Contracting on the Internet

Directory

A. Introduction

B. Conclusion of a Contract
1. Offer of a Contract
1.1 Coming into effect of a declaration of intention
1.1.1 Divestiture of a declaration of intention
1.1.2 Entry of a declaration of intention
1.1.3 One-way- and dialog-traffic
1.1.3.1 Entry of a declaration by e-mail
A) Sphere of reception
B) Possibility of notice
C) Automatic forwarding and processing
D) Entry interference
1.1.3.2 Entry of a declaration in the WWW
1.1.3.3 Entry of a declaration in a chat channel
1.1.3.4 Entry of a declaration during Internet telephony
1.1.4 Revocation of a declaration of intention
1.1.5 Proof of entry
1.2 The contestation of a faulty declaration of intention
1.2.1 Input error as a mistake
1.2.2 Faulty declaration by computer
1.2.3 Transmission error
1.3 Allocation and liability for acting in somebody’s name
1.3.1 Representation and acting under strange name
1.3.2 Ostensible authority and authority by estoppel
1.3.3 Acting under imaginary names
2. Offer or ‘invitatio ad offerendum’
3. Term of Acceptance
3.1 Acceptance of the offer by e-mail
3.2 Acceptance in the WWW
3.3 Acceptance during Internet telephony and video conference
3.4 Reasons for nullity

C. Particularities of Online-auctions
1. Forms of Online-Auctions
2. Auctions according to § 156 BGB

D. Result

E. Appendix - Applicable Right
1. UN Convention on Contracts for International Sale of Goods - CISG
2. International Civil Law (Internationales Privatrecht - IPR)
3. Legal System of Characteristic Contract Performance
4. German Law

List of abbreviations

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A. Introduction

No closing time regulations, no purchase stress, timesaving and uncomplicated ordering, comparable prices, detailed information and direct contact to the manufacturers, these are just some advantages the Internet offers. The number of people using the internet as a shopping platform is increasing steadily - in Germany already more than 28 million people now use the Internet frequently to make purchases.¹ This underlines the importance of legal matters on the electronic Highway and will contribute furthermore to the electronic drive on legal issues within the next years. All the more, it is important to strengthen the confidence of the consumer of the safety of so-called Internet contracts. This paper shall give a summary of issues concerning contracts on the Internet and its consistency with the norms of the BGB (German Civil Code).

Commonly every manner of economic activity on the Internet is referred to as e- commerce. Nevertheless, one can distinguish these activities into so-called offline and online business. With offline business, solely the conclusion of the contract occurs electronically. An example would be the ordering of a book through the internet, however, it will still be delivered conventionally by mail. So this remains a simple sales contract with rare online-specific problems. With online business the whole performance including delivery will be conducted on the net. This presupposes when purchasing goods that the objects can be digitalized (e.g. software, music, electronic books etc.). Also in the field of services (e.g. the use of databases, Internet telephony, ticket booking, electronic trade of securities, etc.) online businesses occur.²

B. Conclusion of a Contract

A contract is concluded by two or more declarations of intention given mutually and coextensively. The term ‘declaration of intention’ (Willenserklärung) subsumes the expression of a will entailing legal consequences.³ Electronic declarations of intention must be distinguished into the electronically transmitted declaration and the (automated) computer declaration. The first-mentioned obviously implies a personal will of legal consequences. On the other hand it is questionable whether a computer can conduct a declaration of intention without human participation. The prevailing opinion affirms this with reference to the underlying human decision when programming or putting into operation the software the computer uses to compile and transmit declarations.⁴ With the use of IT-systems and software the operator expresses knowledge of the programming and therefore allows himself to be classed with any execution actions as his own declarations of intention.⁵

In order to conclude a contract it is necessary to have at least two declarations of intention take effect, the offer of the contract as well as its acceptance.

1 Offer of a Contract

1.1 Taking effect of a declaration of intention

(Wirksamwerden einer empfangsbedürftigen Willenserklärung) For taking effect of a declaration of intention as the offer of a contract, it is necessary that it has been submitted by the declaring person and has been received by the donee.

1.1.1 Proposing a declaration of intention (Abgabe einer Willenserklärung)

The explanatory person must express his will of legal significance in such a way which leaves no doubt at the finality of his will. The declaration must be initiated to the receiver in such a way that the reception can be assumed based on normal circumstances.

