cost prior to the conclusion of the
agreement, including any what might be termed as hidden charges. If the seller fails
to reveal all information regarding the total cost of the goods or service, the
consumer will not have to pay the extra fees. Finally, if the consumer needs to make
further contact with the seller, he will not have to injure extra surcharges (telephone
calls will be charged at their standard rate).
The CRD seeks to prevent unnecessary costs. One of the important changes begin
made is that the CRD will prohibit sellers from pre-ticking selection options and
adding extra items to transactions. Consumers will need to positively select any add-
ons they want. For example, when purchasing a pair of shoes, the seller will no
longer be able to automatically pre-select and add shoe polish to the transaction.
For the first time the new CRD will allow consumers to cancel a contract for the sale
of digital downloads.84 The EU has never offered protection to consumers
purchasing digital downloads, such as movies, video games, music and software,
because such goods were considered to be intangible.85 Furthermore, online
retailers will need to provide clearer information concerning the download prior to the
82Pinsent Masons., Consumer Rights Directive to be transposed by 13 December 2013 (Apr. 2013)
http://www.out-law.com/en/articles/2011/november/consumer-rights-directive-to-be-transposed-by-13-
december-2013/
83Ibid
84 Greek, D., What the changes to the Consumer Rights Directive mean for shoppers (Sep. 2011)
mean-shoppers
85Ibid

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conclusion of the contract. In particular, they must provide information regarding the
compatibility of the digital downloads with hardware and software.86
The new CRD allows for the cancellation of the contract, up to the point of download.
It is however still unclear whether stopping the download early will also cancel the
contract.87 Greater clarity on this matter is needed and websites should state
whether cancelling the download will also cancel the contract.
Chapter conclusion
The EU Directive does not seek to intervene in the general contract law principles of
the member states. Article 9 was enacted to ensure that all Member States
electronic contracts are as valid as a normal contract concluded offline. The E-
Commerce Directive has enabled member states modifications to their contract law
principles, so that their laws can accommodate contracts concluded via the internet.
Though the DSD has in the past offered protection to consumers, it no longer fully
protected the consumer when contracting over the internet. The new CRD is being
introduced to address areas in internet contracting, not sufficiently covered by the
DSD. It is difficult to fully critique the CRD because it has not yet come into force.
The CRD appears to be an improvement over the DSD, offering more protection to
consumers engaging in internet transactions.
87Ibid

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3.0 Offer versusInvitation to Treat
The E-Commerce Directive failed to define the legal status of a display of goods
found on websites.88 For this reason, where disputes arise with relation to online
contract formation, the general principles of English contract law must be applied.
This chapter investigates the applicability of traditional contract law principles in
defining the legal status of a display of goods found on a website. This relates to the
hypothesis specifically focusing on the distinction between an offer and an invitation
to treat.
3.1 Contract law principles for contract formation
Under English contract law there are four fundamental elements for the formation of
a contract. The elements are an offer, an acceptance, an intention to create legal
relations and some form of consideration. An invitation to treat is “simply a request
for others to make an offer”89, for example an advertisement is usually considered to
be an invitation to treat. The invitation to treat originates from the person who wishes
to sell goods or services. Following the invitation to treat, an offer would then be
made by the offeror (the buyer). An offer is considered to be “a clear expression of
contractual content”90 which suggests the offeror’s willingness to enter into an
agreement based on the terms provided. Once an offer is made, the offeree (the
seller) will either accept the offer, present a counter-offer or reject the offer.
Acceptance is “an unconditional positive response to an offer”91 and must be
communicated by the offeree to the offeror. Once acceptance has been
communicated a contract is made and the parties assume all rights and obligations
under the agreement.92 An intention to create legal relations in the context of a
commercial agreement is automatically presumed and this presumption will not be
rebutted unless there is clear contrary evidence.93 Additionally, some form of
88 Roach, L., Business Law, (2009), p.158
89Deveci, Hasan A., ‘Consent in online contracts: old wine in new bottle’ (2007) 13 Computer and
Telecommunications Law Review 223 p. 224
90Ibid
91 Turner, C., Unlocking Contract Law (2010), p.29
92Ibid

