The risky business of entering into international contracts online

More and more frequently, Australians are entering into international contracts online. At a commercial level, these arrangements often involve outsourcing services. As individuals, people often book holidays through online intermediaries operating in foreign countries.

An agreement is no less a formal contract simply because it is entered into on a computer. In general, there are three types of online contracts:

• Clickwrap contracts require a user to click a button to accept the terms and conditions.
• Browsewrap contracts allow a user to use a website without formally accepting the terms and conditions.
• Sign-in wrap contracts do not include an ‘acceptance’ function, but users are generally taken to accept the terms by proceeding with use of the website or service. They include a link to terms and conditions before the user decides to proceed.

The terms of online contracts are often complicated by the implication of international contract law. When entering into international contracts online, it is important to understand the contract terms and which laws apply.

Case example – Gonzalez v Agoda Company Pty Ltd

The recent Supreme Court case of Gonzalez v Agoda Company Pty Ltd [2017] NSWSC 1133 highlights the importance of reviewing website terms before entering into a contract with a foreign party. In this case, Ms Gonzalez booked a hotel in Paris through Agoda, an online Singaporean booking intermediary. When she made the booking, she accessed the Agoda website from her home computer in Sydney, Australia.

Agoda’s standard terms and conditions of booking included a clause providing for the ‘exclusive jurisdiction’ of Singapore:

…The Terms and the provision of our services shall be governed by and construed in accordance with the laws of Singapore without reference to Singapore conflict of laws rules, and any dispute arising out of the Terms and our services shall exclusively be submitted to the competent courts in Singapore. The Contracts (Rights of Third Parties) Act (Cap. 53B) is expressly excluded and shall not apply to the Terms.

This means that the only law that would apply to the contract was Singaporean law, and all disputes would need to be submitted to the courts of Singapore. Ms Gonzalez was provided with a link to these terms, and clicked the ‘book now’ button which was positioned below the words:

I agree with the booking conditions and general terms by booking this room…

When Ms Gonzalez stayed at the hotel, she slipped in the bathroom and fractured several bones in her leg. She claimed that a fault in the shower screen caused soapy water to leak, and made the floor slippery. She filed proceedings against Agoda in the NSW Supreme Court, claiming damages under Australian consumer and contract laws.

Ms Gonzalez argued that the exclusive jurisdiction clause was not incorporated into the contract properly. She ran a range of arguments relating to the website, including the lack of a button displaying the words ‘I agree’, and absence of a statement regarding the exclusive application of Singaporean law. Ms Gonzalez also argued due to her commitment to caring for her autistic grandson, the inconvenience she would suffer as a result of being in Singapore for the period of the court case would be considerable.

The court gave substantial weight to the ‘exclusive jurisdiction’ clause, and found that Ms Gonzalez had essentially ‘signed’ the document by clicking the ‘Book Now’ button. Ms Gonzalez was bound by the terms of the contract she had ‘signed’, regardless of whether she read them.

Things to consider when entering into international contracts online

In our increasingly globalised and digitised world, it is easy to enter into an international contracts online without considering the legal implications of the transaction. Here are the key things you need to consider when entering into an online contract:

1. Make sure you read the terms and conditions when entering international contracts online. You will be bound by anything you ‘agree’ to, even if you have not read it.
2. Be aware that an agreement does not need your actual signature to be binding. Under the Electronic Transactions Act 1999 (Cth), a ‘signature’ is a “method used to identify the person and to indicate the person’s intention in respect of the information communicated.” In Ms Gonzalez’s case, she provided her personal and contact details, and clicked a ‘Book Now’ button below a statement that she agreed to the terms.
3. Outside of the contract, be aware of any domestic and foreign laws that affect the agreement or transaction. For example, Australia’s trade agreements with other nations could affect the importation and exportation of products, as well as taxation.
4. Investigate the true location of the business of the other party. It is easy to make incorrect assumptions from a quick glance of a website.
5. Check whether the contract has an ‘exclusive jurisdiction’ clause specifying which country’s law will apply to the agreement. Consider how a potential dispute in the agreed jurisdiction could affect you or your business.
6. If purchasing or selling goods, the United Nations Convention on Contracts for the International Sale of Goods 1980 could apply. The convention automatically applies to contracts between parties in countries that have agreed to this convention. The application of the convention can provide certainty in cross-border transactions, and a neutral legal mechanism accessible in multiple languages. However, it is important to note that the application of this convention could be expressly excluded in a contract. Also, the convention does not apply to certain goods and contracts, including goods bought for private use, and the sale of ships, vessels or aircraft’s.
7. If you make a mistake when entering into a contract, such as providing incorrect details, you must notify the other part as soon as possible. Section 15D of the Electronic Transactions Act 1999 (Cth) provides a right to withdraw an error in electronic communication. This right of correction does not give you the right to rescind or otherwise terminate a contract. In some circumstances, the withdrawal of an error may invalidate the entire communication and render it ineffective for the purposes of contract formation.

Want more information on international online contracts? Looking for an experienced solicitor in Newcastle, Sydney or the Hunter to assist you with your business contracts and agreements? Call us on (02) 4929 7002, email us or complete an enquiry form.