A declaration of intention via Internet (e.g. online-order) becomes effective with the willful authorization of the sending command, which leads to the irreversible dispatch of the data.⁶ It is irreversible when the data transmission has been carried out to a point that the explanatory person cannot exert any influence on it any more.⁷ If there is still the possibility to cancel the sending process, no effective divestiture and no offer in the legal sense have occurred.⁸ For oral declarations of intention through Internet telephony or a video conference one can refer to § 147 I 2 BGB. After its change (13.07.2001) this norm also includes declarations by other communication systems besides the telephone and also classifies them as declarations of attendees. Such a declaration is regarded as released if it is expressed in a way that the other attendee is able to understand it. In addition, a computer declaration is regarded to be released not before the computer system finally emits it, i.e. it has left the IT-system and is irrevocably transferred to the receiver.⁹

1.1.2 Entry of a declaration of intention (Zugang einer Willenserklärung)

With respect to the entry a distinction is generally made, whether the declaration of intention is given between absentees or attendees and whether it is given in embodied or not embodied form. In the legal literature as well as in findings of the courts one can find the notion that declarations of intention via Internet can generally be considered as declaration (embodied) under absentees.¹⁰ Another view makes a further distinction of the different Internet services into one-way- and dialog-exchange.¹¹

To distribute the risk of loss, delay or mutilation of the declaration of intention adequately between sender and receiver, the latter view seems more proper due to the multitude of communication possibilities on the Internet.

1.1.3 One-way- and dialog-exchange (Einweg- und Dialog-Verkehr)

With one-way-traffic one understands those forms of communication where an imme- diate communication contact is missing due to a spatial and temporal separation. The most common form of one way traffic on the Internet is the communication via e-mail. Due to the spatial separation it is considered as declaration of intention under absentees. The actual entry is determined by the reception- or entry-theory of the common law based on § 130 BGB: the declaration of intention must have reached the sphere of control of the receiver, so that under normal circumstances and conventions he could have gained notice, not whether he actually took notice.¹² With dialog traffic a mutual, simultaneous communication takes place between the parties, which makes it possible to react immediately on received information. Also it allows one enquiring whether declarations were received, perceived and understood. Examples are video conferences or Internet telephony. Despite a spatial separation of the parties dialog traffic can be understood as communication under attendees, comparable to telephony since there are contemporaneous transmission and communication contact. Therefore the entry according to § 147 I 2 BGB complies with the theory of notice (Vernehmungstheorie):¹³ an entry is completed when the receiver correctly and completely takes note of the content of declaration. If the declaration of intention is elusive and not embodied, increased protection of the receiver seems justified. In turn if he has the possibility of saving the declaration and therefore embodying it, it is appropriate to judge the entry time by the reception theory (Empfangstheorie).¹⁴ To follow, the types of one-way-exchange will be illustrated then those of dialog-exchange.

1.1.3.1 Entry of a declaration of intention by e-mail

a) Area of Reception

According to reception theory, the sphere of control (Machtbereich) includes mail box, PO Box and answering machine.¹⁵ However it is questionable whether the electronic mail box on the mail server of the provider also belongs to the reception area of the receiver. Since the provider has the possibility to close down the mail server, delete e- mails or deny access to ones account, he concentrates the actual sway over the mail server on himself. The electronic mailbox however is destined to receive the e-mails of the addressee and therefore it belongs to the addressee’s sphere of risk.¹⁶ It is incumbent to the receiver to choose a reliable provider which can ensure him a safe retrieval of received and saved e-mails at any time.

If a businessman (§ 14 I BGB) appears in legal and commercial relations with his e-mail address, he demonstrates that an entry of legal consequence (§ 130 I BGB) can be carried out in his mailbox.¹⁷ A restriction to other means of communication and an exclusion of the Internet must be expressed explicitly to each business partner ("opt out"). The opposite applies to the private consumer (§ 13 BGB); for his protection it must be made clear ("opt into"), that he wishes communication via Internet - the consumer may already show this by establishing contact to a business partner via e- mail.¹⁸

b) Possibility of Notice

The possibility of notice is given when the e-mail is stored in and can be retrieved from the electronic mail server. The accomplishment of the entry does not occurs until one can count on its notice. The prevailing opinion distinguishes between e-mail use in the private and business sector.¹⁹ In the course of business one assumes that e-mails are obtained regularly, so one concludes that entry of a declaration occurs immediately with its saving within the normal working hours. This is criticized to that effect that the businessman cannot be expected to check his mailbox permanently for recently received e-mail. The common expectation is that a business man would check for incoming mails at least twice a day. Consequently an e-mail with a declaration is considered to take effect by the closing hour of the business day. If a message is not sent within the usual business hours, it is regarded to be delivered with the beginning of the next business day.²⁰