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consideration is also required that is to say “each party should derive something
beneficial94 from the transaction”95.
3.2 Offer versus invitation to treat
The most problematic area of online contract formation is deciding whether the
website constitutes an offer, or an invitation to treat. This distinction is extremely
important because the legal status of a display of goods on a website “has not been
tested by the UK courts”96 and the E-Commerce Directive failed to provide greater
clarity on this issue. It has been suggested that there needs to be a statutory
provision defining website adverts as invitations to treat.97 The conflicting view states
that no universal rule can give guidance on the legal status of a display of goods, the
status depends on the content of the statement and the intention of the parties and
not the method of communication.98
3.3 Virtual shop
Websites are more commonly regarded by legal scholars as the equivalent of a
“virtual shop”99, where shop displays are merely invitations to treat. Instead of
viewing the goods on a shelf, the online buyer navigates through a series of
electronic pages on a computer screen to view the goods.100 As a substitute for a
shopping basket, the buyer drops his selected goods into a virtual basket.101 Finally,
the buyer goes to the checkout and pays for the goods.102 Such a process is
analogous to the self-service shop found in the case of Pharmaceutical Society of
Great Britain v Boots Cash Chemists103
. In this case there was a need to decide at
what point the contract was concluded in a self-service shop. The defendants were
accused of breaching section 18(1) of the Pharmacy and Poisons Act 1933, which
states that it is not lawful for a person to sell any poison unless he is authorised to
sell such goods and that the sale is processed by, or under the supervision of, a
94 For example, the buyer will give the seller money in exchange for the seller’s goods or services.
95Halberstam, S., How to contract online (Nov. 2012) http://www.weblaw.co.uk/2009/09/06/how-to-
contract-online/
96Pinsent Masons., Online Contract Formation (Feb. 2008) http://www.out-law.com/page-394
97 Article 11 – United Nations Convention on the Use of Electronic Communication in International Contracts
98Furmston, M., et al., Contract Formation, (2010),p.168
100Ibid
101 Richards, P., Law of Contract, (2011), p.23
103 [1953] 1 QB 401

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registered pharmacist.104 If the priced goods were an offer, the contract would be
concluded as soon as the consumer took the goods off the shelf, thus the
defendants would have been in breach of the statutory provision. However, if the
display was only an invitation and it was the customer who made the offer, then the
plaintiffs were not in breach. Lord Goddard CJ held that in a self-service shop the
customer selected and brought the goods to the shop-keeper. “The contract being
completed if the shop-keeper accepted the customer’s offer to buy”105. The offer
therefore is “an offer to buy, not an offer to sell”106. The case went to the Court of
Appeal where Somervell LJ agreed with the lower court’s decision.
Case law has proved that a display of goods in a shop at a particular price will only
amount to an invitation to treat. In Fisher v Bell107
a shop-keeper displayed a ‘flick
knife’ with a price tag attached and was alleged to be a breach of Section 1(1) of the
Restriction of Offensive Weapons Act 1959. J.A. Cox for the prosecution argued “it
may have been a conditional offer, but if a person entered the shop and asked why it
was in the window the answer must have been: It is for sale”108. Lord Park C.J
reluctantly held “according to the original law of contract the display of an article with
a price on it in a shop window is merely an invitation to treat”109.
Regulation 12 of the E-Commerce (EC Directive) Regulation 2002 states that “[an]
order may be but need not be a contractual offer”110. This suggests that an advert on
a website will typically constitute an invitation to treat, but on occasion could signify
an offer.111 Where disputes about the status of a display of goods on a website arise,
the courts will need to determine the status on a case by case basis, looking at the
individual facts and the intentions of the parties. Thus online retailers must “exercise
great care”112 when designing the website.
To understand whether a display of goods will amount to an offer or merely an
invitation to treat, the courts will need to determine whether the advert is for a
104 Section 18(1)(a)(i-iii) – Pharmacy and Poisons Act 1933
105Pharmaceutical Society of Great Britain v Boots Cash Chemists [1952] 2 All ER 458
106Ibid
107 [1961] 1 QB 394
108Fisher v Bell [1961] 1 QB 394 - J.A Cox (Prosecutor)
109Fisher v Bell [1961] 1 QB 394 – Lord Parker C.J
110 Regulation 12 - Electronic Commerce (EC Directive) Regulations 2002
111 Richards, P., Law of Contract, (2011), p. 24
112 Richards, P., Law of Contract, (2011), p.23

