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merely for the benefit of jurists and legal scholars. Merchants incorporate
contract law into their standard business practices not only to satisfy the law,
but also to conform with informal norms and to prevent misunderstandings
with customers. The four elements of the legal contract derive largely from the
fundamentals of any negotiating process. The law has merely formalised the
elements and the process. Furthermore, businesses often use the ceremonial
aspects of the contract creation process for their “cautionary effect, thereby
deterring hasty, premature or ill-considered contracts from being made.”¹
People understand that signing a document creates legal obligations and that
it should not be taken lightly. However, rituals in the virtual world with similar
significance have yet to be established.
The legal and social aspects of contracts have similarly important roles
to fulfill in the new world of electronic commerce. Merchants need contracts
not
only to secure their legal rights, but also to prevent consumer misunder-
standings. But contract law and standard business practices have had little
time to adjust and develop to handle the virtual and ephemeral nature of
cyberspace. Will the long-held
traditions and principles of English contract
law be flexible enough to accommodate this new commercial medium? Will
on-line contracts be accepted and enforced by the courts?
Even more importantly, will contract law be consistent with commercial
norms
and practices and will consumers readily comprehend the meaning and
consequences of their actions online? A mismatch between law and practice
could result in misunderstandings, injustices, inefficiencies, and added costs.
Even more so than mail order catalogue transactions, on-line transactions in
intangible goods predominantly gain competitive advantage through lower
prices from the reduction of distribution, intermediary, and overhead costs.
Therefore, the margins in electronic commerce will most likely be razor thin
and unable to absorb the costs of consumer misunderstandings, disputes, and
particularly litigation. Electronic commerce will demand the utmost legal and
commercial certainty in on-line contracts, otherwise its enormous potential
will not be fully realized.²
This means that there will need to be certainty and
understanding about the significance of online behaviour, both from the
merchant and customer side.