It appears that the courts consider internet contracts to be valid. IvanHoffman.com lists a few cases that concerned the validity and enforceability of internet contracts. A few of the listed cases are: Groff v. America Online and Register.com, Inc. v. Verio, Inc. If the contract is valid, the courts treat the contract as they would any other. Internet contracts are enforceable, as are other, more traditional contracts, as long as they meet all of the standard qualifications for valid contract formation. On page 227 of Business Law Today it lists the qualifications: “(1) an agreement (offer and acceptance) (2) supported by legally sufficient consideration (3) for legal purpose and (4) made by parties who have the legal capacity to enter into the contract.” Some examples of legislation that supports the validity of internet contracts is the Electronic Signatures in Global and National Commerce Act, passed in 2000, and the Uniform Electronic Transactions Act.
Contracts entered into over the internet are expressed contracts, though there are exceptions. In Business Law Today “express contract” is defined as “one in which the terms of the agreement are fully and explicitly stated in words, oral or written (223).” Internet contracts, because of the nature of the internet, are almost always in the form of an expressed contract. When communicating through the internet, people use type-written communications and occasionally use phone or video conferencing software. A “terms of use” or “service” agreement on a website is considered a form of valid contract, if you are required to agree to it, to be rendered service or use of software.
As mentioned previously in the above paragraph, there are exceptions to expressed contracts. These contracts are called “implied contracts.” The text defines them as “a contract that is implied from the conduct of the parties (224).” To illustrate how there can be an implied contract entered into over the internet, let us consider the following example:
Mr. Warren would like to buy a painting that he saw featured on a website. He e-mailed the website owner and asked her how much the painting would cost him if he decides to purchase it. The owner of the site (and painting), Mrs. Thatcher, promptly e-mailed Mr. Warren back. In her reply, she told him that she would sell him the painting for $1000.00 and that he could pay by check. She also said that if he would just e-mail her his mailing address, she would send him the painting right away. The next day, Mr. Warren e-mailed Mrs. Thatcher his mailing address.
As you can see, an implied contract was entered into via the medium of the internet.
Is an internet contract formal or informal? First let’s define these terms. A formal contract, as defined by the previously quoted font of wisdom, that is the text Business Law Today, is “a contract that by law requires a specific form, such as being executed under seal, for its validity (226)” and an informal contract is “a contract that does not require a specified form or formality to be valid (226).” So, to answer the above question, an internet contract would fall into the category of an informal contract.
A few other issues are important to consider when contracting over the internet. When forming a contract with someone over the internet you must be sure to verify that the party you are making the contract with has legal capacity to enter into a contract with you. This means that the other party to the contract must be at least at the age of consent, 18, and he or she must not be mentally impaired or otherwise lacking legal capacity to enter into a contract with you. Also, you should endeavor to be sure of the identity of the other party to the contract.
Another thing to keep in mind, when forming a contract over the internet, is that because of its very nature, parties to the contract are often in different states. This is important because when a plaintiff brings a defendant to court for not following through with his side of the internet contract, the court in the plaintiff’s state will exercise the “long arm statute” and bring the defendant to court in the plaintiff’s state. If you are the defendant, this may be very inconvenient for you if a dispute over the contract should arise.
Another important thing to remember is that you should always be sure that a record of the contract is kept by both parties. One more thing that you should keep in mind, and this applies to traditional contracts as well, is that you should not make a contract with someone to do, or sell, something illegal. If you do this, the contract is not valid and, therefore, it is not enforceable.
Works Cited:
Hoffman BA, J.D., Ivan. The Validity of Online “Contracts”. 21 Oct. 2005
Jentz, Gaylord A. and Miller, Roger LeRoy. Business Law Today, 6th ed. Thomson South-Western: Mason, Ohio, 2003.