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unilateral or bilateral contract. A unilateral contract requires that “only one party
assumes an obligation under the contract”113whereas in a bilateral contract “all
parties assume an obligation”114. In Carlill v Carbolic Smoke Ball Co115 the
defendant manufactured smokeballs and in the advertisement claimed the
smokeballs would prevent the flu. If anyone still caught the flu, the defendant would
pay £100 compensation. Mrs Carlill bought and used the product, but still contracted
flu. The defendant refused to pay claiming that an offer could not be made to the
world at large. The court held that the advertisement could in fact constitute an offer
to the world at large. The offer became a contract when a member of the general
public accepted it. Such contracts are assumed to be unilateral because there is no
need for further negotiation, the person making the advertisement intends to be
bound.116
Furmston et al117 proposed that there should be no universal rule defining the legal
status of an advert on a website. Furmston et al explains that it is the content of the
statement made, not the method by which it is communicated which determines
whether a website acts as an offer or an invitation to treat.118 Under traditional
contract laws an advertisement can be an offer if expressed in a particular manner
that would prove intent to be binding.119
3.4 Risk of pricing errors
One of the main reasons for determining the status of display of goods on a website
is to avoid disputes over pricing errors. Advertising online is advertising to the world
and the impact of a pricing error can therefore be significantly worse for an online
retailer.120 There have been several recent cases where consumers insisted that a
contract be upheld where there was a pricing error on the website. Poole121 cites two
examples: Argos advertised Sony Television sets for £3 instead of £299 in 1999 and
Amazon tendered a pocket PC for £7.32 instead of £274.99 in 2003.122 The Sun
113 Elliot, C., and Quinn, F., Contract Law, (2009), p.12
114Ibid
115 [1893] 1 QB
116 Elliot, C., and Quinn, F., Contract Law, (2009), p.15
117Furmston, M., et al., Contract Formation, (2010), Chapter 6
119Carlill v Carbolic Smoke Ball Co [1893] 1 QB
120Chwee Kin Keong v Digilandmail.com Pte Ltd [2004] 2 SLR 594
121 Poole, J., Textbook on Contract Law, (2012), Chapter 2
122 Poole, J., Textbook on Contract Law, (2012), p.40-41

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newspaper reported in 2012 that Tesco’s website advertised iPads for £49.99
instead of £659.123 Tesco was able to refuse to honour the orders, because their
website stated that the site was an invitation to treat.124 If a website constitutes an
invitation to treat and the supplier has not accepted the offer, they will not have to
fulfil their obligations under the contract.
Case law established that no contract exists where a customer has tried to take
advantage of an exceptional offer that was the result of an obviouspricing error.125
The Hartog v Colin Shields126
case confirmed that the courts will not assist a buyer
who is aware of a pricing error and who is attempting to exploit the error.127 Singleton
J explained “there really was no contract”128 because the plaintiff knew the offer
“contained a material mistake”129 and the plaintiff “sought to take advantage of it”130.
Such a concept is perhaps better described as “snapping up the offer”131. The
presumption then is that if a consumer is aware of an obvious pricing error on a
website, the online retailer will not be bound by the contract and the law here
appears to be fair.
Whether the purchaser ‘ought to have known’ there was a pricing error is subject to
the reasonable prospective purchaser test.132 In Chwee Kin Keong v
Digilandmall.com Pte Ltd133
the High Court of Singapore held, the unusual pricing of
the products in question would encourage a reasonable buyer to research and
compare prices of similar goods on other websites. The comparison would lead the
buyer to conclude that there was a pricing error in the original offer. Although case
law appears to favour the seller in such situations, the outcome may be less clear if a
more modest pricing error was made.134
123Kinnon, F., ‘Should Tesco perform U-turn over £49.99 iPads?’, The Sun, 15 March 2012
124Ibid
125 Poole, J., Textbook on Contract Law, (2012), p.41
126Hartog v Colin Shields [1939] 3 All ER 566 (KB)
128McKendrick, E., Contract Law, (2012), p.33
129Ibid
130Hartog v Colin Shields [1939] 3 All ER 566 (KB)
131Tamplin v. James (1880) 15 Ch D 215, 211
132 Poole, J., Textbook on Contract Law, (2012), p. 41
133 [2004] SLR 594

