Legal download 2.0 - Concluding Contracts on the World Wide Web - a UAE Perspective

Since the introduction of the Internet in the mid-1990s, the way in which products are bought and sold has changed significantly. E-commerce, a method of purchasing goods and services through the Internet using secure protocols and electronic payment services, is a familiar concept that is increasingly becoming a key part of modern trade.

Indeed, recent statistics from Forrester project that in 2008, e-commerce and online retail sales in the United States may reach $204 billion, an increase of 17% from 2007. And yet few online shoppers appreciate that such online retail transactions would each form a contract that is governed by relevant contractual rules and applicable laws.

Because of the novel and unusual nature of the online environment, many contractual rules with which most people are familiar fail to deal with specific issues arising from an online transaction in an unequivocal manner. For example, in an ‘offline’ scenario, parties often indicate their acceptance to a contract by signing on the dotted line. But in the online environment, where an actual signature is not possible in the traditional sense, how does one ‘sign’ the contract?

In light of the above, it is unsurprising that many countries have recognised that new ways to deal with trading by electronic means are needed. Suitable laws have thus been enacted in various countries to deal with the specific issues in online or electronic transactions, the UAE being one of these countries.

In this article, we examine the different ways by which contracts can be concluded by electronic means. We also consider in some detail how the UAE Federal Law No. 1 of 2006 regarding Electronic Transactions and Commerce (the ‘e-commerce Law’) treats the conclusion of contracts between parties via electronic means.

Types of Electronic ContractsGenerally, there are two common ways by which contracts can be concluded by electronic means. The first is the ‘automated’ means of contracting, where the user is presented with a set of terms and conditions as part of his transaction. That user is then required to accept those terms and conditions, in order to continue the transaction or enter the site.

Such acceptance may be by a variety of methods, such as (i) clicking a ‘Yes’ button, (ii) ticking an acceptance box, or (iii) using an online checkout system where automated e-mail confirmation confirms a purchase.

One common example of such an ‘automated’ transaction can be found on many online airline ticketing websites, where the user is required to tick an acceptance box to agree to the terms and conditions in order to reserve his airline ticket.

The second way for two parties to enter into a contract by electronic means is via e-mail. That is to say, one party may offer goods and/or services by way of an e-mail, in some cases attaching its standard terms and conditions. The other party would then accept the offer by replying to the email in the affirmative.

Is It Legal?

In the UAE, the e-commerce Law generally appears to allow, and indeed provide for, both of these means of concluding contracts, subject to certain provisions and exceptions. We examine some of the key provisions of the e-commerce Law and the conditions and exceptions under this law below.

The e-commerce Law specifies that a contract can be made by ‘Automated Electronic Medium’ - that is to say, by any program or system that operates without the supervision or interference of any actual person. Such a contract would be valid despite there being no actual person being directly involved in the contracting process. This option would encompass the first method of electronic contracting, which we have looked at above.

The e-commerce Law also allows parties to express their consent and acceptance (see below) to enter into a contract (in full or in part) by electronic means, including email communication. Under the e-commerce Law, a contract does not become invalid or unenforceable only for the reason that electronic methods of communication were used in such contract's formation. Indeed, the e-commerce Law states that an offer (or the acceptance of an offer) may be expressed either in whole or in part by electronic methods of communication.

Therefore, as a general rule, contracts concluded electronically can be enforced under the UAE’s e-commerce Law.

Consent

Generally, the e-commerce Law will assume that a party has accepted the information or contract sent electronically if his ‘positive behaviour’ indicates as such. That is, if a party has replied (via e-mail) accepting an offer made to him via e-mail, then he will most likely be deemed to have implicitly agreed to enter into that contract electronically. Accordingly, if a party does not wish to conclude any transactions electronically, it would be prudent to include a clear statement in all such correspondence with the other party to this effect.

That said, it is worth noting that as an exception to this general rule, any transactions which involve the UAE government can only be concluded electronically if express consent is given by the government (or its representative).

Exceptions

We also note that the e-commerce Law specifically provides that certain types of transactions may not be concluded or form binding contracts via electronic communications. Such transactions include (i) transactions involving personal affairs, such as marriage, divorce and estates, (ii) transactions in connection with the sale, purchase, disposal and lease of ‘immovable assets’ for over ten years (such as houses or other similar types or property), and (iii) any document required by law to be attested by a notary public. It is therefore vital for the parties to ensure that the nature of their contract is not excluded under the e-commerce Law.

Conclusion

While it is clearly possible for parties to enter into contracts by electronic means, there are various conditions and potential pitfalls that would face the unsuspecting. It is therefore important for anyone intending to contract by electronic communications to be aware of these potential pitfalls and take legal advice on the contractual issues involved in trading by such means - and in so doing, go some way towards avoiding any potential issues that may arise.

The author, Tsung-Wei Wong, is a Legal Consultant for Technology, Media and Commercial Practice Group, DLA Piper Middle East LLP