ELECTRONIC TRANSACTIONS (MISCELLANEOUS) AMENDMENT BILL

Introduction and First Reading

Received from the House of Assembly and read a first time.

Second Reading

The Hon. G.E. GAGO (Minister for Regional Development, Minister for Public Sector Management, Minister for the Status of Women, Minister for Consumer Affairs, Minister for Government Enterprises, Minister for Gambling) (16:45): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

Members will be aware that the Electronic Transactions Act 2000 has equivalents in all States and Territories. It came about as a national project to adopt the 1996 UNCITRAL model provisions into domestic law. The provisions were intended to make clear that electronic communications can be used to create valid contracts, and to provide that certain legal requirements, such as a requirement for a signature, or a requirement to provide information in writing, can be complied with electronically.

Since 2000, international work on this topic has continued and in 2005 the United Nations reached agreement on a Convention on the Use of Electronic Communication in International Contracts. This Convention was based on the 1996 provisions but amended them in some respects.

Australia wishes to accede to this Convention and so intends to bring its domestic laws into conformity with it. Accordingly, the Standing Committee of Attorney-General in May 2010 agreed that the Commonwealth and all States and Territories would amend their existing electronic transactions laws, following model provisions prepared by the Parliamentary Counsel's Committee.

The amendments are largely technical. Their effect is as follows:

It is proposed to amend the wording in the signature provisions from 'indicate the person's approval' to 'indicate the party's intention' in respect of the information communicated. This is because to sign a document might not always connote that the person approves of its contents, for example, where a signatory is simply a witness to another person's signature.

It is also proposed to add a safeguard to the existing signature provisions to prevent parties from arguing that a signature fails the reliability test in the Act. The current test depends on showing that the method of identifying the person and indicating their intentions was 'as reliable as was appropriate for the purposes for which the material was communicated', that is, it was reasonably reliable in the circumstances. It is proposed to provide, in addition, that the method equates to a signature in any case where the method can be proved in fact to have identified the signatory and indicated the signatory's intention in respect of the information contained in the electronic communication.

The definition of a 'transaction' in the Act is to be amended to make it clear that, for the purposes of a transaction in the nature of a contract, a 'transaction' includes dealings in connection with the formation and performance of a contract, consistently with the definition of 'communication' in article 4 of the Convention.

The Bill proposes to add a provision that proposals to enter into a contract made by electronic means to the world at large are to be treated as an invitation to make offers, unless there is a clear indication by the trader of an intention to be bound. This clarifies the position where a trader's website offers goods or services on specified conditions to any interested visitor to the site. There may well be a limited supply of the goods or services and it would not make sense that the trader be legally bound to supply them no matter how many persons sent a message to the site seeking to obtain the goods or services. It is more sensible to analyse the transaction so that the trader is merely inviting the public to deal with his or her business, and a legal offer only comes into existence when the visitor to the site submits an order for the goods or services. At that point, the trader can decide whether he or she can fill the order and, if so, can accept the offer, thus forming a contract. This provision is in addition to, and is not intended to derogate from, general consumer protection laws.

The Bill also deals with the situation where a trader accepts and processes orders by means of a computer programme, without any human being necessarily scrutinizing the exchange of information. It proposes to add to the Act a provision to clarify that contracts resulting from the use of automated message systems are not invalid simply on that ground. It is proposed to insert a definition of 'automated message system' meaning 'a computer program or an electronic or other automated means used to initiate an action or respond to data messages or performances in whole or in part, without review or intervention by a natural person each time an action is initiated or a response is generated by the system'.