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3.5 The vending machine analogy
In a typical online transaction the customer goes to the website, selects the product
or service, enters their card details, the computer accepts the money and then the
goods or services are delivered. The process resembles closely the one used for
vending machines and as seen in Thornton v Shoe Lane Parking Ltd135
, vending
machines are deemed to be an offer136. Thus it is argued that if the transaction can
be completed online in its entirety and the consumer has the final choice to contract
or not, the website’s display should amount to an offer.137 The type of transactions
where this analogy applies is where the consumer buys digital downloads, such as
computer software, music, video files and computer games. Once the consumer
accepts the agreement by entering their card details, the download automatically
begins and there is no need for further acceptance by the seller. In these
transactions the digital file cannot ‘run out of stock’, therefore it would seem perfectly
acceptable to assume the advert should be deemed an offer.
The Thornton v Shoe Lane Parking Ltd138
case involved the use of a car park ticket
machine.Lord Denning explained “the customer pays his money and gets a ticket.
He cannot refuse it...he was committed at the very moment when he put his money
into the machine”139. In the case of a digital file the buyer receives a file as opposed
to a ticket and cannot revoke the agreement.
Chapter conclusion
No English court has tackled the issue regarding the legal status of a display of
goods on a website. Adverts for the sale of goods on websites can be likened closely
to a display of goods in a ‘real shop’, which will usually constitute an invitation to
treat. However, some adverts and displays of digital goods can also be analogous of
a vending machine, which is deemed to be an offer. English contract law is able to
adapt to the new medium and accommodate any disputes arising from online
contract formation. The courts need to decide the legal status on a case by case
135 [1971] 2 QB 163
136Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163 – Lord Denning MR said vending machines
constitute a standing offer because once the machine was activated there was no possibility of
negotiation.
138 [1971] 2 QB 163
139Thornton v Shoe Lane Parking Ltd [1971] 2 QB 163

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basis. The status will depend on the intention and the content of the statements
made on the website. No universal rule should be made, but it is believed that in
most cases a display of goods on a website is merely an invitation to treat.

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4.0 Termsand ConditionsIncorporated
This chapter will look at the ways in which terms and conditions are incorporated into
online contracts and matters relating to their enforceability. Brief consideration is
given to what impact other technological advances, such as browser types and
HTML files, may have on the terms and conditions. To fully understand how terms
are incorporated and enforced, it is first necessary to review the general contract law
principles.
4.1 Contract law principles for terms and conditions
Under English contract law, the overriding rule for the implementation of terms and
conditions is that parties should be free to make contracts on any terms, a concept
also known as freedom of contract140. The courts make the assumption that nobody
would choose to enter into a contract that would be unfavourable or
disadvantageous. Elliott and Quinn et al141 suggest that the courts merely act as
umpires in holding parties to their promises. It is not the court’s role to ask whether
the bargain made between the parties was fair.142
For an agreement to be binding the terms and conditions must be properly
incorporated. There are two categories of terms, implied and expressed. Implied
terms are incorporated by statute, custom and fact.143 Expressed terms however, are
either written or spoken by the parties. There are three ways to incorporate written
terms: by reasonable notice, signature (assent) and previous course of dealing.144
In trying to establish if the terms and conditions were incorporated into the contract
properly, there must be reasonable notice of the terms. In Parker v South Eastern
Railway145
the facts explains that Parker paid two pence and deposited a bag into
the railway’s cloakroom subsequently receiving a ticket. On the front of the ticket it
said “See back”. On the back was an exclusion clause proclaiming the cloakroom
140 Freedom of contract was derived from the doctrine of laissez-faire (parties should be left alone to
make their own bargains).
141 Elliott, C., and Quinn, F., Contract Law, (2009)
143Treitel – Peel, E., The Law of Contract, (2010), p.222
145(1877) 2 CPD 416

