Article Summarize

Under Malaysian law, there are a few elements that can constitute a binding
contract and this is the same in cyberspace. Where there is an offer, an acceptance,
consideration and intention to create legal relation between the parties, a contract is
said to be valid. Internet has become the medium to communicate and anticipation of
forming legal binding contract through communication where there are business owners
and consumers use the technology for dealings and such.
The article given is about the formation of e-contracts in Malaysia. Legislation
regarding this should be technologically advanced and flexible as to make it easier for
electronic transaction and e-commerce activity as there is no need to update the laws
relating to it constantly. The legislation that were analysed and examined are Contracts
Act 1950 and Electronic Commerce Act 2006 with United Nations Commission on
International Trade Law (UNICITRAL)
In the case of American Libraries Association v. Pataki, the notion that the
internet is a borderless world has been rejected which the case stipulates that internet
transactions reach many jurisdictions and many boundaries. However, it was argued by
Boyle that information is one of the most important resources in the society if the shift is
indeed significant. With the fact that internet is borderless and continuously developing
has made the e-commerce to grow fast in every parts of the world. In 2012 alone, half of
the majority of the population of Malaysia has become the internet user. It is indeed has
become an essential part of todays society as it is now available anywhere.
Contract Act 1950 and Digital Signature Act 1997 are the two legislation that
influence the formation of e-contract in Malaysia. This also includes the E-Commerce
Act 2006 in making of the electronic transactions and consumer protection in the
transactions. However, there are many legal issues that are not addressed in passing of
the act which includes the issue of offer and acceptance, applicability of law and also
the issue of jurisdiction.
According to Kidd, Donnie and Daughtery, electronic contracts may be said as
legally enforceable promises or set of promises that are concluded using electronic

medium. From this we can interpret that an electronic contract simply means a
transaction using electronic means. Among the ways that there is the formation of an econtact are web contracts, changing of e-mail and Electronic Data Interchange (EDI).
In email transaction, the offer and acceptance take place via the changing of emails while a contract can be formed by way of e-mail transaction alone or a
combination of web offer and e-mail acceptance. The second type of contract is the web
contract which can come in the form of shrink-wrap, click through or browse-wrap
agreements. Each of them is different and an e-consumer has to follow the mechanisms
provided else the contract is not valid. A web contract usually is concluded by the click
of the mouse on specific button such as I Agree after the terms and conditions has
been read through. The third type of contract is EDI which there is a trading cycle of a
transaction virtually without any paperwork. It is made via communication of a computer
with another computer and not between computer and human.
The concept of bringing stores to shoppers, not shoppers to stores has currently
become a trend and lifestyles. Online transactions however, expose the e-consumers to
issues and challenges that are not faced by offline consumers. Among the main
concerns are the implementations of the Contract Act in a transaction such as the
incapability of solving disputes that may arise from e-commerce transactions and also
the uncertainty to conclude the act.
Both the Model Law and Contract Act do not addressed the issue of e-contracts
formation. They only give legal recognition of offer and acceptance by electronic means
but not at what stage can a contract be formed. UNICITRAL Model Law on Electronic
Commerce is a Model Law that provides a basis for jurisdictions relating to ecommerce. Article 5 and article 11 recognize the validity of a data message.
Legal issues in a contract over internet are different as it first starts from
communicating the contract, offer and acceptance. An offer of proposal is defined in
section 2 (a) of Contract Act. Under the statutes, it raises some issues in online
contract. In normal contract, there is a difference between an offer and invitation to treat
as according to the case Fisher v. Bell. In online transaction, e-commerce websites

provides invitation to treat to the e-consumer and when the button I Agree has been
clicked or via e-mail, the response is an acceptance of an offer that is legally binding.
This can be a risk to the website owner as they do not know who they serve. There is a
thin line of difference between a web offer and an invitation to treat. A web
advertisement will be regarded as an offer and not invitation to treat when confirmation
of transaction is made at the end. Therefore, even if our Contract Act does not deal with
online matter, it is vital to consider that in web offers advertisements or display of goods,
it is not an invitation to treat but an offer.
In the rule of acceptance by online transactions, when an acceptance is made,
the receipt rule is applicable. This rule has been specifically mentioned on the Model
Law in article 14. There are 2 issues which is first, the Contract Act does not specifically
define the data message in e-commerce to validate the contract Secondly, even if it
does, how does one determine the acceptance has been made? If e-mail is sent to the
offeror, the acceptance is complete whether it is being read or not. This shows that econtract may be created without both parties awareness which this is in contrast with
Article 15 of the Model Law.
In order for a contract to be valid, there must be a consideration else, it is void as
stated in Section 26 of the Contract Act. The issue rise whether in e-commerce,
downloading a free software or access to website amount to valid consideration
because there is no consideration taking place in an online transaction which is in
contrast with Section 26. There is also the issue when obtaining a free goods or
services is a bonus but it is not clear as the applicability of it under the section.
To form a valid contract, there must intention to create a legal relation. The
elements however is not mentioned in the Contract Act and for that matter, court will
look at the intention of both parties. In an online contract, the existence of the intention
is automatic. There is however an exception when an unclear or deceptive website
deceives customer into making an unwanted contract. From this, it is safe to presume
that the seller cannot demand payment because of customers absent intention to
create legal intention. EU Council Directive on E-Commerce requires that the offer,