According to the prevailing opinion it cannot be expected that the private consumer would check his mailbox more than once a day, normally within the afternoon hours. Otherwise it could cause him significant expenditure in time and cost to establish a connection to the mail server more than once per day. To protect the consumer, an e- mail is regarded to be delivered within the next day.²¹

However, this is only valid if the private consumer has "released" his electronic mail address and explained that he may be contacted this way. If he has not, the entry concludes according to the theory of notice: the declaration takes effect when the receiver actually acknowledges it. Of course, the entry in business and private relations is concluded as well when the receiver has retrieved the e-mail at an earlier time.²²

c) Automatic Forwarding and Processing

The same principles are also applied if the mail server forwards e-mails automatically directly to its receiver. This cannot imply a renunciation of usual entry times. Also the automatic forwarding usually is not recognizable to the sender.²³ However, one has to differentiate whether the e-mails are not only immediately passed on but also processed by EDP automatically. If the processing solely consists of confirming the receipt of an e-mail, no changes arise to the depicted legal matter. But if incoming information is evaluated and its content processed automatically, an immediate entry needs to be affirmed. Due to the automation the receiver generally loses his abstract possibility of notice of the declaration’s content. The automation creates the prerequisites for an entry without temporal limitation to business hours and also turns down his possibility of personal information. The principle of the machine recording takes effect. Thus entry is caused when the e-mail is in the sphere of reception in which evaluation and processing by the computer become possible.²⁴

d) Entry interference or disruption (Zugangsstörung)

The e-mail is far more susceptible to interferences than other means of communication such as the letter. So there are a variety of types of entry disturbances which draw different cases of carrying and dividing the risk. If an e-mail is lost in the Internet or is intercepted, the loss is assumed to be an undisputed part of the transportation risk of the sender.²⁵

In the case that the e-mail reaches the addressee’s mailbox but cannot be saved, due to a net failure or a system crash, for example, the opinions differ. The prevailing opinion states that generally no entry is concluded. A more recent opinion considers dividing the transportation risk into the spheres of influence of the parties.²⁶ It affirms the entry if under normal circumstances the possibility of storage exists on the receiving side. The risk of transmission shifts further from the sender to the recipient, since the recipient has to carry the risk of functionality of the receiver terminal. Nevertheless, even this opinion is sometimes rejected and said to be too undifferentiated: not every malfunction of the receiver terminal falls into the sphere of risk of the recipient; for example, external causes like power failure or virus attacks are characteristic for this medium and therefore should be carried by the sender with the risk of transmission.²⁷ This differs when an e-mail could not be saved because the in-box on the mail server is full of e-mails already received. According to the theory of entry, the prevailing opinion questions whether the receiver has to be held responsible for the failed entry or not. If the space provided was insufficient contrary to the recipient’s duty or because of fraudulent intent, the failed entry is the recipient’s liability. If a large number of unwanted e-mails (spam) exceed his in-box capacity, the liability shall not be with the recipient.²⁸ However, this risk may be regarded as diminished as the storage capacity of providers has been increased and effective systems have been developed which filter unwanted mails.

It is another case of entry interference, if an e-mail already saved in the receiver terminal is deleted by a malfunction of the mail server before the time its notice is expected or if it cannot be retrieved due to a technical defect. In any case, the risk and liability for loss and delay shifts with the arrival at the mail server and the saving in the recipient’s in-box from the sender to the recipient.²⁹ There is no legal difference to a mailbox key that has been misplaced; the receiver of an e-mail must merely retrieve it with the use of another computer - since the declaration has entered the recipient’s sphere of control.³⁰

1.1.3.2 Entry of a declaration of intention in the WWW

It isn't obvious whether the communication in the WWW by means of web pages, hyperlinks and form sites is classified as one-way- or dialog-exchange. At first sight it could be classified as dialog-exchange: a user enters an Internet address into his browser and promptly receives the answer of the server in form of a web page. Nevertheless, communication in the WWW is qualified as one-way communication under absentees.³¹ This is justified with the reasoning that the interaction appears to be a dialog between a user and the supplier’s computer system. However, it lacks the flexibility required for an interactive dialog communication, such as the possibility of being responsive to a remark or elucidating one’s point of view. The computer cannot do more than react with predefined program steps, so that content and course of the complete communication are predetermined. Also a somewhat default declaration of the user is being created when entering a text or marking a function field on a web page and finally hitting the "send"-button which sends it over the Internet directly to the web server of the supplier. Its entry is being determined when the declaration enters the area of reception so that its processing can be expected by the supplier’s computer.³²