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service excludes all liability “for any package exceeding the value of £10”146. A
similar sign had also been placed in the cloakroom. The plaintiff argued he had not
read the conditions as he assumed the ticket was merely a receipt. It was held that
sufficient notice had been provided, a decision which was upheld by the Court of
Appeal.
The courts appear to concentrate on whether the offeror used reasonable efforts to
bring the terms to the attention of the offeree.147 This is illustrated in the Olley v
Marlborough Court Ltd148
case. The facts of the case were that the plaintiff, a guest at
the defendant’s hotel, locked the hotel room, left the keys at reception and returned
four hours. On return the plaintiff noticed the keys had gone along with some of her
belongings from the room. The defendant argued there was a notice exhibited in the
bedroom that stated “The proprietors will not hold themselves responsible for articles
lost or stolen unless handed to the manageress for safe custody”149. All valuables
should be deposited for safe custody and a receipt should be obtained. It was held
that the terms of the notice had not been properly incorporated into the contract prior
to the agreement. The notice was only visible after the plaintiff had been accepted as
a guest. The lower court held the terms were not clear in exempting the defendant
from all liability and therefore not incorporated. The Court of Appeal upheld this
decision.150
Where there is a signature, the expressed terms will be incorporated into the
contract. In L’Estrange v F Graucob Ltd151the landlady of a café purchased and
signed a contract for an automatic cigarette vending machine. However, the landlady
failed to read the agreement, which contained an exemption clause prior to its
conclusion152. The court held she was still bound by the clause and Scrutton LJ said
“when a document containing contractual terms is signed...the party signing it is
bound”153. Though the rule may appear to be harsh, a party may only be bound by
146Deveci, H A., ‘Consent in online contracts: old wine in new bottles’, (2007) 13Computer and
Telecommunications Law Review 223 Pg. 225
147Ibid
148 [1949] 1 KB 532
149Olley v Marlborough Court Ltd [1949] 1 KB 532
150Ibid
151 [1934] 2 KB 394
152 Exemption clause - Consumer could not rely on defects in the machine as a defence to a claim for
part of the price or as entitling her to damages.
153L’Estrange v Graucob [1934] 2 KB 394

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the agreement where one would reasonably have expected to find contractual
terms.154
Expressed terms can also be incorporated by previous course of dealings. In
Spurling (J) Ltd v Bradshaw155
the defendant contracted to store goods in the
claimant’s warehouse over many years. On one occasion the goods went missing
and when the defendant refused to pay the claimant for the store facility, the
claimant sued. The defendant then counter-claimed, alleging the claimant was
negligent for the loss. The claimant pointed out an exclusion clause for any loss
which was implied by the parties previous course of dealing. The courts agreed the
clause was incorporated as the parties had dealt under the same terms for many
years.156 The courts however, will not accept exception clauses where there has not
been a consistent course of action.157 The judgement is comparable with the
judgement of Parker v South Eastern Railway158
.
4.2 Click-wrap agreements
Click-wrap agreements are typically used when purchasing goods such as a sweater
or a cooking appliance. These agreements can be identified when a “user must first
click on an ‘I Accept’, ‘I agree’…button expressing assent”159. A click-wrap
agreement will prohibit the formation of a contract unless the consumer positively
assents to the terms and conditions.160 For a customer to proceed they must at the
very least have acknowledged the terms and therefore cannot argue lack of notice.
Click-wrap agreements provide customers with sufficient notice and demand that the
customer make a clear statement to show their acceptance of the terms and
conditions. For this reason “click-wrap agreements have generally been found to be
enforceable”161. In Hotmail Corp v Van Money Pie, Inc162
, Hotmail provided a free
154Treitel - Peel, Edwin., The Law of Contract., (2010), p.238
155 [1956] 1 WLR 561
156Ibid
157 McCutcheon v David MacBrayne Ltd [1964] 1 WLR 125
158 (1877) 2 CPD 416
160Ibid
162(1998) WL 388389 (N.D.Cal)