acceptance and receipt of acknowledgement will automatically represent an intention to

create legal relations.
Under capacity, it has been state in Section 11 of Contract Act that a person is
competent to a contract if he is the age of majority, of sound mind and not disqualified of
contracting. If a person lacks these elements, the contract is void. This can also means
that a person who is minor may enter into an e-contract using his parents credit card,
he would recover the money paid even if the contract is void. In order to avoid losses of
unwanted transactions, the contract should be made in written form and authentication
of the third party by the use of digital signature.
Digital Signatures in Malaysia are governed by The Digital Signature Act 1997.
This act mainly provides for the licensing and regulation of Certification Authorities.
Digital Signature uses special unintelligible code messages that only the contracting
parties can use. It uses cryptographic messages that generate 2 types of keys which is
public key and private key. For a digital signature to be recognised by law, it has to
provide means to verify the integrity of messages sent, verify the source of an electronic
message, prevent denial by the sender and satisfy the requirements of a signature by
the Statue. Writing requirement is not specified in Contract Act but Article 6 of Model
Law provides that the writing requirement is met by the data message if the information
contained there is accessible.
It is possible for e-consumer from one jurisdiction to be subjected by another.
Therefore, it is important to have jurisdiction to limit liability outside ones country. A
problem may arise if there is an issue when there is no jurisdiction to determine the
legal system and court. Even if there is a particular legal system or court to deal with it,
it might not work out well due to the limitation applies to both choice of law and
jurisdictional principles. Various countries work with other countries that have an extraterritorial effect therefore it is possible for the parties to choose the jurisdiction of law
that is applicable to both contracting parties.
An acceptance of an offer would create an agreement. The way an e-contract is
formed is very important to avoid any unnecessary lawsuits for failure of the web owner

to deliver. This can be seen in www.amazon.com in their terms and conditions. The
purpose of it is to protect seller being bound by an agreement outside its control. A
contract can then be formed when the offer give its assent to the terms of the offer.
In conclusion to the article, with the exchange of consideration through offer and
acceptance, a contract can be formed. The formation of e-contract however provides
additional rule. The issues of formation of e-contract are not properly dealt with by our
existing legislation or UN Model Law. On the whole, current legislation need to be
updated and properly addressed for a secure transactions.
Legal Opinion
From the article that was given regarding the formation of e-contract in Malaysia,
there are a few contentions that I would like to address. It is true that from the
development of technology, e-commerce has become very successful and progressive
as it is easier to make a transaction by online. It is however is hard to determine the law
or jurisdiction regulating e-commerce.
When a contract is involved, Contract Act is use as a medium to be referred to
should there be any enquires or issues that need to be address. In the article, it is said
that neither the Model Law nor the Contract Act addressed the issue of the formation of
e-contract and this is true. This is for my opinion because e-commerce and e-contract is
a developing and can be regarded as a newly developed medium.
Regarding the offer and acceptance by e-contract, the article mentioned that ecommerce websites constitute an offer and not an invitation to treat. This is true as
incitation to treat is the display of goods with price tag with it and by e-commerce, there
is similarity in there. The distinguishable between an offer and invitation to treat can be
seen in the case of Fisher v. Bell. In the case of Chee Kin Keong v. Digilandmall.com
Pte Ltd, it was held that a web advertisement is regarded as an offer and not invitation
to treat. From the case, it is vital that the court need to also consider other things in
websites such as the display of goods to be regarded as an offer and not invitation to
treat as when a consumer clicks the button to agree, there is a contract that binds both
parties.

As for acceptance, the issue pertaining in the article is that under Article 14 of the
Model Law states that when the data message is used in an online transaction, it has to
be acknowledged by the recipient of the data. The issue here is that there is no
specifications of data that need to be send and how can you determine that the
acceptance has been made? This is really important for the court or the legislation to
address as when contract is involved, it is important that there is details in every
communication of the contract as to avoid any issues and to protect the consumer.
Consideration also plays an important part as it is part and parcel of a contract. In
e-contract, consideration does not form part of the e-contract. This is true as there is no
communication of the consideration.
Intention to create a legal relation in the article it states that it comes
automatically. This is true however is not clear. If there is perhaps an issue arises, it
may be difficult to determine the intention of each party unless the websites itself is
deceptive.
Legal capacity plays an important role in a contract. However, it can be said hard
to determine the legal capacity by both parties as there might be situation where a
minor use the credit card details of his parents. The way to overcome this, the article
suggest to have a digital signature. A digital signature is indeed important to have as it
provide protection for the consumer.
In conclusion, the article mainly stipulates that it is important for an e-contract to
have a proper law to regulate it as to avoid any issues and problem that may create
loophole.