Next we can refer to the automatic processing of e-mails. The area of reception of the supplier begins with his web server attached to the Internet. So the entry is accom- plished when the data has reached it and is saved into the main memory. Correspon- dingly, the explanatory user has to carry the risk of loss and delay until the data is saved into the main memory of the supplier’s computer.³³ Unlike an e-mail, a declaration of a computer in the form of a web page is not being saved intermediately but transmitted directly to the user. In this case the receiver terminal will not be the host computer of the ISP (as in case of an e-mail) but the personal computer of the user. The transfer of the risk of transmission shifts from the supplier to the user with the saving into the main memory of the user’s computer. According to the prevailing opinion the notice by the user will occur immediately since it is displayed in the browser and the must be present to operate the computer.³⁴

1.1.3.3 Entry of a declaration of intention in the chat channel

Within chat channels people communicate online by reacting in very short intervals with text messages to each other. The text becomes visible on the screen for all others in a chat room shortly after typing and sending it. So in the moment of reception the received message is being saved to the main memory and therefore even embodied. But in some cases of very frequent channels the message will only be displayed for a short time period. So despite being temporarily embodied a degree of elusiveness is reached which equals a conversation. It is controversial whether ‘chatting’ is a dialog exchange between absentees or attendees.³⁵

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¹ source: AGIREV, www.agirev.de

² Cp. ZERDICK, p. 148

³ Cp. PALANDT/HEINRICHS, § 104 Rn. 2

⁴ Cp. BRAUNER, p. 39 et sqq.

⁵ Cp. BETTENDORF, p. 9

⁶ Cp. BGHZ 65, 13, 14; LARENZ/WOLF, §26 Rn. 3

⁷ Cp. SÜßENBERGER, p. 136

⁸ Cp. BETTENDORF, p. 9

⁹ Cp. BROX, AT, Rn. 147; SÜßENBERGER, p. 139

¹⁰ Cp. KÖHLER/ARNDT, p. 94; HOEREN/SIEBER/MEHRINGS, Rn. 73; cf. BGH, 14.12.1995, IX ZR 242/94, NJW 96, 1062; also see AG Ulm, 29.10.1999, 2 C 1038/99

¹¹ Cp. GLATT, p. 34 et sqq.; HERGET/REIMER, p. 1291

¹² Cp. LARENZ/WOLF, § 26 Rn. 17

¹³ Cp. LARENZ/WOLF, § 26 Rn. 13,17 und 33

¹⁴ Cp. MEDICUS, Rn. 288

¹⁵ Cp. PALANDT/HEINRICHS, §130 Rn. 5

¹⁶ Cp. KOCH, p. 142; a.m.

¹⁷ Cf. OLG Köln NJW 1990, 1608 (Btx); cp. KRÖGER/GIMMY, p. 69

¹⁸ Cp. DÖRNER, AcP 202 (2002), 368

¹⁹ Cp. DÖRNER, AcP 202 (2002), 368 et sqq.

²⁰ Cp. DÖRNER, AcP 202 (2002), 369; CORDES, p. 110 et sqq.; SÜßENBERGER, p. 168

²¹ Cp. ERNST, NJW-CoR 1997, 166; WENDEL, p. 91

²² Cp. CORDES, p. 111; GLATT, p. 63

²³ Cp. SÜßENBERGER, p. 172

²⁴ Cp. GLATT, p. 63-64; KUHN, p. 103

²⁵ Cp. KUHN, p. 97

²⁶ Cp. KUHN, p. 99; HEUN, CR 1994, 598

²⁷ Cp. DÖRNER, AcP 202 (2002), 370

²⁸ Cp. SÜßENBERGER, p. 169

²⁹ Cp. TAUPITZ/KRITTER, JuS 1999, 839, 843

³⁰ Cp. DÖRNER, AcP 202 (2002), 372

³¹ Cp. SCUSTER/SCHMITZ, Kap. 2, Rn. 194

³² Cp. BIERNOTH, p. 141; REHBINDER/SCHMAUS, UFITA 2000, 313, 327

³³ Cp. MORITZ/DREIER/HOLZBACH/SÜßENBERGER, Rn. 182

³⁴ Cp. GLATT, p. 65 et sqq.

³⁵ Cp. DREXL, p. 83 et sqq.