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email service to subscribers under the expressed condition that subscribers should
not use “Hotmail to send unsolicited commercial emails”163. The site made the terms
available prior to the completion of setting up the account and consent by
subscribers was made by clicking on the ‘I Agree’ button. The defendant sent an
unsolicited commercial mail using a third party email service, but used the Hotmail
service mark in the return address.164 This suggested that the email had been sent
from a Hotmail account. It was held that the defendant had sufficient notice and had
agreed to Hotmail’s terms. In sending unsolicited emails the defendant had breached
the click-wrap contract.165
In Capsi, Rudder v Microsoft Corp166
there was a dispute over a forum selection
clause in Microsoft’s membership agreements. Potential members were warned, “if
you click [the] ‘I agree’ button without reading the member agreement, you are still
agreeing to be bound by all of the terms…without limitation”167. The plaintiff argued
that the user had to scroll down in order to see the agreement in its entirety.168 The
court proclaimed that the “electronic multiscreen display”169 was no “different from a
multi-page written document which requires a party to turn the pages”170. Regardless
of whether the terms are contained in a scroll box the parties will still be bound by
the agreement.171 Where a person has signed a contract, even if he has not read the
terms and conditions he will be bound by the agreement.172 As in L’Estrange v
Graucob173, where the customer is given the opportunity to read the terms prior to
providing consent, it is in their best interest to do so. This is based on the notion of
caveat emptor174
.
163Ibid
165 Ibid
166[1999] O.J. No. 377
168Capsi Rudder v Microsoft Corp[1999] O.J. No. 3778
169 Ibid
171 Forrest v Verizon Communications 805 A.2d 1007 (D.C. App. 2002)
172Treitel - Peel, Edwin., The Law of Contract., 13th Edition, Sweet & Maxwell, p. 238
173 [1934] 2 K.B. 394
174 Latin for ‘let the buyer be aware’

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4.3 Browse-wrap agreements
A browse-wrap agreement occurs where the “user has an opportunity to view the
online terms but is not required to demonstrate consent”175. These agreements are
typically used when downloading software, music, games or other electronic files.It
has been argued that browse-wrap agreements have been more problematic176
when compared to their click-wrap counterparts.
The use of browse-wrap agreements carries a significant risk for the online retailer.
This type of agreements do not provide a method of affirmatively accepting the
terms, it can be hard for the site provider to prove consent was actually given. If it
can be proved that consent was demonstrated by conduct, where the user had a
previous course of dealings, the courts may still enforce the agreement.
Perhaps the greatest issue with browse-wrap contacts is that they often do not place
the terms in a prominent position, or highlight them for the attention of the consumer.
If the customer can establish that they were not given reasonable notice of the terms
nor did they provide consent, then the courts may dismiss the contract as being
unenforceable. In Specht v. Netscape Communications Corp177
, the plaintiff
purchased a plug-in programme in which he agreed to the terms and conditions.
However, upon download an additional spyware programme was installed thus
breaching the plaintiff’s privacy. The defendant attempted to stay the court
proceedings by arguing that the plaintiff had agreed to an arbitration clause when he
downloaded the software. The United States Court of Appeal found that the plaintiff
was not given sufficient notice of the license terms for spyware, nor had the plaintiff
provided assent to the terms prior to downloading the program.178 It was held the
browse-wrap was unenforceable because it did not require the customer to
affirmatively agree to the conditions. The court held the claimant could not be bound
by contractual provisions of which he was aware.179
176Ibid
177 306 F.3d 17 (2d Cir.2002)
178Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir.2002)