The Bill also proposes to amend the Act to incorporate article 14 of the Convention, which gives a natural person who interacts with an automated message system the right to withdraw the portion of the electronic communication in which an input error was made. This right only applies if the automated message system does not provide the person making the input, or the party on whose behalf that person was acting, with an opportunity to correct the error. Many traders do, of course, include in their automatic message systems a screen that displays the information entered by the customer and asks the customer to either confirm or resubmit the information. As long as traders do that, they are not affected by the proposed right of withdrawal. For those who do not, however, they bear the risk that a customer might make an error and need to withdraw the erroneous portion of the information. The customer must act promptly to notify the trader of the error and, in any case, the customer cannot withdraw after he or she has had the benefit of the goods or services.

These proposed provisions are not limited to business-to-business contracts but apply to transactions in general, including transactions with consumers.

The Bill also proposes that the Act should incorporate provisions that clarify rules for determining a party's place of business. In keeping with the Convention, these rules are proposed to be as follows:

(a) a party's place of business is presumed to be the location indicated by that party, unless another party demonstrates that the party making the indication does not have a place of business at that location;

(b) if a party has not indicated a place of business, and has more than one place of business, then the place of business is that which has the closest relationship to the relevant contract, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the contract;

(c) a location is not a place of business merely because that is:

(i) where equipment and technology supporting an information system used by a party in connection with the formation of a contract are located; or

(ii) where the information system may be accessed by other parties;

(d) the fact that a party makes use of a domain name or electronic mail address connected to a specific country does not, of itself, create a presumption that its place of business is located in that country.

It is proposed to insert a definition of 'place of business' for a private entity as 'a place where a party maintains a non-transitory establishment to pursue an economic activity other than the temporary provision of goods or services out of a specific location'.

The Bill also proposes amendments to the default rules in the Act for timing of dispatch so that:

(i) the formula for determining time of dispatch ('when it enters an information system outside the control of the originator') reflects instead the Convention's formula ('when it leaves an information system under the control of the originator'); and

(ii) if the electronic communication has not left an information system under the control of the originator (e.g. where the parties exchange communications through the same information system or network) the time when the electronic communication is received.

The default rules in the Act for timing of receipt are also proposed to be amended so that:

(i) the time of receipt of an electronic communication is the time when it becomes capable of being retrieved by the addressee at an electronic address designated by the addressee (an electronic communication is presumed to be capable of being retrieved by the addressee when it reaches the addressee's electronic address); and

(ii) the time of receipt of an electronic communication at another electronic address of the addressee is the time when it becomes capable of being retrieved by the addressee at that address and the addressee becomes aware that the electronic communication has been sent to that address.

The rules in the Act for time and place of dispatch and receipt would also make it clear that the fact that an information system of an addressee is located in a jurisdiction other than that in which the addressee itself is located does not alter the application of the rules in articles 10.2 (time) and 10.3 (place) of the Convention.

An amendment is made to the regulation-making power. It is proposed that there should in future be regulations, consistently with the Convention, providing for the exclusion of specific financial transactions and negotiable instruments, documents of title and similar documents when the subject of an international contract. It is not intended that the general rules in the Act should apply to situations that are already covered by more specific regulation, such as money-market transactions.

Finally, the Bill would amend the Act to incorporate the definitions of 'originator' and 'addressee' used in the Convention.

The model law has already been enacted in New South Wales and other Australian jurisdictions are expected to enact it soon.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

3—Amendment provisions

These clauses are formal.

Part 2—Amendment of Electronic Transactions Act 2000

4—Amendment of section 4—Simplified outline

Clause 4 is a consequential amendment on the insertion of proposed new Part 2A into the principal Act.

5—Amendment of section 5—Interpretation

Clause 5 inserts definitions necessary for the measure.

6—Insertion of section 6A

Clause 6 inserts a new section 6A into the principal Act to provide that the regulations may provide that all or specified provisions of the Act do not apply to specified matters, circumstances or laws. This regulation making power was previously in various sections of the Act.

7—Amendment of section 7—Validity of electronic transactions

This amendment is consequential on the insertion of new section 6A.