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Pinsent Masons180 argues where the phrase ‘Terms and conditions’ appears on a
website there needs to be “an obvious link to the terms themselves”181. It is not
acceptable to have the terms and conditions in an inconspicuous place. Where the
agreements do not bring the relevant terms to the attention of the purchaser the
contract cannot be bindingas seen in Olley v Marlborough Court Ltd182
. Pinsent
Masons argues that the website “seller must ensure that the ordering process
requires the customers to read and agree to the seller’s terms and conditions”183.
Terms can be incorporated into the agreement by conduct therefore browse-wrap
agreements should be enforceable. “A signature is not always a prerequisite of
traditional contracts”184, so the question raised is, why should a ‘click button’ be a
precondition for an online contract to be enforceable. Many contracts are concluded
through conduct were a signature or affirmative assent is not provided by the user.
Deveci supports this by declaring that the courts “should not write off browse-wrap
agreements as unenforceable”185. However, browse-wrap should only be
enforceable where the parties have had reasonable notice of the terms.
Online retailers are instructed by the Office of Fair Trading not to encourage users to
make statements that are untrue when agreeing to the sites terms. Sites should
avoid phrases such as “I have read, understand and accept the terms and
conditions”186. Where for example, a customer has not actually read the terms and
conditions, the site is considered to be encouraging him to make untrue statements.
In order to prevent consumers from making false statements, the OTF suggests sites
should warn consumers of the importance of reading the terms and conditions and
use phrases such as “I accept the terms and conditions”187 beside the acceptance
click button.
181Ibid
182[1949] 1 KB 532
185Ibid
187Ibid

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4.4 HTML files compatibility with browser types
Websites are made up of a series of HyperTextMarkup Language (HTML) files,
which provide instructions expressing how the contents on the site should be
displayed.188 The way the content is presented on a website however, is dependent
on how the various browsers189 process these instructions. In some cases the
browser may distort the content of the original website so much that parts of the
content may not be displayed at all. Such content could include the hyperlink needed
to redirect the consumer to the terms and conditions.190 Therefore online retailers
cannot control how their website will be displayed to their customers because
different browsers will interpret the HTML files differently.191 The question is, who
should bear the risk if notice of the terms were incorporated, but were not displayed
because the customer’s browser could not support the necessary technology.192
The online retailer must ensure the construction of the website is not distorted by the
various browsers if the terms of the agreement are to be incorporated effectively.
“The visibility or positioning of a hyperlink providing the terms depends on the
specific browser”193. Reasonable notice of the terms ultimately determines whether
the agreement will be enforceable. To protect the online retailer they can create
multiple versions of a site to ensure similar functionality across different browser
types.194
Customers can change the default settings by customising their browsers.195 In this
instance it is hard to determine who should bare the risk. Online retailers will have
limited capabilities in controlling how their websites are laid out and customers may
be unaware of the affect their customizations will have on their ability to view the
terms. It would seem reasonable, however, that where a customer has his altered
the browser settings, he should bare all responsibility and the courts should still insist
on the enforceability of the agreement. The basic presumption is that if a customer
188Niederst, J., Web Design in a Nutshell, (2006), p.114
189 Internet Explorer browser will process the instructions differently from that of Safari, Netscape or
Firefox.
190Furmston et al, Contract Formation, (2010), p.164
191Ibid
194Niederst, J., Web Design in a Nutshell, (2006), p. 22

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possesses the knowledge to alter the browser the customer should also appreciate
that any tampering with the default settings could incur a range of problems. Thus
this notion of ‘tamper at your own risk’ should be adopted.
Chapter conclusion
Several issues arise when incorporating the terms into a contract for online
transactions. General contract law principles state terms must be incorporated by
reasonable notice, assent or previous course of dealing. Click-wrap agreements are
enforceable because they satisfy two criteria, reasonable notice and assent by
clicking on the ‘I accept’ or ‘I agree’ button. Browse-wrap agreements present a
dilemma when reasonable notice is not provided and where affirmatively expressed
acceptance is not required. However, if the browse-wrap agreement does provide
reasonable notice of the terms the agreement should still be enforceable.
Technological aspects of a website can induce further complications where browser
types distort the layout of web pages. The question still remains, if a browser affects
the web page to the extent that reasonable notice of the terms is not provide, who
should then bare the risk. Recently the courts have begun to consider the
enforceability of browser-wrap contracts in other jurisdictions.196
Telecommunications Law Review 223 Pg. 231

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5.0 Conclusion
The research hypothesis stated that ‘English contract law principles can encompass
internet transactions’. Contract law can accommodate any new medium and
therefore does not require major revision when applied to online contracting.
The EU has created several Directives to help boost e-commerce and to protect
online consumers. Though Roach argues the E-Commerce Directive failed to define
the legal status of an advert on a website, the Directive was not designed to reform
the contract law of the various member states. Instead the Directive intended only to
harmonise the rules and to encourage member states to recognise the validity of
electronic contracts by the enactment of Article 9. Article 9 is extremely important in
that it prohibits the laws of member states from preventing the valid formation of an
electronic contract. The E-Commerce Directive favours e-business and in order to
boost business to business commerce the Directive established the principle of
‘country of origin’.
The DSD has been effective, but in the world of ever changing technology, greater
protection for consumers is needed. For this reason, the new Consumer Rights
Directive will come into force by 2013. Though it is argued that the CRD is only a
mere expansion of the DSD197, however this is not an accurate description. It is true
that the CRD will expand on the DSD, but it intends to go much further than that. For
the first time ever consumers will be given new rights where refunds for digital
content downloads are concerned. Additionally the CRD will prohibit sellers from
adding items to the consumer’s basket by pre-ticking option boxes. As the CRD has
not yet come into force, any in depth critical assessment would be somewhat
superficial. The CRD does however appear to be more effective in protecting online
consumers than the DSD.
Case law has proven that traditional paper adverts can be deemed to be an invitation
to treat, but on some occasions can amount to an offer. If the analogy of a paper
advert can be applied to an online advert, then the website too can fall under both
categories. If the advert on the website is for the display of goods, then the site will
197 Greek, D., What the changes to the Consumer Rights Directive mean for shoppers, (Sep. 2011)
mean-shoppers

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resemble a self-service shop and will usually constitute an invitation to treat.
However, there are instances when the advert is for a unilateral contract, in which
case the advert will amount to an offer. Additionally, it can be argued that where
there is an advert for a display of digital downloads, the transaction process is more
liken to a vending machine interaction, which is deemed an offer. No universal rule
should be made to define the legal status of an advertisement found on a website.
The courts will need to make a decision on a case by case basis. Applying general
contract law principles to decide whether the contract was bilateral or unilateral will
enable the courts to determine its status.
There are three ways that terms can be incorporated into a contract, by reasonable
notice, signature and previous course of dealings. Click-wrap agreements allow the
incorporation of the terms by providing reasonable notice and by affirmative assent;
and as such are enforceable. However, browse-wrap agreements do not necessarily
bring the terms and conditions to the attention of the consumer and therefore do not
give sufficient notice. Furthermore browse-wrap agreements do not require
consumers to make an affirmative assent and proving assent by previous course of
dealing can be hard to establish. If a consumer has not had previous dealings with
the online retailer, how will the online retainer be able to enforce the terms.
Conversely Deveci states that signatures are not a prerequisite of a normal contract
and for this reason the courts should enforce the terms of the browse-wrap
agreement where previous course of dealings can be proven.
Websites and the internet are significantly complex and there appears to be a real
hesitance within the English legal system to tackle some of the issues in this area.
One critic has even gone as far as to argue that the Judges and academics alike
seem to shun technology.198
Furmston et al raises the challenges the courts may have when dealing with the
complications created by HTML file configurations and browser types variants. In
particular how these can distort the ways the terms and conditions are presented. A
consumer can customise their browser types in which case, who then should bare
the risk. It seems only reasonable that site providers should ensure that their
198Furmston, M., et al., Contract Law, (2010), p.160

Page 41 of 45
websites are fully functional. Yet the site provider cannot assume all responsibility
when the consumer alters the default settings of their browsers.
Contract law has proven over the years that it is able to absorb technological
change, such as contracts made through fax. However, in order for contract law to
apply to internet transactions there must be a clear understanding of the technology
involved in the construction of website and an appreciation for the way in which the
internet operates.

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