8—Amendment of section 9—Signatures

Section 9 of the principal Act provides that if the signature of a person is required, that requirement is taken to have been met in relation to an electronic communication if, amongst other things, a method is used to identify the person and to indicate the person's approval of the information communicated. The proposed amendment removes the word 'approval' and instead provides that the requirement is taken to have been met in relation to an electronic communication if a method is used to identify the person and to indicate the person's 'intention in respect of' the information communicated.

Currently, section 9 provides that the method used to identify the person and to indicate the person's intention in respect of the information communicated must be as reliable as appropriate for the purposes for which the information was communicated. The amendment proposes to add that the method will also equate to a signature if it does, in fact, identify the person and indicate the person's intention in respect of the information communicated.

9—Repeal of section 12

This amendment is consequential on the insertion of new section 6A.

10—Substitution of section 13

It is proposed to delete section 13 of the principal Act and replace it with new sections 13, 13A and 13B to alter the requirements with respect to the time and place of dispatch and receipt of an electronic communication. New clause 13 provides that the time of dispatch of an electronic communication is the time when the electronic communication leaves an information system under the control of the originator or, if the electronic communication has not left an information system under the control of the originator, the time when the electronic communication is received by the addressee.

New clause 13A provides that the time of receipt of an electronic communication is either—

the time when the electronic communication becomes capable of being retrieved by the addressee at an electronic address designated by the addressee; or

if being received at another electronic address of the addressee, is the time when both—

(i) the electronic communication has become capable of being retrieved by the addressee at that address; and

(ii) the addressee has become aware that the electronic communication has been sent to that address.

New clause 13B provides that an electronic communication is taken to have been dispatched at the place where the originator has its place of business and is taken to have been received at the place where the addressee has its place of business. For the purposes of this—

(a) a party's place of business is assumed to be the location indicated by that party, unless another party demonstrates that the party making the indication does not have a place of business at that location; and

(b) if a party has not indicated a place of business and has only 1 place of business, it is to be assumed that place is the party's place of business; and

(c) if a party has not indicated a place of business and has more than 1 place of business, the place of business is that which has the closest relationship to the underlying transaction, having regard to the circumstances known to or contemplated by the parties at any time before or at the conclusion of the transaction; and

(d) if a party has not indicated a place of business and has more than 1 place of business, but paragraph (c) does not apply—it is to be assumed that the party's principal place of business is the party's only place of business; and

(e) if a party is a natural person and does not have a place of business—it is to be assumed that the party's place of business is the place of the party's habitual residence.

The proposed clause also provides that a location is not a place of business merely because that is where equipment and technology supporting an information system used by a party are located or where the information system may be accessed by other parties, and the fact that a party makes use of a domain name or electronic mail address connected to a specific country does not create a presumption that its place of business is located in that country.

11—Amendment of section 14—Attribution of electronic communications

This amendment is consequential on the insertion of new section 6A.

12—Insertion of Part 2A

Clause 12 inserts a new Part 2A into the principal Act to provide additional provisions to apply to contracts involving electronic communications. In particular, proposed new clause 14B provides that a proposal to form a contract made through an electronic communication that is not addressed to 1 or more specific parties and is generally accessible to parties making use of information systems, is to be considered as an invitation to make offers, unless it clearly indicates the intention of the party making the proposal to be bound if accepted.

New clause 14C provides that a contract formed either by the interaction of an automated message system and a natural person or by the interaction of automated message systems, is not invalid, void or unenforceable on the sole ground that no natural person reviewed or intervened in each of the individual actions carried out by the automated message systems or the resulting contract.

New clause 14D provides that if a natural person makes an input error in an electronic communication exchanged with the automated message system of another party, and the automated message system does not provide the person with an opportunity to correct the error, the person has the right to withdraw the portion of the electronic communication in which the input error was made if—

the person notifies the other party of the error as soon as possible after having learned of the error and indicates that he or she made an error in the electronic communication; and

the person has not used or received any material benefit or value from the goods or services received from the other party.

Debate adjourned on motion of Hon. S.G. Wade.